November 26, 2014 — Company executives owe it to their shareholders to protect their interests by making truthful public announcements concerning the company’s financial position. When executives use phony marketing campaigns to artificially pump up their company’s stock price and then dump their shares on unsuspecting investors, that’s securities fraud. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 provides for a reward to whistleblowers who notify the Securities and Exchange Commission (SEC) about illegal pump-and-dump schemes. Tipsters are eligible to receive a reward equivalent to thirty percent of the amount the government collects, provided that the recovery tops $1 million.
California Lawyer And Two Massachusetts Men Carried Out Scheme To Drive Up Share Price Of Boston Sports Ticket Broker
A California lawyer and two Massachusetts men have been charged in a pump-and-dump scheme that allegedly snookered investors in a ticket brokering business based in Boston. Richard Weed, a Southern California attorney in Newport Beach, allegedly used reverse mergers to structure CitySide Tickets Inc. into a publicly traded company. By writing allegedly phony legal opinion letters and creating back dated promissory notes, Weed allowed Coleman Flaherty and Thomas Brazil to secure millions of purportedly unrestricted shares of company stock. Weed also acted as CitySide’s officer and director so Flaherty and Brazil could secretly control the business.
Flaherty and Brazil then pumped up the company’s stock price with an allegedly false and misleading marketing blitz describing CitySide Tickets as an up-and-coming business that was grooming itself for a takeover by Ticketmaster. As the sham marketing campaign pushed the company’s share price higher, Flaherty and Brazil dumped their shares on the market. CitySide’s unsuspecting investors did not realize that the company was in fact in an extremely shaky position with no financial means to carry out its purported plan to acquire five smaller ticket resellers, which deal would allegedly lift profits to soaring heights.
Flaherty and Brazil allegedly took in around $3 million in illicit proceeds and paid Weed a handsome sum for his part in the scam. Meanwhile, CitySide’s share price collapsed and the company eventually shut its doors.
The SEC is pursuing Weed, Flaherty and Brazil to recover their ill-gotten gains as well as penalties and interest.
Reporting Pump-and-Dump Schemes to the SEC
While Waters & Kraus is not working with a whistleblower on this particular pump-and-dump scheme, we are representing tipsters in similar qui tam matters. If you have comparable claims against a your employer or anyone else engaged in securities fraud, email us or call our qui tam attorneys at 855.784.0268 to learn more about our practice and how we can work together to notify the government about fraud and abuse. Our qui tam lawyers, like Michael Armitage and Gary Paul in the firm’s office in Southern California, are committed to advancing and protecting informants’ interests in whistleblower lawsuits.
