SEC target Curshen receives 16 months
2011-09-19 13:35 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-IBOT) Industrial Biotechnology Corp
by Mike Caswell
stockwatch.com*SEC-1882891&symbol=*SEC®ion=C
Former Vancouver promoter Jonathan Curshen, 47, has received 16 months in jail in New York on securities fraud and bribery charges. The sentence, handed down by Judge Leonard Sand at a hearing on Tuesday, Sept. 13, includes two years of probation and participation in a mental health program.
The sentence comes three years after the FBI arrested Mr. Curshen in a broker bribery sting. According to prosecutors, he paid a kickback to an undercover agent called "Charlie Moore" who was posing as a person with access to corrupt brokers. The agent agreed to have the brokers buy shares of Industrial Biotechnology Corp., a Washington State pink sheets listing that Mr. Curshen had been paid to promote. Mr. Curshen pleaded guilty to the charges in June, 2009.
Prosecutors sought 21 to 27 months for the promoter, saying the scheme was essentially a classic pump-and-dump. Mr. Curshen and others sought to artificially drive up Industrial Biotechnology's price, cash out their stock and leave defrauded investors holding overvalued shares. Moreover, the scheme was sufficiently complex that it warranted severe punishment, the government contended.
Mr. Curshen, for his part, sought a much lower sentence. He said that the scheme was not a pump-and-dump of any sort. He had told the undercover agent that brokerage customers could sell the stock at any time. As far as he knew, he had no obligation to disclose the kickbacks, or commissions as he called them. By his calculations, his sentence should have been as low as six months.
Mr. Curshen also asked that the judge consider that he had already "suffered tremendously" for his actions. Among other things, since his arrest he had to live apart from his Costa Rican wife (who the FBI threatened to arrest if she came to the U.S.). He also became impoverished, as he lost his Costa Rican business, a stock promotion firm called Red Sea Management. In addition, he had to leave the securities industry and ended up working for a bakery. He asked that the judge consider placing him under house arrest instead of sending him to prison.
Judge Sand, in the end, determined that jail was appropriate for Mr. Curshen to deter both him and others from similar crimes. As the judge saw it, the 16-month sentence was a lenient one. "You have repeatedly, repeatedly, engaged in ... illegal activity. You have testified falsely or furnished documents under oath which are contrary to fact," the judge said at the sentencing hearing.
The judge was initially going to order Mr. Curshen immediately taken into custody to begin his sentence, but instead allowed him 10 days to say goodbye to his children and to wrap up his affairs. In doing so, he recognized that Mr. Curshen has a GPS tracking device attached to him as part of his bond conditions in another criminal case he faces in Miami. The judge also fined Mr. Curshen $10,000. (All figures are in U.S. dollars.)
Curshen's charges
The charges against Mr. Curshen, as detailed in a Jan. 15, 2009, information sheet, were one count of conspiracy to commit securities fraud and commercial bribery. According to prosecutors, the scheme began in October, 2007, when the undercover FBI agent contacted Mr. Curshen and told him that he represented a group of stockbrokers at a firm called Jeffries & Company. The agent said he could have the brokers buy shares of Industrial Biotechnology using discretionary accounts. The buying would be timed to coincide with selling by Mr. Curshen.
Mr. Curshen, in turn, agreed to pay the brokers an undisclosed kickback of 25 per cent. The agent told Mr. Curshen that the brokers would hold the stock for a substantial length of time. The first of the buys took place on June 27, 2008, when the FBI used an undercover account to buy 20,000 shares of Industrial Biotechnology at 90 cents. That buy was followed by several more over one week, during which the FBI bought another 127,500 shares. After the buying, Mr. Curshen arranged for $19,000 to be wired to an undercover bank account, the information sheet stated.
He then spoke with the undercover agent in a recorded phone call on July 22, 2008, to arrange more buying. He and the agent agreed that the brokers would buy $2.5-million worth of Industrial Biotechnology shares in the following three months. Mr. Curshen's discussions with the agent culminated with a Sept. 4, 2008, meeting in New York. During a recorded conversation, Mr. Curshen offered an even higher kickback of 30 per cent. At the conclusion of that meeting, the FBI arrested him.
Charges in Miami
Although Mr. Curshen has now resolved his New York case, he still faces a separate criminal action in Miami for a pump-and-dump scheme he ran from Costa Rica between 2003 and 2008. Prosecutors claim that he fraudulently promoted several stocks and funnelled $91.5-million in proceeds through an account at HSBC Bank in Vancouver. The only stock that prosecutors identified was CO2 Tech Ltd., a pink sheets listing that claimed to have a pollution control product in which Boeing had taken an interest. Mr. Curshen pleaded not guilty to those charges and awaits trial.
He also faces a parallel civil suit from the U.S. Securities and Exchange Commission. The defendants in that case include former Pacific International Securities Inc. broker David Ricci who, according to the SEC, helped Mr. Curshen carry out several manipulative trades in CO2 Tech. Mr. Curshen denies any wrongdoing in that case as well.
In the late 1980s, Mr. Curshen lived in Vancouver and ran a company called Hollywood Promotions which served junior stocks in Canada and the U.S. He sold the operation to his partner in 1989 and moved to Miami.
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