SEC target Curshen loses appeal
2014-06-03 13:17 ET - Street Wire
From Street Wire (U:*SEC) U.S. Securities and Exchange Commission
by Mike Caswell
Jonathan Curshen, the Vancouver-linked promoter serving 20 years in a U.S. jail for a pink sheets pump-and-dump scheme, has lost an appeal of his conviction. He had claimed that prosecutors improperly influenced the jury at his trial by bringing in evidence of unrelated stock promotions. The appeal court, however, has found that even if the evidence was improper, there were many other overwhelming indications of fraud.
The ruling comes over two years after Mr. Curshen's trial for the pump-and-dump of CO2 Tech Ltd., a company that purportedly made pollution control products. Florida prosecutors claimed that he was a central figure in a $7.3-million scheme to manipulate the stock. (All figures are in U.S. dollars.) He and others (including former Pacific International Securities Inc. broker David Ricci) carried out a series of wash trades that boosted the company to $1.65 from 91 cents in one day. The trading occurred around the time that the company issued a news release in which it falsely claimed to have a relationship with Boeing.
After an 11-day trial, the jury convicted Mr. Curshen for the scheme. On May 11, 2012, a Miami judge sentenced him to 20 years in jail, by far the lengthiest sentence in the case. The judge also ordered him to forfeit $7.3-million and to serve three years of probation.
Mr. Curshen appealed the verdict within days of his sentence. He complained that during the trial prosecutors introduced evidence of other pump-and-dumps for which he was not charged. Robert Weidenbaum, a co-accused who pleaded guilty and agreed to testify for the government, told the jury about three specific stocks (Software Effective Solutions, Axis Technologies and Sun Sport Entertainment) and said there were "probably 10 other deals." The trial record included dozens of mentions of stocks that were not part of the charges, according to the appeal notice.
 | | NEVIS BLOG | | Jonathan Curshen |
Mr. Curshen further complained that prosecutors used this improper evidence in their closing arguments. Among other things, a government lawyer told the jury that CO2 Tech "wasn't defendant Curshen's first rodeo." The comments were not isolated and should cast "grave doubt" on the jury's verdict, Mr. Curshen contended.
The matter went before a three-judge appeal panel on May 21, 2014, in Miami. The appeal judges released a brief decision just one week later, on May 28. They agreed that there was some question as to whether the court should have allowed the evidence relating to other stocks. The evidence, however, would have had no bearing on the outcome of the case, the appeal court found. This is because the trial record provided "overwhelming evidence of the defendants' fraud," the ruling reads.
The appeal court also rejected a number of other complaints by Mr. Curshen, without providing any explanation. Among other things, Mr. Curshen had complained about evidence the FBI gathered in Costa Rica, where he had his office. He said that the trial judge allowed the evidence to go in without any serious discussion, despite his contention that the FBI had collected it illegally. He had also complained that the judge unreasonably refused to delay the trial. This left his lawyer ill-prepared for a complex securities fraud case that involved over one million pages of documents and several hundred hours of recorded conversations. The appeal judges said nothing about these arguments, except that they "lack merit and warrant no further discussion."
In the same ruling the judges also rejected an appeal by one of Mr. Curshen's co-defendants, Nathan Montgomery. He was the only other defendant in the case to go to trial. (The others pleaded guilty or remain fugitives.) He too complained about the judge allowing prosecutors to introduce evidence of other pump-and-dumps. For Mr. Montgomery, the loss does not mean quite as much as it does to Mr. Curshen. His sentence was far shorter (three years and three months), and he is scheduled for release on July 14, 2014.
CO2 Tech charges
The case against Mr. Curshen and the others is best described in a parallel civil complaint that the U.S. Securities and Exchange Commission filed against them on Feb. 18, 2011, in the Southern District of Florida. The complaint centred around the pump-and-dump of CO2 Tech, a company that was purportedly developing pollution control technology. On Jan. 30, 2007, the stock went to $1.65 from 91 cents and traded 12.2 million shares.
According to the SEC, Mr. Curshen was at least partly behind the company's substantial trading that day. Some time prior, two Israeli men had enlisted him to help promote the stock. The two men, Ariav Weinbaum and Yitzchak Zigdon, controlled the company's entire public float of 22.5 million shares through nominees, the SEC claimed. (The men are also defendants, and remain fugitives in the criminal case.)
The men then began a promotional campaign that included a news release in which the company claimed to have some sort of relationship with Boeing. The news release, dated Jan. 30, 2007, said that Boeing had taken an interest in a pollution control product that CO2 Tech was developing. According to the SEC, the release was completely false. The only communication between Boeing and CO2 Tech was a cease-and-desist letter from Boeing that arrived one week after the news release.
On the day the news went out, Mr. Curshen and one of his employees in Costa Rica, Mr. Ricci, "jump-started" the stock with a series of wash trades, the complaint stated. They also dumped $5.5-million worth of shares that day, according to the complaint. The SEC listed the total profits from the scheme as $7-million.
The complaint sought disgorgement of ill-gotten gains, appropriate civil penalties and penny stock bans against the men. In filing the case, the SEC acknowledged the assistance of the B.C. Securities Commission, the Costa Rican Police, the Israel Securities Authority, the United Kingdom Financial Services Authority and the City of London Police.
Although the SEC did not specify what the BCSC helped with, the criminal case did feature an HSBC account in Vancouver. Prosecutors claimed that Mr. Curshen funnelled $91.5-million through the account, with most of the money representing the proceeds of pump-and-dumps.
The only Canadian charged in the case, Mr. Ricci, pleaded guilty early and received 18 months in jail. He was released on Aug. 30, 2013. Mr. Curshen, meanwhile, is scheduled for release from a low-security jail, Fort Dix FCI, in 2029. |
