Canadian lawyer settling SEC charges in sham microcap case

Canadian lawyer and stock promoter John Briner is settling with the SEC on allegations that he orchestrated a mining stock fraud scheme.

Two audit firms, and seven audit professionals have also agreed to settle the SEC charges, which were filed in January alleging that they engaged in sham offerings of stock in 20 purported microcap mining companies.

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Briner previously had been suspended from appearing or practicing before the SEC on behalf of regulated entities, so he recruited others to become figurehead executives of companies that he secretly controlled. The companies’ registration statements falsely stated that each CEO was running the company when in fact Briner was making all material decisions. The SEC settled charges against certain of these CEOs in January (AP Rel. Nos. 33-9700, 33-9701, 33-9702).

Briner has agreed to settle the charges and consent to an order prohibiting him from acting as an officer or director of any issuer, barring him from participating in any offering of a penny stock, and suspending him from appearing and practicing before the SEC as an attorney. He has also agreed to pay US$21,820.94 in disgorgement and prejudgment interest and US$50,000 in civil penalties.

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“Briner unsuccessfully sought to conceal his recidivist past and his role as the de facto CEO of the mining companies in the alleged scheme by acting through figurehead executives,” said Andrew Calamari, director of the SEC’s New York Regional Office. “Today’s sanctions against Briner are broader in scope and permanent, and make clear that repeat offenders will not be tolerated.”

In the January 2015 SEC order, the SEC also alleged Briner engaged Nevada-based audit firm De Joya Griffith and its partners Arthur De Joya, Jason Griffith, Philip Zhang, and Chris Whetman, and a Texas-based audit firm M&K CPAS and its partners Matt Manis, Jon Ridenour, and Ben Ortego, to audit the financial statements of the mining companies. The audits they conducted were allegedly so deficient that they effectively amounted to no audits at all and the auditors allegedly ignored red flags suggesting that Briner was engaging in fraud.

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Both firms and each of their above named partners agreed to settle the charges against them without admitting or denying the findings, on the terms set forth below:

De Joya Griffith consented to an order suspending it from appearing and practicing before the SEC as an accountant for a minimum of five years. The firm also agreed to pay nearly US$60,000 in disgorgement, prejudgment interest, and penalties. Arthur De Joya, Jason Griffith, and Philip Zhang agreed to be suspended from appearing and practicing before the SEC as accountants for varying periods ranging from a minimum of three to five years. De Joya and Griffith each agreed to pay a US$15,000 penalty and Zhang agreed to pay a US$25,000 penalty. Chris Whetman agreed to settle the charges in this matter and those relating to another issuer, Idle Media, and consented to an order suspending him from appearing and practicing before the SEC as an accountant for a minimum of five years. Whetman also agreed to pay a US$15,000 penalty.
M&K CPAS consented to an order censuring it and requiring it to refrain from accepting new public audit clients for 12 months or until an independent consultant certifies that the firm has completed the undertakings specified in the order, whichever is later. The firm also agreed to pay more than US$103,000 in disgorgement, prejudgment interest, and penalties. Matt Manis and Jon Ridenour agreed to be permanently barred from appearing and practicing before the SEC as accountants and to pay a penalty of US$20,000 and US$15,000, respectively. Ortego consented to an order suspending him from appearing or practicing before the SEC as an accountant for a minimum of three years. Ortego also agreed to pay a civil penalty of US$50,000.

The SEC’s litigation as to the sole remaining respondent, Colorado-based attorney Diane Dalmy, is continuing.

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