Former executive pleads guilty, cooperates in securities probe
ALEXANDRIA, Va. (AP) _ A Florida businessman admitted Friday he participated in what federal authorities describe as a $12 million stock manipulation scheme involving an Internet stock-picking service.
Charles O. Huttoe has cooperated secretly since November with prosecutors and regulators looking into a complicated plan to drive up the price of his firm’s stock and launder the profits, according to documents unsealed in U.S. District Court.
The investigation continues, and Huttoe has led prosecutors to nearly two-dozen likely criminal targets, according to the documents.
He pleaded guilty to securities fraud and money laundering Nov. 13, a week after the federal Securities and Exchange Commission charged that Huttoe and five others reaped millions from driving up the value of shares in Systems of Excellence.
The SEC also accuses an Internet stock promoter of making fraudulent, rosy forecasts about Huttoe’s company, and selling the stocks when they went up on the news.
SGA Goldstar Inc., a Nashville, Tenn.-based publisher of an Internet stock newsletter, wrote about Systems of Excellence ``on nearly 100 occasions, almost always in a highly promotional tone″ in its online newsletter, the SEC complaint said.
A lawyer for SGA Goldstar’s owner said last month his client will fight the SEC’s civil lawsuit.
Huttoe’s plea was secret until Friday, when he appeared in U.S. District Court for sentencing. Huttoe also plans to settle the civil SEC action against him, documents in his case show.
``I apologize to those who trusted me,″ Huttoe said in a halting voice.
U.S. District Judge James Cacheris sentenced Huttoe to 46 months in prison and two years of probation. Huttoe also was fined $10,000.
The 49-year-old former Systems of Excellence chairman and chief executive officer agreed that he would never work in the securities industry again and never head another publicly traded company.
Huttoe, of Miami, admitted he issued false, favorable press releases about the company and then sold his shares into an inflated market. He also secretly distributed millions of the company stock shares to his mother, wife and niece.
Systems of Excellence, with offices in McLean, Va., and Coral Gables, Fla., sells video teleconferencing equipment. Huttoe left the company in October.
Huttoe’s punishment was the least permitted under federal sentencing rules, because of what prosecutors called his ``extraordinary cooperation″ with investigators.
Huttoe helped identify 21 additional targets of the investigation, his lawyers wrote in a sentencing memo to the judge. The memo was unsealed Friday.
``The SEC now also has information from Mr. Huttoe regarding other federal securities law violations which it likely would not have obtained without his cooperation,″ the memo said.
And Huttoe has pointed investigators to more than $10.5 million of the $12 million in ill-gotten profits, the memo said.
Federal prosecutors have interviewed Huttoe for more than 60 hours and he testified for three hours before a federal grand jury earlier this month, the memo said.
``Mr. Huttoe chose immediate contrition, cooperation and punishment rather than delay, further harm to others and unnecessary expense to the government and himself,″ said Huttoe lawyer John Fedders.