SEC Charges Michael Shumway with Securities Fraud
On April 8, 2017, the Securities and Exchange Commission (SEC) announced securities fraud charges against Michael Shumway, a former corporate secretary and treasurer of two Utah water companies for misappropriating and fraudulently selling corporate shares.
The SEC’s complaint, filed in federal court in the District of Utah, alleges that Michael D. Shumway misappropriated unauthorized shares of stock in American Fork Irrigation Company (AFIC) and Lehi Irrigation Company (LIC) and sold them to unwitting investors for at least $435,500. Michael Shumway also allegedly misappropriated at least $633,396 from AFIC and LIC. From at least 2003 through May 2015, Shumway allegedly engaged in a fraudulent scheme of falsifying AFIC and LIC books and records and issuing unauthorized shares in those companies and fraudulently selling the shares to investors. The complaint alleges that shares in AFIC and LIC convey the right to an appropriation of water from each company. The allegedly unauthorized shares Shumway sold did not have such water rights. Shumway also allegedly established secret bank accounts that he used to misappropriate AFIC and LIC funds for his personal use. Michael Shumway allegedly misled the companies’ officers and directors in carrying out his fraud. The total value of Shumway’s alleged misappropriation of shares and funds from AFIC and LIC is at least $1,068,896.
The SEC’s complaint charges Michael Shumway with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks injunctive relief, disgorgement, and an officer and director bar against Shumway. Shumway agreed, without admitting or denying the allegations in the SEC’s complaint to the entry of a judgment imposing permanent injunctions and an officer-and-director bar, and ordering him liable for disgorgement of $435,500, payment of which will be deemed satisfied by the restitution ordered in the parallel federal criminal case.
On December 14, 2016 Shumway pleaded guilty in federal district court in Utah to one count of felony wire fraud. On April 5, 2016, he was sentenced to 12 months and 1 day and ordered to pay $1,100,481.78 in restitution.
For further information about this article, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202N, Boca Raton, Florida, (561) 416-8956, [email protected] or visit www.securitieslawyer101.com. This blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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