Virginia tout facing 33 months for manipulative trades
SEC defendant Landis to plead guilty
VIRGINIA STOCK tout Eric Landis has agreed to plead guilty for carrying out a scheme to boost 97 public companies. The government claims that he carried out scores of manipulative trades in stocks that he was paid to promote. The listings included Interactive Multi-Media Auction Corp., an OTC Markets company that Vancouver-area residents Kenneth Telford and Jason McDiarmid were separately fined for manipulating.
Mr. Landis’s upcoming guilty plea is set out in a letter that prosecutors filed in federal court in Boston on Wednesday, Dec. 5. The letter states that Mr. Landis has agreed to plead guilty to one count of securities fraud, a charge that carries a maxi--
mum term of 20 years. Prosecutors and defence lawyers appear to have settled on a jail term of 33 months, with each side agreeing not to appeal such a sentence. The judge will, of course, be free to impose a different term. Mr. Landis will also forfeit his gains from the scheme, which prosecutors previously calculated to be $3.3-million. (All figures are in U.S. dollars.) The plea agreement comes just one week after Mr. Landis’s legal troubles became public, with the U.S. Securities and Exchange Commission filing a parallel civil suit against him in Boston. The SEC accused him of carrying out a three-year scheme that involved thousands of manipulative trades. The SEC cited three companies in particular, with all three having Canadian connections.
Among them was Interactive Multi-Media, a purported dealer of fine art. According to the SEC, somebody paid Mr. Landis to promote the stock between March and May, 2015. The SEC did not say who that somebody was, but Interactive Multi-Media was the subject of a separate case that the regulator pursued against two Vancouverites, Mr. Telford and Mr. McDiarmid. The SEC claimed that the men ran a $3.1-million pump-anddump with the company from October, 2014, to May, 2015. During the scheme, Mr. Telford and Mr. McDiarmid sold 2.48 million shares as the stock went to a $1.62 high, the SEC claimed. (The SEC has since won fines and bans against both men. Mr. Telford settled the case out of court, without admitting any wrongdoing. The judge later determined that he should pay $5.26-million. Mr. McDiarmid ignored the matter entirely, and the SEC obtained a $5.1-million judgment against him.)
The charges against Mr. Landis were somewhat unusual, in that he did not tell his clients about the manipulative trades. The clients had paid him to issue promotional material on their companies through three tout sheets that he controlled (The Street Alert, The Penny Reporter and The Stock Beacon). He did publish the material, but his distribution lists were far smaller than he claimed. To make it ap-
pear as if he had distributed his tout sheets more widely than he had, he carried out the trades, the SEC said.
This was the case with another of the stocks that the SEC listed in its complaint, Environmental Packaging Technologies Holdings Inc. (which claimed to have some sort of specialty liquids tanks, among other things). According to the SEC, Mr. Landis touted the stock in June, 2017. He told his client that he would distribute e-mails to 72,000 subscribers, but in fact only sent the materials to around 3,600. Meanwhile, he used brokerage accounts that he controlled to carry out co-ordinated trades in the stock, the SEC claimed. The stock went to a $2.25 high in 2017, but later came down considerably, last trading at 25 cents. (The company no longer trades. A TSX Venture Exchange shell, Blue Bay Capital Corp., has since acquired it.)
Environmental Packaging is the subject of a separate case that prosecutors in Boston are pursuing against another Canadian, Morrie Tobin. They claim that he boosted that company and another through paid promotional campaigns while secretly selling $3.6-million worth of stock. Mr. Tobin has agreed to plead guilty and awaits sentencing.
The last example that the SEC cited Mr. Landis for was that of Agora Holdings Inc., a Toronto company that is developing products called eSilkroad and eSilknet. (The company says that it will “make the interaction between businesses and non-profit organizations throughout the world faster, more effective, and less costly.”) According to the complaint, Mr. Landis received $200,000 to tout the stock in 2016. Again, he created the appearance of market interest by trading the stock himself, buying and selling Agora through accounts that he controlled. (Agora had a 49-cent high in 2016. The stock was last at 9.99 cents.)
For Mr. Landis, the case is not the first time the SEC has pursued him. In 2004, he settled a prior matter that the regulator brought against him for his part in the pump-and-dump of 2DoTrade Inc., a Vancouver-linked anti-anthrax promotion from 2001. The SEC claimed that he was part of a group that boosted the stock to 58 cents amidst public fears of an anthrax attack. (In 2001, envelopes containing the lethal bacteria were mailed to several news offices and to two Democratic senators.) 2DoTrade claimed that it had a product that would eliminate numerous strains of anthrax, but within weeks the SEC halted the stock, questioning the accuracy of the company’s news releases. The regulator said that the scheme resulted in $1.6-million in illegal gains. In addition to settling the SEC case, Mr. Landis pleaded guilty to related obstruction of justice charges.
The defendants in the SEC’s 2DoTrade case included a one-time Howe Street tout, Dominic Roelandt. The SEC said that Mr. Roelandt, a Belgian, dumped 1.85 million shares during the scheme. He ignored the case entirely, and the SEC eventually obtained a $1.1-million judgment against him. Prior to that trouble, Mr. Roelandt had boosted many Vancouver-linked companies, including Wamex Holdings Inc., Winchester Mining Corp., SmarTire Systems Inc. and E-Vegas.com Inc.