Attorney Indicted for Conspiracy and Wire Fraud in Stock Registration and Manipulation Scheme
WASHINGTON – A securities attorney was charged in an indictment unsealed today with participating in a stock registration evasion scheme involving nine different publicly traded companies and with defrauding investors in a manipulation scheme related to three of the companies, Acting Assistant Attorney General Rita M. Glavin of the Criminal Division and Acting U.S. Attorney Dana J. Boente for the Eastern District of Virginia announced.
Phillip Windom Offill, Jr., of Dallas, was indicted on Thursday, March 12, 2009, in U.S. District Court in the Eastern District of Virginia. The defendant is charged with one count of conspiracy to commit registration violations, securities fraud and nine counts of wire fraud. The indictment also seeks approximately $15 million in forfeiture from the defendant.
In related actions, the U.S. Securities and Exchange Commission (SEC) has enforcement actions against Offill pending in federal district courts in Michigan and Texas.
Offill was taken into custody in Dallas this morning. He is scheduled for arraignment on Friday, March 27, 2009, at the federal courthouse in Alexandria, Va.
According to the indictment, Offill, an attorney in Dallas, was retained by David Stocker, a Phoenix attorney who pleaded guilty earlier this week to conspiracy to commit securities fraud in the Eastern District of Virginia. The indictment charges that Offill and Stocker employed a method to evade federal securities registration requirements in order to provide co-conspirators with millions of unregistered and "free-trading" shares of nine companies’ common stock that the co-conspirators could not have otherwise legally obtained. The indictment alleges many of the shares were subsequently sold by co-conspirators to the general investing public. By evading the registration requirements, the co-conspirators were able to hide from the investing public the actual financial condition and business operations of the companies. The companies included Emerging Holdings Inc.; MassClick Inc.; China Score Inc.; Auction Mills Inc.; Custom-Designed Compressor Systems Inc.; Ecogate Inc.; Media International Concepts Inc.; Vanquish Productions Inc.; and AVL Global Inc.
The indictment also alleges that, in connection with Emerging Holdings, MassClick, and China Score, Offill knowingly participated in a conspiracy known as a "pump-and-dump" scheme to manipulate the price of these companies’ securities. The indictment alleges that co-conspirators falsely manipulated the price and volume of some of the companies’ stock by making materially false and misleading statements in press releases and in spam emails distributed by co-conspirator Justin Medlin and other spammers to tens of millions of email addresses throughout the United States in an effort to create artificial demand for the three companies’ stock. After fraudulently "pumping" the market price and demand for the companies’ stock, co-conspirators allegedly "dumped" shares by selling them for large profits to the general investing public in the over-the-counter market through listings on Pink Sheets, an inter-dealer electronic quotation and trading system. These shares were purchased by unsuspecting investors, including investors in the Eastern District of Virginia, and were often rendered virtually worthless.
If convicted on all charges, Offill would face a maximum prison sentence of 185 years.
An indictment is merely a charge and a defendant is presumed innocent until proven guilty.
Nine other defendants have pleaded guilty and eight of them have been sentenced in federal court in Alexandria, Va., for their roles in related stock manipulation schemes. David B. Stocker pleaded guilty on Wednesday, March 11, 2009, and will be sentenced on November 6, 2009. Michael R. Saquella was sentenced to 10 years in prison; Justin Medlin was sentenced to six years in prison; Steven P. Luscko and Gregory A. Neu were each sentenced to five years in prison; Lawrence Kaplan was sentenced to three years in prison; Brian G. Brunette was sentenced to a one year in prison; Anthony Tarantola was sentenced to six months in prison; and Henry "Hank" Zemla was sentenced to three months in prison.
The case, which was referred by the Financial Industry Regulatory Authority (FINRA), was investigated by the FBI and the U.S. Postal Inspection Service, with assistance from the Virginia Securities Division. The case is being prosecuted by Assistant U.S. Attorneys Patrick Stokes and Ed Power of the Eastern District of Virginia and Deputy Chief Steve Linick of the Criminal Division’s Fraud Section. The Department of Justice acknowledges the substantial assistance of FINRA and the SEC in its investigation. It would also like to thank the Virginia State Corporation Commission, Division of Securities and Retail Franchising, for its assistance.