Two Individuals Plead Guilty To Securities Kickback Scheme
BOSTON – In two related, but separate proceedings, an executive of two publicly-traded companies and an advisor, pleaded guilty today to using kickbacks in order to trigger investments in thinly-traded stocks.
Seijin Ki, 42, of Toronto, Canada pleaded guilty to wire and mail fraud arising out of his participation in a deal that was part of an undercover FBI operation. Ki admitted to paying secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in a two publicly-traded companies, Lightlake Therapeutics, Inc. and Church & Crawford, Inc. Ki was an executive with both companies. The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents. What Ki did not know was that the purported investment fund representative was actually an undercover agent.
Kelly Black-White, 52, of Mesa, Ariz. pleaded guilty to conspiracy to commit securities fraud and wire fraud arising out of her role in a similar deal that was part of the same undercover FBI operation. Black-White, the operator of Premier Funding, Inc. and Premier Services, Inc. provides investor and public relations services to publicly-traded companies. Black-White admitted to referring executives of publicly-traded companies to the investment fund representative so that those executives could enter into the kickback arrangement. In exchange, Black-White accepted a portion of the kickbacks paid by the executives.
The pleas followed a year-long investigation focusing on preventing fraud in the micro-cap 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 Securities and Exchange Commission.
Ki and Black-White are two of 15 defendants charged criminally in this undercover operation. Thirteen of those charged, including Ki and Black-White, pleaded guilty and two were convicted after trial. Two defendants are scheduled for trial in October 2013.
United States District Court Judge William G. Young scheduled sentencing for Ki for Dec. 9, 2013. Black-White is scheduled to be sentenced by US District Court Judge Denise J. Casper on Jan. 29, 2014.
The statutory maximum penalties for the securities fraud conspiracy charges are 25 years in prison, three years of supervised release and a $250,000 fine and the statutory maximum penalties for mail and wire fraud are 20 years in prison, 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 bringing these charges as well as those against the other defendants.
United States Attorney Carmen M. Ortiz and Vincent B. Lisi, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, announced the conviction today. The case is being prosecuted by Assistant U.S. Attorneys Sarah E. Walters, Vassili Thomadakis and Eric Christofferson 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.