LEXINGTON, KY. (June 25, 4:15 p.m. ET) — Former recycled plastics product executive James Norman Turek has been convicted on eight counts of securities fraud and five counts of tax fraud for defrauding some 8,500 investors nationwide out of $18 million.
The 66-year-old former president and CEO of now-defunct Plasticon International Inc. was convicted June 22 after a two-week trial in U.S. District Court in Lexington, Ky.
Turek is scheduled for sentencing on Sept. 27. He faces a maximum prison sentence of 20 years on each count of securities fraud and three years on each count of tax fraud.
According to an announcement from the U.S. District Attorney's office in Lexington, the tax division of the Department of Justice, the Federal Bureau of Investigation and the criminal investigation division of the Internal Revenue Service, Turek lured about 8,500 investors between 2004 to 2006 by falsely claiming — in statements to investors and in press releases — that Plasticon owned valuable patents, and that the company was profitable.
According to the federal government, the Lexington, Ky., company had few sales, and Turek knew the firm was losing millions of dollars.
The evidence further showed that Turek had issued roughly 5 billion shares of company stock to himself and backdated promissory notes that claimed he had donated millions to the company — when he had not.
In order to circumvent SEC rules governing the sale of stock by a control person, he then transferred the stock into the names of friends and family members, including his deceased aunt, before selling the stock to unsuspecting investors, according to the indictment.
Turek was president and CEO and sole director of Plasticon from 1994-2007, giving him complete control over the firm's affairs until October 2007, when a bankruptcy court-appointed trustee took control.
Plasticon filed for bankruptcy May 16, 2007, less than 18 months after it acquired injection molder and thermoformer Pro-Mold Inc. of St. Louis. The SEC suspended trading in the stock four months later and revoked the company's securities registration two months after that.
According to the government's news release, Turek filed false tax returns for the years 2003 through 2007, for “failing to report approximately $12 million that he stole from Plasticon.”
A federal grand jury had indicted Turek on charges of securities fraud and filing false income tax returns in March 2011 — about 2½ years after the Securities and Exchange Commission had filed charges against Turek in the same court, accusing him of misappropriating company funds for personal use.
SEC had charged that Turek had taken at least $2.8 million of the $8.2 million to $11.2 million in funds that Plasticon had raised from at least 30 investors — capital that the firm said would be used to buy equipment and acquire other companies.
Those funds were raised in an unregistered, multistate securities offering between January 2005 and April 2007, according to SEC.
Those charges were settled Feb. 11, 2009, when Turek, without admitting or denying the allegations, agreed to a judgment that found him liable for disgorgement of $2.6 million plus $557,836 in interest. However, the court waived payment of that total amount and did not order Turek to pay a civil penalty, based on a statement of financial condition that Turek filed with the court.