Former CEO Of Las Vegas Company Convicted Of Securities Fraud

Richard A. Bailey, 57, of Las Vegas, Nevada has been convicted of securities fraud involving the willful distribution of unregistered shares in Gateway Distributors, Ltd., United States Attorney André Birotte Jr. announced today.    Following a three-day trial in federal district court in Los Angeles, on June 13, 2013 a jury returned a unanimous verdict finding Bailey had violated the securities laws in April and May 2004.

According to evidence presented at trial, Bailey, the former CEO and Chief Operating Officer of Gateway Distributors Ltd., a publicly-traded company whose main business involved the sale of nutritional supplements, paid over $1 million dollars worth of the corporation’s stock to Stephen Owens during a two-month period in 2004 as purported consulting fees for services provided by Owens.   Shortly thereafter, Owens liquidated the shares and wired hundreds of thousands of dollars to escrow accounts where Gateway was purchasing a resort in Utah and an office building in Las Vegas.  Prosecutors charged that the stock payments to Owens were a sham and violated the securities laws because they were not paid to Owens for bona fide services he actually performed and were paid instead with the illegal intention of raising capital for the corporation.  

At trial, the government presented evidence that the company’s financials were in trouble in 2004 and that the large stock distributions to Owens, which were immediately liquidated for the benefit of the company, were used as a means to raise capital for the company in a manner that violated the securities laws.   

The case results from an investigation by the Federal Bureau of Investigation and the United States Internal Revenue Service - Criminal Investigation Division.  Bailey is scheduled to be sentenced on September 23, 2013 by United States District Judge Otis D. Wright II.