Ex-SEC lawyer convicted in stock manipulation scheme
A federal jury Thursday convicted a former Securities and Exchange Commission (SEC) lawyer for participating in 'pump-and-dump' schemes, where demand for a stock is pumped up by false statements before the shares are dumped for a large profit.
A former attorney with the Securities and Exchange Commission has been convicted by a federal jury of conspiring in a series of “pump-and-dump” stock manipulation schemes in 2004.
Phillip Windom Offill Jr., was found guilty Thursday by a federal jury in Alexandria, Va., of conspiracy to evade securities registration requirements and nine counts of wire fraud.
According to the indictment, he and a co-conspirator evaded securities registration requirements that mandate disclosure of the actual financial condition and business operations of the companies. The two then provided other co-conspirators with millions of unregistered shares of the common stock of nine companies.
The actions set the stage for what authorities call a “pump-and-dump” scam in which stock prices and trading volume are falsely manipulated by making false and misleading statements in press releases and spam emails. The false information was sent to tens of millions of e-mail addresses throughout the US to try to create artificial demand for the stocks.
After fraudulently pumping up the market price and the demand for the stocks, the co-conspirators dumped the shares – selling them for large profits to the general investing public in the over-the-counter market.
The pumped-up shares were purchased by unknowing investors and were often rendered virtually worthless in the sell-off, officials say.
“It is a sad day when a former US Securities and Exchange Commission (SEC) attorney uses what he learned in the government to later defraud the investing public,” said Assistant Attorney General Lanny Breuer, in a statement.
“As a former SEC lawyer, Mr. Offill knew the law – and he intentionally broke it and tried to hide his crimes,” said US Attorney Neil MacBride of the Eastern District of Virginia. “He and his co-conspirators made millions while innocent investors were left with stock in worthless companies.”
A key participant in the scheme, Phoenix attorney David Stocker, pleaded guilty in March 2009 and is set for sentencing on March 8. The alleged scam was conducted from March 2004 to October 2004.
Offill faces a statutory maximum 185 years in prison and forfeiture of $15 million. He is set to be sentenced on April 16.
In addition to Stocker, nine other defendants have pleaded guilty. Eight have been sentenced to prison terms ranging from three months to 10 years.
The traded stocks were identified as: Emerging Holdings Inc., MassClick, Inc., China Score Inc., Auction Mills Inc., Custom-Designed Compressor Systems Inc., Ecogate Inc., Media International Concepts Inc., Vanquish Productions Inc., and AVL Global Inc.
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