Tuesday, April 29, 2008

The Noose Further Tightens... Government Indicts Stock Touts Kos, Hagen For Fraud, Money Laundering

Federal prosecutors in North Carolina continue to march out alleged conspirators in a multi-million securities scam encompassing a handful of penny stocks.

Bryan Kos, a stock promoter who a few years back settled civil charges with the Securities and Exchange Commission, has now been indicted under one count of conspiracy to commit securities fraud and one count of conspiracy to commit money laundering.

David Hagen, founder and former chief executive of one of the companies which stock was unlawfully pumped and dumped, was also indicted under similar charges.

Hagen has been under arrest since he returned to the U.S. earlier this year. An arrest warrant has been issued for Kos, a U.S. citizen who resides in Canada.

Co-conspirators Jeremy Jaynes, Sam Currin, Howell and Vernice Woltz already pleaded guilty for their roles in the conspiracy.

Kos, Jaynes and Hagen were featured in several Dow Jones Newswires "In The Money" columns for their participation in the illegal promotion of Absolute Health and Fitness Inc. (AHFI), Concorde America Inc. (CNDD) and GTX Global ( GTXC).

According to criminal prosecutors, proceeds from the GTX Global pump and dump alone topped $31 million. Those proceeds, like others from different stocks, were then laundered through foreign and domestic accounts.

Recently unsealed court documents show that Jaynes, a convicted Internet spammer who has been under house arrest while he appealed his conviction, pleaded to one count of securities fraud in November 2006 and has been cooperating with the government since then.

Jaynes was charged in 2003 under a Virginia state law banning the bulk distribution of junk email. He was sentenced to nine years in prison in that case. Under the terms of his deal with federal prosecutors, he faces a maximum sentence of 20 years imprisonment but could get a lot less because of his cooperation. Jaynes is scheduled to be sentenced on May 6 for his role in the securities fraud case.

The complaint filed against Kos, Jaynes and others followed in the footsteps of civil cases filed against promoters and entities associated with some of the same companies by the SEC in the U.S. District Court for the Southern District of Florida in 2004.

In that original case, Kos and another promoter named Donald Oehmke were accused by the SEC of having pumped the stocks of Concorde America and Absolute Health and Fitness. The two stock promoters, without denying or admitting the charges, settled with the SEC and agreed not to violate securities laws.

-By Carol S. Remond; Dow Jones Newswires; 303 997 5783; carol.remond@ dowjones.com

Next up, Ivan Ivanov, Edward "Ed" Ovsenik, Curtis Garth, Keri Keenan-Hagen and Annette Hagen-DeFusco likely too.