California Financing Consultant Convicted in Kickback Scheme Sting

Boston – A California-based business consultant was convicted on Friday, May 15, 2015, for his role in a fraudulent scheme to pay kickbacks to an undercover agent posing as a corrupt hedge fund manager in order to obtain financing for small, publicly traded companies.

Sandip Shah, 41, of Chino, Calif., was convicted following a five-day jury trial on nine counts of wire fraud.  Shah was indicted in May 2014, and is scheduled to be sentenced on August 11, 2015.

Shah was involved in a scheme to pay secret kickbacks to a purported investment fund representative who had agreed to use the fund’s money to buy stock in three companies that had hired Shah to help them raise capital.  The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents.  Shah and the company executives were unaware that the purported investment fund representative was actually an undercover agent with the Federal Bureau of Investigation.

The conviction followed a year-long investigation focusing on preventing fraud in the micro-cap stock markets.  Micro-cap companies are small publicly traded companies whose stock often trades at pennies a share.  Fraud in the micro-cap 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 micro-cap stocks may be difficult for the average investor to find, since many micro-cap companies do not file financial reports with the Securities Exchange Commission.

The Securities and Exchange Commission, which conducted a parallel civil investigation alongside the Federal Bureau of Investigation undercover operation, cooperated with criminal authorities in bringing charges against Shah and 20 other defendants who participated in the kickback scheme.  All but one of those defendants has been convicted, either after trial or by way of guilty pleas, on charges arising out of their involvement in the scheme.  The sole remaining defendant is currently a fugitive. 

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.  The case was prosecuted by Assistant U.S. Attorneys Sarah E. Walters and Stephen E. Frank, Chief and Deputy Chief, respectively, 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.