Fumble Leads To Freedom
September 30th, 2014 - New York, NY
Readers of StockPatrol.com have become familiar with Daniel Chapman and Sean Flanagan, a pair of Las Vegas lawyers who served as counsel to a roster of obscure penny stock companies and frequently received stock in exchange for their efforts. Their clients have included Infotopia, Inc. and Bach Hauser, Inc. – two companies that issued millions of shares to consultants and executives, but failed to develop any meaningful operations. See Bach-Hauser, Inc. – A Haus Full Of Consultants; Update: Bach-Hauser, Inc. – The First Thing We Do, Let's Give Stock To All The Lawyers; Update: Bach-Hauser, Inc. – Everyone Makes Misteaks; Infotopia, Inc. – Bye Bye Shares; Update: Infotopia, Inc. – The Professionals - Demise Of A Consultant; Update: Infotopia, Inc. – The Professionals - A Familiar Ring.
When we last heard from Chapman and Flanagan, they were facing criminal charges in Nevada. Prosecutors had filed a 64 count indictment accusing Chapman, Flanagan, New York attorney, Herbert Jacobi, and two other men with orchestrating a $414 million stock fraud scam. The indictment alleged that the conspirators had created phony shell corporations, pumped up stock prices, and then dumped shares on the public – taking over a scheme designed in the early 1990s by Las Vegas businessman, Peter Berney. The government alleged that the men manipulated the shares while concealing that they controlled the shell companies. The defendants faced jail sentences of up to 25 years on charges that included racketeering.
No longer. Chapman, Flanagan and Jacobi have dodged that bullet – at least for now. In February 2006, a federal judge tossed out all charges saying the three men had been denied due process. According to U.S. District Court Judge, James Mahan, the lead prosecutor, Assistant U.S. Attorney, Greg Damm, engaged in "flagrant, willful" misconduct by failing to turn over evidence to lawyers for the defendants. In announcing his decision, the judge noted that during the trial he had relied upon assurances from the prosecutors and repeatedly overruled defense complaints that information had not been shared as required.
"This was not some slight oversight, but strikes at the heart of the government's obligation," Judge Mahan declared, adding, "I can't find other cases like this one."
The government has not indicated whether it will attempt to revive the prosecution.
Damm it!