Defendant in $20 Million Illegal Stock for Compensation Fraud Scheme Sentenced to Prison

Los Angeles – This morning, the lead defendant in an illegal stock-for-compensation fraud scheme investigation was sentenced to spend 36 months in federal prison after pleading guilty to subscribing to a false federal individual income tax return for 2005, conspiracy, and securities charges.

Stephen Floyd Owens, formerly of Lafayette, Louisiana, was also ordered by United
States District Judge Terry J. Hatter to spend three years on supervised release after completing his prison sentence and to truthfully and timely file and pay all federal income tax returns for the years of the investigation.

According to his plea agreement in the tax case filed in April 2010, Owens admitted
that he failed to report income of $1,600,000 that he had received from the sale of
stock in numerous publicly traded companies. Owens admitted that he deliberately
understated his income on his 2005 tax return, resulting in a tax loss of
approximately $448,000.

In June 2009, Owens pleaded guilty to conspiracy and securities charges related to
the fraudulent issuance of American Fire Retardant Corporation stock as compensation
to William Manfei Woo, of Rosemead, California and to Tarun Mendiratta, of Weston,
Connecticut. American Fire formerly did business in Santee, California.

According to court records, as a part of the scheme, Woo received American Fire
stock from Owens, the company’s president and chief operating officer. During 2003
and 2004, Owens caused American Fire to issue stock to Woo directly and indirectly
through two nominees. The stock issued to Woo was issued as free-trading,
unrestricted stock of the type issued to employees, consultants, and advisors who
provide bona fide services to the company

Between July 2003 and February 2004, Mendiratta received approximately 1.18 billion
shares of American Fire, stock that was publicly traded on the Over-The-Counter
Bulletin Board. Mendiratta received the stock from co-conspirator Owens. The stock
Mendiratta received from Owens had a market of value of approximately $3.3 million.
As a part of the scheme, Mendiratta requested that Owens fraudulently issue American
Fire stock to two of his aunts in an effort to conceal his ownership of the stock
from federal authorities.

When he was issued the stock, Woo and Owens both knew that neither Woo nor either of
his nominees performed bona fide services that justified the amount of stock issued
to them. Similarly, Mendiratta and Owens knew that neither Mendiratta nor his aunts
performed any bona fide services for American Fire that were worth the amount of
stock issued to them.

Owens admitted that the total value of American Fire stock purportedly registered on
SEC Form S-8 and issued to Woo, Mendiratta, and other non-bona fide consultants of
American Fire between 2003 and 2004 exceeded $20,000,000.

At the conclusion of today’s sentencing hearing Judge Hatter ordered Owens to begin
serving his sentence on April 11, 2011.

Mendiratta was sentenced on April 19, 2010 on conspiracy and tax evasion charges.
At sentencing, Judge Hatter specified that Mendiratta’s custodial term consist of
one year and one day in federal prison followed by six months at a community
corrections center and six months of home detention. Additionally, Mendiratta was
ordered to pay a fine of $150,000 and spend three years on supervised release after
serving his sentence.

Woo was sentenced by Judge Hatter last year to 6 months in the custody of the Bureau
of Prisons, followed by 1 year of supervised release, which included 6 months in a
halfway house and 6 months of home detention after Woo pleaded guilty of subscribing
to a false tax return and to conspiracy charges. Additionally, Woo was ordered to
pay restitution to IRS in the amount of $725,956.

The investigation and prosecution of Owens, Woo and Mendiratta was conducted by IRS
– Criminal Investigation and the Federal Bureau of Investigation in Los Angeles in
conjunction with the United States Attorney’s Office for the Central District of
California.

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