(CN) – The 9th Circuit upheld the convictions of the former CEO of an equipment-testing company and a disbarred attorney in a $9 million pump-and-dump stock scheme.
Universal Dynamics owner Ira Gentry and Randy Jenkins, the disbarred lawyer, formed UniDyn in 1997 and issued nearly 15 million shares of stock. The pair intentionally misrepresented that their company offered revolutionary technology that could identify circuit board flaws. The so-called Sterling concept was based on technology that was known to be not viable for mass production, according to the ruling.
Jenkins and Gentry made false statements in Securities and Exchange Commission filings and press releases about the technology between 1997 and 2001, even though their own researchers had concluded that the Sterling concept did not work, the court found. The pair also claimed that a Japanese company had committed to to purchase $200 million in Sterling units from UniDyn, and they lauded the technology in message postings on the Internet.
After the penny stock took off in 2001, Gentry and Jenkins dumped their UniDyn shares by setting up accounts at brokerage houses in Canada using aliases. They sent millions of shares to the Canadian accounts and eventually netted about $9 million. They wired the money from Canada to bank accounts all over the world, and then bought themselves millions of dollars worth of gold, silver, homes, cars and jewelry.
When the head of the Japanese company that had supposedly ordered $200 million in Sterling units told a UniDyn subsidiary that he had never agreed to the purchase, the whole scheme came tumbling down.
Gentry resigned as CEO and UniDyn’s stock tanked.
After an IRS investigation, Gentry and Jenkins were convicted of money laundering, tax evasion, securities fraud and other charges. Jenkins was sentenced to 90 months in prison, and Gentry received a 180-month sentence. They also had to pay back the money.
Jenkins and Gentry tried to overturn their conviction, arguing in part that many of the charges against them were time barred under the five-year statute of limitations. They claimed the government failed to properly suspend the statute’s clock as they sought discovery from the Canadian government.
Prosecutors argued that the March 16, 2005, 16-page request to Canada under the Treaty on Mutual Legal Assistance in Criminal Matters was enough to legally suspend the statute of limitations, and the 9th Circuit agreed on Tuesday.
In affirming the pair’s convictions and sentences on Tuesday, the federal appeals panel in San Francisco ruled that none of the charges were time barred.
“Whether or not the March 22, 2005, application was sufficient, the government’s June 20, 2005, ‘supplemental application’ clearly was adequate,” Judge Betty Fletcher wrote for the three-judge panel. “The June 20 application included the sworn declaration of IRS Agent Linda Wallace, who described the IRS’s investigation, the grand jury investigation and the evidence already recovered from Canada tending to indicate that further evidence of the offenses was abroad. Agent Wallace’s declaration bore the necessary indicia of reliability and supported the district court’s finding, by a preponderance of the evidence, that the government reasonably believed evidence of appellants’ crimes was in Canada.”
The panel also rejected the pair’s claims that the evidence against them was insufficient and that their sentences were too harsh.