Executive Sentenced to 21 Months in Prison for Participation in Securities Kickback Scheme | WPN World People News

A Cleveland man was sentenced in federal court for using kickbacks in order to trigger investments in a thinly-traded stock.

Muhammad (M.J.) Shaheed, 45, was sentenced by U.S. District Judge Douglas P. Woodlock to 21 months in prison, to be followed by two years of supervised release and forfeiture of $30,000. In February 2013, Shaheed pleaded guilty to mail and wire fraud arising out his participation in an undercover FBI operation. Shaheed admitted to paying secret kickbacks to an investment fund representative in exchange for having the investment fund buy stock in a publicly traded company, Augrid Global Holdings Corporation, of which Shaheed was chief executive officer. The kickbacks were concealed through the use of sham consulting agreements and other fraudulent documents. What Shaheed did not know was that the purported investment fund representative was actually an undercover agent.

The conviction and sentence followed a year-long investigation focusing on preventing fraud in the micro-cap stock markets. Microcap companies are small, publicly traded companies whose stock often trades at pennies a share. Fraud in the microcap markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse. 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.

Shaheed is one of 15 defendants charged criminally with having participated in the undercover operation. Nine of those charged have now pleaded guilty, and two were convicted after a jury trial.

The Securities and Exchange Commission, which conducted a parallel civil investigation alongside the FBI undercover operation, cooperated with criminal authorities throughout the course of the investigation and prosecution.

Source: U.S. Federal Bureau of Investigation