Manhattan U.S. Attorney Announces Charges Against Former Stockbroker In Bribery Scheme
Preet Bharara, United States Attorney for the Southern District of New York, and Mary Galligan, the Acting Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced that CHRISTOPHER KLINE, a former stockbroker, was charged for his participation in a bribery scheme involving G&S Minerals, Inc. (“G&S”) common stock. KLINE surrendered this morning and will be presented in federal court in Harrisburg, Pennsylvania, later today.
Manhattan U.S. Attorney Preet Bharara stated: “Stockbroker bribery by promoters is another form of corruption that undermines confidence in our markets and picks the pockets of investors. As alleged, Mr. Kline violated the law and threw aside his duty as a broker to investors.”
FBI Acting Assistant Director-in-Charge Mary Galligan stated: “Kline is alleged to have been in the middle of a conspiracy to manipulate the market for G&S stock. Had he not been dealing with an FBI informant, real investors would have been victimized by Kline’s role in the scheme of bribes and kickbacks. To protect the integrity of the marketplace, the FBI will continue actively to look for unscrupulous players.”
The following allegations are based on the Indictment unsealed today in Manhattan federal court:
From July 2007 through February 2008, KLINE participated in a scheme in which one of his clients, William Curtis, agreed to pay secret cash bribes to a confidential informant (“CI”) working with the FBI. The CI posed as a financial advisor who purportedly convinced “investors” to purchase G&S common stock, which Curtis controlled, in exchange for receiving the bribes from Curtis. G&S was a Nevada Corporation whose common stock was publicly traded on the Pink Sheets, an inter-dealer quotation service that provides financial information for certain over-the-counter securities and issuers. One purpose of the bribes was for Curtis to sell his G&S stock, which he did through accounts managed by KLINE.
KLINE acted as the middle-man between Curtis and the CI. Curtis agreed to pay the CI a kickback of 30 percent of any orders placed by the CI, and the CI, in turn, agreed to pay 10 percent of the kickback to KLINE for his role in the scheme. In conversations recorded by the FBI, KLINE, among other things, (1) discussed with the CI specific price and volume targets for the purchases and orders placed by the CI on behalf of his “investors,” (2) facilitated the bribe payments from Curtis to the CI, and (3) was overheard collecting his 10 percent kickback.
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KLINE, 48, is charged with one count of participating in a conspiracy to commit securities fraud and commercial bribery, and one count of securities fraud. The charges carry a maximum combined penalty of 25 years in prison and a maximum fine of $5 million. In addition, the Indictment seeks forfeiture of the proceeds obtained by the defendant for his commission of the offenses.
The case has been assigned to U.S. District Judge Shira A. Scheindlin. KLINE will make his first appearance in Manhattan federal court on October 2, 2012 at 3:30 p.m.
Curtis, 50, a resident of Naperville, Illinois, pled guilty on October 2, 2009, in Manhattan federal court before United States District Judge Samuel Conti to one count of participating in a conspiracy to commit securities fraud and commercial bribery, and one count of securities fraud. On June 2, 2010, Chief United States District Judge Loretta A. Preska sentenced Curtis to three years of probation and ordered him to pay a $200 special assessment.
The charges against KLINE are the result of a wide-ranging FBI undercover investigation of related stockbroker bribery schemes involving US-based, Canadian-based and Costa Rican-based stock promoters and stockholders. Mr. Bharara praised the work of the FBI, the Vancouver Integrated Market Enforcement Team of the Royal Canadian Mounted Police, the Vancouver Police Department, the Criminal Prosecution Assistance Group of FINRA, and the U.S. Securities and Exchange Commission for their assistance in this investigation.
This case is being prosecuted by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney John J. O’Donnell is in charge of the prosecution.
The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.