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CEO Pleads Guilty to Securities Kickback Scheme
FEBRUARY 12, 2013

BOSTON - The CEO of a publicly-traded company was convicted today on charges that he paid kickbacks in return for purchases of his company’s stock.

Muhammad (M.J.) Shaheed, 45, pleaded guilty before U.S. District Judge Douglas P. Woodlock to three counts of wire fraud and three counts of mail fraud. Sentencing is scheduled for June 3, 2013.

Shaheed, who was the CEO of a publicly-traded company, Augrid Global Holdings Corporation, paid secret kickbacks to an investment fund representative. In exchange, the fund representative used fund monies to purchase stock in Shaheed’s company. The kickbacks were concealed through sham consulting agreements and other fraudulent documentation. In actuality, however, and unbeknownst to Shaheed, the purported investment fund representative was an undercover FBI agent.

The plea followed a year-long investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small, publicly-traded companies whose stock often trades at pennies a share. Fraud in the microcap markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the SEC.

Shaheed is one of 15 defendants criminally charged for participating in this kickback scheme. Six of those charged have now pleaded guilty.

The statutory maximum sentence for each count is 20 years in prison, followed by three years of supervised release and a $250,000 fine.

The Securities and Exchange Commission, which conducted a parallel civil investigation alongside the FBI undercover operation, cooperated with criminal authorities in the investigation.

United States Attorney Carmen M. Ortiz and Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation Boston Field Division, made the announcement today. The case is being prosecuted by Assistant U.S. Attorneys Sarah E. Walters and Vassili Thomadakis of Ortiz’s Economic Crimes Unit.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.

 

 

 

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