Xinhua Finance Ltd.’s former chief executive officer pleaded guilty to a single charge of conspiring to obstruct the Internal Revenue Service, resolving U.S. accusations that she joined a $50 million insider-trading scheme.
Loretta Fredy Bush, 54, admitted today in federal court in Washington that she and two other former Xinhua Finance board members, Shelly Singhal and Dennis Pelino, conspired to hide more than $2.1 million in forgiven debt from the IRS so she could avoid about $24,500 in taxes. She faces as much as five years in prison when sentenced April 29.
“You are in fact guilty of this offense?” U.S. District Judge Royce Lamberth asked Bush today.
“I am guilty,” Bush said.
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.
Pelino and Singhal are scheduled to plead to the same charge at later dates. As part of the plea agreements with the three, prosecutors said they’ll drop charges of conspiracy, mail fraud and making false statements.
Xinhua Finance, the first Chinese company listed on the Tokyo stock exchange, provides information products focused on Chinese and international financial markets.
Under the indictment, all three defendants faced four charges of mail fraud, each of which carried a maximum penalty of 20 years in prison. In 2011, the three pleaded not guilty to the charges.
“Those charges, which alleged fraud, making false statements and conspiracy involving Xinhua Finance Limited, will be formally dismissed as to Ms. Bush at the time of sentencing,’ Bush’s lawyer, Charles Leeper of Drinker Biddle & Reath LLP, said in an e-mailed statement.
He said today’s plea arose out of a personal loan to Bush that was later forgiven, and the delay in payment of taxes on the balance of that loan resulted in an underpayment to the IRS.
According to Bush’s plea agreement, the government won’t seek to use the accusations in the 2011 indictment as a basis of its sentencing recommendation. Under nonbinding U.S. guidelines, the sentencing range for Bush is six months to a year in prison and a fine of as much as $20,000.
The case is U.S. v. Singhal, 11-cr-00142, U.S. District Court, District of Columbia (Washington).