An attorney for South Carolina health care device company, Signalife, was arrested last week at Los Angeles International Airport (LAX) on charges related to his alleged role in a multi-million dollar market manipulation fraud scheme.
The indictment charges Mitchell Stein with one count of conspiracy to commit mail fraud and wire fraud, three counts of mail fraud, three counts of wire fraud, three counts of securities fraud, three counts of money laundering and one count of conspiracy to obstruct justice. The indictment also seeks forfeiture of the proceeds of the offenses.
The indictment alleges that Stein engaged in a scheme to artificially inflate the stock price of Signalife Inc. by creating the false impression of sales activity for the company. Signalife, now known as Heart Tronics, was a publicly traded company that purportedly sold electronic heart monitoring devices. According to the indictment, Stein’s wife held approximately 85 percent of the shares of Signalife.
The indictment alleges that Stein and his co-conspirators created fake purchase orders and related documents from fictitious customers and then caused Signalife to issue press releases and file documents with the Securities and Exchange Commission (SEC) trumpeting these fictitious sales. The indictment also alleges that in a further effort to create the false appearance of sales activity, Stein arranged to have Signalife products shipped to and temporarily stored with an individual who had not purchased any products.
The indictment further alleges that Stein and his co-conspirators sold shares of Signalife stock at inflated prices, disguising the fact that they were doing so by placing the shares in purportedly blind trusts. In addition to selling shares in that manner, Stein and his co-conspirators allegedly also caused Signalife to issue additional shares to third parties so that those third parties could sell the shares and remit the proceeds of those sales to Stein and his co-conspirators.
According to the indictment, Stein also conspired to obstruct an SEC investigation into Heart Tronics by testifying falsely and arranging for others to testify falsely in an effort to conceal the fraud scheme.
If convicted, Stein faces up to 20 years in prison on each count of mail fraud, wire fraud, securities fraud, and conspiracy to commit mail and wire fraud, as well as up to 10 years in prison on each count of money laundering and up to five years in prison on the conspiracy to obstruct justice count.
The SEC conducted a parallel investigation and today announced its filing of a civil enforcement action against Stein and others. The department thanks the SEC for its substantial assistance in this matter – Source.
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