MAN WHO RAN OFFSHORE BROKERAGE SENTENCED FOR ROLE IN INTERNATIONAL STOCK FRAUD

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, March 18, 2016

Former Head of Offshore Brokerage Sentenced to 18 Years for Conspiracy to Commit International Stock Fraud and Money Laundering

A California man was sentenced to 216 months in prison today for two counts of conspiracy to commit wire fraud and one count of conspiracy to commit international money laundering in connection with an international “pump and dump” scheme involving stocks traded on the over-the-counter (OTC) market.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia and Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office made the announcement.

Harold Bailey Gallison II, 58, of Valley Center, California, pleaded guilty on Dec. 10, 2015, and was sentenced by U.S. District Judge Anthony J. Trenga of the Eastern District of Virginia, who also ordered Gallison to pay $1,724,770 in restitution.  Gallison was charged in an indictment unsealed on July 14, 2015, along with eight other individuals for their roles in complex international stock manipulation and money laundering schemes.

In his guilty plea, Gallison admitted that he conspired to artificially “pump” or inflate the trading volume and price of the shares of Warrior Girl Corp., quoted on the OTC market under the ticker symbol WRGL, and Everock Inc., quoted on the OTC market under the ticker symbol EVRN, by touting business activities and deceptive revenue forecasts and by engaging in coordinated trading activity to create the appearance of increasing market demand.  Gallison also admitted that he and others then “dumped” or sold the shares at the inflated prices and laundered proceeds through bank accounts in the United States and overseas.  Gallison facilitated the schemes through an offshore brokerage and money laundering platform that went by various names, including Sandias Azucaradas, Moneyline Brokers and Trinity Asset Services (collectively Moneyline), he admitted.  According to the plea, through Moneyline, Gallison created nominee accounts in the names of shell companies to conceal both the true source and ownership of the securities and the flow of funds.  In addition, Gallison pleaded guilty to one count of conspiring to launder the proceeds of a number of securities fraud schemes, including Warrior Girl and Everock, totaling more than $25 million.

The FBI’s Washington Field Office is investigating the case.  Senior Trial Attorney N. Nathan Dimock and Trial Attorney Michael O’Neill of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Kosta S. Stojilkovic of the Eastern District of Virginia are prosecuting the case.  The Securities and Exchange Commission, the Financial Industry Regulatory Authority and the Criminal Division’s Office of International Affairs also provided significant assistance.

SEC CHARGES LAWYER WITH OPINION LETTER FRAUD

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Dec. 7, 2012 — The Securities and Exchange Commission today announced charges against a Florida-based securities lawyer for issuing fraudulent attorney opinion letters that resulted in more than 70 million shares of microcap stock becoming available for unrestricted trading by investors.

An attorney opinion letter is required from a licensed and duly authorized securities lawyer in order to facilitate the transfer of restricted microcap shares on the over-the-counter markets. In April 2010, the Pink Sheets (now OTC Markets Group) banned Guy M. Jean-Pierre of Pompano Beach, Fla., from issuing attorney opinion letters due to "repeated missing information and inconsistencies" about the issuers and his lack of due diligence in his past letters.

The SEC alleges that Jean-Pierre has since engaged in a scheme to continue writing and issuing attorney opinion letters in the name of his niece by applying her signature without her consent. Jean-Pierre (also known as Marcelo Dominguez de Guerra) sought to evade the ban by forming a new company called Complete Legal Solutions and misrepresenting that his niece was conducting the legal work that was allegedly performed.

"Securities lawyers are trusted gatekeepers in the issuance of stock, and it is particularly offensive when attorneys like Jean-Pierre blatantly break the rules and commit fraud," said Andrew M. Calamari, Director of the SEC’s New York Regional Office. "The SEC is committed to punishing offenders like Jean-Pierre as we continue to root out the enablers of microcap fraud in our markets."

According to the SEC’s complaint filed late yesterday in U.S. District Court for the Southern District of New York, Jean-Pierre hatched a plan within two weeks of his ban to continue issuing attorney opinion letters through Complete Legal and his niece’s identity. Jean-Pierre’s niece, a licensed attorney herself, was looking for work at the time. Jean-Pierre told his niece about his work issuing attorney opinion letters and offered to pay her to assist him. He suggested they form Complete Legal and asked her to send him three copies of her signature and a copy of her driver’s license. Jean-Pierre’s niece complied with his requests with the understanding this information was needed to incorporate Complete Legal. Afterwards, Jean-Pierre never requested that his niece do any legal work at Complete Legal and she was not compensated for any such work.

Instead, the SEC alleges that Jean-Pierre used the new company and his niece’s identity to continue his prior practice of issuing attorney opinion letters. Each of these letters contained fraudulent statements and falsely represented his niece as the signatory. Jean-Pierre’s niece did not write any of the letters and did not make the representations concerning the issuers. Jean-Pierre fabricated attorney opinion letters on Complete Legal letterhead for at least 11 companies that traded publicly on the Pink Sheets. Certain letters resulted in Pink Sheet issuers being granted the improved status of having adequate current information in the public domain under Rule 144(c)(2) of the Securities Act of 1933. This status kept the issuers from being tagged on the Pink Sheets’ website with a red "STOP" sign near its ticker symbol with the moniker of "OTC Pink No Information" and a large warning that the company "may not be making material information publicly available."

According to the SEC’s complaint, adequate current public information about an issuer must be available for certain selling security holders to comply with the Rule 144 safe harbor allowing companies to issue unregistered securities pursuant to Section 4(1) of the Securities Act. Jean-Pierre falsely issued letters bearing his niece’s signature to transfer agents opining that restrictive legends could be legally removed from either pre-existing stock certificates or newly issued stock certificates pursuant to Rules 144 or 504 of the Securities Act.

The SEC’s complaint alleges that Jean-Pierre violated Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest and financial penalties, a permanent injunction, and a bar from participating in the offering of any penny stock pursuant to Section 20(g) of the Securities Act.

The SEC’s investigation, which is continuing, has been conducted by Megan Genet and Steven G. Rawlings in the New York Regional Office. Todd Brody, Barry Kamar, and Ms. Genet are handling the SEC’s litigation.