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Feds Charge Alt-Fuel, All Electric Company Simply Old Fashioned Hot Air Stock Scam
August 29, 2016Consider this bit of recent history "StarPoint USA and Niyato Industries Enter Into Exclusive Vehicle Distribution Agreement" (Nasdaq Globe Newswire, June 6, 2012), where we learn, in pertinent part:
StarPoint USA, Inc. announced today that it has entered into an Exclusive Vehicle Distribution Agreement with Niyato Industries Inc. for the distribution of alternative fuel and all-electric vehicles. StarPoint USA introduced and distributed Daewoo brand vehicles to the US market through a nationwide retail distribution network that included more than 500 locations across all of the major US metro markets. Niyato Industries plans to introduce a number of alternative fuel and all-electric vehicles starting in the July time frame that includes a full range of vehicle options for US consumers.Of more interest to today's BrokeAndBroker.com Blog is this portion of the Press Release:
About Niyato Industries: Niyato Industries is a US company based in Las Vegas and is a Licensed Automobile Manufacturer and a Federal Contractor. The company will convert gasoline vehicles to alternative fuel and all-electric vehicles under the Clean Air Act SEC. 247. VEHICLE CONVERSIONS. The company will not outsource jobs and plans to do everything it can to help to keep America's work force employed. Niyato's business model is very simple: convert an already existing, time tested, new gasoline vehicle to an alternative fuel or all-electric vehicle for a more sustainable economic model. Additionally, Niyato plans to sell its all-electric models to the US government to help the government fulfill its quota of fleet conversions to alternative fuels by 2015. Niyato will also be converting vehicles for rental and fleet operators and for consumers who are interested in reducing their carbon footprint and reducing their vehicle related costs. Niyato Industries is a Cleantech company. Niyato Industries has filed its Reg. D 505 and 506 with the SEC and has already blue skied its current offering in 15 states and expects to register in all 50.So . . . waddawegot here? Sounds impressive, no? An exclusive vehicle distribution agreement of alt-fuel vehicles. All-electric vehicles. A very patriotic gesture in the midst of the Great Recession to not outsource American jobs. U.S. government purchases. Fleet conversion. Reg D filed. Blue sky done. Seems like we have a robust company getting ready to launch . . . maybe even a public offering on the near horizon?
The Pitch Begins Sometime around January 2012, you may have been among a number of unlucky pigeons who were targeted by a sales pitch to sell you shares of stock in Niyato Industries, Inc., not a household name but simply another in a long line of somewhat dubious Nevada corporations of dubious pedigree. Sorry, Nevada but you truly don't have the most exacting of standards when it comes to registering corporations. Niyato was allegedly founded in 2010 and Robert Leslie Stencil of Charlotte, North Carolina, served as its President and Chief Executive Officer. Stencil along with Daniel Thomas Broyles Sr., 59, of Beverly Hills, California; and Kristian Francis Sierp, 45, of Costa Rica marketed Niyato as a manufacturer of compressed natural gas ("CNG") automobiles and a distributor of CNG fuel that had patented technology, valuable contracts and high-profile executives. 10X ROI If that's all the pitch that Stencil, Broyles, and Siep threw down upon their pigeons, that would have been a fairly tepid scenario. BrokeAndBroker.com Blog doesn't do tepid. Apparently, the three pitchmen sort of promised potential Niyato investors that the company was planning -- imminently -- an Initial Public Offering that would sell shares to investors for 50 cents and those shares would rise to at least $5 a share after the offering. Indictment On August 26, 2016, Stencil, Broyles, and Sierp were indicted in the Western District of North Carolina ("WDNC") for their alleged roles in a $2.5 million high yield invest fraud. the three Defendants (all American citizens) were charged with:
- one count of conspiracy to commit wire fraud and mail fraud;
- five counts of mail fraud; and
- eight counts of wire fraud
According to the Indictment in United States of America, Plaintiff, v. Robert Leslie Stencil, Daniel Thomas Broyles, Sr. and Kristian F. Sierp, Defendants (Bill of Indictment, 16-CR-221; August 18, 2016) , Defendant Sierp operated under a fake name from a telemarketing call center that he owned and operated in Costa Rica. The juxtaposition of "fake name" "telemarketing call center" and "Costa Rica" ain't three things in common that you want to learn about after you've made an investment. As set forth in the Indictment:
To induce victims to purchase Niyato stock, STENCIL, BROYLES, SIERP, and others made numerous false and fraudulent representations, both in direct exchanges with victims and through published and publicly posted materials. These false and fraudulent representations included, among other things, that Niyato: had a headquarters in Charlotte, North Carolina, and at least one operational facility; had manufactured electric vehicles and sold 2,700 such vehicles; was an original equipment manufacturer of compressed natural gas (CNG) and liquid petroleum gas (LPG) vehicles and had been contracted to convert at least 150 such vehicles; possessed patented technology and proprietary hardware; held orders for hundreds of vehicles in production; was contracted to establish 5,000 CNG pumps across the United States; and employed as its Vice Chairman and Chief Operating Officer a former executive of Toyota motor Corporation.Page 4 of the Indictment
Imminent IPO
Of course, it gets even worse because the Indictment alleges that Defendants Stencil, Broyles and Sierp knew that Niyato had no facilities, products, patents or plans for an imminent IPO, but rather was merely a vehicle for inducing investor funds. Ummm . . . let's break that down, even if just for the fun of slowly, spelling it all out again:
All of which raises what I consider a very fair and critically important question of just what, if any, due diligence did the purportedly duped victims perform? If a potential investor had simply attempted to confirm whether this once-in-a-lifetime investment was in a company with facilities or products or intellectual property, the deafening silence of an answer would have been "NO."
- No facilities;
- No products;
- No Patents; and
- No Plans for an imminent IPO
- Merely a vehicle for inducing investor funds
Targeting the Elderly
Sadly, the Indictment alleges that at least ten of the victims were over the age of 55, which means that a number of those targeted were were elderly. In addition, Broyles and Sierp are alleged to have used high-pressure sales tactics to encourage investments from their victims. According to the Indictment, Sierp operated under a fake name from a telemarketing call center that he owned and operated in Costa Rica. In terms of Sierp's lovely contribution to this enterprise, the Indictment alleges that:
SIERP and co-conspirators working in his telemarketing call center in Costa Rica used fake names and Voice over Internet Protocol (VoIP) in calling victims. The VoIP technology, which utilized computers to make telephone calls over the Internet, allowed SIERP and co-conspirators to use recognizable United States area codes to make it falsely appear on victims' caller identification devices that their calls were made from somewhere in the United States when, in fact, the calls originated in Costa Rica.Pages 3 -4 of the IndictmentBank Shots
So much for the front-end of the alleged investment fraud. Now let's consider what happened to the investment funds. We start with investors being instructed to mail payment to Niyato's purportedly private mail box in Charlotte or to wire funds into the company's J.P. Morgan Chase bank account (which was, in fact, allegedly under Defendant Stencil's control). Once investors's funds were directly deposited or transferred into the company's J.P. Morgan Chase bank account, the Indictment alleges that:
[S]TENCIL distributed from that account by wire transfer a sales commission payment of approximately 50 percent of the victim's funds to the bank account of the co-conpsirator(s) who had contacted the victim and induced the victim to purchase Niyator stock. . .Page 5 of the Indictment
Following the Money
You might ask, you might wonder, hey, what the hell happened to the other half of the investors's funds -- you know, Bill, the balance that didn't get sent as a finder's fee to one of the Defendants? Oh, that's an easy question to answer: The Indictment alleges that the Defendants "used invested victim funds for their personal benefit, not to develop and operate Niyato as a viable business. "
Federal prosecutors are seeking a forfeiture of at least $2,597,910 of the proceeds of the alleged fraud. Of that amount, $40,672.71 was seized from a SunTrust Accounts held by or for Defendant Sierp; $305,096.58 seized from J.P. Morgan Chase accounts held by or for Niyato and/or Defendant Sierp; and $100,000 seized from a law firm to which Niyato had forwarded fraud proceeds.