UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16558 \ May 17, 2000
United States v. Brent A. Wagman 3:00-CR-108-1
Securities and Exchange Commission v. Redbank Petroleum, Inc., et al.
#3-99CV1267-T, USDC, NDTX (Dallas Division)
On May 12, 2000, Brent A. Wagman entered into a plea agreement with the United States Attorney for the Northern District of Texas (Dallas Division) for one count of securities fraud and one count of criminal contempt. Wagman and two of his colleagues, Warren T. Donohue and Margaret F. Swinney, were each indicted by a grand jury in the U.S. District Court for the Northern District of Texas for two counts of securities fraud on March 21, 2000.
* Wagman, age 42, was a resident of Celina, Texas during the course of the scheme.
The indictments against Wagman alleged that he made material misrepresentations and omissions to the public to encourage investments in Redbank Petroleum, Inc. and AmeriTech Petroleum, Inc. In addition, he was charged with criminal contempt for leaving the continental United States in violation of a Court Order entered in the Commission's civil action against him. Wagman, the former president of Redbank and AmeriTech, is presently in the custody of federal authorities. On March 10, 2000 he was arrested in Panama and brought back to the United States to face criminal charges. He and his family had fled to Panama last summer after the Commission filed its lawsuit against him.
The Commission filed its civil lawsuit against Wagman on June 3, 1999, seeking a temporary restraining order, asset freeze and other emergency relief. The Commission's Complaint alleged that Redbank and Ameritech, at Wagman's direction, offered and sold approximately $30 million in so-called high interest corporate notes to investors in numerous states. The corporate notes were offered to retirees and others as risk-free investments with above market rates of return, and backed by an unconditional guarantee by an independent insurance company. In fact, no such guarantee existed. Rather than using investors' monies for the stated purposes, funds were diverted to fund the operations of several other entities under Wagman's control, and for personal expenses of Wagman. The defendants also used investors' funds as "Ponzi" payments to lull existing investors and to lure new ones. The Complaint further alleged certain Wagman-controlled companies received proceeds diverted from Redbank and AmeriTech, including Lyric International, Inc., a publicly-traded company. In addition, the Complaint alleged that Lyric issued numerous false and misleading public statements and failed to disclose Wagman's control over the company.
On March 24, 2000, Judge Barbara M.G. Lynn granted the Commission's Motion for Summary Judgment against Wagman. Judge Lynn permanently enjoined Wagman from future violations of the antifraud and registration provisions of the federal securities laws. Judge Lynn further ordered Wagman to disgorge approximately $24 million and pay the maximum civil penalty of $110,000.