07/09/2012 190 SENTENCING MEMORANDUM by USA as to Ricardo Fernandez.
Extract -
The defendant’s description of his own criminal conduct is both self-serving and incomplete. In the sentencing memorandum submitted by his counsel (“Sentencing Mem.”), as well as in his own letter (“Fernandez Ltr.”), which is submitted under Tab 1 of Exhibit A to the sentencing memorandum, Fernandez asserts a “firmly-held belief that he did not knowingly make false statements to the investing public concerning the stocks” he was paid to target (Sentencing Mem. 6), in the words of his counsel. Even more broadly, in his own letter, he asserts that “At no time did I ever think or suspect or know that anything that I was doing was in any way shape or form against the law because if others were doing it I thought that it must be OK.” (Fernandez Ltr. 3 (emphasis in original)). In a half-hearted attempt to reconcile this belief with his claim to credit for accepting responsibility for his offense, Fernandez attempts to blame two members of the charged conspiracy, Michael Oiring and another co-conspirator not named herein (“CC-1”), for what he describes as an unknowing descent into criminality. Fernandez claims that beginning in 2009, he “worked for” Oiring and CC-1 in an effort to earn money so that he could support his daughter, not realizing that in doing so he was actually committing a crime. (Sentencing Mem. 3-4). Fernandez asserts that while he described himself to Oiring and CC-1 as a sophisticated penny stock promoter with a “black book” of investors who could generate retail trading volume for targeted stocks and access to numerous marketing channels, he was nothing of the sort. Instead, according to Fernandez, he was secretly outsourcing the marketing work to third parties who were doing the work for him, and he lied about having access to retail trading customers, apparently soliciting money from Oiring and CC-1 based on fraudulent representations that some portion of the money was going to be used to generate retail trading activity. Fernandez himself tries to justify what he alleges is deception of other criminals as “faking it until I make it.” (Fernandez Ltr. 4).
In reality, Fernandez was making it by faking it – making hundreds of thousands of dollars in profits by disseminating fake information to prospective investors, and helping artificially manipulate the prices of penny stocks, to the detriment of retail investors, in exchange for large amounts of money from many others, not simply Oiring and CC-1. Fernandez’s fakery was on display during the first pump and dump scheme captured over the Title III interception that, along with substantial other evidence, led to Fernandez’s arrest and prosecution—a scheme involving a company called Emerging World Pharma, Inc., which trades under the symbol “EWPI.” As described in previously-filed documents in the case, Donna Levy served as a lead promoter in the scheme; she in turn engaged CC-1, along with other touters and market manipulators, in an effort to increase the liquidity and price of EWPI. During the afternoon of understood from this information that insiders would be getting out of the stock during the next day as the stock promotion peaked. That same afternoon, CC-1 informed Fernandez of the nature and timing of the scheme, and Fernandez decided to purchase stock in EWPI before the “pump” phase of the scheme was carried out, and to participate himself in promoting the stock:
CC-1: Were you able to buy that stock I gave you [i.e., EWPI]?
FERNANDEZ: Yes, I did, I bought 10,000 shares. I wish I would’ve bought more when I saw it at the end of the day at 62 [cents]. Jesus man, what a play.
CC-1: Just so you know, just so you know tomorrow morning’s gonna open up huge.
FERNANDEZ: Wow.
CC-1: So start exiting at some point tomorrow; watch that thing, okay?
FERNANDEZ: Okay. Dude, keep them coming. Fantastic.
CC-1: No problem, bro. If you want to put it on your Twitter, you can now because I’m going out on my email today.
FERNANDEZ: Okay. Alright, consider it done. I’ll be putting it on there shortly.
CC-1: So at least you can get a little credit for it.
FERNANDEZ then asked CC-1 to “check out” his website, pennywinners.com. The next morning, on or about April 6, 2010, at 10:49 a.m., CC-1 participated in another call with FERNANDEZ. During the call, CC-1 asked, “Ok, did you sell your EWPI?” FERNANDEZ replied, “Oh yeah, I sold that shit at 87 [cents]. What a profit! What a profit!” CC-1 replied, “Good for you.”
Fernandez thus knew on April 5, 2010, that EWPI was to be the target of manipulation activities that evening into the next morning; that EWPI would likely peak during the morning of April 6, 2012; and that EWPI would then be likely to decline precipitously after that — all events that in fact came to pass. Fernandez then took advantage of the inside information he had obtained concerning the manipulation scheme, effectively doubling his money in less than a day by buying shares of EWPI before the scheme took hold and selling his shares the next morning before it collapsed, leaving unsuspecting investors holding soon-to-be valueless shares that FERNANDEZ had sold to them at a hefty profit. But he did not stop there. As promised, and as reflected on pennywinners.com, Fernandez posted a tout concerning EWPI on April 5, 2012.1
Viewers of the home page likely would have seen, among other things, Fernandez’s representations that his stock picks were based on “Hours of Due Diligence”; that he had “Decades of Experience” picking stocks; and that he conducted “In Depth Scans and DD [due diligence] Concerning Our Picks.” Each of these assertions was a lie, based on the Title III intercepts reflecting that Fernandez posted stock purchase recommendations that were based not on scans or due diligence, but on the coordinated and paid-for efforts of market manipulators, and based on Fernandez’s own assertions in his sentencing submission that he had no experience in the penny stock industry, much less “Decades” of it.
The tout concerning EWPI is no better: it lists EWPI as “our Next Big Pick! Since 1996 EWPI has been producing top quality USP generics at competitive prices based on a low overhead corporate model. . . . We believe that this company has a lot going for it and we recommend that everyone puts it on their watch list! Last price is .62 per share and technical indicators are pointing up! This week we expect the stock to see continued buying pressure.” Fernandez had no basis, at the time he posted this information, to know whether EWPI had “been producing top quality USP generics at competitive prices” (in fact it had not). His exhortation to the investing public that “everyone put[] it on their watch list” was a trick, intended to get unsuspecting investors to buy stocks from people with access to inside information concerning the timing of the scheme, who would be selling the next day—people like himself. And his claims that “technical indicators are pointing up!” and that “[t]his week we expect the stock to see continued buying pressure” were outright lies, based on Fernandez’s lack of awareness of any technical indicators recommending purchase of the stock, and his knowledge that the “buying pressure” he was describing would evaporate the next morning, rather than in a week’s time. That is why Fernandez himself intended to sell, and in fact sold, his shares the morning after he bought them — facts that he did not disclose to investors who would have received Fernandez’s tout concerning EWPI.
The EWPI scheme is illustrative of the enthusiasm with which he approached manipulation activities and his lack of regard for the truth or for the investing public when carrying out the scheme, but it is far from the most significant—in other instances, including the scheme involving the stock trading under symbol MRNJ, Fernandez served in a much more significant role in receiving funds from promoters and distributing them to a network of touters that he maintained to help him carry out the goal of the scheme, and he made far more money from his role in the scheme. In 2009 and 2010, Fernandez took in just shy of $1 million in gross revenue from market manipulation activities, over $250,000 of which was wire transferred from an offshore trading account that co-conspirators other than Oiring and CC-1 used to facilitate market manipulation activities. His effort to lay blame for his predicament at the feet of his co- defendants in this case, e.g., his claim that he is going to have to pay “dearly” because he “unknowingly overlooked several important details when I started to work with two of the codefendants” Fernandez Ltr. 4) utterly fails to account for his extensive participation in market manipulation activities with others beside Oiring or CC-1.
Moreover, the evidence does not bear out Fernandez’s claim that his net revenue from that inflow of funds was less than $160,000, his tax returns notwithstanding. In fact, a analysis of Fernandez’s financial transactions through bank accounts maintained in the name of his business reflects that he profited over twice that amount, approximately $330,000, during the relevant period, including making $37,900 in payments to his father, $10,000 of which went for a partial payment on a Mercedes Benz; over $70,000 in check (debit) card purchases; over $200,000 in transfers to his personal bank account; over $2500 in payments on a Buick; and almost $10,000 in cash withdrawals. And while Fernandez claims a lack of concern for material goods, lack of substantial income, and lack of current resources in his letter, Fernandez also had a luxury car, a five-bedroom home in an upper-class neighborhood (PSR ¶ 60), and at least according to account application documents submitted by the defendant to two different brokerage firms in mid-2010, a net worth of over $1 million, in part as a result of his participation in the scheme.2
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