DENVER (LAWFUEL) – Eric Richfield Majors, age 39, formerly of Colorado Springs, Colorado, pled guilty on April 17, 2009, before U.S. District Court Judge John L. Kane to conspiracy to defraud the Internal Revenue Service (“IRS”) and the U.S. Securities and Exchange Commission (SEC), Acting United States Attorney David Gaouette, Special Agent in Charge of the IRS Criminal Investigation for the Denver Field Office Christopher M. Sigerson, and Denver Postal Inspector in Charge Shawn S. Tiller, announced. Majors remains free on bond.
According to the facts contained in the defendant’s plea agreement, Maximum Dynamics, a company formerly based in Colorado Springs, Colorado, became a publicly-traded company subject to SEC reporting in August 2002. The stock was traded on the OTC Bulletin Board, an electronic stock quotation system typically used to facilitate the trading of stock of small capitalized companies. Maximum was described in its initial SEC filings as a development stage company offering customized computer software for financial institutions. Maximum later described itself as a project development company involved with various developmental technology projects, including a wireless tracking system and a wireless mobile point-of-sales terminal. The company moved a significant portion of its operations to South Africa in 2003. The company represented that it had offices in Mexico and in other foreign countries through business partners.
Between August 2000 and April 2005, defendant Eric Majors and co-defendant Joshua Wolcott conspired to cause materially false information to be included in Maximum Dynamics’ quarterly and annual statements and other reports and documents filed with the SEC. Majors and Wolcott used the names and identities of unwitting Mexican nationals and shell companies to issue stock as compensation for consulting services purportedly done for the company. Majors and Wolcott maintained control of this stock, sold the stock and used the proceeds for their own enrichment and purposes, including as a source of financing for Maximum.
Majors and Wolcott sold Maximum Dynamics stock issued to Mexican nominees on the open market, through brokerage accounts opened in the names of the nominees, to individual investors or entities through private sales arranged by, at the direction or on behalf of Majors and/or Wolcott. They would then use the proceeds of the stock sales for their own personal use and personal expenses, to make payments to relatives and pay for their personal expenses, to pay Maximum employees and bona fide Maximum consultants for their work for Maximum or for other expenses incurred in connection with developing the business of Maximum.
The IRS was unaware that the stock sales were attributable either to the defendant Majors or co-defendant Wolcott or that either defendant was responsible for the taxes owed on any gains from the sales as the stock was held in nominee names. As a result of the net proceeds realized by the defendants from the sale of Maximum and non-Maximum stock that was sold in the names of the Mexican nominees, the government calculates the unpaid tax of $402,004, based on the realized gains of $1,262,258.
“The investing public must have confidence in our corporate institutions and the representations they make,” said Acting U.S. Attorney David Gaouettte. “This was a particularly complex investigation. Ken Harmon, as the lead prosecutor from our office, and the investigating agents from U.S. Postal Inspection Service and the Internal Revenue Service’s Criminal Investigations Division should be commended for their outstanding work.”
“We are pleased with the conviction of Eric Majors,” said Postal Inspector in Charge Shawn Tiller. “This was a complex case which involved working with Mexican and South African authorities. The U.S. Postal Inspection Service remains committed to investigating schemes whereby the U.S. Mail is used to commit crimes against consumers and undermine our financial markets.”
“Defrauding investors is a serious offense and IRS CI will continue to investigate those who victimize shareholders and defraud the IRS,” said Special Agent in Charge Christopher M. Sigerson of IRS Criminal Investigation for the Denver Field Office.
Conspiracy carries a penalty of not more than 5 years in federal prison, and up to a $250,000 fine. The defendants could also be ordered to pay restitution.
The case was investigated by the US Postal Inspection Service and IRS Criminal Investigation, based on a criminal referral from the SEC, through its Denver Regional Office.
This case is being prosecuted by AUSA Kenneth Harmon.