Friday, December 7, 2007

Dallas man pleads guilty to role in conspiracy to manipulate stock prices

By Pegasus News wire

Gerald Kingston of Dallas pled guilty on Wednesday in federal court to conspiracy to commit securities fraud, stemming from his role in manipulating the stock price of Interfinancial Holdings Corporation (IFCH), announced U.S. Attorney Richard B. Roper of the Northern District of Texas. Kingston faces a maximum statutory sentence of five years in prison, a $250,000 fine, and restitution. He is scheduled to be sentenced by U.S. District Judge Barbara M.G. Lynn on March 19, 2008.

According to documents filed in Court, in August 2006, Kingston and others agreed to manipulate the stock price of IFCH, a thinly-traded penny stock that traded on the "Pink Sheets" of the National Association of Securities Dealers Automatic Quotation National Market System (NASDAQ) that had minimal capitalization or assets, through fraudulently trading its publicly-traded stock. Using matched trade orders through which the co-conspirators bought and sold IFCH stock to and from each other, and in some cases, themselves, Kingston and his co-conspirators sought to create the false appearance of significant market demand for and trading activity in IFCH, to fraudulently increase its trading price.

The co-conspirators, including Kingston, made these match trades by buying and selling large volumes of IFCH stock using multiple trading accounts they controlled. However, before ordering these purchases and sales of IFCH stock on the open market, members of the conspiracy and others obtained large blocks of IFCH stock, ensuring the co-conspirators a profit if Kingston and the other designated traders could drive up the price of IFCH through their fraudulent matched trades. Kingston admitted that he derived, either directly or indirectly, approximately $1,628,482 in proceeds from his fraudulent sales of IFCH during the conspiracy.

Between August 15, 2006 and July 10, 2007, Kingston, acting a the direction of Jeffrey C. Bruteyn and others, bought approximately 334,434 shares of IFCH stock through multiple transactions on the open market, using trading accounts held in Dallas and elsewhere. Kingston placed purchase orders over the Internet using brokerage accounts he held in his own name and in the name of United Financial Markets (United Financial), an entity jointly owned and controlled by Jeffrey C. Bruteyn and Kingston. Bruteyn reimbursed Kingston for the IFCH shares he bought using his personal brokerage accounts. The vast majority of the IFCH shares purchased by Kingston and United Financial were bought either by Bruteyn, entities controlled by Bruteyn, or from other individuals and entities acting in concert with Bruteyn. As Kingston and his co-conspirators intended, his multiple and timed purchases of IFCH shares created the false appearance of significant market demand for IFCH, resulting in increases in its trading price.

During the same time period, Kingston, again acting at Bruteyn’s direction, sold approximately 1,628,170 shares of IFCH stock on the open market using the brokerage accounts in Kingston’s name and in the name of United Financial. Kingstson made the majority of these sales to Bruteyn, entities under Bruteyn’s control, or other individuals and entities acting in concert with him. As intended, the multiple and periodic matched sales continued to give the false appearance to the public of legitimate market demand for IFCH, which resulted in significant profits or potential profits to Kingston and his co-conspirators due to the stock’s price increase.

In a related case, the United States Securities and Exchange Commission (SEC) previously filed civil fraud charges in federal court in Dallas against AmeriFirst and its principals, including Bruteyn and Dennis W. Bowden, arising out of conduct related to the underlying conduct for Kingston’s guilty plea. The SEC charged Bruteyn, Bowden, and others with raising as much as $55 million through the fraudulent offer and sale of AmeriFirst’s secured debt obligations and collateral secured debt obligations. The SEC also charges that AmeriFirst and its sales agents targeted and lured many elderly investors to invest their retirement savings with AmeriFirst based on promises that the investments had little or no risk and were guaranteed through the protection of a commercial bank and numerous insurance companies.

While stating that the investigation is ongoing, U.S. Attorney Roper praised the investigative efforts of the Federal Bureau of Investigation, the Federal Deposit Insurance Corporation-Office of Inspector General, the Texas State Securities Board, the Securities and Exchange Commission, and the Florida Office of Financial Regulation. The case is being prosecuted by Assistant U.S. Attorney Jeffrey J. Ansley and Special Assistant U.S. Attorney Stephanie Tourk.

Source: Department of Justice

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