Pair of Las Vegas Lawyers Roll Snake Eyes Again

Sean Flanagan and Daniel Chapman are back in the news, once again targeted for their role in a fraudulent stock scheme. We thought we had heard the last of these two Las Vegas, Nevada lawyers in August 2003, when they were indicted for their roles in a $414 million stock fraud scam. At the time, prosecutors charged that Chapman and Flanagan were engaged in a scheme to create phony shell companies and dump shares on the public.

But there was more two come for this pair of attorneys, who represented a lengthy list of obscure over-the-counter companies, many of which had entered the public marketplace through reverse-mergers. StockPatrol.com readers already were well acquainted with Chapman and Flanagan. The two men had acted as attorneys for a series of highly touted, non-performing companies, like Infotopia, Inc. Hydro Environmental Resources, Inc., Inc. and Bach-Hauser, Inc. – often receiving stock, registered on Forms S-8, in exchange for their services.

Now Flanagan and Chapman have run afoul of regulators once more. On April 25, 2005, the SEC filed a civil action charging the two lawyers and several of their associates with orchestrating a stock manipulation and accounting fraud scam from 1999 through 2002. The lawsuit centers on a scheme to rig the market for shares of Exotics.com, Inc., a Nevada corporation that maintains its principal office in Vancouver, British Columbia,. Named as defendants in the Complaint are Exotics.com, its sole officer, four accountants, and Chapman and Flanagan. The law firm of Flanagan & Associates Ltd was named as a relief defendant because it purportedly received proceeds from the scheme.

The Commission alleges that, from 1999 through 2002, the defendants manipulated trading of Exotics.com stock in order to increase both the share price and trading volume, filed false and misleading public documents, and issued misleading press releases and promotional material about the Company using fax and spam e-mail.

According to the Commission, fraudulent trading activity was coordinated from the law offices of Chapman & Flanagan. Shares were funneled through accounts maintained by Chapman & Flanagan to further the illicit scheme. In this case the SEC says the corrupt lawyers were teamed with a series of unscrupulous accountants, some of whom prepared phony financial statements and filed false financial reports.

In essence, Exotics.com, the product of a reverse-merger – one of the specialties employed by Chapman and Flanagan – became a vehicle for these "professionals" to ride as they manipulated the marketplace.

The SEC is seeking, among other relief, to bar Chapman and Flanagan from future participation in penny stock offerings and to recover funds from the Flanagan law firm.