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Former EConnect CEO Pleads Guilty in Fraud Case

August 12, 2003|David Rosenzweig | Times Staff Writer

The former chief executive of EConnect Inc. pleaded guilty Monday in federal court in Los Angeles to charges that he inflated the San Pedro-based company's stock price by issuing false press releases.

Thomas S. Hughes, 55, of Rancho Palos Verdes entered pleas to three counts of securities fraud and one count of criminal contempt just a week before he was scheduled to go on trial.

U.S. District Judge Nora M. Manella scheduled a Dec. 1 sentencing date.

According to prosecutors, Hughes oversaw the issuance of false and misleading press releases in July 2002. Those releases claimed that EConnect had begun a stock repurchase program and had received a $20-million investment in highly rated bonds as well as a purchase order for nearly $1 million worth of its ECash pad product, designed to facilitate secure Internet transactions from home.

EConnect's shares, traded over the counter, rose from 24 cents to a high of $2.86 over a three-week period after issuance of the upbeat press announcements. But the share price tumbled to 93 cents July 25, one day before the Securities and Exchange Commission suspended trading in the stock.

The SEC subsequently filed a civil suit against Hughes and several others seeking disgorgement of profits made during the alleged stock manipulation.

It was Hughes' second run-in with the SEC over the issuance of fabricated press releases. In 2000, Hughes settled SEC civil charges by agreeing to abstain from further infractions. For violating that agreement, Hughes pleaded guilty Monday to criminal contempt of court.

Hughes, who is being held without bond, faces a statutory maximum sentence of 30 years for the fraud charges and an indefinite term for contempt. He is likely to receive much less time, however, under federal sentencing guidelines.

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