Kentucky Attorney Pleads Guilty for Role in Stock Manipulation Scheme and Obstruction of Justice
WASHINGTON - Louisville, Ky., attorney James Reskin, 51, pleaded guilty late yesterday in U.S. District Court in Tulsa for his role in a scheme to defraud investors through the manipulation of the publicly traded stocks of three companies, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney for the Northern District of Oklahoma Thomas Scott Woodward.
Reskin pleaded guilty to one count of conspiracy to commit wire fraud, securities fraud and money laundering, as charged in the indictment returned by a federal grand jury in Tulsa on Jan. 15, 2009. Reskin also pleaded guilty to one count of obstruction of justice, contained in a criminal information filed March 25, 2010. Specifically, Reskin pleaded guilty to making false and misleading statements to the Internal Revenue Service (IRS) and to the Department of Justice regarding stock promotions and movement of stock proceeds.
Two companies based in Tulsa at the time of the alleged scheme were among those whose stock was manipulated: Deep Rock Oil & Gas Inc., and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments. The third company, National Storm Management Group Inc., is based in Glen Ellyn, Ill.
G. David Gordon, a Tulsa, Okla., attorney; Richard Clark, also of Tulsa; Dean Sheptycki, a resident of the Bahamas; and Dallas-area resident Joshua Wayne Lankford were also charged in the Jan. 15, 2009, indictment for their alleged roles in the scheme. The U.S. Securities and Exchange Commission (SEC) also filed a civil enforcement action against Gordon, Lankford and Sheptycki. Trial for Gordon and Clark is scheduled to begin April 5, 2010. Lankford and Sheptycki remain under indictment. The charges contained in the indictment are merely allegations and the defendants are presumed innocent unless and until proven guilty.
According to the indictment, between April 2004 and December 2006, Reskin and his co-conspirators devised and engaged in a scheme to defraud investors known as a "pump and dump," in which they manipulated three publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges. According to the indictment, the scheme reaped the defendants more than $41 million.
The co-conspirators allegedly executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained. Reskin admitted that he authored false documents regarding Global Beverage to further the manipulation of that company’s stock.
The co-conspirators then allegedly "parked" their shares with various nominees, such as friends, relatives or other entities that they owned and controlled to conceal their ownership. After "parking" the shares, the co-conspirators allegedly engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they allegedly conducted massive promotional campaigns in which unsolicited fax and e-mail "blasts" were sent to millions of recipients. The promotions touted the respective stocks without accurately disclosing that the co-conspirators paid for the promotions, controlled the majority of free-trading shares and intended to sell their shares. According to the indictment, the promotions induced unsuspecting legitimate investors to purchase stock in the companies. During and after dissemination of the promotions, the co-conspirators allegedly sold their stock at artificially inflated prices, leaving legitimate investors holding stock of significantly reduced value.
Reskin admitted relocating his brokerage account in order to coordinate stock trading and further the manipulation of Global Beverage stock. He also admitted using his attorney trust account to conceal ownership of Global Beverage and to transfer proceeds from the sale of stock.
The conspiracy charge to which Reskin pleaded guilty carries a maximum sentence of five years in prison and a $250,000 fine or twice the amount of the gain/loss caused by Mr. Reskin’s conduct. The obstruction of justice charge carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing has been scheduled for Aug. 25, 2010.
The case is being prosecuted by Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section, Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma, and Special Assistant U.S. Attorney Kevin Muhlendorf, who is detailed to the U.S. Attorney’s Office from the SEC. The case is being investigated by the FBI, the IRS-Criminal Investigation Division and the U.S. Postal Inspection Service.