Businessmen Convicted in Securities Fraud Scheme
|U.S. Attorney’s Office May 03, 2013|
BOSTON—The chief executive officer of California-based Vida Life International Ltd. and a self-described financing consultant to small and emerging companies were convicted today for their role in a securities fraud scheme.
John C. Jordan, 62, of Cameron Park, California, and James Prange, 62, of Greenbush, Wisconsin, were convicted following an eight-day jury trial. Jordan was convicted of conspiracy to commit securities fraud, four counts of wire fraud, and mail fraud. Prange was convicted of three counts of conspiracy to commit securities fraud and eight counts of wire fraud for his role in transactions involving Vida Life and two other publicly traded companies, China Wi-Max Communications Inc. and the Small Business Company Inc. U.S. District Court Judge Nathaniel M. Gorton scheduled sentencing for August 8, 2013.
Last month, executives of those companies pleaded guilty to conspiracy to commit security fraud for their roles in the scheme. Steven Berman, 50, of Hillsboro, Ohio, was the chief executive officer of China Wi-Max; Karen Person, 62, of Las Vegas, Nevada, was the chief executive officer of the Small Business Company Inc.; and Richard Kranitz, 69, of Grafton, Wisconsin, was a board member and lawyer for China Wi-Max.
The defendants were convicted for their roles in a conspiracy to pay secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in publicly traded companies that traded on the over-the-counter securities market. The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents. What the defendants did not know was that the purported investment fund representative was actually an undercover agent with the Federal Bureau of Investigation.
The convictions 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 SEC.
“It matters not whether the stock is trading at pennies per share or hundreds of dollars. Fraud is fraud and will be stringently regulated by federal authorities,” said United States Attorney Carmen M. Ortiz. “We will continue to work with our counterparts to identify and prosecute individuals engaged in schemes with the aim to manipulate the securities market and defraud investors.”
“Boston FBI agents initiated an undercover operation purposefully aimed at identifying corporate insiders engaged in the illegal manipulation of stock prices,” said Richard DesLauriers, Special Agent in Charge of the FBI’s Boston Division. “These convictions send a message that no one who is engaged in illegal activity while participating in the markets, including CEOs, traders, fund managers, equities analysts, lawyers, and publicists, is exempt from justice. The FBI’s use of undercover operations and other investigative tools to protect the integrity and transparency of financial markets will continue. During these difficult economic times, now, more than ever, the well-being of the global economy rests on the diligent enforcement of laws designed to ensure the fair and orderly operation of the capital markets.”
The statutory maximum penalties for the securities fraud conspiracy charges are 25 years in prison, followed by 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, followed by 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 and charges against 10 other defendants who participated in the kickback scheme. Six of the defendants have already pleaded guilty to charges arising out of their involvement in the scheme. The Financial Industry Regulatory Authority (FINRA) provided assistance with the trial.
United States Attorney Carmen M. Ortiz and Richard DesLauriers, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, announced the conviction today. The case was prosecuted by Assistant U.S. Attorneys Sarah E. Walters, Stephen E. Frank, and Vassili Thomadakis 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. For more information about the task force visit www.stopfraud.gov