Criminal Charges in Corporate Hijackings on the Rise
The Justice Department has increasingly pursued criminal charges against corporate hijackers and their conspirators for illegal takeovers of publicly traded shell companies. In many instances, a securities attorney or transfer agent have been charged in connection with the schemes. Recent examples include the criminal convictions ofIrwin Brook and Lawrence S. Hartman. Broock a Florida securities lawyer. Hartman recently pled guilty to a charge of conspiracy to commit mail and wire fraud in connection with a corporate hijacking and shell trafficking fraud scheme. Hartman faces up to 20 years’ imprisonment and a maximum fine of $250,000.
In May 2012, Houston lawyers Roger Lee Shoss and Nicolette Loisel were convicted of one count of conspiracy to commit wire fraud in connection with their participation in the corporate hijacking and identity theft aspect of the Hartman scheme.
According to the charges, the defendants in the case conspired to steal the identities of dormant, publicly-traded shell companies, use the corporate identities they had stolen to create fraudulent empty-shell companies which had the appearance of being publicly-traded, and sell those fraudulent empty-shell companies for use in reverse merger transactions.
All four of the companies featured in the corporate hijacking indictment were sold to or through Lawrence S. Hartman and ultimately used in connection with a sophisticated investment fraud and money laundering scheme. The administrative and money laundering functions of the scheme were headquartered in Pinellas County, Florida.
To date, juries have found all of Hartman’s co-defendants in the scheme guilty, and another co-defendant pled guilty. On April 19, 2013, a federal jury found United Kingdom citizens Paul R. Gunter (64, Odessa, Florida; originally of London) and Simon Andrew Odoni (56, Hertfordshire, UK) guilty of three counts of conspiracy to commit mail fraud, wire fraud, and money laundering, as well as nineteen counts of mail and wire fraud, and fourteen counts of money laundering. In March 2011, co-defendant Richard Sinclair Pope pled guilty to conspiracy to commit wire and mail fraud. Hartman has not yet been sentenced.
The Irwin Boock corporate hijacking case is a gift that keeps on giving.
The various actions against Boock and his accomplices began in October 2008, when the Ontario Securities Commission (“OSC”) filed a Statement of Allegations and scheduled a hearing. The SEC followed up a year later, filing suit against Boock, Stanton B. J. DeFreitas, Loisel, her parter Roger Lee Shoss, and Jason C. Wong on September 29, 2009. Boock dreamed up the scheme in late 2003, and recruited Shoss and Loisel to handle the paperwork. According to the charges, this consisted of false documentation to Secretaries of State, the Standard & Poor’s CUSIP Service Bureau, transfer agents, and Nasdaq Corporate Data Operations. They also provided fraudulent opinion letters. Shortly thereafter, the FBI investigated and criminal charges were filed. The matter is ongoing and has spurred multiple investigations.
In the course of the scam, all three used a variety of aliases, and even “borrowed” the names of real people. The perpetrators even created their own transfer agency, Select American Transfer Company, to ensure that no questions would be asked by a suspicious independent transfer agent.
The defendants used several methods to takeover their shells including custodianship and receivership actions. Custodianship hijackings involve complicit transfer agents, securities lawyers and/or receivers who stage or assist others in staging bogus state court receivership and custodianship proceedings to gain control of dormant public companies in shell trafficking schemes. Upon obtaining control of the hijacked entity, fraudsters profit by selling the public vehicle in a reverse mergertransaction. In these schemes the shell purveyors often misrepresent that the bogus order cleanses their illegal actions or that their activities are outside the jurisdiction of the SEC or FBI.
The increasing number of succesful convictions of corporate hijackers sends a clear message that the government will aggresively pursue criminal charges in corporate hijacking cases. We expect to see many criminal cases from custodianship and receivership actions in 2014 because the schemes are so easily identified from publicly available documents.
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