CEO Pleads Guilty To Securities Kickback Scheme
BOSTON – The CEO of two publicly-traded companies was convicted today on charges that he paid kickbacks in return for purchases of his companies’ stock.
Shailesh Shah, 48, of Chino, Calif., pleaded guilty before U.S. District Judge Richard G. Stearns to two counts of mail fraud and two counts of wire fraud. Sentencing is scheduled for Oct. 23, 2014.
Shah was the President and Chief Executive Officer of two publicly-traded companies, SOHM, Inc. and Costas, Inc. Shah agreed to pay secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in these two companies. The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents. In actuality, however, and unbeknownst to Shah, the purported investment fund representative was an undercover FBI agent.
The plea follows a lengthy investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly-traded companies whose stock often trades at pennies per share.
The charging statutes provide a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gain or loss on each count. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
United States Attorney Carmen M. Ortiz and Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement today. U.S. Attorney Ortiz expressed appreciation for the significant assistance her office received from the U.S. Securities and Exchange Commission. The case is being prosecuted by Assistant U.S. Attorney Alexander H. Berlin.
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.