Local News

2 North Texans Accused Of Securities Fraud

COLLEYVILLE (AP) ― Two North Texas men face securities fraud charges in connection with an alleged "pump and dump" stock-fraud scheme that resulted in more than $32 million in losses for duped investors.

Paul Johnson, 60, of Colleyville and Mark Lindberg, 40, of Coppell are both charged with fraud, according to court documents filed July 15 in the U.S. Northern District Court in Dallas by the Securities and Exchange Commission.

Johnson was president of Sniffex Inc., which the SEC alleges was a shell company that produced a hand-held bomb detector called the Sniffex. Its 50-year-old Bulgarian inventor Yuri Markov allegedly designed it to emit an electromagnetic field to detect gunpowder and other explosives as far away as 300 feet and the device was promoted as an anti-terror breakthrough. But the device did not live up to its claim.

"My client vehemently denies the allegations. . . . We look forward to our day in court. We believe we will be able to establish that Sniffex is a legitimate bomb-detection device," said Johnson's attorney Bill Mateja of Dallas. Lindberg did not immediately respond to repeated telephone calls on Tuesday.

The SEC says Johnson and Lindberg created a fake promotional campaign designed to inflate the share price and trading volume of the company's stock, between May 17, 2005 and April 6, 2006. Allegedly, Lindberg sold 2 million shares for a net gain of more than $300,000 and the company's market value leaped to $474 million at one point, court documents said.

The SEC is investigating Sniffex's partners in Bulgaria and Denmark.

In a separate case brought by the U.S. Attorney's Office for the Northern District Court of Oklahoma, Lindberg pleaded guilty to securities fraud. Prosecutors accuse him of working with a group that manipulated at least three penny stocks from 2004 through 2006. Two of those manipulations took advantage of investors' emotions during Hurricanes Katrina and Rita in 2005, according to court documents.

Timothy McCole, SEC attorney in Fort Worth, said a $6.2 million forfeiture order has been issued against Lindberg. Mateja said because Johnson did not have any Sniffex shares, he did not gain from the company beyond his salary.

Sniffex Inc. is now Homeland Safety International.

(© 2008 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

---