For West Vancouver stock promoter Gregg Mulholland, things have gone from bad to worse since his arrest on a layover in Phoenix on a flight to Mexico from Canada back in June. He's accused of orchestrating a massive fraud that, among other things, pushed an obscure technology firm's value up to $6 billion, allegedly reaping $300 million in illicit proceeds later laundered through a network of offshore firms.
Mulholland has pled not guilty to the securities fraud and money laundering charges filed in Brooklyn last month. In a press release touting his arrest, the U.S. Attorney for the Eastern District of New York said "Mulholland used an elaborate offshore corporate structure built on lies and deceit to defraud U.S. investors in publicly-traded companies."
Between 2010 and 2014, Mullholland allegedly helmed a group that induced American investors to buy stock in "various thinly-traded" public firms through bogus promotions and laundered the money through five offshore firms.
But while he awaits his fate across the border, Mulholland faces more legal troubles with the U.S. Securities and Exchange Commission, albeit on Canadian soil.
The commission filed a notice of civil claim in B.C. Supreme Court on July 21, claiming Mulholland consented to a judgment for his part in a multi-million securities fraud involving a "classic pump-and-dump scheme" for stocks in a company called Rudy Nutrition. The company purported to make sports drinks and had Daniel "Rudy" Ruettiger at the helm. Ruiettiger was the inspiration for the 1993 movie "Rudy," based on Ruettiger’s dreams of playing football at the University of Notre Dame despite significant obstacles.
According to the claim, Mulholland promoted the stock online and sent out mailers claiming that Rudy Nutrition sports drinks outsold competitors such as Gatorade in certain test markets. The scheme, which began in 2008, generated $11 million in illicit gains and the U.S. District Court in Las Vegas ordered Mulholland in 2013 to disgorge more than $2.4 million, considered his share of the proceeds, plus interest as well as pay a civil penalty of an equal amount. Mulholland, according to the claim, consented to the judgment. The commission now claims that in September 2011, while it was investigating Mulholland, "Mulholland engaged in conduct designed to delay, hinder, and defraud the Commission."
Mulholland, the commission says, incorporated defendant Vision Crest Consulting Group Ltd. two months before he consented to the disgorgement order, and the company bought a sprawling California property which was later sold to buy a West Vancouver property at 3630 Mathers Ave. The property was purchased in Vision Crest's name, but "Vision Crest has been used as a cloak for fraud" to deliberately cover up the "wrongdoing," the claim states.
The SEC seeks declarations that the property transactions are void under the Fraudulent Conveyance Act, that Vision Crest has no separate legal identity from Mulholland, and that the West Vancouver property and other assets are held in trust for the commission. It also wants an injunction to restrain the defendants from "selling, disposing of, or otherwise encumbering" the property.
The SEC declined to comment on the lawsuit for this story. Mulholland's New York-based lawyer, Andrew Lankler, who also defended Bernard Madoff's auditor David Friehling, didn't respond to requests for comment.
Mulholland and Vision Crest had not filed a response to the SEC's lawsuit by press time.
