| To: scion who wrote (2506) | 2/13/2007 11:41:58 AM | | From: StockDung | | | | Las Vegas woman gets 90 months in federal investment fraud case
LAS VEGAS A Las Vegas woman has been sentenced to seven-and-a-half years in federal prison for her role in an investment scheme involving claims that she could extract precious metals from volcanic rock.
U-S District Judge Robert Jones also ordered 57-year-old Diana Flaherty to pay five-point-seven (M) Million dollars in restitution and forfeit five-point-seven (M) Million dollars.
Flaherty and her husband, Robert, controlled Robert F- and Diana Lee Flaherty Incorporated and controlled Phoenix Metals U-S-A II Incorporated.
Authorities say they promised a 300 percent return to investors -- with claims that she could extract gold, platinum and other metals.
Robert Flaherty died in 2001.
Diana Flaherty was found guilty last May of conspiracy to commit securities fraud, mail fraud, wire fraud, securities fraud and conspiracy to commit mail fraud.
A co-defendant -- Michael Gardiner -- pleaded guilty to securities fraud and is awaiting sentencing.
Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. |
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| From: StockDung | 2/14/2007 11:11:32 AM | | | | | | WOMAN GETS 90 MONTHS IN PRISON FOR SECURITIES FRAUD SCHEME
NEWS RELEASE
MONDAY, FEBRUARY 12, 2007
PRESS CONTACTS:
Natalie Collins, Public Affairs Specialist
(702) 388-6508
usdoj.gov
WOMAN GETS 90 MONTHS IN PRISON FOR SECURITIES FRAUD SCHEME
LAS VEGAS - - A Las Vegas woman who induced people to invest in a company that she claimed could extract gold, platinum, and other precious metals from volcanic cinders, was sentenced today by U.S. District Judge Robert C. Jones to 90 months in federal prison, announced Daniel G. Bogden, United States Attorney for the District of Nevada.
Diana Flaherty, age 57, of Las Vegas, was also ordered to serve three years of supervised release, pay $5.7 million in restitution, and forfeit $5.7 million. She was convicted by a jury on May 4, 2006, of one count of Conspiracy to Commit Securities Fraud, Mail Fraud and Wire Fraud, one count of Securities Fraud and one count of Conspiracy to Commit Money Laundering.
Evidence presented at her trial showed that no later than January 1993, Diana Flaherty conspired with her late husband, Robert F. Flaherty, to promote and sell securities issued by Robert F. & Diana Lee Flaherty, Inc., and Phoenix Metals U.S.A. II, Inc., Nevada corporations controlled and managed by the Flahertys.
During the period from 1993 to 1994, the Flahertys promoted and sold “Ore Purchase Agreements” issued by Flaherty, Inc. The Flahertys represented that they possessed proprietary technology that enabled them to profitably extract gold, platinum, and other precious metals from volcanic cinders, and claimed that they owned vast reserves of such cinders. The Flahertys promised to process the purported “ore” purchased by investors—typically at a rate of $1,000 per ton—and guaranteed a 300% return.
In 1993, Robert and Diana Flaherty acquired control of a publicly traded corporation they renamed Phoenix Metals U.S.A. II, Inc. The Flahertys purported to transfer proprietary technology and millions of dollars of cinders to Phoenix Metals. Over the years, they also inflated Phoenix Metals’ assets and value by purporting to assign over $2.6 billion of additional cinder “ore” to the corporation in exchange for millions of shares of stock. From 1993 through 2002, Robert and Diana Flaherty actively promoted Phoenix Metals and sold millions of shares of their stock by making and causing others to make untrue representations, such that volcanic cinders contain concentrations of precious metals; that the Flahertys and their corporations owned or controlled vast reserves of such cinders; that the Flahertys and their corporations possessed proprietary technology capable of extracting precious metals from cinders on a commercially viable basis; and that production of precious metals had begun or was imminent.
In September 1997, the Securities and Exchange Commission (SEC) brought a civil suit against Robert F. Flaherty and Phoenix Metals alleging essentially the same fraudulent conduct as was charged in the Indictment. In January 1998, a Judgment was entered against Robert F. Flaherty and Phoenix Metals permanently enjoining them from making false statements and engaging in fraudulent business practices regarding the sale of securities. Despite the entry of this judgment, Robert F. Flaherty and Diana Lee Flaherty continued to promote and sell the stock of Phoenix Metals. Indeed, rather than abandoning their fraudulent scheme, during the pendency of the SEC investigation, the Flahertys acquired a refinery on a mill-site situated on public lands near Searchlight, Nevada. The Flahertys hosted a “Grand Opening” at this mill-site in March 1998 where they displayed precious metals purportedly extracted through their purported process, and disseminated financial statements representing that Phoenix Metal's assets were valued at almost three billion dollars.
In 1998, the U.S. Department of Interior found that Phoenix Metal's mill site claim should be revoked because their purported technique for extracting precious metals from volcanic cinders had no scientific or technological validity and the cinders contained no valuable mineral content.
Robert Flaherty died in December 2001, and despite the corporation's expulsion from public lands and its inability to extract or produce precious metals, Diana Lee Flaherty and co-defendant Michael Gardiner perpetuated the "gold from cinders" scheme and continued to make material misrepresentations regarding Phoenix Metals’ assets and capabilities in an effort to sell shares of that corporation’s stock through January 2002.
Defendant Flaherty expended proceeds from the sale of securities on a variety of personal expenses and luxuries including acquiring luxury automobiles, servicing the mortgage on her residence in the Lakes Estates in Las Vegas, and maintaining a lavish lifestyle.
Diana Flaherty must self-report to the Federal Bureau of Prisons no later than April 16, 2007.
Co-defendant, Michael Gardiner, pleaded guilty to securities fraud and is awaiting sentencing.
This case was investigated by the Federal Bureau of Investigation and BLM, and prosecuted by Assistant United States Attorney Timothy S. Vasquez.
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usdoj.gov |
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| To: StockDung who wrote (2529) | 2/14/2007 1:04:42 PM | | From: scion | | | | Re: WOMAN GETS 90 MONTHS IN PRISON FOR SECURITIES FRAUD SCHEME
By: elbac in FAKE
Wed, 14 Feb 07 12:07 PM Msg. 00765 of 00767
You are aware of her current husband, John Edwards, of CMKX and NevWest fame right??
convert.neevia.com |
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| To: StockDung who wrote (2529) | 2/14/2007 9:21:04 PM | | From: scion | | | | (In a July 14, 2006, pleading in an unrelated criminal trial where Mr. Edwards's wife Diana Lee Flaherty is awaiting sentencing after being convicted of securities fraud in connection with Phoenix Metals U.S.A. II Inc.'s "gold from volcanic cinders" scam, the prosecution claims that "the source of wealth offered as bond by defendant's current husband is uncertain in light of the SEC's continuing investigation of reports that he has engaged in significant securities fraud."
CMKM Diamonds Features in NASD Enforcement Action
by Lee M. Webb
Canada StockWatch
September 29, 2006
CMKM Diamonds Inc., Saskatchewan native Urban Casavant's revoked pink sheet woofer, features prominently in a National Association of Securities Dealers (NASD) disciplinary proceeding against Nevada-based NevWest Securities Corp. and two of its top officers.
The NASD complaint alleges that NevWest president Sergey Rumyantsev and vice-president Antony M. Santos violated anti-money laundering rules and failed to file suspicious activity reports (SARs) as a client with 32 accounts dumped 259 billion CMKM shares for proceeds of more than $53-million. (All amounts are in U.S. dollars.)
"Broker-dealers have an obligation to investigate 'red flags' indicating suspicious activity and, where appropriate file SARs," NASD enforcement head James Shorris said in a Sept. 26 news release. "Despite a multitude of very obvious red flags, NevWest chose to look the other way, earning millions for itself in the process."
The respondents have not yet filed a response to the NASD complaint and no findings have yet been made regarding the allegations.
The client
According to the NASD, the CMKM transactions executed on behalf of a NevWest client identified by the initials "JE" in the complaint were "highly suspicious" and should have caused the firm and its officers "to suspect that the customer was violating federal securities laws."
The client, who is known to many followers of the wild CMKM saga as John Edwards, is not a broker and is not a party to the NASD enforcement proceeding and there have been no findings that he violated securities laws.
(In a July 14, 2006, pleading in an unrelated criminal trial where Mr. Edwards's wife Diana Lee Flaherty is awaiting sentencing after being convicted of securities fraud in connection with Phoenix Metals U.S.A. II Inc.'s "gold from volcanic cinders" scam, the prosecution claims that "the source of wealth offered as bond by defendant's current husband is uncertain in light of the SEC's continuing investigation of reports that he has engaged in significant securities fraud."
Mr. Edwards was not implicated in the Phoenix Metals fraud and, as noted in a subsequent court order in Ms. Flaherty's criminal case, there has been no appropriate showing that the collateral offered by Mr. Edwards constitutes the illegal proceeds of criminal activity. Ms. Flaherty, who faces a sentence of 12 to 18 years in prison and forfeiture of $5.7-million, filed a motion for a new trial on Sept. 19.)
The NASD claims that Mr. Edwards opened five accounts at NevWest in 2002; 19 accounts in 2003; and another eight accounts in 2004. The regulator says that the same UPS postal box address was used for 30 of Mr. Edwards's 32 accounts in the names of various trusts and corporate entities.
"Shortly after JE began opening accounts at NevWest, he developed a trading pattern of physically carrying into the firm certificates of low-priced securities," the complaint alleges. "In February 2003, JE began to deposit shares of CMKM into the various accounts he opened at NevWest.
"JE instructed NevWest, through his registered representative, to expeditiously liquidate the certificates and to immediately wire all sales proceeds to various bank accounts.
"The bank account owner of record rarely matched the name of the NevWest account holders."
The NASD says that between January of 2003 and December of 2004, NevWest wired $43-million through 139 wire transfers from at least 28 of Mr. Edwards's accounts as he unloaded a staggering 259 billion CMKM shares.
The transactions
According to the allegations in the 27-page NASD complaint, the number of CMKM shares Mr. Edwards unloaded increased over time. During 2003, the regulator says that he sold 4.3 billion CMKM shares in 66 transactions for proceeds of $401,000.
Mr. Edwards allegedly ramped up his selling in 2004, "aggressively" implementing his CMKM trading strategy.
"In many instances, JE carried into NevWest billions of CMKM shares at a time," NASD claims. "Through NevWest he liquidated billions of shares per month."
The regulator says that as Mr. Edwards began dumping billions of shares per month in early 2004, NevWest's anti-money laundering compliance officer recommended to Mr. Santos that the firm file an SAR regarding his CMKM transactions. That recommendation was not followed, nor was a subsequent recommendation to file an SAR made by Mr. Edwards's registered representative in August of 2004.
During 2004, as sub-penny CMKM's promotion was ratcheting up, Mr. Edwards allegedly managed to unload 207 billion shares in 368 transactions for proceeds of more than $49-million. The complaint alleges that the busy CMKM seller wired $41.5-million from his NevWest accounts in 2004.
By 2005, the wheels were falling off Mr. Casavant's pink sheet promotion, particularly after the U.S. Securities and Exchange Commission (SEC) temporarily suspended trading in CMKM in March of 2005 and then followed up with an administrative proceeding against the company.
Notwithstanding the badly floundering promotion and the SEC investigation, Mr. Edwards allegedly managed to unload approximately 48.5 billion shares of CMKM in 133 transactions for proceeds of $3.7-million between January and May of 2005.
The red flags
According to the NASD complaint, Mr. Rumyantsev and Mr. Santos should reasonably have been aware of "red flags" with respect to Mr. Edwards's CMKM transactions and wire transfer activity, which should have triggered anti-money laundering procedures.
Among other things, the regulator says the fact that Mr. Edwards suspiciously refused to reasonably explain how he acquired his CMKM shares should have raised a red flag.
The regulator also says that Mr. Edwards "suspiciously opened and maintained 32 accounts at the firm for no business or apparent lawful purpose."
The NASD complaint suggests that Mr. Edwards hand-delivering CMKM certificates to the brokerage firm should have raised concerns.
"The CMKM certificates JE deposited for sale were not always registered in the name of a specific account holder with NevWest," the NASD continues. "Instead, beginning in or about August 2004 and continuing into 2005, JE began depositing certificates registered in the name of NevWest's clearing firm."
In addition to pointing to Mr. Edwards's wire transfer activity as another red flag, the regulator says that he "suspiciously exhibited a lack of concern regarding the commissions and other transaction costs relating to the liquidation of CMKM shares."
According to the NASD complaint, NevWest earned $2.5-million in commission revenue from Mr. Edwards's CMKM dumping, accounting for 36 per cent of the firm's total revenues during the relevant period.
Rounding out the list of red flags, the regulator goes on to say that the substantial number of shares unloaded by Mr. Edwards and the significant proceeds of those sales "should have prompted NevWest to conduct a searching inquiry to ensure that CMKM was complying with relevant laws and regulations."
Among other things, NASD claims that NevWest failed to conduct a reasonable inquiry to obtain specific details concerning how and when Mr. Edwards acquired his CMKM shares.
Moving on from the discussion of red flags, the NASD claims that Mr. Rumyantsev and Mr. Santos were, or should have been, aware of public information regarding CMKM.
Among other things, the regulator claims that the brokers should have known that the company had not filed any quarterly or annual reports for years, leaving investors in the dark as NevWest unloaded approximately 37 per cent of CMKM's outstanding shares for Mr. Edwards.
The regulator further claims that the respondents should have been aware of CMKM's NHRA funny car promotional campaign in which the company sponsored a car called the CMKXTREME vehicle. At the time, the company's trading symbol was CMKX.
"Promotional items such as T-shirts and hats with "Got CMKX?" written on the front were handed out at race events," the complaint notes. "All of this activity was used to encourage investors to purchase shares of CMKM through trading activity on the pink sheets."
NevWest should also have been aware of the SEC suspension and subsequent administrative proceeding against CMKM, which was initiated on March 16, 2005. The hearing was held on May 10, 2005.
"Despite the aforementioned events, NevWest from March 17, 2005, through May 11, 2005, continued to sell at least 22.5 billion shares of CMKM for JE's accounts in approximately 77 transactions," the complaint notes.
The SEC finally yanked CMKM's stock registration on Oct. 28, 2005.
According to the NASD, Mr. Rumyantsev and Mr. Santos should also have known that Mr. Edwards had liquidated a substantial number of shares of Pinnacle Business Management Inc., which later became Serac Holdings Inc., and Barrington Foods, which became U.S. Canadian Minerals Inc., a company with close ties to Mr. Casavant and his pink sheet dog of dogs.
The complaint alleges that Mr. Edwards deposited almost six billion Pinnacle shares with NevWest and approximately 6.2 million U.S. Canadian Minerals shares.
In May of 2002, the SEC temporarily suspended Pinnacle and subsequently filed fraud charges against the company. Pinnacle's stock registration was revoked in July of 2004.
The SEC temporarily suspended U.S. Canadian Minerals in October of 2004, just as the OTC Bulletin Board promotion that had traded as high as $18.75 per share was executing a 3-for-1 forward split. The company was booted down to the pink sheets where it now occasionally ekes out a trade for less than 10 cents.
It is not clear just what the NASD thinks NevWest and its senior officers should have drawn from Mr. Edwards's apparent penchant for dumping wads of shares of dubious penny and sub-penny companies with regulatory problems.
Indeed, in the absence of any evidence that Mr. Edwards did anything at all illegal while unleashing his flood of 259 billion CMKM shares that were apparently eagerly sponged up by naive investors, it is far from clear just how strong a case the NASD will be able to bring against Mr. Rumyantsev and Mr. Santos.
Among the proposed sanctions, the NASD wants the respondents to disgorge any ill-gotten gains and pay such costs of the proceedings "as are deemed fair and appropriate under the circumstances."
Stockwatch will follow developments in the NASD proceeding and the continuing CMKM saga |
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