WASHINGTON - A 24-count indictment charging five individuals with various crimes arising from an alleged scheme to defraud investors through the manipulation of the publicly traded stocks of three companies was unsealed today in Tulsa, Okla., announced Acting Assistant Attorney General of the Criminal Division Rita M. Glavin and U.S. Attorney for the Northern District of Oklahoma David E. O’Meilia.
The indictment, returned by a federal grand jury in Tulsa on Jan. 15, 2009, alleges the scheme reaped the defendants in excess of $41 million.
G. David Gordon, 47, a Tulsa, Okla., attorney, and Richard Clark, 61, also of Tulsa, were arrested and are scheduled to make their initial appearance today in the U.S. District Court for the Northern District of Oklahoma. Louisville, Ky., attorney James Reskin, 50, was also arrested today and is scheduled to make his initial appearance in the U.S. District Court for the Western District of Kentucky. Dean Sheptycki, 41, a resident of the Bahamas, was arrested by Bahamian authorities today and currently awaits extradition to the United States. The indictment also charges Dallas-area resident Joshua Wayne Lankford, 35, in the scheme to defraud.
Two companies based in Tulsa at the time of the alleged scheme were among those whose stock was manipulated: Deep Rock Oil & Gas, Inc. and Global Beverage Solutions, Inc., formerly known as Pacific Peak Investments. The third company, National Storm Management Group, Inc., is based in Glen Ellyn, Ill.
The indictment alleges that between April 2004 and December 2006, the defendants devised and engaged in a scheme to defraud investors known as a "pump and dump," in which they manipulated three publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges.
According to the indictment, the defendants executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained.
According to the indictment, the defendants hid and "parked" their shares with various nominees, such as friends, relatives, or other entities that they owned and controlled. Subsequently, they allegedly engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they conducted massive promotional campaigns in which unsolicited fax and e-mail "blasts" were sent to millions of recipients. According to the indictment, these blasts touted the respective stocks without accurately disclosing who was paying for the promotions, omitted that the defendants intended to sell their shares, and induced unsuspecting legitimate investors to purchase stock in the companies. The defendants and their nominees allegedly took significant profits by selling large amounts of shares after they had artificially inflated the stock price. For each of the three manipulated stocks, the defendants’ alleged sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
The indictment charges all five defendants with one count of conspiracy to commit securities fraud, wire fraud, and money laundering, nine counts of wire fraud, five counts of securities fraud, and six counts of money laundering in connection with the manipulation of three penny stocks. Gordon is also charged with one count of making a false statement in a matter within the jurisdiction of the Securities and Exchange Commission (SEC) regarding the scheme to defraud. Additionally, the indictment charges Gordon with one count of wire fraud in connection with a fourth penny stock, that of International Power Group Ltd., based in New Jersey, and one count of obstruction of justice of an investigation into the alleged wire fraud violation.
According to the indictment, the defendants profited more than $41 million from the overall scheme. The indictment seeks the criminal forfeiture of $41.4 million from all five defendants in connection with the three penny stocks. Additionally, the indictment seeks criminal forfeiture of $2.74 million from Gordon in connection with the wire fraud involving the fourth penny stock.
A grand jury indictment is one method of charging defendants with alleged violations of federal law, and all defendants are presumed innocent unless and until the charges are proved beyond a reasonable doubt in a court of law.
The conspiracy and false statement charges each carry a maximum sentence of five years in prison and a $250,000 fine. Each charge of wire fraud as well as the obstruction of justice count carries a maximum sentence of 20 years in prison and a $250,000 fine. The maximum sentence for each securities fraud count is 20 years in prison and a $5,000,000 fine and the maximum sentence for each money laundering count is 10 years in prison and a $250,000 fine.
In a related action, the SEC today filed a civil enforcement action against Gordon, Lankford and Sheptycki.
On July 22, 2008, Mark Byron Lindberg, 40, of the Dallas area, pleaded guilty to a conspiracy alleging the same wire and securities fraud scheme and agreed to a $6,229,354 forfeiture judgment for his participation in the scheme that bilked investors across the nation out of millions of dollars. Lindberg admitted that he and other unnamed co-conspirators, two of them from Tulsa, attempted to illegally manipulate the stock price of various companies through a number of means including: acquiring a substantial amount of free-trading shares of stock in the companies that were concealed in various brokerage accounts; creating and distributing to the public false and misleading promotional materials; and engaging in coordinated trading of stock in order to manipulate the price of the stocks being traded, including selling their stock while at the same time encouraging the public to buy.
The case is being prosecuted by Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section, Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma, and Special Assistant U.S. Attorney Kevin Muhlendorf, who is detailed to the U.S. Attorney’s Office from the SEC. The case is being investigated by the FBI, the IRS-Criminal Investigation Division and the U.S. Postal Inspection Service.