SEC target Gallison to plead guilty
2015-12-03 10:34 ET - Street Wire
Also Street Wire (U-*SEC) U S Securities and Exchange Commission
Also Street Wire (U-EVRN) Everock Inc
by Mike Caswell
Harold Gallison Jr., the man accused of being the mastermind in the Moneyline Brokers pump-and-dump scheme, is scheduled to plead guilty. An entry in the court docket indicates that he will appear before the judge at a change of plea hearing in Virginia set for Dec. 10, 2015. He previously pleaded not guilty, so a change of plea could only be to guilty.
Prosecutors claim that Mr. Gallison and others, including a Canadian named Michael Randles, were behind the pump-and-dumps of two companies. The group ran promotional campaigns and anonymously sold $6.5-million worth of stock through several U.S. brokerages on behalf of others, according to the government. (All figures are in U.S. dollars.) One of the stocks in the scheme was Everock Inc., a subpenny mining stock that was once domiciled in Ontario.
Also set to plead guilty in the case is Ann Hiskey, a U.S. citizen and former broker who was living in Costa Rica. The government claims that she and Mr. Gallison planned and executed the manipulation of one of the stocks in the scheme, a purported hydroelectric company called Warrior Girl Corp. She is scheduled to change her plea in an appearance on Dec. 14, 2015. She previously pleaded not guilty, and has been free on bond.
The terms of Ms. Hiskey and Mr. Gallison's plea agreements are not yet available, as the pleas have not yet been entered. It is possible that the pair have agreed to testify against others in return for a favourable sentence recommendation. There are seven other defendants who the government claims had varying levels of participation in the scheme. Most of them await a trial by jury, scheduled for Jan. 25, 2016. (The lone Canadian defendant, Mr. Randles, is not among them, as he is not in U.S. custody. Court filings identify his last known location as Costa Rica.)
Authorities arrested Mr. Gallison in California on July 10, 2015, days before they unsealed an indictment against him and the others. He remained in custody until Aug. 20, 2015, when a judge released him on a $1,797,500 appearance bond. His release conditions include GPS monitoring and a travel restriction that limits him to California (where he lives) and Virginia (where he must go for court).
Details of the case are contained in an indictment prosecutors filed in the Eastern District of Virginia and in a 63-page civil complaint the U.S. Securities and Exchange Commission filed on July 14, 2015, in the Southern District of New York. The documents identified Mr. Gallison, 57, as the founder of Moneyline Brokers, a Costa Rican entity that facilitated market manipulations. In 2009 and 2010, it ran promotional campaigns and had accounts at several U.S. brokerages through which it could anonymously sell shares using nominees, the SEC said.
One of the examples the SEC provided was the pump-and-dump of Everock, a subpenny mining stock that became a purported maker of natural condiments at the start of the scheme. The promotion, as described in the complaint, began on March 22, 2010, when an on-line tout sheet called the OTC Reporter started covering Everock. At the time the company claimed to have a deal in which a natural foods supermarket had approved its products for sale. The tout sheet called the company the "next huge move" that could have a "plan for growth into a new economy."
As the tout sheet was going out, Mr. Gallison was directing manipulative trades behind the scenes, the SEC said. He set up shares of Everock so that they were held at different firms. This allowed Moneyline to carry out matched trades with less risk of detection, the complaint stated. Over the course of the Everock manipulation, accounts at Moneyline earned $2.5-million selling the stock, the SEC claimed. (The company reached a 1.44-cent high during the scheme, in April, 2010. Within five months it was well under a penny, trading around 0.2 cent.)
The role of the lone Canadian, Mr. Randles, was to supervise Moneyline employees in Costa Rica, the SEC said. He and Mr. Gallison were aware that what they were doing was illegal, according to the SEC. An intercepted conversation, quoted in the complaint, contained Mr. Gallison attempting to assure Mr. Randles about the scheme before a trip from Costa Rica. Mr. Randles had expressed concern that he could be "hauled off" a plane and arrested. In the conversation, as quoted by the SEC, Mr. Gallison explained that for a first offence the SEC "raps your knuckles ... it's civil." He also told Mr. Randles that it would be "tough for anyone to figure out what ... we are doing in the first place."
The criminal charges are conspiracy to commit wire fraud, securities fraud and money laundering. The other defendants in the criminal case are: Roger Coleman, 79, of Las Vegas; Carl Kruse Sr., 75, of Miami; Carl Kruse Jr., 50, of Miami; Frank Zangara, 52, of Locust Valley, N.Y.; and Mark Dresner, 59, of Dix Hills, N.Y. Of those, Mr. Coleman, Mr. Zangara, Mr. Dresner and Mr. Moeller have been arrested and released. They entered pleas of not guilty. |
