Ontario consultant agrees to pay US$6.2M IN SEC stock manipulation probe

0

WASHINGTON – The U.S. Securities and Exchange Commission says an Ontario-based consultant has agreed to pay US$6.2 million to settled charges related to illegal reverse merger schemes involving two China-based companies and related charges of stock manipulation.

In addition to the payment, the SEC says S. Paul Kelley will be barred from the securities industry as well as participation in any penny stock offering.

The SEC alleged that Kelley, from the Toronto area, and three of his associates acquired controlling interests in two U.S. public shell companies in order to orchestrate reverse mergers with China Auto Logistics Inc. and Guanwei Recycling Corp.

They then hired stock promoter Shawn Becker of Overland Park, Kan., and others to tout the two companies’ unregistered stock to investors.

“Kelley and his associates engaged in various forms of manipulative trading in order to further drive up the price and volume of China Auto and Guanwei Recycling stock and they profited when they dumped their shares into the inflated market they created,” the SEC said Monday in a posting on its website.

Besides Kelley, two of his associates — Roger Lockhart of Holiday Island, Ark., and Robert Agriogianis of Florham Park, N.J., – have also agreed to settle the SEC’s charges.

Lockhart agreed to pay more than $3 million and Agriogianis entered into a co-operation agreement.

All three men consented to the entry of final judgments, including permanent injunctions, without admitting or denying the allegations. The settlements are subject to court approval.

“The SEC’s litigation continues against Becker and another Kelley associate, George Tazbaz of Oakville, Ont.,” the posting said.

“Kelley and his associates concealed their acquisition and control of public shell companies, and they manipulated trading in two China-based companies following reverse mergers with those shells,” Julie Lutz, director of the SEC’s Denver Regional Office, is quoted in the positing as saying.

“The SEC has exposed their scheme with persistence and the help of fellow regulators.”

According to the SEC’s complaint filed in U.S. District Court for the District of New Jersey, the schemes involving China Auto and Guanwei Recycling occurred in 2008 and 2009. Becker, Lockhart, and Tazbaz allegedly orchestrated manipulative trading in a third China-based issuer Kandi Technologies in 2009 and 2010.

The SEC alleges that Kelley, Tazbaz, Lockhart, and Agriogianis reached secret oral agreements with management at China Auto and Guanwei Recycling in which they covered all of the costs to take the companies public in the U.S. in exchange for approximately 30 to 40 per cent of the resulting stock.

Kelley and his associates then acquired controlling interests in the two U.S. public shell companies used to conduct the reverse mergers with China Auto and Guanwei. They concealed their controlling interest in the public shell companies and the reverse merger transactions by having others create at least nine Hong Kong-based companies to hold their shares.

“Despite their concealment efforts, the SEC was able to obtain documents and testimony to corroborate the suspected conduct with assistance from the Ontario Securities Commission,” the SEC said.

The SEC’s complaint charges Kelley, Tazbaz, Lockhart, Agriogianis and Becker with violating the antifraud, securities registration and securities ownership reporting provisions of U.S. federal securities laws. Becker is charged with violating the antifraud and securities registration provisions.

Kelley and Becker also are charged with violating the broker-dealer registration provisions. The SEC’s complaint seeks disgorgement of “ill-gotten gains plus prejudgment interest and financial penalties” as well as penny stock bars.

In the settlements, Kelley agreed to pay disgorgement of $2,828,353.53, prejudgment interest of $560,812.47 and a penalty of $2,828,353.53.

Leave a comment

Your email address will not be published. Required fields are marked *