CTTD CO2 Tech's Ricci asks for low sentence 2

CTTD CO2 Tech's Ricci asks for low sentence

2012-05-07 13:55 ET - Street Wire

by Mike Caswell

David Ricci, the former Pacific International Securities Inc. broker who pleaded guilty to criminal charges in Florida for market manipulation, is asking for a lower sentence than the five-year maximum contained in his plea agreement. He says he has co-operated fully with the government, playing a vital role in convicting his co-accused. He has also endured threats from somebody with ties to organized crime.

Mr. Ricci, 39, will be sentenced on Thursday, May 10, for his role in the pump-and-dump of CO2 Tech Ltd. The government claimed that he and others, including recidivist securities violator Jonathan Curshen, helped boost the stock to $1.65 with manipulative trades in 2007. They obtained $7-million in illegal profits, which they sent to two Israeli men. (All figures are in U.S. dollars.)

On Thursday, May 3, Mr. Ricci filed a sentencing memorandum in which he explains what he sees as the extraordinary lengths he went to in aid of the prosecution. Despite being a Canadian citizen living in Costa Rica, which has no extradition treaty with the U.S., he started co-operating with the FBI within days of learning of an investigation into CO2 Tech's trading.

At the request of FBI agents and the Department of Justice, he travelled at his own expense to the U.S. and other countries to meet with agents. During those meetings, he voluntarily explained to the government the operations of his former employer, Red Sea Management Ltd., a Costa Rican company founded by Mr. Curshen that catered to those looking to run a pump-and-dump. He provided much of this assistance while having no plea agreement in place nor any guarantee that he would be able to return to Costa Rica, where his wife lives.

Moreover, while he was helping the government he and his family received threats from somebody he believed had ties to violent Canadian organized crime figures. Mr. Ricci does not identify the individual, but says that the person was an account holder at Sentry Global Securities, a brokerage closely associated with Red Sea. On several occasions, the individual left threatening and abusive messages for Mr. Ricci and his wife, demanding the release of all of the money in his accounts. (The account records had, by that time, been seized by the FBI.)

Mr. Ricci says he reported the threats to the FBI. After looking into them, an FBI agent informed Mr. Ricci that the customer was known to have affiliations with violent individuals. The FBI offered to protect Mr. Ricci and his wife if they came to the U.S., but Mr. Ricci chose to remain in Costa Rica. Despite the threat, he continued to assist the FBI, he says.

As Mr. Ricci sees it, his co-operation helped prosecutors and lawyers for the U.S. Securities and Exchange Commission comprehend the "convoluted layers" of companies through which Red Sea operated. He also helped them find and trace the flow of money through many banks in the U.S. and overseas.

While Mr. Ricci's memorandum does not suggest a specific sentence, he notes that the judge has the option to place him on probation. If jailed, Mr. Ricci asks that he be designated to the lowest security institution near his family, in Vancouver. He also asks that the judge permit him to surrender voluntarily.

Ricci's charges

The charges against Mr. Ricci and the others are best set out in a civil complaint the SEC filed on Feb. 18, 2011, in the Southern District of Florida. The complaint described the manipulation of CO2 Tech, an OTC Bulletin Board listing that was purportedly making pollution control products.

The scheme began when two Israeli men, Ariav Weinbaum and Yitzchak Zigdon (who are also defendants), enlisted Red Sea Management to help promote CO2 Tech. According to the SEC, Red Sea's services included market manipulation, money laundering, incorporating shell companies and establishing virtual offices. The SEC said it carried out these activities through a labyrinth of nominee brokerage and bank accounts.

Red Sea's role in the CO2 Tech manipulation, as described by the complaint, was to carry out a number of manipulative trades. The trading occurred as the company issued news releases that were misleading or completely false, including one in which the company claimed to have a relationship with Boeing.

On the day of the Boeing news, Mr. Ricci executed a number of trades that helped "jump-start" the stock. The company went from 91 cents to $1.65 that day as Mr. Ricci and others executed trades at gradually increasing prices. They then started dumping stock, generating $5.5-million in profits that day alone, the complaint stated.

The SEC sought disgorgement of ill-gotten gains, appropriate civil penalties and penny stock bans. In filing the case, the SEC acknowledged the assistance of the B.C. Securities Commission, the Costa Rican Police, the Israel Securities Authority, the United Kingdom Financial Services Authority and the City of London Police.

Mr. Curshen was separately convicted in the criminal case on Jan. 31, 2012, and awaits sentencing. He was already in jail prior to his conviction, the result a separate criminal case in which the government said he tried to bribe corrupt brokers of a Washington State company. He pleaded guilty to those charges in June, 2009, and received 16 months.

Mr. Ricci, when he was in Vancouver, worked at PI for five years. He left the firm on Nov. 17, 1999.