Three chief executives and two stock promoters were charged Thursday in federal court with engaging in fraudulent penny stock schemes, federal investigators said Thursday.
The Justice Department said the executives charged included Donald W. Klein, 40, of the KCM Holdings Corporation; Douglas Newton, 66, of the Real American Capital Corporation; and Thomas Schroepfer, 54, of Smokefree Innotec Inc.
Also charged were Charles Fuentes, 66, accused of promoting Smokefree stock; and Brian Gibson, 63, accused of promoting stock of Xtreme Motorsports International Inc.
Each defendant was charged with conspiracy to defraud the investing public and faces a maximum of five years in prison and fines.
The Securities and Exchange Commission also filed civil fraud charges against the defendants. The charges were brought in the United States District Court for the Southern District of Florida.
Investigators said the defendants had manipulated the shares of thinly traded companies that traded on the pink sheets, a daily listing of over-the-counter stocks.
Most of the schemes involved kickbacks to a purportedly corrupt pension fund or a broker who agreed to buy shares, while Mr. Gibson’s scheme involved the creation of a fake stock promotion Web site to recommend Xtreme stock, the S.E.C. said.
In one example, an F.B.I. agent posing as a pension fund trustee met with Mr. Newton and agreed to buy Real American stock in exchange for a 30 percent kickback, according to the S.E.C.
A day later, the F.B.I. wired funds to a Real American affiliate, Billy Martin’s USA, which then issued a check to a bogus consulting firm set up to conceal the kickback, the S.E.C. said.
“Investors deserve better than secret investment strategies based on kickbacks and bribes,” the S.E.C.’s enforcement chief, Robert S. Khuzami, said in a statement. “These C.E.O.’s got more than they bargained for, but exactly what they deserved.”
Jeffrey Cox, a lawyer for Mr. Klein, said his client had entered a plea agreement in his criminal case.
Jason Kreiss, a lawyer for Mr. Gibson, said his client’s “legitimate marketing company was utilized by the other co-conspirators involved in the stock promotion.”
“Mr. Gibson looks forward to an expedited resolution of this matter,” Mr. Kreiss said.
The other defendants’ lawyers were not immediately available to comment on their behalf.
Article source: http://feeds.nytimes.com/click.phdo?i=4ae9b25d461fce998994b503f0d9f938
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