Undercover Kickback
At the end of June, the SEC charged several company CEOs and penny stock promoters with fraud, alleging they used kickbacks, a bribe and email blasts to manipulate trading in microcap stocks. The individuals were caught by undercover FBI agents who acted as the counterparties to the illegal transactions. The charges follow a series of similar cases filed in October and December of last year, in which the SEC sued more than a dozen companies and penny stock promoters with stock manipulation schemes.
Named in the SEC complaints were Douglas Newton, of Rancho Mirage, Calif., the CEO of Real American Brands, Inc. n/k/a Real American Capital Corp.; Donald W. Klein, of Frisco, Texas, president and CEO of KCM Holdings Corp.; Thomas Schroepfer of Las Vegas, Nev., the president and CEO of SmokeFree Innotec, Inc. and Charles Fuentes, of Dana Point, Calif., a promoter of SmokeFree's stock, who paid kickbacks to an undercover FBI agent; and Brian Gibson, of Coconut Creek Fla., who created a now-defunct website, Roaringpennystocks.com, to promote shares of Xtreme Motorsports International, Inc., as part of a planned pump-and-dump scheme.
The SEC alleges that the company officers and promoters in most of the schemes disguised the kickbacks as payments to phony consulting companies, which they knew would perform no actual work.
An Exceptional Sentence
Attorney and CPA Lorn Leitman, 61, of Miami, Fla., was sentenced to 17 and a half years in prison for his role in a 10-year Ponzi scheme. Leitman's sentence exceeds the maximum sentencing guidelines for his crime, which called for about 12 and a half years (151 months). Leitman was also ordered to pay his victims $3.31 million in restitution. The court explained its departure from sentencing guidelines saying, “This case is exceptional.” Leitman allegedly preyed upon his closest friends, fellow U.S. military personnel, the elderly and retirees, the court explained, and breached codes of conduct applicable to members of the Florida Bar and certified public accountants.
A federal grand jury charged the defendant with violating the mail fraud statute for defrauding elderly victims and retirees, among others, through a Ponzi scheme that sought investments in either phantom residential mortgages or a separate venture burdening U.S. military personnel with predatory and usurious loans. A number of his victims appeared in court. One victim said that the losses from the Ponzi scheme forced the end of his retirement and his return to work. “My dreams are dead,” he told the court.
