SEC target Stocker asks for short sentence
2010-03-04 14:42 ET - Street Wire
by Mike Caswell
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David Stocker, the former Arizona lawyer who helped insiders of several companies illegally acquire millions of free-trading shares, is asking the judge for a short sentence. Mr. Stocker, 50, pleaded guilty to securities fraud on March 11, 2009, and is scheduled to be sentenced on March 8, 2010. In a presentence memorandum, he says that the judge should give him a reduced sentence because he agreed to plead guilty early in the investigation and then provided valuable evidence against others, including recently convicted Texas lawyer Phillip Offill.
Prosecutors indicted Mr. Stocker in Virginia on March 11, 2009, for contributing to the manipulation of 19 stocks over two years. The companies included AVL Global Inc., the pink sheets listing run by Ontario father and son Peter and Tyler Fisher. In pleading guilty, Mr. Stocker admitted that he prepared misleading opinion letters that allowed insiders to evade the registration requirements, and that those same insiders subsequently pumped and dumped the companies. He also admitted that he sold $2.25-million worth of shares during the pump-and-dumps. (All figures are in U.S. dollars.)
His former associate, Mr. Offill, was recently convicted by a Virginia jury for his role in the scheme. He has not yet been sentenced, but prosecutors say he faces a jail term of 21 to 27 years.
Presentencing memorandum
In a presentence memorandum filed on March 1, 2010, Mr. Stocker is asking for a sentence of one year in jail plus one year of home confinement. He says that the 40-month sentence prosecutors have recommended is too long, given the consequences his crime will have on his life. He will have to forfeit all his assets, will be unable to practise law and will be forced to live the rest of his life on his wife's earnings, the memorandum states. (His wife, Karyn, is a podiatrist in Phoenix.)
Mr. Stocker says he co-operated fully with law enforcement right from the day that the FBI raided his office in September, 2007. "While he could have attempted to defend the investigation, and any subsequent indictment on the grounds that he relied on the advice of Offill, a former SEC official and member of a prominent Dallas law firm ... he came to the conclusion that this was not the correct path and he needed to admit his own culpability," the memorandum reads.
During many days of interviews with prosecutors, he admitted that he and Mr. Offill were engaged in an unlawful distribution of securities cloaked under Rule 504 (which normally allows accredited investors to acquire shares that they do not plan to sell). Mr. Stocker says his assistance undermined Mr. Offill's contention that there was a legitimate legal rationale for issuing the shares.
Mr. Stocker is also asking the judge to consider his age and his family circumstances. After his decision to co-operate with the government and abandon his law practice, he became the primary caregiver for his two girls, then 3-1/2 and 1-1/2 years old. He drives his children to their activities, and is responsible for cleaning and maintaining the home.
Mr. Stocker says the effect that the conviction has had upon him is best described by his friend, Robert Baumann, a criminal defense lawyer. He stated that Mr. Stocker has "personally, professionally, economically and socially suffered tremendously already." If the purpose of sentencing is to protect the public, the criminal investigation and subsequent media coverage have already served that purpose, according to Mr. Baumann.
Mr. Stocker also notes that several of his co-conspirators received sentences lower than those recommended by prosecutors. These include Hank Zemla of Michigan. The government had recommended a sentence of 21 to 27 months, but Mr. Zemla received three months in jail followed by three months of home confinement.
Finally, Mr. Stocker requests that the judge allow him to serve his time at FPC Pensacola, a minimum security prison in Florida that is a short flight for his family to visit him. (According to Forbes.com, the facility is also one of the 12 best places to go to prison.) He says the minimum security prisons on the West Coast are too distant for frequent visits.
Stocker's plea agreement
Mr. Stocker's sentencing will come nearly one year after he filed a statement of facts admitting his guilt. In it, he stated that he and Mr. Offill engaged in several sham transactions that allowed insiders to illegally obtain free-trading shares. Mr. Stocker said he generally knew that the promoters were engaged in fraudulent stock promotions, but he remained "willfully blind" to their specific actions. He understood that they co-ordinated manipulative trades to coincide with misleading spam e-mails, fax blasts or mailers.
Mr. Stocker also admitted that he dumped shares of the companies during the scheme. After helping the insiders obtain their stock, he kept shares in many of the companies, which he held until the insiders started their promotions. Then he sold his shares into the subsequent market activity. As with most pump-and-dumps, the stock collapsed after the promoting ended, leaving investors with nearly worthless shares.
As part of his plea agreement, Mr. Stocker agreed to a restitution order in an amount to be determined by the judge.
SEC cases
In addition to the criminal charges, Mr. Stocker was a defendant in three separate civil suits launched by the U.S. Securities and Exchange Commission, which alleged that he aided in varying pump-and-dumps. Mr. Stocker settled the cases in May, 2009, agreeing to disgorge $1.4-million in illegitimate profits plus $399,070 in interest. The SEC also suspended him from serving as a lawyer before the commission.
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