Tuesday, August 18, 2009

Local Newspaper Recycles News

Chappell continues to do nothing but take this blog's (and others work) and recycles it. But does have an interesting tidbit (last paragraph) mentioning a possible pending indictment for Edward C Ovsenik.

Hagen Faces Prison for Securities Fraud


A former Southern Pines businessman is waiting to be sentenced after a federal court in Charlotte convicted him on fraud charges.

The jury found David A. Hagen guilty of conspiracy to commit securities fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering.

No date has been set for sentencing, the clerk of court for the Charlotte office of the Federal District Court for Western North Carolina said Thursday. Hagen was indicted in December as "David A. Hagen a/k/a David DeFusco, David DuFusco, David Allen Hagen DuFusco, and Antonio," according to court documents and convicted May 15, 2009.

A co-defendant, Brian Kos, (described in the indictment as "a longtime stock promoter") and Hagen were accused of using false statements in press releases and Web sites to drive up the price of stock for GTX Global, formerly known as Gatelinx Corp.

Unindicted co-conspirators named in the indictment included Mark E. Brecher of Naples, Fla. (secretary-treasurer of GTX Global) and Howell and Vernice Wolz.

Earlier this week, Sam Currin, a former federal prosecutor and judge, was released from prison early in return for his cooperation in the Hagen case. U.S. District Judge W. Earl Britt ordered Currin -- a Raleigh attorney and former aid to Sen. Jesse Helms -- released. Britt, who presided over Hagen's trial, reduced Currin's sentence to time served. Currin had been in federal prison since May 2007. His original release date was not until April, 2013. Currin was named in the Hagen case as an unindicted co-conspirator. Currin admitted to laundering $1.3 million for Hagen.

Hagen formerly operated PrimeTV, a satellite television sales company out of the former Winn-Dixie supermarket building off U.S. 1 between Southern Pines and Aberdeen. There were many complaints against PrimeTV for failure to pay reimbursements and it was fined by the Attorney General's office.

After losing the DirecTV franchise for also selling competing DISH systems, Hagen reorganized his business as Gatelinx Corp., later GTX Global. Hagen claimed to be developing high-definition Internet movie delivery and other innovative technologies and would show visitors such a purported system appearing to operate on a big-screen televisions. He claimed to be developing artificial intelligence systems.

His office walls displayed a collection of antique weapons. Hagen and his wife, Annette, had served time for bankruptcy fraud under the name DeFusco. Several Washington Post articles chronicled their extravagant lifestyle prior to their arrest. Blaming the conviction on some bad business decisions, the Hagens said they were starting over when they moved to Southern Pines.

Gatelinx fought off one lawsuit after another. The Hagens abandoned plans to restore The Jefferson Inn -- now restored by a different owner. They moved offshore. They were said to be divorcing.

A new company, SRS Prayer Services, set up shop behind the Food Lion on N.C. 5 but closed its doors last year. It claimed to have nothing to do with the Hagens, but Federal Express envelopes addressed to Annette Hagen could be seen on the counter waiting for pickup. FBI agents arrested Hagen in October 2007 after he got off a plane in New York from the Bahamas. In an affidavit filed with his arrest warrant, Hagen was accused of using erroneous Web sites purporting to give tips to drive up the stock price of GTX Global so he could sell his stock.

He was also accused of issuing a false press release claiming that GTX merged with another technology company. The affidavit calls it a "classic pump-and-dump" scam. The indictment on which Hagen was convicted accused him of selling stock at its inflated price and then laundering the money through bank accounts in the Bahamas, the Netherlands and Cyprus and finally the United States.

An affidavit by FBI Special Agent Douglas P. Curran mentions a cooperating witness for the prosecution who recorded phone conversations with Hagen in which they discussed the scheme. Britt referred to Currin's extensive cooperation with federal prosecutors in his decision to release Currin early, according to a story in Tuesday's News & Observer of Raleigh. In court, federal prosecutors said Hagen used a number of Web sites to drive up the price of GTX Global stock price, sold the stock at inflated prices and then launder his profits through bank accounts in the Bahamas, the Netherlands, Cyprus and the U.S. Criminal prosecutors first began looking into GTX Global as part of their investigation of two other penny stock companies called Concorde America Inc. and Absolute Health and Fitness Inc. according to a Dow Jones report.

The jury ordered Hagen to forfeit almost $28 million in proceeds from his illegal acts. He faces a maximum sentence of 45 years in prison. Other investigations by the Securities and Exchange Commission in Florida and the FBI in Charlotte led to a number of other arrests connected with the GTX Global stock scheme, including Currin.

A number of plea agreements made with other individuals in the case are expected to be unsealed soon, including one with co-defendant Kos. Others could include former GTX lawyer (and SRS Prayer Services president) Edward C. Ovsenik. There could be indictments naming Hagen's wife and others, Dow Jones said.


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