April 6, 2010
SECOND MAXIMUM DYNAMICS PRINCIPAL IS SENTENCED TO HOME CONFINEMENT FOR CONSPIRACY TO DEFRAUD THE IRS AND SEC
DENVER – Joshua Neale Wolcott, age 36, of Denver, Colorado, was sentenced April 1, 2010, by U.S. District Court Judge John L. Kane to serve 6 months of home confinement as part of a 5 year term of supervised release for conspiracy to defraud the Internal Revenue Service (IRS) and the U.S. Securities and Exchange Commission (SEC), United States Attorney David Gaouette, Special Agent in Charge of the IRS Criminal Investigation for the Denver Field Office Christopher M. Sigerson, and U.S. Postal Inspector in Charge in Denver Shawn S. Tiller announced. Wolcott was also ordered to pay $127,000 in restitution to company shareholders-investors, who reported that they were victims of the fraud.
Wolcott’s co-defendant, Eric Richfield Major, was sentenced on March 19, 2010, to 5 years in federal prison, and was also ordered to pay $127,000 to responding shareholders-investors.
Joshua Neale Wolcott was indicted by a federal grand jury in Denver on November 28, 2007. He was later charged by Information which resulted in a guilty plea before Judge Kane on July 11, 2008. He was sentenced on April 1, 2010.
According to the facts contained in the defendant’s plea agreement, Maximum Dynamics, a company formerly based in Colorado Springs, Colorado, became a publicly-traded company subject to SEC reporting in August 2002. The stock was traded on the OTC Bulletin Board, an electronic stock quotation system typically used to facilitate the trading of stock of small capitalized companies. Maximum was described in its initial SEC filings as a development stage company offering customized computer software for financial institutions. Maximum later described itself as a project development company involved with various developmental technology projects, including a wireless tracking system and a wireless mobile point-of-sales terminal. The company moved a significant portion of its operations to South Africa in 2003. The company represented that it had offices in Mexico and in other foreign countries through business partners.
Between August 2000 and April 2005, Eric Majors and Joshua Wolcott conspired to cause materially false information to be included in Maximum Dynamics’ quarterly and annual statements and other reports and documents filed with the SEC. Majors and Wolcott used the names and identities of unwitting Mexican nationals and shell companies to issue stock as compensation for consulting services purportedly done for the company. Majors and Wolcott maintained control of this stock, sold the stock and used the proceeds for their own enrichment and purposes, including as a source of financing for Maximum.
Majors and Wolcott sold Maximum Dynamics stock issued to Mexican nominees on the open market, through brokerage accounts opened in the names of the nominees, to individual investors or entities through private sales arranged by, at the direction or on behalf of Majors and/or Wolcott.
They would then use the proceeds of the stock sales for their own personal use and personal expenses, to make payments to relatives and pay for their personal expenses, to pay Maximum employees and bona fide Maximum consultants for their work for Maximum or for other expenses incurred in connection with developing the business of Maximum.
The IRS was unaware that the stock sales were attributable to either Majors or Wolcott or that either defendant was responsible for the taxes owed on any gains from the sales as the stock was held in nominee names. As a result of the net proceeds realized by the defendants from the sale of Maximum and non-Maximum stock that was sold in the names of the Mexican nominees, the government calculates the unpaid tax of $402,004, based on the realized gains of $1,262,258.
The case was investigated jointly by the U.S. Postal Inspection Service and IRS Criminal Investigation, based on a criminal referral from the SEC, through its Denver Regional Office.
This case was prosecuted by Assistant U.S. Attorney Kenneth Harmon.
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