The U.S. Securities & Exchange Commission charged former Wound Management Technologies (OTC:WNDM) chairman, president & CEO Scott Haire of using kickbacks to "illegally generate stock sales."
Haire was caught in an undercover sting by FBI special agent Michael Sputo, according to court documents.
"In or around October 2009, in an effort to increase artificially the trading volume and price of WNDM common stock in the Pink Sheets, Haire engaged in a pay-to-play scheme to cause a purported stock broker to purchase WNDM stock in exchange for a kickback," according to an affidavit by Sputo filed in the U.S. District Court for Southern Florida. "The purpose of the market manipulation scheme was to give the investing public the false impression that WNDM’s stock price was rising and that there was a public market for WNDM stock."
The SEC also alleges that Haire timed press releases to coincide with the fraudulent stock buys, aiming to make it appear that the trading activity was generated by positive news.
"In or around October 2009, in a meeting and a series of telephone calls with a cooperating source in Broward County, Florida, Haire agreed to pay a purported stockbroker a kickback worth approximately $100,000," according to Sputo’s affidavit. "On or about October 23, 2009, Haire provided an advanced copy of a WNDM press release to the purported stockbroker. The WNDM press release discussing the distribution of a patented material was subsequently issued to the public on October 26, 2009. On or about October 23, 2009, and October 26, 2009, an FBI agent in the Southern District of Florida, acting in an undercover capacity as the purported stock broker, purchased 5,000 and 3,000 shares, respectively, of WNDM common stock in the open market."
Haire, who resigned from Wound Management effective May 25, stepped down as CEO last March. Current president & CEO Robert Lutz Jr. said the company learned of the charges via the SEC’s press release.
"Current management of the company (which does not include Mr. Haire) was not aware of any such allegations by the SEC and has not discussed this matter with the SEC," Lutz said in prepared remarks.
"The company officers and promoters in many of these schemes disguised their kickbacks as payments to phony consulting companies that performed no actual work," Eric Bustillo, director of the SEC’s Miami office, said in prepared remarks. "These illegal activities were fully intended to artificially inflate the stock volume and prices of these penny stock companies to the detriment of investors."