May 9, 2013
From July 2007 through February 2008, Christopher Kline, 49, York, PA, participated in a scheme in which one of his clients, William Curtis, 50, Naperville, IL, agreed to pay secret cash bribes to a confidential informant ("CI") working with the Federal Bureau of Investigation ("FBI"). The CI posed as a financial adviser who, in exchange for receiving the bribes from Curtis, purportedly convinced "investors" to purchase on the Pink Sheets the common stock of G&S Minerals, Inc. ("G&S") that Curtis controlled.
A Little Sumthin' For Ya Troubles
Curtis agreed to pay the CI a 30% kickback of any orders placed by the CI, and, in turn, the CI agreed to pay 10% of the kickback to Kline. In FBI-recorded conversations, Kline
- discussed with the CI specific price and volume targets for the purchases and orders placed by the CI on behalf of his "investors,"
- facilitated the bribe payment from Curtis to the CI, and
- was overheard collecting his 10% kickback.
In October 2009, Curtis pled guilty in Manhattan federal court to one count of participating in a conspiracy to commit securities fraud and commercial bribery, and one count of securities fraud. In June 2010, he was sentenced to three years of probation and ordered to pay a $200 special assessment.
On May 8, 2013, Kline pled guilty to one count of participating in a conspiracy to commit securities fraud and commercial bribery, and one count of securities fraud. At sentencing scheduled for September 2013, he faces a maximum combined penalty of 25 years in prison and a maximum fine of $5,000,000. In addition, Kline agreed to a $2,000 forfeiture.
A Sting That Stung
The FBI is to be congratulated for its execution of the "sting" that lead to the convictions in these cases. For those of you who are truly interested in understanding the nature of fraud in our markets, the Indictment in USA v. Kline (SDNY, 12-CR-701), offers not only an intriguing tale but does so in a most readable fashion. I urge you to take some time to familiarize yourself with the dirty underbelly of the securities industry.