Two Expected to Plead Guilty to Stock Fraud, Money Laundering of MindArrow SharesThe owner of a stock transfer agency and her associate have agreed to plead guilty to federal stock fraud and money laundering charges for counterfeiting 1.1 million shares of MindArrow Systems Inc., an online marketing software and services provider.
The U.S. attorney's office said Nikki Ann Daly and Maseia Bardasian, both of Reno, NV, filed papers in federal court in Santa Ana, CA, stating that they agreed to enter a guilty plea in the case on June 25. Under the plea agreement, Bardasian faces 57 months to 71 months in prison and Daly faces 46 months to 57 months.
According to the charges, Daly set up a stock transfer agency, RTT Transfers, and issued more than 1.1 million fraudulent shares of MindArrow stock from May 1999 through April 2000. The bogus shares were then sold at market prices, which ranged from $7 to $55 at the time.
As part of their plea agreement, the defendants agreed to pay back $15.7 million. They agreed to forfeit more than $4.6 million in cash and a number of luxury cars that were purchased with their illegal proceeds.
According to MindArrow Systems, which is based in Aliso Viejo, CA, the fraudulent shares were not recorded in RTT Transfers' ledger but were issued and sold nonetheless. The company said it discovered the fraudulent activity in February 2000.
Rather than cancel the fraudulent stock certificates, which a number of stockholders purchased in good faith, MindArrow co-chairmen Tom Blakeley and Eric McAfee contributed more than 1.1 million of their own shares to the company and promptly cancelled the shares. This offset the potential impact the fraudulent shares would have had on the company's bottom line by bringing the number of outstanding shares back in line with previously reported numbers.
In a statement issued last week, Robert Webber, president/CEO of MindArrow Systems, thanked the Justice Department, Nasdaq and the Securities and Exchange Commission for their work in bringing the counterfeiters to justice.
"MindArrow was the victim of a very clever scheme in which no one at the company was involved," he said. "Because the shares were taken directly from the company and sold, money that should have come to MindArrow was misappropriated by Bardasian and Daly."
As the investigation was taking place, Nasdaq suspended trading in MindArrow Systems' shares. Trading in MindArrow shares was halted at $4.50 on Feb. 5. The shares resumed trading on May 1. In early trading on Monday, MindArrow's shares were up 5 cents at $1.50.