The Indian-American CEO of two publicly-traded companies in the US, Shailesh Shah, was convicted on charges that he paid kickbacks in return for purchases of his companies’ stock.
Shah, 48, of Chino, Calif., pleaded guilty before U.S. District Judge Richard G. Stearns to two counts of mail fraud and two counts of wire fraud, according to a press release issued by the FBI. His sentencing is scheduled for October 23 of this year.
Shah was the President and Chief Executive Officer(CEO) of SOHM, Inc. and Costas, Inc. He agreed to pay secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in these two companies. The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents. In actuality, however, and unbeknownst to Shah, the purported investment fund representative was an undercover FBI agent.
Apart from Shailesh Shah, also charged in May was Sandip Shah, 40, in an indictment with nine counts of wire fraud. Sandip Shah is also from Chino, California, and was previously arrested on February 27th of this year.
Sandip Shah was in the business of promoting penny stocks and assisting public companies in finding sources of funding. He agreed to introduce the investment fund representative to executives of publicly traded companies so that those executives could enter into the kickback arrangement. In exchange for the introductions and for facilitating the kickback arrangements as they continued, Sandip Shah accepted a portion of the kickbacks paid by the executives. What the defendants did not know was that the purported investment fund representative was actually an undercover agent.
The plea by Shailesh Shah follows a lengthy investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly-traded companies whose stock often trades at pennies per share.
Shah faces 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gain or loss on each count.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.
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