New Jersey Attorney Charged In Securities Fraud Scheme
Lawyer allegedly participated in scheme to lie in public filings and obstruct the SEC
SAN FRANCISCO – Gregg Jaclin, an attorney and resident of New Jersey, was indicted today for his role in an alleged securities fraud scheme, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. According to the indictment, Jaclin, through the law firms at which he worked, conspired with another individual in a scheme to create and sell public shell companies with no ongoing business but which, in on their Securities and Exchange Commission (SEC) filings, were represented to be owned and controlled by various individuals and were legitimate businesses. In reality, they were shell companies created by one individual and meant for one purpose—selling them to others, who in some cases used them as vehicles for securities market manipulation schemes. Jaclin and the other individual also allegedly obstructed multiple SEC investigations into their conduct.
According to the indictment filed today, since at least March of 2008, Jaclin, 47, of Princeton Junction, New Jersey, was a licensed attorney who specialized in creating and taking public small companies. After helping companies through what the indictment alleges was referred to as his “self-filing process” to take companies public, Jaclin would frequently facilitate the sale of the companies that he and his co-conspirator created, in a “reverse merger” with a privately traded company owned by others. According to the indictment, Jaclin conspired to misuse this process in a way that violated federal law. Specifically, with Jaclin’s knowledge, his co-conspirator allegedly found individuals who would serve as sham nominee chief executive officers (CEOs) of the companies. These nominee CEOs, on paper, served as majority shareholders and sole directors of the companies. Nevertheless, in reality they did little more than receive payment for signing documents. The nominee CEOs exerted no control over the companies and took directions from Jaclin’s co-conspirator. Similarly, Jaclin’s co-conspirator allegedly recruited sham minority shareholders as part of the scheme. With Jaclin’s knowledge, money was fronted to these shareholders to purchase the securities of the companies, and fraudulent business plans were drafted for the companies, purporting to demonstrate the companies had real plans to engage in business and grow. In actuality, the companies were created and maintained for the sole purpose of being sold as a shell to purchasers who, either individually or as a group, wished to control all of the shares of the company. The companies were then, in most cases, used as a vehicle for a reverse merger, and the stock of the resulting companies was, in some instances, subject to market manipulation.
To assist in the scheme, Jaclin allegedly prepared and directed the filing of numerous fraudulent documents to create the companies, register their shares for public sale, and sell the companies in a reverse-merger transaction. According to the indictment, the documents that Jaclin and his co-conspirator filed with the SEC contained misrepresentations, promises, and omissions that allowed the shares of the companies to become publicly tradable. Following the reverse mergers, later investors who looked at the SEC filings would be misled into believing that the companies had legitimate histories of actual business and numerous shareholders when, in reality, the original company was a shell with only one person controlling all the stock. Jaclin is also accused of corruptly obstructing and impeding the proceedings on the SEC with respect to two separate companies.
In sum, Jaclin was charged with conspiracy, in violation of 18 U.S.C. § 371; securities fraud, in violation of 15 U.S.C. §§ 78j(b), 78ff and 17 C.F.R. § 240.10b-5; false filing under the Securities Exchange Act of 1933, in violation of 15 U.S.C. §§ 78j(b) and 78ff; false filing under the Securities Act of 1933, in violation of 15 U.S.C. §§ 77q(a) and 77x; scheme to conceal a material fact from a government agency, in violation of 18 U.S.C. § 1001(a)(1); false writings to a government agency, in violation of 18 U.S.C. § 101(a)(3); and two counts of obstruction of the proceedings of the SEC, in violation of 18 U.S.C. § 1505.
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the maximum penalty for conspiracy is five years’ imprisonment and a $250,000 fine, the maximum penalty for securities fraud and false filing under the Exchange Act of 1934 is 20 years’ imprisonment and a $5,000,000 fine; the maximum penalty for false filing under the Securities Act of 1933 is five years’ imprisonment and a $10,000 fine; the maximum penalty for scheme to conceal a material fact from a government agency, false writings to a government agency, and each count of obstruction of proceedings before the Securities and Exchange Commission is five years of imprisonment and a $250,000 fine. Any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Jaclin is scheduled to appear on June 8, 2017, at 9:30 a.m., before U.S. Magistrate Judge Laurel Beeler for arraignment.
Assistant U.S. Attorney Benjamin Kinglsey is prosecuting the case with the assistance of Claudia Hyslop, Denise Oki, and Bridget Kilkenny. The prosecution is the result of an investigation by the Federal Bureau of Investigation.