CD War Between Securities and Exchange Commission and Federal Bureau of Prisons

February 8, 2016

When last we left Sandip Shah, this is where things stood with him: The Securities and Exchange Commission ("SEC") had filed an Order Instituting Administrative Proceedings (the "OIP") and had noticed the Respondent for a hearing. In the Matter of Sandip Shah, Respondent (OIP, Securities and Exchange Commission, '35 Act Rel. No. 76396; Admin. Proc. File No. 3-16949 / November 9, 2015):

1. Respondent, age 41, is a resident of Chino, California. He was in the business of promoting penny stocks and assisting public companies in finding sources of funding. Respondent participated in offerings of the common stock of SOHM, Inc. ("SOHM"), Costas, Inc. ("Costas"), and a third company ("Company A"), each of which is a penny stock. During the relevant period from at least March 10, 2011 through at least May 12, 2011, Respondent was a consultant to Company A. On May 8, 2014, Respondent was indicted on nine counts of wire fraud in U.S. v. Shah, 14-CR-10135- NMG (D. Mass.). On May 15, 2015, a jury found him guilty of nine counts of wire fraud. On August 25, 2015, he was ordered to forfeit $40,000 and, on September 11, 2015, was sentenced to 27 months' imprisonment to be followed by 2 years' supervised release, and was ordered to pay a $9,000 fine. 

To learn more of the underlying case, read: "Pennystock Kickback Scheme Gets In Last Kicks at SEC ( Blog, November 13, 2015).

Public Hearing

Notwithstanding that Sandip Shah was headed to prison, the SEC, that inveterate federal watchdog of Wall Street, was statutorily obligated to keeps its teeth firmly embedded in Shah's rear-end and, according to the OIP, to have an SEC Administrative Law Judge conduct a public hearing:

In view of the allegations made by the Division of Enforcement, the Commission deems it necessary and appropriate in the public interest that public administrative and cease-and-desist proceedings be instituted to determine: 

A. Whether the allegations set forth in Section II hereof are true and, in connection therewith, to afford Respondent an opportunity to establish any defenses to such allegations;

B. What, if any, remedial action is appropriate in the public interest against Respondent pursuant to Section 15(b) of the Exchange Act including, but not limited to, disgorgement, and civil penalties pursuant to Section 21B of the Exchange Act; and 

C. Whether, pursuant to Section 21C of the Exchange Act, Respondent should be ordered to cease and desist from committing or causing violations of and any future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, whether Respondent should be ordered to pay a civil penalty pursuant to Section 21B(a) of the Exchange Act, and whether Respondent should be ordered to pay disgorgement pursuant to Sections 21B(e) and 21C(e) of the Exchange Act. IV. 

IT IS ORDERED that a public hearing for the purpose of taking evidence on the questions set forth in Section III hereof shall be convened not earlier than 30 days and not later than 60 days from service of this Order at a time and place to be fixed, and before an Administrative Law Judge to be designated by further order as provided by Rule 110 of the Commission's Rules of Practice, 17 C.F.R. § 201.110.

From Wall Street Wizard to Federal Inmate

According to the Federal Bureau of Prisons ("FBP") Website, as of February 8, 2016:

Register Number 67512-112
Age: 42
Race: White
Sex: Male
Located at: Sheridan FCI
Release Date: 10-28-2017

The FBP website describes the Sheridan Federal Corrections Institution ("Sheridan FCI") as "a medium security federal correctional institution with an adjacent minimum security satellite camp and a detention center." Sheridan FCI, which is located in the pastoral setting of beautiful Sheridan, Oregon, is a "male" institution of: 

1,717     Total Inmates
1,187  Inmates at the FCI & FDC
530         Inmates at the Camp


Supposing -- just supposing -- you wanted to send a package to Sheridan FCI, or, you know, you were the SEC and, hmmmm, maybe you needed to send some stuff to an inmate, you know, an inmate such as Sandip Shah. How would you go about that? According to the FBP website, in order to send "Freight and Non-USPS parcels" to an inmate, you would forward the package as follows:

Freight and non-USPS parcels
Use the following address when shipping freight & non-USPS parcels.


We Don't Do CDs . . . Have You Thought About MP3 or Streaming?

Why, you might  ask, am I regaling you with all this federal prison stuff? Fair question. Frankly, in terms of answering, I'm not really sure. I tend to be fascinated by the obscure, by the edgy, by things that others often find bizarre. Hey, what can I tell you? According to a recent SEC Prehearing Order, we learn of this obscure, edgy, and bizarre development, which I offer to you in a full-text extract:

Before the 
Washington, D.C. 20549 

Release No. 3576/February 4, 2016 
File No. 3-16949 
In the Matter of  SANDIP SHAH

The Securities and Exchange Commission instituted this proceeding with an Order Instituting Proceedings on November 9, 2015, pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934. A second prehearing conference was held today. Martin F. Healey and Ellen Moynihan, Esqs., appeared on behalf of the Division of Enforcement, and Respondent Sandip Shah, who is incarcerated at FCI Sheridan in Oregon, appeared pro se. 

The parties advised that the Division's attempt to make available its investigative file pursuant to 17 C.F.R. § 201.230 (Rule 230) was not successful. Specifically, FCI Sheridan did not allow Shah to receive the Division's production of two CDs, although an FCI Sheridan official had told the Division that Shah would be allowed to receive such CDs. One of the CDs contains a video recording that cannot be viewed by any other means. The Division will attempt to resolve the problem and will report on its efforts by February 11, 2016. After the Rule 230 production is successful, further procedural steps will be ordered. 

/S/ Carol Fox Foelak
Carol Fox Foelak Administrative Law Judge

Stock Scamster Sandip Shah Shipping Shutdown

Oh, my, lemme see if I got this right. The SEC's Division of Enforcement has an ongoing matter with Respondent Sandip Shah (or should we now call him Federal Inmate Sandip Shah).The Division has tried to deliver two CDs to Shah. Those CDs are in furtherance of the Division's presenting its case to the ALJ that Shah should likely be barred from future endeavors in the securities industry. I'm guessing here . . . so don't hold me to it . . . but the Division may be taking the position that since Shah was found guilty of 9 counts of wire fraud by a jury and sentenced to 27 months in prison (among other sanctions) that maybe this just isn't the kind of fellow that we want working on Wall Street. It seems that inmate Shah takes a contrary view. Good for him. Nice to see he takes an interest in his career. Should keep him busy for the next 27 months.

In any event, as the wheels of Wall Street justice grind and imperceptibly move in neutral, it appears that "an official" at FCI Sheridan told the Division that it could deliver the CDs to inmate Shah. As it turns out, there is a video recording embedded on one of the CDs and that file cannot be viewed other than from the CD. Lo and behold, after the Division attempted to deliver two CDs to Shah at his palatial cell in the exclusive Club FCI Sheridan, someone or someones at FCI Sheridan would not allow the delivery. All of which leaves the Division with nothing more than another "attempt to resolve the problem."

I can understand why the officious officials of FCI Sheridan would have strict controls over inmates receiving mail and packages. On the other hand, it's not like someone is concealing a file within the laser-printed ridges of the CDs. But, okay, there could be other concerns - legitimate ones. Maybe embedded among the content on the CD is a step-by-step blueprint for building a drill, using that drill to punch through the cell walls, and then, on another file in the CD folder, directions to a hidden car and a road map of the environs of Sheridan, Oregon. Clearly, the public has an interest in making sure that the officials at FCI Sheridan are aware of all that hidden and potentially dangerous computer stuff.

Still . . . couldn't the officials at FCI Sheridan and the folks at the SEC's Division of Enforcement worked out the details for the transmission of the CD? For starters, howsabout having someone at FCI Sheridan review the CD before clearing it for forwarding to Shah? Or how about the FBI reviews the CD and then attaches an Affidavit to the CD in order to assure FCI Sheridan? Or how about someone at FCI Sheridan picks up a goddamn telephone and speaks to someone at SEC Enforcement and sets forth whatever protocol is required to transmit the CD? Of course, nooooooooo . . . none of that was possible. Instead, we got some crook sitting in federal prison -- oh, I'm sorry, I should call that a federal correctional institute -- and, for all we know, still legally able to launch another stock scam from behind the bars of his cell, assuming that there are still bars and cells at FCI Sheridan.

And you wonder why I often characterize the mission of my Blog as ferreting out the inept and ineffective on Wall Street and in government?