Opinion ID: 2748470
Heading Depth: 3
Heading Rank: 1

Heading: Defendant Prange

Text: Defendant Prange is a self-described financial consultant. A mutual acquaintance introduced E.H. and Prange over the phone in early 2011. In June 2011, Prange called E.H. asking for details about the kickback program. E.H. explained the program as a “program of last resort” where fifty percent would go right back to the agent-manager “and basically it’s a kickback to him.” E.H. also emphasized that the executives had to “fully understand the program” and that those who were uncomfortable could “just walk away.” When Prange asked whether the manager had “a little one page term sheet” documenting the kickback arrangement, E.H. responded “no, no . . . he would never put anything in writing.” Prange then replied “Exactly. Right.” 1 “Restricted” shares generally refer to unregistered and non-transferable shares of ownership in a corporation. They typically carry less value because the owner’s right to sell or transfer the stock is limited. -3- Prange recommended a number of executives as participants in this scheme and later participated in conference calls where E.H. explained to these executives that the hedge fund did not know about the kickback because the manager “slip[ped] this money in” with his “legitimate business” deals. He also explained that the manager used “seven or eight different nominee names” to receive the consulting fee even though there was “no consulting work being done for the company.” With Prange on the call, E.H. told one of these executives that the arrangement was “inappropriate . . . definitely inappropriate . . . in my mind illegal.” Prange met the undercover agent in Massachusetts on July 22, 2011. The agent explained that his fund’s typical investments involved a great deal of due diligence. But alongside these “legitimate deals,” the agent said he invested in longshot corporations in a way that made it look like he had done due diligence when, instead, he would simply “paper the file in order to get it through, and have the hedge fund, make the capital investment.” The catch? He took “a fifty percent kickback, right off the top.” The agent then offered Prange a choice: “if at the end of today . . . there’s something about me you don’t like, then, we decide to part ways.” But if Prange decided to participate he would receive ten percent of each kickback, “so if . . . we do five million, I get two and a half, I can give you ten percent.” -4- The agent then explained logistics. He would fund the companies “in tranches . . . just to make sure all the mechanics . . . work out.” Each tranche would “overpay” for restricted shares of the company’s stock. As for the kickback, the agent explained, “it’s me, personally, and through my nominee company, that gets the money . . . so the fund doesn’t know, they don’t need to know.” To “mask the payment,” the agent would “execute a consulting agreement” with one of his nominee companies, but he made clear that “[the] consulting agreement . . . is in paper only, there’s no consulting.” The agent then told Prange “the ball is in your court . . . if you wanna continue these meetings.” Prange responded, “[a]bsolutely . . . it’s excellent.” Prange then sat through two meetings where the agent repeated the kickback pitch to two of the executives Prange had recommended for participation in the scheme.