Xinhua Finance Ltd.’s former chief executive officer, accused of joining a $50 million insider- trading scheme, signed a plea agreement with U.S. prosecutors resulting in a single charge of conspiring to obstruct the Internal Revenue Service.
Loretta Fredy Bush and two other former Xinhua Finance board members, Shelly Singhal and Dennis Pelino, also agreed to enter pleas next month, according to a filing by prosecutors in federal court in Washington. In 2011, the three pleaded not guilty to charges of conspiracy, mail fraud and making false statements.
“Consistent with those plea agreements, the government is filing concurrently a one-count superseding information charging each defendant with conspiracy to impede the lawful functions of the Internal Revenue Service,” Assistant U.S. Attorney Michael Atkinson said in papers notifying the court of the deal.
The insider-trading scheme isn’t mentioned in yesterday’s criminal information. The document instead alleges that Bush, Singhal and Pelino conspired to hide from the IRS $3.5 million in loans from a company created at the direction of a co- conspirator. The loans were later “abandoned,” according to the filing.
The maximum penalty for obstructing the IRS is five years in prison.
Xinhua Finance, the first Chinese company listed on the Tokyo stock exchange, provides information products focused on Chinese and international financial markets.
The three defendants were indicted on May 10, 2011, for allegedly using various entities to disguise the sale of shares in Shanghai-based Xinhua Finance from the Securities and Exchange Commission and investors, and to engage in insider trading. They were also accused of manipulating the company’s balance sheet to avoid taking so-called impairment charges.
The filing of a criminal information in a pending case signals the defendants have reached a resolution with the government and that remaining counts of an indictment will be dismissed, said Bernie Grimm, a criminal defense lawyer in Washington who isn’t involved in the case.
“Given the core of this case was insider-trading, it sounds like they’re walking away with much less,” Grimm said in a phone interview.
Under the indictment all three defendants faced four charges of mail fraud, each of which carried a maximum penalty of 20 years in prison.
William Miller, a spokesman for U.S. Attorney Ronald Machen, and Charles Leeper, Bush’s lawyer, declined to comment on the filings.
Barbara Van Gelder, a lawyer for Singhal, said she couldn’t comment until the matter is resolved. Charles De Monaco, a lawyer for Pelino, didn’t immediately respond to an e-mail message seeking comment on the filings.
The case is U.S. v. Singhal, 11-cr-00142, U.S. District Court, District of Columbia (Washington).
To contact the reporter on this story: Tom Schoenberg in Washington at email@example.com.
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org.