710 F.3d 1124 (10th Cir. 2013), 10-5146, United States v. Gordon
|Docket Nº:||10-5146, 11-5009.|
|Citation:||710 F.3d 1124|
|Opinion Judge:||HOLMES, Circuit Judge.|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. George David GORDON, a/k/a|
|Attorney:||William D. Lunn, Tulsa, OK, for Defendant-Appellant. Claire McCusker Murray, Criminal Division, Appellate Section, U.S. Department of Justice, Washington, D.C. (Thomas Scott Woodward, United States Attorney, Catherine J. Depew, Assistant United States Attorney, Northern District of Oklahoma; Kevi...|
|Judge Panel:||Before HARTZ, O'BRIEN, and HOLMES, Circuit Judges.|
|Case Date:||March 15, 2013|
|Court:||United States Courts of Appeals, Court of Appeals for the Tenth Circuit|
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Defendant-Appellant George David Gordon is a former securities attorney convicted of multiple criminal charges relating to his alleged participation in a " pump-and-dump" scheme where he, along with others, violated the federal securities laws by artificially inflating the value of various stocks, and then turning around and selling them for a substantial profit. The government also restrained some of his property before the indictment was handed down and ultimately obtained criminal forfeiture of that property. We affirm Mr. Gordon's conviction and sentence, as well as the accompanying forfeiture orders.
I. Factual and Procedural Background
Mr. Gordon was a securities attorney in Tulsa, Oklahoma. The government charged that Mr. Gordon and Richard Clark,1 a Tulsa businessman, engaged in a " pump-and-dump" scheme.2 As part of their scheme, Messrs. Gordon and Clark, along with other alleged co-conspirators, " acquired millions of shares in ‘ penny stock’ companies[,] ... used false and backdated documents to make their shares publicly tradeable[,] ... [and] coordinated trading among themselves and nominees they controlled to create the false appearance of an active market for the stock[s]." Aplee. Br. at 3.
The government further claimed that the conspirators initiated false and misleading advertising campaigns to promote the stocks, sold the stocks through " an array of bank accounts and nominee[s]," and engaged in a subsequent cover-up to conceal their conduct from the Securities and Exchange Commission (" SEC" ). Id. at 3-4.
The scheme can be traced back to 2004 when Mr. Gordon began dealing with
Mark Lindberg and Joshua Lankford, two Dallas stock promoters (also alleged members of the conspiracy). Through a sequence of transactions, Mr. Gordon assisted Mr. Lindberg, Mr. Lankford, and others in, inter alia, establishing and promoting the stock of numerous companies. Transactions involving three companies headline the government's charges: specifically, National Storm Management (" National Storm" ), Deep Rock Oil & Gas (" Deep Rock" ), and Global Beverage Company (" Global Beverage" ). The government also alleged that Mr. Gordon fraudulently obtained free-trading shares of International Power Group (" IPG" ). We briefly discuss the material facts relevant to each company below.3
A. National Storm
National Storm was a roofing and siding company in Illinois with annual revenues of around $8 million. Mr. Gordon and Mr. Lindberg met with National Storm's president in 2005 to discuss financing options. The parties agreed to take the company public. In pursuit of that goal, Mr. Gordon and an associate (New York businessman Richard Singer) arranged for a merger between National Storm and The 18th Letter— a public " shell company ... that had been incorporated and had issued stock in 2002." Aplt. Opening Br. at 9.
Mr. Gordon forwarded to Mr. Singer a legal opinion letter pursuant to SEC Rule 144, signed by an associate attorney, Robert Bertsch, stating that The 18th Letter's shares were freely tradeable under Rule 144's criteria because the shares had been purchased by the respective owners two years ago. See 17 C.F.R. § 230.144(k) (" Rule 144" ) (2005) (" The requirements of paragraphs (c), (e), (f) and (h) of this section shall not apply to restricted securities sold ... [by] a person who is not an affiliate of the issuer at the time of the sale ..., provided a period of at least two years has elapsed since the later of the date the securities were acquired from the issuer or from an affiliate of the issuer." (emphasis added)); 4 see also M & A West, 538 F.3d at 1051 (" Rule 144(k) permits a person who is not an affiliate of the issuer ... to sell restricted securities without complying with certain requirements after they have held the securities for a period of two years." (footnote omitted)).
Mr. Singer testified that because he was the only shareholder in The 18th Letter, Mr. Gordon instructed him to " offer some friends a thousand dollars each to falsely claim that they were shareholders." Aplee. Br. at 6. Mr. Gordon's office transmitted to Mr. Singer " backdated corporate records ... that purported to memorialize Singers' [sic] friends' purchase of shares two years previously" — i.e., seemingly with the aim of satisfying Rule 144's requirements. Id.; see R., Vol. VIII, at 1494-98 (Trial Test. of Richard Singer, dated Apr. 14, 2010) (" [The documents] were backdated to show that the shareholders owned the stock longer than they actually did, so upon becoming a public company those
shares would be freely tradable to sell in the market." ).
The opinion letter was transmitted to a transfer agent so that the shares at issue could be traded publicly on an " over-the-counter" (" OTC" ) market. See generally Black's Law Dictionary 1214 (9th ed. 2009) (defining " over-the-counter market" as " [t]he market for securities that are not traded on an organized exchange" ). The merged company consisted of six million freely-tradeable shares— or 15% of the total shares. National Storm's president held the remaining interest in the form of restricted shares (i.e., non-trading shares).
In 2005, several storms pelted the Gulf of Mexico, causing " severe damage" throughout the Southern states. Aplt. Opening Br. at 6. Because National Storm was a building company, Messrs. Gordon, Lindberg and Lankford wanted to take advantage of the potential for increased share performance, so they employed a stock promoter named Dean Sheptycki (a charged co-conspirator) " who could write and send ... millions of fax advertisements each day about a company." Id. at 10. A " fax blast" campaign was initiated subsequently; thousands of faxes were sent out touting strong market expectations for National Storm's future growth. A similar " e-mail blast" campaign followed.
The distributed material was misleading in many ways. For instance, an August 31, 2005, fax represented that " Wall Street expectations" for the company's growth were " 207% now" and " 450% in the next 12 months" — this, despite the fact that no Wall Street " analysts" were covering the company. Aplee. Br. at 7 (citation omitted) (internal quotation marks omitted); see also Aplt. Addendum, ex. 4 (Nat'l Storm Fax Advertisement, dated Aug. 31, 2005). Evidence also was introduced at trial that the faxes included misleading statements regarding the source of the information in order to " conceal the fact that the blast had been prepared by Sheptycki, reviewed by Gordon, and paid for from Gordon's client trust account." Aplee. Br. at 8; see also R., Vol. VIII, at 3049-50 (Trial Test. of Mark Lindberg, dated Apr. 6, 2010) (noting that a marketing company included in the fax blast disclosures actually had no involvement with their dissemination, and that a statement suggesting that nonaffiliated shareholders paid for the advertisements was untrue). Similarly, one mass e-mail that contained information regarding National Storm's purported significant expected growth referred readers to the SEC's website for investor information. But, because National Storm was a so-called " Pink Sheet" OTC company, it was not required to file periodic reports with the SEC. See generally SEC v. Whittemore, 659 F.3d 1, 5 (D.C.Cir.2011) (describing the Pink Sheet system as " a trading system that lists small companies that do not meet the requirements of the major stock exchanges" ); SEC v. Platforms Wireless Int'l Corp., 617 F.3d 1072, 1081 (9th Cir.2010) (noting that the defendant's " stock has been traded on the Pink Sheets, now known as Pink Quote, an inter-dealer electronic quotation and trading system for registered and unregistered securities" ); Black's Law Dictionary 1265 (defining " pink sheet" as " [a] daily publication listing over-the-counter stocks, their market-makers, and their prices" ); R., Vol. I, at 53 (describing " Pink Sheets" as " a quotation service for over-the-counter stocks" ).
Throughout the advertising campaign, Mr. Gordon, along with other co-conspirators, including Mr. Lindberg, used various " nominee" accounts to disguise ownership of National Storm shares and coordinate trading. National Storm's stock began to rise. As the prices rose, the conspirators began selling their shares. Ultimately, the conspirators made more than $5 million from the manipulation of National Storm.
B. Deep Rock
The conspirators conducted another promotion, this time of Deep Rock, a Tulsa-based oil company. See Aplt. Opening Br. at 12 (" The rise in natural gas prices during the early part of 2005 caused Lindberg to want to do a similar promotion with Deep Rock...." ). Mr. Clark had...
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