MANHATTAN (CN) - A former stockbroker will appear in federal court today to face charges that he participated in a bribery scheme to unload G&S Minerals holdings.
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The government unsealed its indictment of Christopher Kline in Manhattan on Friday. Kline faces charges of securities fraud and conspiracy to commit securities fraud and commercial bribery.
While working for a York, Pa.-based securities brokerage firm in 2007, Kline acted as a middleman between G&S promoter William Curtis and a purported financial adviser who was a confidential FBI informant, according to the indictment.
G&S Minerals is a Nevada exploratory mining company whose common stock is publicly traded on the Pink Sheets, an electronic quotation system for over-the-counter securities.
Curtis and G&S Minerals are not named as defendants.
"From in or about July 2007 through in or about February 2008, Christopher Kline, the defendant, Curtis, and others known and unknown, schemed to defraud investors in G&S Minerals stock by arranging for secret bribes to be paid to a purported financial adviser in exchange for the financial adviser inducing his purported clients to purchase G&S Minerals stock," the indictment states. "These purchases permitted Curtis and others to generate cash by selling their own G&S Minerals stock holdings.
"In furtherance of the scheme, Christopher Kline, the defendant, and Curtis, each had discussions with a confidential informant ('CI-1') working at the direction of the Federal Bureau of Investigation (the 'FBI'). CI-1 purported to be a financial adviser who could induce investors to purchase G&S Minerals stock, in return for secret, undisclosed kickbacks that Curtis and his co-conspirators would pay to CI-1. According to the plan, CI-1 would convince one or more 'clients' to purchase G&S Minerals stock. The objective was to fill the 'client's' stock order using sales of G&S Minerals shares from accounts controlled by Curtis. Curtis's shares of G&S Minerals stock would also be sold to others in the marketplace at an inflated price. Kline, a stockbroker, served as the 'middle man' between CI-1 and Curtis. In that role, Kline instructed CI-1 concerning volume and price targets for CI-1's purchases, and attempted to ensure that Curtis's sell orders matched CI-1's buy orders.
"Christopher Kline, the defendant, Curtis, and CI-1 agreed that when CI-1 convinced his purported 'clients' to purchase G&S Minerals stock, Curtis would pay CI-1 approximately 30 percent of the purchase orders (including actual sales proceeds) placed by CI-1's 'clients.' Kline, Curtis and CI-1 agreed that these payments to CI-1 would not be disclosed to CI-1's 'clients.' In addition, CI-1 represented to Kline and Curtis that the purchasers would hold the stock and not sell it for a substantial period of time. In exchange for his participation in the scheme, Kline received approximately 10 percent of the cash bribe paid to CI-1." (Parentheses in original).
CI-1 and Kline discussed potential deals in several meetings and phone conversations that it recorded, the government claims. Kline allegedly recommended Curtis during one of the conversations, and passed his phone number to CI-1.
"CI-1 and Kline had previously engaged in similar schemes whereby CI-1 had caused clients to purchase stock of a publicly traded company in exchange for a cash bribe," according to the indictment.
After CI-1 told Curtis that he had approximately $2.5 million "at his disposal" and could easily steer investors toward the promoter, Curtis agreed to pay CI-1 30 percent in undisclosed commissions on each order, the government claims.
From August to September 2007, the FBI, through CI-1, ordered hundreds of thousands of G&S Minerals shares from Curtis, who then transferred almost $20,000 in bribes to the FBI's undercover bank account.
CI-1 gave Kline $2,000 in cash, which represented his share of the bribe paid to CI-1, according to the indictment.
Kline and CI-1 also discussed an additional deal whereby CI-1's purported clients would buy and hold stock of a publicly traded company in exchange for a cash bribe, prosecutors say.
The government seeks forfeiture of the proceeds obtained by Kline as a result of the scheme.
"Stockbroker bribery by promoters is another form of corruption that undermines confidence in our markets and picks the pockets of investors," Manhattan U. S. Attorney Preet Bharara said in a statement. "As alleged, Mr. Kline violated the law and threw aside his duty as a broker to investors."
Kline, 48, surrendered Friday, and is scheduled to appear in Manhattan federal court on Oct. 2.
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