SEC target Georgiou seeks two-week pass to Canada 2009-10-27 14:20 ET - Street Wire Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-AVCE) Avicena Group Inc
Also Street Wire (U-HYHY) Hydrogen Hybrid Technologies Inc
Also Street Wire (U-NOET) Northern Ethanol Inc
by Mike Caswell George Georgiou, the former Toronto broker facing criminal fraud charges in Pennsylvania, has asked for permission to return to Canada for a two-week visit. He says he would like to see his family before his trial, which has been delayed until Jan. 21, 2010. Mr. Georgiou has been in the United States since Sept. 17, 2008, when he was arrested in a bribery sting. Prosecutors claimed that he offered to bribe an undercover FBI agent who was posing as a person with access to corrupt brokers. The government also said that Mr. Georgiou manipulated the market for four OTC Bulletin Board companies, causing $26-million in investor losses. (All figures are in U.S. dollars.) Since April, 2009, Mr. Georgiou has been living and working in Florida, under supervision by pretrial services. Motion for a visit In his Oct. 26, 2009, motion for a two-week visit to Canada, Mr. Georgiou says he requires time with his family. He has missed the birthdays of each of his children over the past year. He has also missed the baptism of his fifth child, which his wife delivered after his arrest. His family did visit him in Florida, but future visits are impossible, the motion states. This is because the government has recently withdrawn a promise not to arrest Mrs. Georgiou. (The reason it could arrest her is not stated.) In support of his motion, Mr. Georgiou contends that he has abided his bail conditions. In the past six months, he has travelled to meetings with business associates and with his lawyer on dozens, if not hundreds of occasions, with no mishaps. He routinely travels through airports on his own, with permission. Should the court grant his request, Mr. Georgiou will immediately return to the U.S. if asked, the motion states. He will also communicate with pretrial services daily to confirm his location, multiple times a day if needed. He says he is eager to attend his trial and disprove the "sensationalized and grossly overstated" allegations against him. Mr. Georgiou also notes that he has executed a waiver of extradition. (Government lawyers have argued in the past that such waivers are impossible to enforce, and the normal, lengthy extradition process would apply if he did not return.) The judge has not set a date to hear his motion, and the government has not yet responded. Georgiou's indictment Prosecutors filed a nine-count indictment against Mr. Georgiou in the Eastern District of Pennsylvania on Feb. 12, 2009. The indictment charged him with bribing a broker, and with manipulating four companies: Neutron Enterprises Inc., Avicena Group Inc., Northern Ethanol Inc. and Hydrogen Hybrid Technologies Inc. The bribery allegations came after a sting operation, in which Mr. Georgiou met with an undercover FBI agent posing as a person with access to corrupt brokers. The agent said he could have stock brokers purchase shares of Northern Ethanol, in return for a 25-per-cent kickback. At first, Mr. Georgiou just agreed to a test transaction, prosecutors said. He paid the undercover agent $5,000, and the agent had his brokers buy 16,000 shares of the company. Mr. Georgiou then agreed to further purchases, which would be for shares worth up to $10-million, the indictment stated. The market manipulation charges covered a much longer time period, starting in 2004 and continuing to 2008. Much of the information about these allegations came from a co-operating witness, Kevin Waltzer. Mr. Waltzer began helping the government in June, 2007, after he was separately charged for bilking insurance companies out of $41-million. The indictment described the information provided by Mr. Waltzer. In the summer of 2004, Mr. Georgiou told Mr. Waltzer that they could make a lot of money pumping Neutron Enterprises. He said that he and others controlled most of the company's free-trading shares. Mr. Waltzer then agreed to help manipulate the company, and to follow Mr. Georgiou's trading instructions. In return, Mr. Georgiou provided him with $120,000 worth of discounted shares. According to the indictment, Mr. Georgiou, Mr. Waltzer and others then carried out a series of matched trades, mostly in the summer of 2006. The largest was on July 18, 2006, when Mr. Georgiou directed accounts at Alliance Investment Management to buy 525,000 shares of Neutron at $2.20. (The stock, which had risen from $1.50, remained above $2 until the end of the year, with daily volumes averaging 91,000 shares. It fell to 23 cents before the company changed its name on Jan. 24, 2008.) Prosecutors said the scheme extended to Avicena Group in 2006. Mr. Georgiou had acquired 21 million shares of the company at 14 cents. He then had Mr. Waltzer execute a series of prearranged buys and sells, at prices between $3 and $4.70, according to the indictment. The Hydrogen Hybrid manipulation began in April, 2008. Mr. Georgiou told Mr. Waltzer that he and others controlled all but 400,000 of the company's 21 million free-trading shares, prosecutors said. The stock was trading at 30 cents. "Defendant Georgiou said that he would begin to raise the price of HYHY
stock with a 10-million-piece mailing campaign and eventually 'whip the deal into a frenzy,'" the indictment read. (The stock went to a $2.05 high on June 12, 2008. It last traded for a penny.) The formal charges against Mr. Georgiou were conspiracy, securities fraud and wire fraud. Georgiou's motion to dismiss Mr. Georgiou pled not guilty to the charges on Feb. 26, 2009. He also filed a motion to dismiss on July 14, 2009. In it, he said that the government's chief witness, Mr. Waltzer, was a con man and a thief. He claimed that he only met with the undercover FBI agent after Mr. Waltzer pressed him for 14 months. He also argued that he did not approve the test transaction, in which the FBI purchased 16,000 shares of Northern Ethanol, and he refused to send any bribe money to the FBI's undercover agent. The $5,000 he did sent was actually not intended for the government agent, and an FBI recording proves it, the motion stated. "Not only is the $5,000 entirely for another purpose but the recording goes so far as to explicitly distinguish between any monies that would some day involve [the agent] and the $5,000 which was specific to matters with Mr. Waltzer," the motion read. The judge has not yet ruled on the motion to dismiss. SEC case Mr. Georgiou is also facing a parallel civil case launched by the U.S. Securities and Exchange Commission on Feb. 12, 2009. In it, the SEC repeats many of the same allegations contained in the criminal case. The regulator is seeking to permanently ban Mr. Georgiou from penny stocks. It also is asking for disgorgement of profits and appropriate civil penalties. That case is on hold pending the outcome of the criminal trial. | 
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