United States Attorney Erica H. MacDonald announced the
conviction of RYAN RANDALL GILBERTSON, 42, founder of Dakota Plains Holdings,
Inc., and DOUGLAS VAUGHN HOSKINS, 50, for orchestrating a complex stock manipulation
scheme that triggered more than $30 million dollars in fraudulent bonus
payments. Following a 10-day trial before U.S. District Judge Patrick J.
Schiltz in Minneapolis, Minnesota, the jury found the defendants guilty of
multiple counts of wire fraud, conspiracy to commit securities fraud, and
securities fraud.
“Ryan Gilbertson masterminded and carried out a complex
scheme to manipulate the price of Dakota Plains stock. Although his scheme was
complicated, Gilbertson's goal was simple—to line his own pockets at the
expense of the company and its investors,” said U.S. Attorney Erica MacDonald.
“Gilbertson, a former derivatives trader who co-founded a billion-dollar
publicly-traded oil company, was a wealthy man. But like all too many white
collar criminals, these defendants were motivated by nothing more than naked
greed. The FBI, U.S. Postal Inspection Service, and IRS worked for years to
understand, investigate, and prosecute Gilbertson's complex stock manipulation
scheme. Thanks to their efforts, these defendants will not escape justice.”
“Postal Inspectors take very seriously their mission to
deter the illegal use of the mails for any criminal activity,” said Postal
Inspector in Charge, Craig Goldberg. “We are committed to working together with
our law enforcement partners to identify, investigate and bring to justice
those who would attempt to mask their criminal activity through the use of the
mail. Today’s verdict reaffirms how critical a role the US Postal Inspection
Service plays in protecting the American consumer from these types of
fraudulent schemes.”
“A free market depends on honesty and integrity of those
involved in publicly traded companies,” said Jill Sanborn, Special Agent in
Charge of the Minneapolis Division of the FBI. “In this case, Gilbertson, the
founder of Dakota Plains, along with his associate, conspired to manipulate the
market for their own financial gain. We are grateful that the jury saw what we
saw in this case – a scheme that looked complex, but was really about market rigging
and self-dealing.”
According to the evidence presented at trial, in November
2008, GILBERTSON and his business partner founded Dakota Plains, Inc. (“Dakota
Plains”), a privately held company based in Wayzata, Minnesota that owned and
operated a transloading facility in New Town, North Dakota. From the outset,
GILBERTSON and his partner concealed their involvement in the company by
installing their fathers as the company’s executives and two-person board of
directors. Rather than capitalize the company at the outset, GILBERTSON caused
the company to issue $9 million in promissory notes to himself and other
corporate insiders. The notes paid 12% annual interest and included a provision
that paid GILBERTSON and the other noteholders a bonus payment based on the
average trading price of Dakota Plains stock during the first 20 days of public
trading. The bonus payment provision operated as an “embedded derivative” in
which the value of the bonus payment would be based on the average price of
Dakota Plains stock during the first 20 days of public trading.
GILBERTSON then caused the company to go public via a
reverse merger with a company called Malibu Club Tan, which was a publicly
traded shell company that operated a single defunct tanning salon in suburban
Salt Lake City, Utah. GILBERTSON made it a secret condition of the reverse
merger that DOUG HOSKINS, his friend and polo coach, be able to purchase the
majority of the freely trading shares, the only shares that could trade
publicly following the reverse merger. GILBERTSON then gave $30,000 to HOSKINS,
who was deeply in debt and owed money to the IRS and other creditors, in order
to purchase 50,000 shares of Dakota Plains stock at a price of $0.50 per share
on March 23, 2012, the morning of the reverse merger. That same day, again at
the direction of GILBERTSON, HOSKINS began selling his shares at the falsely
inflated price of $12 per share.
According to the evidence presented at trial, on the first
day of public trading, HOSKINS began selling his newly acquired shares for an
inflated price of $12 per share at GILBERTSON’S direction, and continued to do
so throughout the first 20 days of public trading following the reverse merger.
At the same time, GILBERTSON directed a local stockbroker at a Minneapolis-based
securities brokerage firm, to purchase shares of Dakota Plains stock on behalf
of both himself and his clients at inflated prices. GILBERTSON also instructed
a Salt Lake City-based business consultant to manipulate the price of the stock
by ensuring that none of the shell company shareholders sold their stock for
less than the $12 per share price offered by his friend and polo coach,
HOSKINS. Indeed, on April 4, 2012, GILBERTSON sent a text message to the
consultant in Utah bragging that the shell company shareholders “would be
participating on sales at 7 bucks [a share] not 12 were it not for my
involvement.”
Throughout the 20-day period following the reverse merger,
GILBERTSON, with the help of HOSKINS and others, manipulated the price of
Dakota Plains stock to increase the average trading price to $11.30 per share.
This triggered a $32.8 million bonus payment to GILBERTSON and the other
noteholders. GILBERTSON made millions as a result of his stock manipulation
scheme. HOSKINS made less money, but still pocketed more than $125,000 from his
stock sales, much of which he used to purchase an Argentine polo pony.
In the wake of the fraud scheme, HOSKINS was interviewed by
the Securities and Exchange Commission about his involvement in these stock
sales. HOSKINS repeatedly lied under oath during the deposition, covering up
both his and GILBERTSON’S involvement in the stock manipulation scheme. Among
other things, HOSKINS claimed that he did not discuss the stock trades with any
other individuals. At trial, GILBERTSON falsely denied his role in the stock
manipulation scheme, but conceded that he had arranged for HOSKINS to purchase
Dakota Plains stock prior to the reverse merger and had provided HOSKINS with
the money with which he purchased the stock.
This case is the result of an investigation conducted by the
FBI, Criminal Investigation Division of the IRS, and the United States Postal
Inspection Service.
This case is being prosecuted by Assistant United States
Attorneys Joseph H. Thompson, Kimberly A. Svendsen, and Melinda A. Williams.
Defendant Information:
RYAN RANDALL GILBERTSON, 42
Delano, Minn.
Convicted:
Wire fraud, 14
counts
Conspiracy to
commit securities fraud, 1 count
Securities fraud,
6 counts
DOUGLAS VAUGHN HOSKINS, 50
Wayzata, Minn.
Convicted:
Wire fraud, 2
counts
Conspiracy to
commit securities fraud, 1 count
Securities fraud,
3 counts
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