Sandip Shah, Shailesh Shah among 7 individuals nabbed.
By Deepak Chitnis
WASHINGTON, DC: A US federal court has charged seven individuals, two of whom are Indian American, with engaging in a wire fraud and stock kickback scheme that could see each of them land as much as two decades behind bars and a quarter-million dollars in fines if they are found guilty.
The desis in question are 40 year-old Sandip Shah and 47 year-old Shailesh Shah, the latter of whom is the CEO of a firm based in California.
Sandip is a stock promoter who, with the help of Shailesh, created a scheme in which representatives from investment firms would receive an under-the-table payment if they would influence their respective funds to invest in stocks that were in the interest of Shailesh’s company.
Through the use of bogus agreements, made under the guise of consultancy services, the kickbacks would be hidden from outside parties. The stocks being traded are what are known as microcap stocks, meaning that they are relatively small publically traded companies with a total market value of between $50 million and $300 million. They are often traded as “pink sheets,†meaning over-the-counter, and many are not listed on the NASDAQ (anyone who has seen the recent film The Wolf of Wall Street will recognize what these types of firms are).
What Sandip and Shailesh didn’t realize is that one of the representatives they ended up doing business with was an undercover government agent, who was eventually able to build a case against them and the other five parties involved – Hadi Aboukhater, Gerard Haryman, Barry Hawk, Donald Lawrence Schuman, and Shmuel Shneibalg – and bring them to court. Now, all are facing heavy jail sentences and stiff fines.
In a press release put out Thursday by the FBI, Special Agent Vincent B. Lisi, who heads up the Bureau’s Boston Division, said “Market manipulators should know that our law enforcement team has a proven track record of high-returns in rooting out fund representatives, CEOs, traders, fund managers, equities analysts, lawyers, and publicists who illegally tilt the playing field against honest investors[.] The FBI’s undercover investigation of the illegal manipulation of microcap stocks has resulted in the conviction of 15 people to date and those who believe they can get away with manipulating the markets should be running scared.â€
The investigation and subsequent arrest of all involved was made possible by cooperation with President Barack Obama’s Financial Fraud Enforcement Task Force, which was established “to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.†Each defendant’s initial court date has not yet been announced.
To contact the author, email to deepakchitnis@americanbazaaronline.com