Corporate CEO Admits Defrauding Shareholders
SAN DIEGO—Mark Lopez, former Chief Executive Officer of San Diego-based Unico, Inc., pleaded guilty in federal court today, admitting he defrauded shareholders in a sophisticated stock fraud scheme. Lopez entered his plea before District Court Judge Gonzalo P. Curiel to conspiring to commit securities fraud, and was ordered to return for sentencing on May 15, 2015.
According to court documents, from 2004 through June 2012, Lopez was the CEO of Unico, Inc., a San Diego-based holding company with mining interests in Utah. Because Unico’s stock was publicly traded, it was prohibited from issuing and transferring new shares of stock without having them registered with the U.S. Securities and Exchange Commission (“SEC”).
There are some narrow exemptions to this registration requirement, however, including “Section 3(a)(10)” of the Securities Act of 1933. Under Section 3(a)(10), a company such as Unico can issue and transfer exempt shares of its unregistered stock if: (a) the purpose is to settle a “bona fide debt;” and (b) the issuance is approved at a “fairness hearing” held by a court or other governmental authority.
Lopez admitted that beginning in or about December 2006, he agreed with co-conspirators to execute a scheme to defraud shareholders by deceptively using the Section 3(a)(10) exemption in order to issue and sell millions of unregistered shares of Unico stock, and then split the proceeds from the resulting sale. The scheme involved a $500,000 loan (or “convertible debenture”) made to Unico by a company called Outboard Investments. The terms of the debenture agreement (the “Outboard Debenture”) gave Outboard the right to seek repayment either in cash or in the form of Unico stock.
According to court documents, on December 1, 2006, Outboard assigned the debt to a company headquartered in the Turks & Caicos called Sequoia International, Inc. (“Sequoia”). After Unico’s default, as part of the conspiracy, on December 7, 2006, the conspirators caused Sequoia and Outboard to file a complaint against Unico in state court in Sarasota, Florida (a jurisdiction to which neither party had any connection).
The lawsuit was designed to give the appearance that Unico was contesting its liability under the Outboard Debenture, when in truth Defendant had already agreed to use the lawsuit as a way to issue unregistered shares. On the day of the filing, Lopez signed a settlement agreement on behalf of Unico that asked the court to permit the issuance of 350 million shares of Unico common stock to Sequoia. Lopez and the conspirators knowingly concealed from the state court the material fact that by so doing, Lopez had agreed to settle the $500,000 Outboard Debenture with Unico stock worth over $2.6 million. Based on these misrepresentations and omissions, the Florida court unwittingly approved the settlement agreement and allowed Unico to issue the shares to Sequoia. Defendant then secretly arranged for Sequoia to return over $1,067,000 in proceeds from the sale of this stock.
To continue the deception of shareholders and the public, Lopez signed and submitted to the SEC a Form 10-QSB (a publicly available quarterly report) as Unico’s CEO, according to court records. In that filing, Lopez falsely characterized Unico’s receipt of stock sale proceeds from Sequoia in order to deceive shareholders into believing that the Florida case was a bona fide lawsuit that was settled after a “fairness” determination.
U.S. Attorney Laura Duffy thanked the Securities and Exchange Commission for its assistance in the investigation and prosecution of Lopez’s complex securities fraud.
- Mark Lopez
- Age: 50
- San Diego, California
- Case Number: 12CR5236-GPC
- Count 1: Conspiracy to Commit Securities Fraud, in violation of 18 U.S.C. § 1349.
- Maximum Penalties: 25 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.
- Federal Bureau of Investigation