N.C. Man Guilty in Internet Hoax
LOS ANGELES (AP) _ An employee of PairGain Technologies Inc. pleaded guilty to securities fraud Monday for posting a phony news report of an acquisition on the Internet to drive up the company’s stock.
Gary Dale Hoke, an engineer for the company in Raleigh, N.C., pleaded guilty to two counts in an agreement with federal prosecutors.
Hoke, who was scheduled to go on trial July 6 on five counts, faces a maximum sentence of 10 years in prison on each count and fines up to $1 million on each count.
Under sentencing guidelines he is expected to get a much shorter sentence of 10 months to 16 months, but that could be changed by the judge, said Assistant U.S. Attorney Christopher Painter.
Hoke remained free on $50,000 bond. Sentencing was scheduled for Aug. 30.
Prosecutors said Hoke was a middle level engineer in electronics development at PairGain, a telecommunications equipment manufacturer. He owned stock in the company and options to purchase other shares, according to a plea agreement.
Hoke, 25, admitted to posting the fake report that suggested PairGain, based in Tustin, was about to be acquired by an Israeli company for $1.35 billion. The story was made up to look like it had been posted on a Bloomberg News Service Web site.
The April 7 hoax pushed up PairGain stock from up $8.50 per share to as high as $11.25. Trading on the stock April 7 amounted to 13.7 million shares, about seven times the average trading volume for the stock. The price of PairGain stock fell back to $9.38 per share when the company issued a statement denying such a deal was in the works.
Hoke was arrested at his Raleigh home after the FBI traced Internet addresses to him. He agreed to pay full restitution, potentially millions of dollars, to victims of the false report.
Bloomberg LP, parent company of the news service, recently filed a lawsuit against Hoke seeking unspecified damages.