Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Tuesday, June 25, 2013

Penny Stock CEO and Co-Conspirator Convicted of Securities Fraud

On May 3, 2013, in connection with an action that went unnoticed by most penny stock observers, the U.S. Attorney’s Office for the District of Massachusetts announced that John C. Jordan, of Cameron Park, California, and James Prange, of Greenbush, Wisconsin, had been found guilty of conspiracy to commit securities fraud, and of the commission of mail and wire fraud.
Jordan is the CEO of Vida Life International, Ltd. (VILF); Prange is a self-described consultant to microcap companies.  Prange also provided his dubious services to two other companies involved in the prosecution, China Wi-Max Communications, Inc. (CHWM), and the Small Business Company, Inc. (SBCO).  The CEOs of the latter two issuers, along with a China Wi-Max director, pleaded guilty last month to conspiracy to commit securities fraud.
The three companies, all of them fully reporting to the Securities and Exchange Commission (“SEC”), were far from successful.  Illiquid and low-priced, they had few buyers.  When Prange offered management a way to attract the interest of a supposed penny stock investment fund representative, they couldn’t resist.  Prange explained that management would be expected to pay kickbacks to the representative from any stock purchases made by the fund.  Still, the CEOs didn’t hesitate.  They went ahead with the deal, concealing the kickbacks by using sham consulting agreements and other cooked-up documents.
 Unfortunately for them, the “fund representative” turned out to be an undercover FBI agent.  Once the perpetrators had paid their first kickbacks, they were arrested and charged.
“Boston FBI agents initiated an undercover operation purposefully aimed at identifying corporate insiders engaged in the illegal manipulation of stock prices,” said Richard DesLauriers, Special Agent in Charge of the FBI’s Boston Division. “These convictions send a message that no one who is engaged in illegal activity while participating in the markets, including CEOs, traders, fund managers, equities analysts, lawyers and publicists, is exempt from justice.”
The maximum penalty for the securities fraud conspiracy charges are 25 years in prison and a $250,000 fine; the maximum penalty for mail and wire fraud are 20 years and a $250,000 fine.
Although the U.S. Attorney’s Office thanks the SEC and FINRA for their help with the investigation, neither regulator has brought an enforcement action against the culprits or the public companies.  VILF, CHWM, and SBCO continue to trade occasionally on the OTCMarkets’ Pink No Information tier, where, if the authorities aren’t careful, they could be spotted by a different kind of crook, who might use them in a corporate hijacking scheme.

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