Former Dallas Securities Broker Pleads Guilty in Oklahoma for Role in Stock Manipulation Scheme
|U.S. Department of Justice December 10, 2012|
WASHINGTON—A former securities broker pleaded guilty today for his role in a scheme to defraud thousands of investors through the manipulation of publicly traded stocks, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Danny C. Williams, Sr. of the Northern District of Oklahoma.
Joshua Wayne Lankford, 39, of Dallas, pleaded guilty before U.S. Magistrate Judge Paul Cleary in the Northern District of Oklahoma to one count of money laundering.
“Joshua Wayne Lankford fled the country in an attempt to escape punishment for his role in a pump and dump investment scheme that allowed him to cash in at the expense of innocent investors,” said Assistant Attorney General Breuer. “We tracked him down, and today he stands as a convicted felon. We have no tolerance for individuals who take advantage of investors, and we will continue to devote significant resources to prosecuting those who threaten the integrity of our markets.”
“Mr. Lankford used his position as a stockbroker and owner of a brokerage to exploit unsuspecting investors of millions of dollars,” said U.S. Attorney Williams. “The investing public must depend upon the integrity of the financial markets. Those who commit such blatant stock fraud will be brought to justice.”
Lankford was originally charged along with four other defendants in a 24-count indictment unsealed on February 10, 2009. Prior to trial, Lankford fled to Costa Rica, where he remained until he was extradited to the United States in May 2012. Two defendants, George David Gordon and Richard Clark, were convicted by a federal jury in May 2010 for their roles in the scheme. James Reskin pleaded guilty on March 26, 2010, to one count of conspiracy to commit securities fraud, wire fraud, and money laundering and to one count of obstruction of a proceeding before the Internal Revenue Service (IRS) for his role in the scheme. Dean Sheptycki remains a fugitive.
According to court documents and evidence presented at the 2010 trial, the defendants manipulated the stocks of three companies: Deep Rock Oil & Gas Inc. and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments, both of Tulsa, Oklahoma; and National Storm Management Group Inc. of Glen Ellyn, Illinois. According to court documents and evidence presented at the 2010 trial, the defendants devised and engaged in a scheme to defraud investors known as a “pump and dump,” in which they manipulated publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges. The defendants executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained.
According to court documents and evidence presented at the 2010 trial, the defendants hid and “parked” their shares with various nominees, such as friends, relatives or other entities that they owned and controlled. Subsequently, they engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they conducted massive promotional campaigns in which unsolicited fax and e-mail “blasts” were sent to millions of recipients. According to evidence presented at the 2010 trial, these blasts touted the respective stocks without accurately disclosing who was paying for the promotions, omitted that the defendants intended to sell their shares, and induced unsuspecting legitimate investors to purchase stock in the companies. The defendants and their nominees obtained significant profits by selling large amounts of shares after they had artificially inflated the stock price. For each of the three manipulated stocks, the co-conspirators’ sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
Evidence presented in the 2010 trial showed that the overall scheme resulted in illegal proceeds of more than $44 million.
According to Lankford’s guilty plea, he laundered $250,000 in proceeds derived from the stock manipulation scheme.
At sentencing, which is scheduled for March 26, 2013, Lankford faces a maximum sentence of 10 years in prison and a $250,000 fine.
The case is being prosecuted by Trial Attorneys Kevin Muhlendorf and Andrew Warren of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma. The case is being investigated by IRS-Criminal Investigation and the FBI. The department wishes to thank the Securities and Exchange Commission for its assistance with the investigation. The department also wishes to thank the Criminal Division’s Office of International Affairs, the U.S. Department of State, and the U.S. Marshals Service for their work in securing Lankford’s extradition.
This case is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which 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.