=DJ Criminal Probe Into GTX Global Leads To New Arrest
Friday, February 01, 2008 2:09 PM
By Carol S. Remond
Of DOW JONES NEWSWIRES
A four-year-old securities fraud investigation into four heavily promoted companies continues to spell trouble for those involved.
Parallel investigations by the Securities and Exchange Commission in Florida and the Federal Bureau of Investigation in Charlotte, N.C., already led to several arrests, including that of former U.S. attorney Sam Currin who pleaded guilty to money laundering and obstruction charges. Currin was sentenced to spend 70 months in jail last year. The four companies are Absolute Health and Fitness Inc. (AHFI), Concorde America Inc. (CNDD) and Bio-Heal Laboratories (BHLL) and GTX Global Corp. (GTX).
One of Currin's accomplices, Howell Woltz, an officer of several financial firms used to transfer offshore millions in illegal gains, also pleaded guilty last year to a tax fraud and money laundering scheme.
Earlier this month, Mark Brecher, secretary and treasurer of GTX Global, was the latest to fall victim of the criminal probe. He was arrested in Florida and removed to North Carolina where he remains incarcerated.
Brecher's arrest comes three months after that of David Hagen, former CEO of GTX Global, who was apprehended last October after returning to the U.S. from the Bahamas where he had been hiding.
According to a court affidavit by FBI special agent Doug Curran, the government investigation was helped by a cooperating witness who took part in all four securities fraud schemes.
According to the affidavit, Brecher and others controlled several offshore corporations, including Laureate's Way Inc., Walcott Indies Ltd., Toubetskoy & Co. Ltd., Toussaint Liberte SA, Valcien SA and Intelligy Corp.
By using these entities, Brecher and others were able to move millions of GTX Global shares to Canadian brokerage firms, including Global Securities Corp., Union Securities Ltd. and Blackmonth Capital Inc.
Then with the help of misleading press releases and several promotional Web sites, Brecher and others were able to pump GTX Global's share price.
The FBI affidavit details how after the stock price rose in response to the fraudulent promotional activity, Brecher and others sold shares held in Canadian accounts for "tens of millions of dollars."
Brecher, Hagen and others then laundered their profits by transferring the funds to accounts at First Caribbean International bank in the Bahamas. These funds were then wired to other destinations, including accounts controlled by Hagen in the Netherlands Antilles and ultimately accounts controlled by others in the U.S.
According to SEC calculations, the pump and dump of GTX Global shares was extremely lucrative.
Based on available records, the SEC estimated that between Oct. 3, 2005, and May 17, 2006, Canadian brokerage firm Global Securities alone cleared sales for about 5.6 million shares of GTX stock with total proceeds of about $32 million.
According to the FBI affidavit filed in the U.S. District court for the Western District of North Carolina, Brecher received between $6 million and $9 million as a result of sales of fraudulently promoted shares of GTX Global. He held a majority of its profits in accounts in Switzerland, Panama and the Bahamas.
The North Carolina criminal case against Brecher, Hagen, Woltz, Currin and others followed on the heel of a civil case filed by the Securities and Exchange Commission in the U.S. District Court for the Southern District of Florida in 2004.
In that original case, the SEC accused two stock promoters - Donald Oehmke and Bryan Kos - and related companies of having pumped the stocks of the two companies. Jeremy Jaynes, a man convicted of spamming and sentenced to a nine-year jail term in Virginia, was also at the center of the SEC case, although he was not charged in that case.
Without denying or admitting the charges, Kos, Oemke settled with the SEC. Under their respective deals with the SEC, both promoters agreed not to violate securities laws, they are barred from participating in penny stock offerings and enjoined from participating in unregistered stock offerings. As part of their respective settlements, Oehmke agreed to disgorgement and civil penalties of $1,454,484, while Kos agreed to repay $499,573.
It's unclear how many more people are in the FBI's sight.
Court documents have indicated in the past that Kos, a U.S. citizen living in Canada, and Jere Ross, a Florida lawyer who facilitated some of the money transfers, might be likely targets.
Dow Jones was first to raise questions about trading in the shares of Concorde America in August 2004. The SEC began its investigation a few days later. Investigative columns revealing problems at Absolute Health and GTX Global were published in December 2004 and December 2005.
-By Carol S. Remond, Dow Jones Newswires; 303-997-5783; carol.remond@dowjones.com
(END) Dow Jones Newswires
02-01-08 1409ET
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