On October 21, 2019 a criminal complaint (pdf) against Michael Starkweather, former CEO of Andiamo Corp (OTC: ANDI), was unsealed in US District Court for the Eastern District of New York. The case is United States v. Starkweather (1:19-mj-00911). See the case docket. I previously reported on the SEC’s lawsuit against Starkweather and predicted criminal charges were coming. As the case has just been filed these are only allegations and have not been proven in a court of law.
Mike Caswell of StockWatch already wrote a good summary of the charges (though without linking to the complaint).
Starkweather was arrested in Ohio (see the Ohio case docket).
Excerpt from complaint / affidavit (do note that I had to OCR the complaint so that may have introduced errors):
I . The Defendant, the Publicly-Traded Company and Co-Conspirators
4. The defendant MICHAEL STARKWEATHER was a United States citizen who resided in North Ridgeville. Ohio. In or about and between November 2017 and September 2018. STARKWEATHER was Chief Executive Officer (“CEO”) of the Andiamo Corporation.
5. The Andiamo Corporation was a microcap or penny stock company whose shares traded publicly on the over-the-counter exchange under the ticker symbol ANDI (“ANDI”). In public statements that it issued at various times, ANDI purported to be involved in various businesses, as described in part below:
(a) In or about and between April 2016 and September 2016, ANDI purportedly entered into a joint venture with Peppermint Jim. a company in the business of marketing pure mint and essential oils, to help Peppermint Jim expand its business.
(b) In or about and between November 2016 and March 2017, ANDI purported to enter into the energy sector, whereby ANDI would create an on-demand hydrogen-producing unit designed to increase performance, reduce emissions and lower the cost of operations for vehicles.
(c) In or about and between November 2017 and June 2018, ANDI, through a merger with Utopya Innovations. Inc., purportedly began to develop a smartphone cellular device.
6. Cooperating Witness #1 (“CW #1”) was a stock promoter. In May 2016. CW # 1 pled guilty to conspiracy to commit securities fraud, in violation of Title 18. United States Code, Section 1349. pursuant to a cooperation agreement with the government.
7. Co-Conspirator # 1 (“CC #1”) was a former ANDI executive. Subsequent to the events described in this complaint. Co-Conspirator # 1 pled guilty to conspiracy to commit securities fraud, in violation of Title 18, United States Code, Section 371. pursuant to a cooperation agreement with the government.
Yet again we see the importance of cooperating witnesses in white collar criminal cases and here we have two cooperating witnesses (Co-Conspirator #1 and Cooperating Witness #1).
Further excerpt from the complaint:
17. In or about June 2018, STARKWEATHER met with C’C # 1 in Ohio to discuss the smartphone and STARKWEATHER told C’C # 1 that there was currently no smartphone.
18. In approximately November 2018, after the defendant MICHAEL STARKWEATIIER stepped down as CEO of ANDI, CC # 1 became CEO of ANDI. At that time, CC # 1 confirmed that no Utopya or Andiamo smartphone existed.
19. On February 28. 2019. the defendant MICHAEL STARKWEATHER met with CC # 1. The meeting was consensually recorded by CC # 1. During this meeting, CC # 1 told STARKWEATHER, “There is no phone there is no physical phones [sic] that I can sell right now.” STARKWEATHER replied: “There never was. What there was the ability for you to place an order for them [Utopya] to be the middleman. It always was a middleman scenario with software, but the software never got built. We paid Cycloids [the software company] and they never did anything. They never built anything…. They never built anything for us.” During that same conversation. CC # 1 stated. “I need a real phone that can be sold.” STARKWEATHER replied: “You’re not going to get one because it doesn’t exist until somebody puts in an order…. You have to put in an order before a real phone exists…. [T]hey [Utopya] have no money to pay for them to do the chip change over there, for the radio. They don’t have the money to pay for the radio….”
B. The Defendant MICHAEL STARKWEATHER received kickbacks from the purported sales of ANDI stock at artificially inflated prices
20. On or about January 18. 2018. the defendant MICHAEL STARKWEATHER met with CW # 1. The meeting had been arranged by CC # 1. and was consensually recorded by CW # 1. During the meeting, CW # 1 stated that he wanted to convert his ANDI notes into ANDI shares of common stock, and that STARKWEATHER needed to approve the conversion. STARKWEATHER told CW # 1 that if he sold such shares “profitably,” STARKWEATHER wanted “some sort of kickback” in return. STARKWEATHER later added that he wanted 50% of CW # 1’s profits and that STARKWEATHER could then “keep this thing [ANDI’s stock price] moving or at least hovering where it is now.