Securities Law Blog

After 5 years of allegedly orchestrating a web of market manipulation by pushing penny stocks, former SEC and Dallas attorney Phillip Offill Jr. was convicted January 28, 2010. A jury in federal court in the Eastern District of Virginia convicted Offill on one count of conspiracy and nine counts of wire fraud, according to the U.S. Department of Justice.

Working with Phoenix attorney David Stocker, Offill registered millions of unregistered shares of nine small companies to facilitate a massive “pump and dump” scheme, according to the prosecutors. Offill evaded federal securities registration requirements and provided co-conspirators with the millions of “free trading” shares to then sell to the general public. Using false statements in news releases, spam emails and mass faxes, they drove up the share prices of the company’s stock. When the prices rose due to increased investors, Offill and his conspirators would dump the stocks, pocket millions in profits, and investors would lose their money.

Offill and Stocker also masterminded a “shell creation group” that dodged federal and state securities rules. They apparently “pumped and dumped” shares of Emerging Holdings Inc., MassClick Inc., and China Score Inc. Offill and Stocker generated “sham” transactions between the companies to make the stocks appear desirable, then walked away with large profits and earned thousands in transaction fees alone, according the indictment.

Offill, who spent 15 years with the SEC in Fort Worth, Texas, could face up to 185 years in federal prison and restitution of $15 million following his April 16, 2010 sentencing. So far, ten others have been targeted in the investigation. Eight have been convicted and sentenced up to ten years, while two have pleaded guilty and are awaiting sentencing.

“It is a sad day when a former U.S. Securities and Exchange Commission attorney uses what he learned in the government to later defraud the investing public,” said Assistant Attorney General Lanny Breuer.