Mining Firm’s Ex-CEO Looking at Hard Time

SAN DIEGO (CN) - FBI agents arrested the former CEO of a San Diego-based mining company and prosecutors unsealed an indictment accusing him of obstructing justice in a $28 million securities fraud.

Mark Anthony Lopez, 48, former president and CEO of Unico Inc., is charged with one count of securities and two counts of obstructing justice, the U.S. Attorney's Office said. He was arrested on Jan. 17.

Lopez, of San Diego, is accused of conspiring with New Jersey-based stock trader Mark Allen Lefkowitz to manipulate the price of Unico stock. Lefkowitz has pleaded guilty to his role in the scheme, prosecutors said.

"As a result of the fraud, the company issued approximately 9 billion new shares of its stock that it did not register with the Securities and Exchange Commission," the U.S. Attorney's Office said in the statement. "These new, unregistered shares diluted existing shares, causing their value to drop by as much as $7 million. At the same time, Lefkowitz received free-trading shares from Unico worth more than $28 million, which he sold to unsuspecting buyers on the open market."

It was not a garden-variety securities fraud, but somewhat more complicated, according to the U.S. attorney's statement: "To carry out the fraud, Lopez and Lefkowitz exploited Section 3(a)(10) of the Securities Act of 1933 C a little-known provision that allows companies to issue unregistered shares of stock to settle bona fide debts. Lopez, on behalf of Unico, would enter into purported loan agreements with various shell corporations owned by Lefkowitz, most of which were based in the Turks and Caicos Islands. It was understood by the conspirators that Unico would purposefully default on the loan agreements so that Lefkowitz's companies could initiate sham lawsuits against Unico.

"Each and every one of these sham lawsuits would be brought by Florida-based lawyers in a Sarasota, Florida court. The Florida attorneys, even though they represented opposite sides in the lawsuits, would obtain their pleadings from a single Manhattan-based law firm that oversaw the sham lawsuits. Very soon after each lawsuit was filed - and typically within the very same week - Lopez and Lefkowitz would draft a written settlement agreement. The terms of the written settlement agreement would be extremely favorable to Lefkowitz. In short, Lopez would agree to settle Unico's debt by issuing unregistered shares of stock worth on average seven times the debt that Unico actually owed. According to a secret side-agreement with Lopez, Lefkowitz would sell the shares on the open market to unsuspecting buyers and kick back a portion of the proceeds to Unico. This kickback would take the form of a new loan - which would have the added benefit of continuing the fraud scheme.

"According to the indictment, Lopez also tried to obstruct an SEC probe into his misconduct by refusing to turn over emails, which he printed and concealed in two manila folders marked 'Files Deleted' and another marked 'Not Released to SEC Subpoena (Delete).' The indictment also alleged that Lopez redacted portions of an email and tried to delete it from his computer, and later lied to the SEC under oath during deposition testimony."

If convicted, Lopez faces up to 65 years in prison and a $750,000 fine.

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