Federal regulators on Thursday halted trading in the stock of a little-known Las Vegas company and one of its executives was charged in what the FBI called a criminal securities kickback scheme.
The Securities and Exchange Commission said it suspended trading in the shares of seven microcap or "penny stock" companies around the country including 1st Global Financial Corp. of Las Vegas.
Officials at 1st Global Financial, which uses the stock symbol FGBF, couldn’t immediately be reached for comment on the SEC order.
In criminal complaints filed in federal courts in Boston and around the country, the Justice Department and SEC said 13 people including several corporate officers, lawyers and a stock promoter had used kickbacks and other schemes to trigger investments in various thinly-traded stocks.
"The schemes involved secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in certain companies; the kickbacks were to be concealed through the use of sham consulting agreements," the SEC said in a statement. "What the insiders and promoters did not know was that the purported investment fund representative was actually an undercover FBI agent."
The SEC said the charges came after an investigation aimed at preventing fraud in the micro-cap stock markets.
"Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap stock markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse," the SEC statement said. "This is, in part, because accurate information about microcap stocks may be difficult for the average investor to find, since many microcap companies do not file financial reports with the SEC."
The only publicly-available information about 1st Global Finance is from a series of press releases it issued in recent months.
Headed by an individual identified as its president, Johnny Bannister, 1st Global says it "is creating strategic partnerships with individual and institutional owners of property portfolios in Ireland , the United Kingdom , Europe , USA and the Caribbean to finance the acquisition of those portfolios."
"1st Global Financial Corp. has selected a range of properties including hotels, commercial retail and office, and leisure developments to provide a comprehensive income generation to facilitate growth in the corporation," said a recent announcement by the company.
According to Yahoo Finance, 1st Global has recently seen its stock trade in the range of 9 cents to 11 cents.
The stock trading suspension will continue through Dec. 14 while the SEC looks into the seven companies because "of questions that have been raised about the accuracy and adequacy of publicly disseminated information concerning them," the SEC said.
In court documents filed Thursday, an FBI agent said 1st Global’s alleged participation in the scheme worked like this:
Albert Reda, 65, of Tustin, Calif., treasurer and a member of the board of directors of 1st Global Financial, one of the 13 people charged Thursday, was introduced by another suspect from Mesa, Ariz., to someone purporting to be a fund manager in Boston but who actually was an undercover FBI agent operating a fake fund company.
The undercover agent invested $32,000 in 1st Global and received a $16,000 kickback from Reda and 1st Global, an FBI affidavit says.
During a June 29 meeting in the Boston office the FBI had set up, a meeting that was secretly recorded, the undercover agent discussed with Reda that "1st Global would enter into ‘consulting agreements,’ even though the agent said that he did not intend to provide any consulting," an FBI affidavit says.
"After the agent discussed the kickback transaction, Reda agreed to pay the kickback in exchange for funding to 1st Global," and went on to make the payment, the document says.
Reda was charged with mail and wire fraud.
Reda and 1st Global have not yet answered these allegations.