Risk Management

Perpetrators Punished in Share-Inflation Case

The ex-CFO and ex-CEO of Hexagon, a penny-stock company, falsely painted a picture that it was rolling in assets when in fact it was nearly worthless.
Stephen TaubNovember 27, 2007

A federal court has entered a final judgment against the former CFO and CEO of a penny-stock company, who were found guilty of running a scheme to boost the company’s share price.

The ex-CFO, Michael Pietrzak, and the ex-CEO, Maurice Furlong, fraudulently inflated the value Hexagon Consolidated Companies of America while at the same time selling their own shares into the market, a federal jury found in August. The judgment against them includes permanent injunctions, disgorgement, prejudgment interest, civil penalties, officer and director bars, and penny-stock bars.

Pietrzak must disgorge nearly $1.3 million, representing gross proceeds he received from sales of his HCCA stock during the period the accounting fraud was ongoing, along with pre-judgment interest of almost $900,000. Furlong was ordered to disgorge nearly $3.4 million and pre-judgment interest of more than $2.6 million.

The jury verdict included findings on a wide range of securities-law violations, including material misrepresentations that HCCA, a development-stage mining company, made in Securities and Exchange Commission filings. To fraudulently increase the company’s stock price and value, the two filed false and misleading registration statements and periodic reports, and they also issued false press releases and a letter to shareholders, according to the SEC.

The jury concluded that from 1996 through 2000, HCCA, through the efforts of Pietrzak and Furlong, reported to the public that it had substantial assets when, in fact, it was virtually worthless.