Business Crimes Hotline

Hughes allegedly oversaw the issuance of false and misleading press releases that claimed that eConnect had received a $20 million dollar investment in “AA”-rated, asset-backed bonds from another issuer; eConnect had begun a stock repurchase program; and eConnect had received a purchase order to sell $964,000 worth of its key product, the eCashPad. According to the charge, the so-called “AA” bonds were not rated and had little value and there was no stock repurchase program. Moreover, the charge alleges that the press release regarding the nearly $1 million sale of eCashPad was misleading because it caused the public to believe the purchase orders came from a company that had no knowledge of eConnect.

Hughes faces up to 30 years in prison for the securities fraud charges and an indefinite maximum sentence for the contempt count.

Man Indicted for Lying to the SEC During Settlement Discussions

John R. Powell of Laguna Beach, CA, was indicted by a federal grand jury in Los Angeles for making false statements to the SEC during the course of settlement discussions with the SEC. The indictment charges Powell with two counts of making false statements to a federal agency and one count of obstructing a federal agency's proceedings.

The SEC previously filed a civil lawsuit against Powell alleging that he had violated the federal securities laws in connection with an oil-and-gas investment he offered through a company called Environmental Energy, Inc. In response, Powell allegedly understated the value of his $3 million residence in documents submitted to the SEC and concealed the fact that he had borrowed more than $400,000 against the property. The indictment further charges that Powell caused the $400,000 to be deposited into the bank account of a film production company that Powell controlled, and that he used these funds to pay his mortgage and other personal expenses.

If convicted on all counts, Powell faces a statutory maximum sentence of 15 years in prison and a fine of $750,000.

Corporation VP Convicted of Embezzling Company Funds in Mail Fraud Scheme.

Steve Yates, former vice president of European MikroGraf Corporation (EMC), pleaded guilty to three counts of mail fraud concerning his alleged embezzlement of company funds. According to the charges, from October 2001 through February 2003, Yates served as vice president of EMC, a distribution company for cross-platform network solutions, software for the pre-press and printing industries, and related products. During his employment, Yates allegedly defrauded EMC by embezzling funds and converting checks issued on his employer's accounts to his own purposes.

According to the plea agreement, Yates established a secret, unauthorized bank account in the name of his employer, which he used to embezzle funds from EMC. Yates allegedly deposited legitimate EMC funds into this bank account and used the proceeds for his personal use. He allegedly had the bank account statements sent to an address he controlled in order to avoid detection of the secret company account by EMC officials. Yates also allegedly altered, or caused to be altered, EMC office records to falsely reflect that certain checks had been used for legitimate office-related expenses, when, in fact, he had diverted those checks to his own personal use.

Yates faces a maximum sentence of 5 years in prison, a fine of $250,000, and a 3-year term of supervised release on each count.

FLORIDA

CEO of FoneCash Pleads Guilty to Securities Fraud

Daniel Charboneau, CEO of FoneCash, Inc., pleaded guilty in Miami to one count of conspiracy to commit securities fraud, wire fraud and mail fraud. FoneCash provides wireless credit card machines for mobile merchants.

The conviction stems from a 2-year undercover investigation conducted by the FBI. An undercover FBI agent posed as a corrupt securities trader employed by a United States-based representative of a fictitious foreign mutual fund that had a number of investors who had invested millions of dollars. According to the charges, Charboneau agreed to pay a 25% undisclosed cash bribe or “kickback” to the FBI undercover agent to induce the purported overseas fund to buy approximately four million restricted shares of FoneCash stock at $2.00 per share for a total cost of $8 million rather than shares of another company's stock. At the time, the prevailing price of the FoneCash stock was 25 cents per share. In conjunction with the purchase, Charboneau directed the undercover agent to transfer the $8 million proceeds into the escrow account of a placement agent representing FoneCash in Hong Kong. In return, Charboneau planned to provide the undercover agent with one million FoneCash shares to be used by co-defendants Michael Puorro and Marshall Klein to artificially increase and maintain the price of the stock.

Charboneau faces a maximum term of 5 years' imprisonment and a fine of up to $250,000.

CALIFORNIA

Former CEO of eConnect Pleads Guilty to Securities Fraud

Thomas S. Hughes, the former CEO of eConnect, pleaded guilty to federal securities fraud charges for orchestrating a scheme to distribute false information designed to boost the stock price of eConnect, a publicly-trade company. Hughes also pleaded guilty to one count of criminal contempt of court for spreading misleading information about eConnect in violation of a permanent injunction barring him from future violation of federal securities laws.

Hughes allegedly oversaw the issuance of false and misleading press releases that claimed that eConnect had received a $20 million dollar investment in “AA”-rated, asset-backed bonds from another issuer; eConnect had begun a stock repurchase program; and eConnect had received a purchase order to sell $964,000 worth of its key product, the eCashPad. According to the charge, the so-called “AA” bonds were not rated and had little value and there was no stock repurchase program. Moreover, the charge alleges that the press release regarding the nearly $1 million sale of eCashPad was misleading because it caused the public to believe the purchase orders came from a company that had no knowledge of eConnect.

Hughes faces up to 30 years in prison for the securities fraud charges and an indefinite maximum sentence for the contempt count.

Man Indicted for Lying to the SEC During Settlement Discussions

John R. Powell of Laguna Beach, CA, was indicted by a federal grand jury in Los Angeles for making false statements to the SEC during the course of settlement discussions with the SEC. The indictment charges Powell with two counts of making false statements to a federal agency and one count of obstructing a federal agency's proceedings.

The SEC previously filed a civil lawsuit against Powell alleging that he had violated the federal securities laws in connection with an oil-and-gas investment he offered through a company called Environmental Energy, Inc. In response, Powell allegedly understated the value of his $3 million residence in documents submitted to the SEC and concealed the fact that he had borrowed more than $400,000 against the property. The indictment further charges that Powell caused the $400,000 to be deposited into the bank account of a film production company that Powell controlled, and that he used these funds to pay his mortgage and other personal expenses.

If convicted on all counts, Powell faces a statutory maximum sentence of 15 years in prison and a fine of $750,000.

Corporation VP Convicted of Embezzling Company Funds in Mail Fraud Scheme.

Steve Yates, former vice president of European MikroGraf Corporation (EMC), pleaded guilty to three counts of mail fraud concerning his alleged embezzlement of company funds. According to the charges, from October 2001 through February 2003, Yates served as vice president of EMC, a distribution company for cross-platform network solutions, software for the pre-press and printing industries, and related products. During his employment, Yates allegedly defrauded EMC by embezzling funds and converting checks issued on his employer's accounts to his own purposes.

According to the plea agreement, Yates established a secret, unauthorized bank account in the name of his employer, which he used to embezzle funds from EMC. Yates allegedly deposited legitimate EMC funds into this bank account and used the proceeds for his personal use. He allegedly had the bank account statements sent to an address he controlled in order to avoid detection of the secret company account by EMC officials. Yates also allegedly altered, or caused to be altered, EMC office records to falsely reflect that certain checks had been used for legitimate office-related expenses, when, in fact, he had diverted those checks to his own personal use.

Yates faces a maximum sentence of 5 years in prison, a fine of $250,000, and a 3-year term of supervised release on each count.

FLORIDA

CEO of FoneCash Pleads Guilty to Securities Fraud

Daniel Charboneau, CEO of FoneCash, Inc., pleaded guilty in Miami to one count of conspiracy to commit securities fraud, wire fraud and mail fraud. FoneCash provides wireless credit card machines for mobile merchants.

The conviction stems from a 2-year undercover investigation conducted by the FBI. An undercover FBI agent posed as a corrupt securities trader employed by a United States-based representative of a fictitious foreign mutual fund that had a number of investors who had invested millions of dollars. According to the charges, Charboneau agreed to pay a 25% undisclosed cash bribe or “kickback” to the FBI undercover agent to induce the purported overseas fund to buy approximately four million restricted shares of FoneCash stock at $2.00 per share for a total cost of $8 million rather than shares of another company's stock. At the time, the prevailing price of the FoneCash stock was 25 cents per share. In conjunction with the purchase, Charboneau directed the undercover agent to transfer the $8 million proceeds into the escrow account of a placement agent representing FoneCash in Hong Kong. In return, Charboneau planned to provide the undercover agent with one million FoneCash shares to be used by co-defendants Michael Puorro and Marshall Klein to artificially increase and maintain the price of the stock.

Charboneau faces a maximum term of 5 years' imprisonment and a fine of up to $250,000.