Home Newark Press Releases 2009 Bearish Outlook for CEO Arrested on Securities Fraud Charges
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Bearish Outlook for CEO Arrested on Securities Fraud Charges

FBI Newark February 03, 2009
  • Special Agent Michael Whitaker (973) 792-3020

NEWARK, NJ—FBI agents from New Jersey and Florida arrested Gary L. Brown, age 60, of Sarasota, Florida, at his home early this morning. The arrest, announced today by Special Agent In Charge Weysan Dun, is based on a federal criminal complaint charging Brown with conspiracy to commit securities fraud –specifically devising and implementing a scheme to artificially inflate the price of shares of Skylynx Communications.

According to the criminal complaint filed in the District of New Jersey, Brown was a former stockbroker and current CEO of Skylynx, a Delaware company purportedly engaged in the business of developing wireless communications. Skylynx was once known as Starcom Wireless Networks, Inc. and Basic Technology, Inc.. Shares of Skylynx were publicly traded under the symbol SKYC on the Over the Counter Electronic Bulletin Board System. Unbeknownst to Skylynx investors, Brown and his co-conspirators, Joseph F. Morgan and Edward McPhee, acquired ownership and control of a significant number of Skylynx shares. Furthermore, Brown and his co-conspirators paid brokers in the form of cash and or Skylynx shares and restricted sale of those shares to brokers for purchasing the shares in their retail customers’ accounts. Brown gave Morgan and McPhee free-trading shares of Skylynx in exchange for their cooperation in promoting Skylynx. Overall, Brown, Morgan, and McPhee knowingly and intentionally engaged in the artificial manipulation of the price of Skylnx shares since approximately July of 2003.

The criminal complaint details several telephone calls and emails whereby Brown gave specific instructions to his co-conspirators as to his intentions and plans to illegally drive the price of the shares upward. This involved the purchase and sale of shares under nominee names, kickback payments in the form of Skylynx shares, and the creation of a bogus consulting agreement. For example, in December of 2003, Brown and Morgan caused a bogus consulting agreement to be issued resulting in Skylynx issuing 300,000 free-trading shares. In fact, no consulting services were ever performed and the shares were to be issued only in return for a capital contribution.

The complaint reflects a telephone call between Brown and McPhee in January of 2004, in which Brown stated that “part of the problem is that we’re doing something illegal and trying to make it legal.” But according to Special Agent In Charge Weysan Dun, “That’s not part of the problem: it’s the whole problem! Based on the allegations in this complaint, it’s very clear what Mr. Brown and his cohorts were up to. While news such as this can inspire concern in investors, I ask the public to trust in their justice system, to work with law enforcement in identifying these schemes, and to view this news as a positive step to fixing the problems of Wall Street”.

A criminal complaint is merely an accusation. Despite this accusation, every defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

Special Agent in Charge Weysan Dun thanks the Financial Industry Regulatory Authority (FINRA) and the Internal Revenue Service for their help in this matter. Anyone who believes they may be a victim of Gary Brown, Joseph Morgan, or Edward McPhee, or who held shares of Skylynx Communications should call the FBI Atlantic City Office at (609) 677-6400 during normal business hours, or the FBI Newark office at (973) 792-3000 at any other time.