FORMER OIL SERVICES COMPANY CEO INDICTED ON FOREIGN BRIBERY AND KICKBACK CHARGES

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, May 9, 2014

Former Chief Executive Officer of Oil Services Company Indicted in New Jersey on Foreign Bribery and Kickback Charges

The former co-chief executive officer (CEO) of PetroTiger Ltd. – a British Virgin Islands oil and gas company with operations in Colombia and offices in New Jersey – was indicted today for his role in a scheme to pay bribes to foreign government officials in violation of the Foreign Corrupt Practices Act (FCPA) and to defraud PetroTiger.

Acting Principal Deputy Assistant Attorney General Marshall Miller of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey and Special Agent in Charge Aaron T. Ford of the FBI’s Newark Division made the announcement.

Joseph Sigelman, 43, of Miami and the Philippines, was indicted today by a federal grand jury in the District of New Jersey and charged with conspiracy to violate the FCPA and to commit wire fraud, conspiracy to launder money, and substantive FCPA and money laundering violations.   Gregory Weisman, 42, of Moorestown, New Jersey, the former general counsel of PetroTiger, pleaded guilty on Nov. 8, 2013, to conspiracy to violate the FCPA and to commit wire fraud.   Sigelman’s co-CEO, Knut Hammarskjold, 42, of Greenville, South Carolina, pleaded guilty to the same charge on Feb. 18, 2014.

According to court records, Sigelman and others allegedly paid bribes to an official in Colombia in exchange for the official’s assistance in securing approval for an oil services contract worth roughly $39 million.   To conceal the bribes, they first attempted to make the payments to a bank account in the name of the foreign official’s wife for purported consulting services she did not perform.  Sigelman and Hammarskjold provided Weisman invoices, including her bank account information.   The conspirators made the payments directly to the official’s bank account when attempts to transfer the money to his wife’s account failed.   Sigelman and his conspirators then took steps to conceal the bribe payments from PetroTiger’s board members.

In addition, court documents allege that Sigelman and others attempted to secure kickback payments while negotiating an acquisition of another company on behalf of PetroTiger, including on behalf of several members of PetroTiger’s board of directors who were helping to fund the acquisition.   In exchange for negotiating more favorable terms for the owners of the target company, two of the owners agreed to kick back to the conspirators a portion of the increased purchase price.   To conceal the kickback payments, Sigelman and others had the payments deposited into Sigelman’s bank account in the Philippines, created a “side letter” to falsely justify the payments and used the code name “Manila Split” to refer to the payments amongst themselves.

Sigelman and Hammarskjold were charged by sealed complaints filed in the District of New Jersey on Nov. 8, 2013.   Hammarskjold was arrested Nov. 20, 2013, at Newark Liberty International Airport.   Sigelman was arrested on Jan. 3, 2014, in the Philippines.   The charges against Sigelman, Hammarskjold and Weisman were unsealed on Jan. 6, 2014.

The charges contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

The case was brought to the attention of the department through a voluntary disclosure by PetroTiger, which cooperated with the department’s investigation.   The department has worked closely with and has received significant assistance from its law enforcement counterparts in the Republic of Colombia and greatly appreciates their assistance in this matter.   The department also thanks the Republic of the Philippines, including the Bureau of Immigration, and the Republic of Panama for their assistance in this matter.   Significant assistance was also provided by the Criminal Division’s Office of International Affairs.

The case is being investigated by the FBI’s Newark Division.   The case is being prosecuted by Assistant Chief Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Zach Intrater of the District of New Jersey.

SEC CHARGES FORMER CEO OF EDUCATION SERVICES PROVIDER WITH STEALING TENS OF MILLIONS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

The Securities and Exchange Commission today charged the former CEO of an education services provider based in China with stealing tens of millions of dollars from investors in a U.S. public offering, and charged another executive with illegally dumping his stock in the company after he helped steal valuable company assets.

The SEC alleges that ChinaCast Education Corporation’s former CEO and chairman of the board Chan Tze Ngon illicitly transferred $41 million out of the $43.8 million raised from investors to a purported subsidiary in which he secretly held a controlling 50 percent ownership stake.  From there, Chan transferred investor funds to another entity outside ChinaCast’s control.  Chan also secretly pledged $30.4 million of ChinaCast’s cash deposits to secure the debts of entities unrelated to ChinaCast.  None of the transactions were disclosed in the periodic and other reports signed by Chan and filed with the SEC.

The SEC further alleges that Jiang Xiangyuan, ChinaCast’s former president for operations in China, avoided more than $200,000 in losses by illegally selling approximately 50,000 ChinaCast shares after participating in the ownership transfer of one of company’s revenue-generating colleges before it was publicly disclosed by a new management team.  ChinaCast had a market capitalization of more than $200 million before these alleged frauds came to light.  After Chan and Jiang were terminated and their misconduct was publicly disclosed by new management, ChinaCast’s market capitalization dropped to less than $5 million.

“The massive fraud perpetrated by Chan destroyed hundreds of millions of dollars in market value, and Jiang’s brazen insider trading allowed him to profit by dumping his own shares on the market before the fraud was exposed,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.

According to the SEC’s complaint filed in federal court in Manhattan, ChinaCast entered the U.S. capital markets through a reverse merger in December 2006, and its common stock was listed on the NASDAQ from Oct. 29, 2007 to June 25, 2012.  ChinaCast conducted multiple public stock offerings in the U.S., with the second one occurring in December 2009 when ChinaCast represented that the proceeds would be used for “working capital, future acquisitions, and general corporate purposes.”  Chan instead directed and engaged in the transactions that moved investor funds outside ChinaCast’s corporate structure for his personal benefit.  He did so without seeking or obtaining the approval of ChinaCast’s board of directors, and the transactions were not publicly disclosed until ChinaCast’s new management prompted the company to file a Form 8-K on Dec. 21, 2012, disclosing Chan’s misconduct.

The SEC alleges that ChinaCast falsely stated in multiple SEC filings signed by Chan that the company indirectly owned 98.5 percent of ChinaCast Technology (HK) Limited – the purported subsidiary to which Chan first transferred investor funds.  However, ChinaCast actually held only an indirect 49.2 percent interest while Chan personally owned 50 percent.  Chan also signed a number of periodic reports falsely stating that offering proceeds were under ChinaCast’s control and falsely including those funds in amounts that ChinaCast reported as cash and cash equivalents.  Chan also defrauded shareholders and prospective investors by secretly pledging ChinaCast’s existing term cash deposits as collateral to secure debts incurred by various third parties that had nothing to do with ChinaCast’s business.  Chan signed periodic reports falsely stating that ChinaCast’s cash and cash equivalents were completely unencumbered.

“Chan orchestrated the systematic looting of ChinaCast and hid his misconduct by repeatedly lying to investors about the company’s assets until he lost control of the board and was terminated,” said Sanjay Wadhwa, Senior Associate Director for Enforcement in the SEC’s New York office.  “Officers and directors who misuse their access to the U.S. capital markets will be held accountable for their insidious behavior.”

According to the SEC’s complaint, Jiang was a member of the senior management group headed by Chan.  Jiang engaged in illegal trading based on inside information by selling his shares on March 28, 2012, at $4.59 per share.  After Chan’s management group lost control of the board, they transferred ownership of ChinaCast’s three profitable brick-and-mortar colleges away from ChinaCast to Jiang and the dean of one of the colleges.  They were later sold to others.  At least one of the colleges was transferred to Jiang and the dean three weeks before Jiang’s March 28 stock sale.  Jiang was terminated on March 29, and NASDAQ suspended trading in ChinaCast on April 2 due to its failure to file an annual report for 2011.  ChinaCast was later delisted.  When over-the-counter trading resumed on June 25 after multiple disclosures made by new management about former management’s misconduct, the stock opened at 55 cents per share and closed at 82 cents.  ChinaCast’s stock is currently trading at 10 cents per share.

Chan is charged with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as violations of various corporate reporting, recordkeeping, and internal controls provisions.  Jiang is charged with illegal insider trading in violations of the same antifraud provisions.  The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest, financial penalties, permanent injunctions, and officer-and-director bars.

The SEC’s investigation, which is continuing, has been conducted by Dominick Barbieri and George Stepaniuk in the SEC’s New York office.  The SEC’s litigation will be led by Nancy Brown.  Assisting in the investigation was the SEC’s Cross Border Working Group, which has representatives from each of the agency’s major divisions and offices and focuses on U.S. companies with substantial foreign operations.

FORMER CHAIRMAN AND CEO OF CECO ENVIRONMENTAL CORP. CHARGED WITH INSIDER TRADING

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
SEC Charges Former Chairman and CEO of CECO Environmental Corp. and API Technologies Corp. with Insider Trading and Other Violations

The Securities and Exchange Commission has charged Phillip J. DeZwirek (DeZwirek), the former CEO, Chairman, and 10% beneficial owner of both CECO Environmental Corp. (CECO) and API Technologies Corp. (API), with insider trading on three separate occasions and engaging in hundreds of violations of the trade reporting and ownership disclosure rules of the federal securities laws. DeZwirek has agreed to settle the charges, without admitting or denying the allegations in the Commission's complaint, by, among other things, paying a total of over $1.5 million in disgorgement of ill-gotten gains, prejudgment interest, and a civil penalty. He also agreed to be barred from serving as an officer or director of a public company for five years.

The Commission's complaint, filed August 30, 2013, in the U.S. District Court for the Southern District of New York, alleges that DeZwirek engaged in insider trading by purchasing CECO stock ahead of two press releases issued in March and October 2008 announcing new contract bookings. The Complaint further alleges that DeZwirek bought API stock before the company announced the acquisition of a privately held company in January 2011. The Complaint also alleges that DeZwirek failed to file amended Schedules 13D and Forms 4 and 5 disclosing 268 purchases and sales of CECO and API stock that he executed between 2008 and 2010.

DeZwirek has consented to the entry of a final judgment that permanently enjoins him from future violations of Sections 10(b), 13(d), and 16(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 13d-2, and 16a-3 thereunder. The final judgment also orders DeZwirek to pay disgorgement of $151,278, plus prejudgment interest of $11,714.50, a civil money penalty of $1,361,278, and imposes upon him a five-year officer-and-director bar.

The Commission acknowledges the assistance of the Financial Industry Regulatory Authority.

AXIUS CEO SENTNECED IN STOCK SALES BRIBERY SCHEME

FROM: U.S. DEPARTMENT OF JUSTICE

Friday, June 14, 2013
Axius CEO Roland Kaufmann Sentenced for Conspiracy to Pay Bribes in Stock Sales

Roland Kaufmann, CEO of Axius Inc., was sentenced today to serve 16 months in prison for his role in a conspiracy to bribe purported stock brokers and manipulate the stock of a company he controlled, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney for the Eastern District of New York Loretta Lynch.


Kaufmann, 60, a Swiss citizen, was sentenced today by U.S. District Judge John Gleeson in the Eastern District of New York. In addition to his prison term, Kaufmann was sentenced to serve three years of supervised release and ordered to pay a fine of $450,000.

Kaufmann pleaded guilty in January 2013 to one count of conspiracy to violate the Travel Act in connection with a scheme to bribe stock brokers to purchase the common stock of a company he controlled and to manipulate its stock price. As part of his plea agreement, Kaufmann forfeited $298,740 gained through this crime.

According to court documents, Kaufmann controlled Axius, Inc., a purported holding company and business incubator located in Dubai. As part of the scheme, the defendant and his co-conspirator, Jean Pierre Neuhaus, enlisted the assistance of an individual who they believed had access to a group of corrupt stock brokers, but who was, in fact, an undercover law enforcement agent. Court documents reveal that they instructed the undercover agent to direct brokers to purchase Axius shares in return for a secret kickback of approximately 26 to 28 percent of the share price. Kaufman and Neuhaus also instructed the undercover agent as to the price the brokers should pay for the stock and that the brokers were to refrain from selling the Axius shares they purchased on behalf of their clients for a one-year period. By preventing sales of Axius stock, Kaufmann and Neuhaus intended to maintain the fraudulently inflated share price for Axius stock.

Jean Pierre Neuhaus has pleaded guilty and been sentenced for his role in the scheme.

The case is being prosecuted by Trial Attorney Justin Goodyear of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Ilene Jaroslaw, with assistance from Fraud Section Trial Attorney Nathan Dimock. The case was investigated by the FBI New York Field Office and the Internal Revenue Service New York Field Office. The Department also recognizes the substantial assistance of the U.S. Securities and Exchange Commission.

This prosecution was the result of efforts by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.