WASHINGTON – A Sarasota, Fla., man has been sentenced to five years in prison and two years of supervised release for conspiring to commit both securities fraud and email fraud stemming from stock manipulation scheme involving four publicly-traded companies – Masslick Inc., eDollars Inc., Emerging Holdings Inc., and China Score Inc. – Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney Chuck Rosenberg for the Eastern District of Virginia announced today.
Stephen P. Luscko, 39, was sentenced today in federal court in Alexandria, Va. Luscko’s co-conspirators included Gregory Alphonse Neu, 30, of Boca Raton, Fla., and Brian George Brunette, 29, of Miramar, Fla., who were previously sentenced for their roles in the stock manipulation schemes. Neu was sentenced to five years in prison and three years supervised release; Brunette, who only participated in the stock manipulation scheme involving Massclick, was sentenced to one year and a day in prison and three years supervised release. The District Court will resolve outstanding restitution issues on June 8, 2007. The government has seized more than $3 million from bank accounts associated with the co-conspirators.
In a related action, the U.S. Securities and Exchange Commission has also filed civil charges against Neu, Luscko, and three of the companies for their part in the fraudulent schemes to manipulate the price and volume of the companies’ securities.
According to the charges to which the three defendants pleaded guilty last year, the co-conspirators touted: Massclick to the investing public as an Internet marketing company located in Hollywood, Fla., that brokered the sale of goods and services online; eDollars as an online payday loan company located in Sarasota, Fla.; Emerging Holdings as a company located in Reston, Va., involved in technology sales in emerging foreign markets in the Middle East and China; and China Score as the first company to establish a national credit scoring system for China. In reality, however, each company’s place of business was nothing more than a private mailbox and none of the companies had a viable business operation, tangible assets, or business prospects.
The co-conspirators controlled the free trading shares of the companies’ stock and falsely manipulated the price and volume of each companies’ stock by making materially false and misleading statements in press releases and in spam emails distributed to hundreds of thousands of email addresses throughout the United States, including in the Eastern District of Virginia, in an effort to create artificial demand for the stock. After successfully pumping up the price of each company’s stock, the co-conspirators dumped the shares that they controlled into the market, realizing $6.8 million in profit. These shares were purchased by unsuspecting investors, including investors in the Eastern District of Virginia, and were rendered virtually worthless.
To effectuate the spam email campaigns, the co-conspirators hired a promoter to distribute the spam email to individuals throughout the United States, primarily to email accounts registered with American Online through AOL’s servers located in the Eastern District of Virginia.
The case, which was referred by the NASD, Inc. (formerly known as the National Association of Securities Dealers), was investigated by the Federal Bureau of Investigation and the U.S. Postal Inspection Service, with assistance from the Virginia Securities Division and AOL. It is being prosecuted by Assistant U.S. Attorney Patrick Stokes of the U.S. Attorney’s Office for the Eastern District of Virginia, Acting Deputy Chief Steve Linick and Trial Attorney Suzanne R. Clement of the Fraud Section of the Criminal Division at the U.S. Department of Justice, Washington, D.C., with significant assistance from the SEC’s Los Angeles Regional Office, which conducted its own parallel investigation.