Ex-CEO of EConnect Sentenced to Prison
The former chief executive of EConnect Inc. was sentenced to eight years in prison for lying in hopes of propping up the stock of his San Pedro Internet-commerce company, authorities said Tuesday.
Thomas S. Hughes, 56, of Rancho Palos Verdes was sentenced late Monday by U.S. District Judge Nora Manella in Los Angeles. He had pleaded guilty in August to three counts of securities fraud stemming from false news releases and statements about EConnect.
Hughes also pleaded guilty to one count of contempt of court for violating a court order obtained by the Securities and Exchange Commission, which had sued him previously for issuing false news releases in March 2000.
In July 2002, prosecutors charged, Hughes was at it again, falsely asserting in news releases and on EConnect’s website that the firm had a stock-repurchase plan, that it had received an investment worth $20 million and that it had received an order of nearly $1 million for its ECash pads.
The pads, designed to keep Internet transactions secure, were a key product for EConnect, which is now known as Eye Cash Networks Inc.
The repeat violation provoked federal officials, who were under pressure to combat a wave of scandals involving corporate bosses who misled shareholders. Within a month, the FBI and prosecutors unveiled criminal fraud charges against Hughes in what U.S. Atty. Debra W. Yang in Los Angeles characterized as “our calculated move to provide the SEC with teeth.”
“Without having the U.S. attorney involved, the SEC doesn’t necessarily have the ability to put them in prison,” Yang said Tuesday.
Hughes has been in custody since September 2002, when he was found to have violated his bond conditions by using the Internet and e-mail, said Assistant U.S. Atty. David Willingham, who prosecuted the case. He’ll be eligible for release in about five years and four months.
The stock in Hughes’ company shot up to a total market value of about $3 billion after his initial false statements in March 2000. It was worth about $700,000 at its price Tuesday of half a cent in over-the-counter trading.
