Indictment Unsealed Alleging Fraud in Securing Investments for HIV/AIDS Treatment
|U.S. Attorney’s Office October 17, 2012|
RICHMOND, VA—Earlier today, an indictment was unsealed charging Michael F. Harris, 49, of Luray, Virginia, with four counts of securities fraud, in violation of 15 U.S.C. § 77q(a); three counts of wire fraud, in violation of 18 U.S.C. § 1343; and one count of mail fraud, in violation of 18 U.S.C. § 1341. If convicted on all charges, Harris faces up to 100 years in prison and a fine of $2,000,000.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement after the indictment was unsealed in connection with the defendant’s initial appearance on these charges.
According to the allegations in the indictment, Michael F. Harris was the president and majority shareholder of M.F. Harris Research Inc. (MFH), a company incorporated under the laws of North Carolina in December 2003. The defendant formed MFH to develop a treatment for human immunodeficiency virus infection/acquired immunodeficiency syndrome (HIV/AIDS). At various times in the past, the defendant claimed to have discovered that the use of hyperbaric chambers to treat divers infected with HIV/AIDS for decompression sickness (also referred to as “the bends”) unexpectedly inhibited the virus. Harris claimed that MFH was devoted to pursuing a potential treatment regimen for HIV/AIDS using the hyperbaric chambers.
The indictment alleges that prior to October 2005 and continuing through at least July 2011, Harris solicited several investors for funds for MFH to use for: (a) obtaining MFH patents, both in the United States and abroad; (b) conducting human trials or assisting with advancing human trials using the treatment method; (c) continuing research on the treatment method; and (d) developing a treatment for HIV/AIDS. In connection with those investments, the defendant sold equity shares of MFH original issue stock and represented that invested funds would largely be used to pursue those objectives. It is further alleged that during the 2005 through 2011 time period, the defendant solicited most investors to pay $1 per share and, in many instances, he promised that MFH shares would be worth 10 to 20 times that amount once the patents were approved and clinical trials completed. On several occasions, Harris solicited investors with a sense of urgency and immediate need for funds in order to meet deadlines associated with the United States or foreign patent applications.
According to the indictment, the defendant made material misrepresentations and omissions in connection with handling investors’ funds, including: (a) misrepresentations regarding MFH’s actual and proposed ownership of the United States patent; (b) misrepresentations about the security of the investments; (c) affirmative acts of concealing financial information regarding MFH and the defendant’s use of MFH investment funds; and (d) omissions regarding Harris’s intended use of the MFH investment funds for his own personal use and benefit. The indictment alleges that, in reality, the defendant retained the United States patent in his own name and diverted the overwhelming majority of MFH investment funds for his own personal use and benefit. The indictment specifically alleges that between October 2005 and July 2011, Harris received over $880,000 in funds from the investors for MFH. It is charged that out of the total investment funds provided by victim investors, the defendant misappropriated over $700,000 for his own use and benefit, unrelated to the MFH-related areas identified by the defendant to the investors. The defendant allegedly used those funds to, among other things: (a) spend more than $250,000 for the costs associated with the purchase, improvements, and utilities associated with the defendant’s primary residence in Luray, Virginia; (b) pay over $70,000 for the defendant’s horse and farm expenses; (c) spend more than $25,000 at firearms stores; and (d) pay other personal expenses, including automobile, entertainment, restaurant, spa, and other personal expenses.
The investigation was led by the Fredericksburg Resident Agency of the Federal Bureau of Investigation (FBI) and the Virginia State Corporation Commission (SCC). Those agencies received assistance in the financial investigation from the National White-Collar Crime Center (NW3C). Assistant United States Attorney Michael Gill is prosecuting the case on behalf of the United States.
This investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is composed of several federal and state agencies, including the Virginia Attorney General’s Office. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force (FFETF), an interagency national task force.
The FFETF was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae.