May 3, 2010
Two Oklahoma Men Convicted of Devising and Participating in Stock Manipulation Scheme
G. David Gordon, a Tulsa, Okla., attorney, and Richard Clark, also of Tulsa, were convicted today by a federal jury of devising and participating in a scheme to defraud investors through the manipulation of publicly traded stocks of three companies, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Thomas Scott Woodward of the Northern District of Oklahoma.
Gordon and Clark were each convicted of one count of conspiracy to commit wire fraud, securities fraud and money laundering. In addition, Gordon was convicted of nine counts of wire fraud, five counts of securities fraud, five counts of money laundering and one count of making a false statement to the U.S. Securities and Exchange Commission (SEC). Clark was also convicted of seven counts of wire fraud, five counts of securities fraud and one count of money laundering. Gordon, 48, and Clark, 62, were originally charged in a 24-count indictment unsealed on Feb. 10, 2009.
According to evidence presented at trial, between April 2004 and December 2006, Gordon and Clark devised and engaged in a scheme to defraud investors known as a "pump and dump," in which they manipulated three 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.
"These defendants illegally manipulated the stock market by deceiving potential investors about the true worth of the stocks they were buying. Investors were left with nearly worthless stock while these defendants reaped more than $44 million in profits," said Assistant Attorney General Breuer. "Investors deserve accurate information. When we find evidence of individuals artificially pumping stocks for their own profit, we will vigorously prosecute them."
"The defendants and their co-conspirators are sophisticated con-men who preyed on unsuspecting investors, and they stole tens of millions of dollars from the investing public," said U.S. Attorney Scott Woodward of the Northern District of Oklahoma. "Those who commit such blatant stock fraud will be brought to justice. These white collar criminals are now in custody and they are facing lengthy prison terms without the possibility of parole."
Two companies based in Tulsa at the time of the scheme were among those whose stock was manipulated: Deep Rock Oil & Gas Inc., and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments. The third company, National Storm Management Group Inc., is based in Glen Ellyn, Ill.
According to evidence presented at trial, Gordon and Clark 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.
Evidence at trial showed that 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 at 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 defendants’ sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
Evidence at trial showed that Gordon, Clark and their co-conspirators received proceeds of more than $44 million from the overall scheme. The government is seeking criminal forfeiture of more than $44 million from Gordon, Clark and three other defendants charged in the February 2009 indictment. The government is also seeking the forfeiture of Gordon’s multi-million dollar residence and proceeds of three bank accounts.
Gordon was also convicted today of one count of wire fraud and one count of obstruction of justice in connection with a fourth penny stock, that of International Power Group Ltd., based in New Jersey. The government is also seeking criminal forfeiture of $2.74 million from Gordon in connection with the wire fraud involving the fourth penny stock.
The February 2009 indictment also charged Louisville, Ky., attorney James Reskin, 51; Dean Sheptycki, 43, at the time a resident of Florida and the Bahamas; and Dallas-area resident Joshua Wayne Lankford, 36, for their participation in the scheme. 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) by making false and misleading statements to the IRS and to the Department of Justice. Sheptycki and Lankford remain fugitives.
An indictment is merely an allegation and defendants are presumed innocent unless proven guilty in a court of law.
At sentencing, which is scheduled for Aug. 25, 2010, Clark and Gordon face a maximum sentence of five years in prison and a $250,000 fine for each of the conspiracy and false statement charges. Each charge of wire fraud as well as the obstruction of justice count carries a maximum sentence of 20 years in prison and a $250,000 fine. The maximum sentence for each securities fraud count is 20 years in prison and a $5 million fine and the maximum sentence for each money laundering count is 10 years in prison and a $250,000 fine.
The case is being prosecuted by Trial Attorney Andrew Warren of the Criminal Division’s Fraud Section, Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma, and Special Assistant U.S. Attorney Kevin Muhlendorf, who is detailed to the U.S. Attorney’s Office from the SEC. The case is being investigated by the IRS-Criminal Investigation Division, the FBI and the U.S. Postal Inspection Service.
Today’s guilty verdict is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
For more information on the task force, visit www.StopFraud.gov.