Former NutraCea CEO Indicted for Securities Fraud
|U.S. Attorney’s Office April 16, 2012|
PHOENIX—Bradley David Edson, 51, of Scottsdale, Arizona, was indicted by a federal grand jury on April 11, 2012, for one count of conspiracy to commit securities and wire fraud, one count of securities fraud, nine counts of wire fraud, five counts of false certification on periodic reports, four counts of false statements to auditors of a publicly traded company, and seven counts of transactional money laundering. Edson is to be arraigned on the charges on May 2, 2012 at 10:30 a.m. before U.S. Magistrate Judge Edward C. Voss.
“The SEC was created during the peak of the Great Depression to restore investor confidence in our nation’s capital markets by requiring publicly traded companies to provide investors truthful and reliable information about their businesses,” said Acting U.S. Attorney Ann Birmingham Scheel. “The U.S. Attorney’s Office will continue to work with our law enforcement partners to dismantle and prosecute complicated securities fraud schemes designed to hide the truth from investors who rely on the financial markets to help secure their futures.”
“This indictment is an example of the complex, white-collar cases our agency has a reputation for investigating. The case against Mr. Edson involves a number of entities and a variety of complicated financial transactions. IRS Special Agents have the training and expertise to unravel these types of activities,” said Dawn Mertz, Special Agent in Charge of the Phoenix Field Office of Internal Revenue Service, Criminal Investigation.
FBI Special Agent in Charge James L. Turgal, Jr., Phoenix Division stated, “The indictment of Bradley Edson for Securities Fraud is based on the investigative efforts by the Internal Revenue Service and the FBI. These alleged schemes led to numerous investors being defrauded. This indictment illustrates the investigative expertise of the IRS and the FBI to address complex securities fraud cases. The FBI will continue to work with our law enforcement partners and the U.S. Attorney’s Office in combating sophisticated securities fraud matters.”
The indictment alleges that, from December 2005 to March 2009, Edson served as the president and chief executive officer of NutraCea, a publicly traded Arizona neutraceutical company that developed, manufactured, and distributed different forms of stabilized rice bran. The indictment also alleges that, as a publicly traded company, NutraCea was required to comply with the rules and regulations of the United States Securities and Exchange Commission (SEC), which required it to: (1) make and keep books, records, and accounts that accurately and fairly reflected NutraCea’s transactions and the disposition of its assets; (2) devise and maintain a system of internal accounting controls that provided reasonable assurances to the investing public that its transactions were recorded in a way that would permit accurate preparation of financial statements; and (3) file quarterly and annual reports with the SEC that accurately and fairly presented NutraCea’s financial condition, which were to be certified by certain NutraCea executives.
The indictment alleges that Edson, as NutraCea’s CEO, perpetrated a scheme to defraud investors, the SEC, and NutraCea’s auditors in order to inflate NutraCea’s stock price, to obtain proceeds from the sale of inflated NutraCea stock, and to obtain financial and other compensation from NutraCea. The indictment alleges that Edson furthered the scheme as follows:
- In 2006, Edson executed sham agreements so that NutraCea could report an additional $750,000 in sales, which artificially inflated its net income from approximately $750,000 to approximately $1,500,000;
- In 2007, Edson engaged in sham transactions to artificially inflate NutraCea’s income by $3.6 million;
- In early 2008, Edson deceived NutraCea’s auditors into approving and recording a 2007 sale of its “Rice ‘n’ Shine” product, worth $1.9 million;
- Edson falsely certified to the SEC that NutraCea’s public filings were fairly presented, even though he knew that NutraCea’s revenues were artificially inflated; and
- Edson covertly received a $600,000 kickback from a debt acquisition deal, thereby depriving NutraCea and its investors of their rights to Edson’s honest and faithful services as the CEO.
A conviction for securities fraud carries a maximum penalty of 25 years in prison, a $250,000 fine, or both. A conviction for false certification on a periodic report carries a maximum penalty of 20 years in prison, a $5,000,000 fine, or both. Convictions for conspiracy to commit securities and wire fraud, wire fraud, and false statements to an auditor each carry a maximum penalty of 20 years in prison, a $250,000 fine, or both. A conviction for transactional money laundering carries a maximum penalty of 10 years in prison, a $250,000 fine, or both. In the event Edson is convicted of any of these offenses, U.S. District Judge James A. Teilborg will consult, but is not bound by, the U.S. Sentencing Guidelines in determining a sentence.
An indictment is simply a method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.
The investigation in this case was conducted by the Internal Revenue Service-Criminal Investigation and the Federal Bureau of Investigation. The prosecution is being handled by Assistant United States Attorney Raymond K. Woo, District of Arizona, Phoenix.