Alabama Man Sentenced for $10.2 Million Securities Fraud Conspiracy
Scheme Targeted Thousands of Investors Nationwide
KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a Northport, Ala., man was sentenced in federal court today for his role in a $10.2 million securities fraud and wire fraud conspiracy that victimized thousands of investors across the United States and Canada who bought shares in Petro America Corporation, which was purported to be a profitable company with $284 billion in assets.
More than 12,000 victims invested in excess of $10.2 million in Petro America. Contrary to the fraudulent representations the conspirators made to victim-investors, Petro America had no oil, no realistic prospects for obtaining, transporting or storing large amounts of oil, no significant assets, no revenue and no employees other than the CEO.
Russell Hopkins, 51, of Northport, was sentenced by U.S. District Judge Brian C. Wimes to four years and three months in federal prison without parole. The court also ordered Hopkins to pay $673,465 in restitution.
Hopkins is among nine co-defendants who pleaded guilty to their roles in the scheme. Five additional co-defendants were convicted at trial, including CEO Isreal Owen Hawkins, 59, of Kansas City, Kan. Hawkins was sentenced on Oct. 8, 2013, to 30 years in federal prison without parole.
Hopkins, who pleaded guilty on July 13, 2011, admitted that he participated in a conspiracy to commit securities fraud and wire fraud that began Sept. 1, 2008. Hopkins promoted Petro America and sold shares to investors, although he was never licensed to sell securities and despite cease and desist orders from both Missouri and Kansas.
Hopkins and other conspirators used religious language in their pitches and often recruited through churches. The sale of Petro America stock was accomplished by making innumerable false misrepresentations and omissions to investors. For example, conspirators falsely claimed that Petro America was worth $284 billion and Petro America stock was worth $24 per share in order to induce people to invest. There was no basis for those numbers.
In an attempt to enable Petro to continue selling its stock after the Missouri cease and desist order was issued on Nov. 12, 2008, and to enable the conspirators to continue to profit, Hawkins gifted billions of shares to Hopkins and other co-defendants. These secondary sellers agreed to sell the stock and they often returned some of the proceeds as kick-back payments to Hawkins and others. Hopkins and other secondary sellers often represented that they were merely investors selling their own shares; they did not disclose that cease and desist orders had been issued, nor did they disclose that most or all of the shares had been gifted to them. Almost no investor proceeds were being reinvested by Petro; instead, conspirators were spending investor proceeds on personal expenditures.
From June 2009 through February 2011, Hopkins made at least $673,465 from the sale of Petro stock to at least 61 investors throughout the United States.
While much of the time Hopkins simply repeated information to investors that he had heard from others, he knew that it was incomplete and potentially misleading. In his dealings with investors, Hopkins intentionally and willfully did not provide certain material information to investors, including: 1) the existence of cease and desist orders in Missouri and Kansas; 2) specific negative information contained in the cease and desist orders; 3) the fact that the stock was unregistered; 4) the fact that the stock was either gifted to him, or sold to him at a price grossly discounted from the offer price; and 5) the fact that he was selling the investors his personal shares. When he sold the stock, Hopkins adopted numerous positive claims concerning Petro’s future potential to become a publicly traded company, and of its claimed assets, which he knew were overly optimistic and misleading.
Starting around July 2010, Hopkins agreed to pay for some of Petro’s “expenses.” In sum, Hopkins paid $32,000 out of his proceeds from the sale of his shares for expenses including Petro’s Pink Sheets registration, payments for accounting and IT work, and $500 weekly payments for Petro conference calls. Hopkins was told that Alvin Sykes was a consultant for Petro who needed to go to Washington D.C., so Hopkins paid for Sykes’s airfare and hotel.
This case is being prosecuted by Assistant U.S. Attorneys Daniel M. Nelson and Kathleen D. Mahoney. It was investigated by IRS-Criminal Investigation, the U.S. Postal Inspection Service and the Office of the Missouri Securities Commissioner.