Emulex Stock Hoax Defendant to Plead Guilty to Fraud
I do believe I said he would get about 4 -5 years, well here it is. the Restitution kills him forever.
Los Angeles, Dec. 28 (Bloomberg) -- A former community
college student agreed to plead guilty to federal fraud charges
for fabricating a press release that led Emulex Corp. investors to
lose almost $110 million, U.S. Attorney Alejandro Mayorkas said.
Mark S. Jakob, 23, signed a plea agreement accepting
responsibility for one count of wire fraud and two counts of
securities fraud. He faces a maximum prison sentence of 46 months
under the agreement, as well as a maximum fine of $220 million,
plus $110 million in restitution to Emulex shareholders, Mayorkas
said in a statement.
Jakob is scheduled to enter his guilty plea tomorrow before
U.S. District Judge Dickran Tevrizian in Los Angeles.
Prosecutors accused Jakob of scheming to manipulate the price
of Emulex shares by distributing the bogus release, then earning
about $241,000 by trading shares in the company. He was a former
employee of Internet Wire, the service that distributed the
release to news organizations. Shares of Emulex, a data-storage equipment maker, fell as
much as 62 percent on Aug. 25, the day Bloomberg News and other
news organizations distributed the inaccurate information.
Besides the criminal charges, Jakob faces a civil lawsuit
brought by the U.S. Securities and Exchange Commission, which
seeks to recover the profits he made by trading Emulex shares. A
federal judge in October froze about $400,000 of Jakob's assets.
Fraud Charges
In his plea agreement, Jakob admitted creating a bogus press
release about Emulex, falsely stating that it was under SEC
investigation and that it had lowered reported earnings figures
for the previous quarter. The release also said Emulex's chief
executive had resigned.
Jakob sent the release from an El Camino Community College
library computer to his former employer, Internet Wire, to be
distributed early on Aug. 25.
He will plead guilty to one count of securities fraud for his
purchase of 3,500 Emulex shares, which gave him a $186,815 profit.
The second charge was based on the losses Jakob's phony
release caused one Emulex investor. That man sold 800 shares for
about $52 a share -- half their value at the time -- after he saw
the news reports on the phony information.
The wire fraud charge was related to Jakob's having caused
Internet Wire to distribute the fake press release to financial
news organizations, the U.S. Attorney said.
Prison Time
Jakob could have faced as much as 25 years in prison for the
charges. The plea agreement, which is not binding until signed by
a judge, suggests 37 months to 46 months in prison. The combined
$330 million in fines and restitution also are not binding until a
court approves them.
The National Association of Securities Dealers calculated
that Emulex shareholders lost $110 million after trading on the
phony news. Prosecutors have not yet identified those
shareholders, Assistant U.S. Attorney Pamela Johnston said.
Shares of Costa Mesa, California-based Emulex, which rose
$3.63 to $85.25 today, are up 52 percent this year.
--Joyzelle Davis in Los Angeles (323) 801-1263, or
joydavis@bloomberg.net, through the San Francisco newsroom/gcb
Story illustration: To see a table of activity in Emulex's
options, see: EMLX US <Equity> OMON <GO> |
