From Vientiane Times

http://www.vientianetimes.org.la

BUSINESSMAN SENTENCED TO 7 YEARS JAIL

EKAPHONE PHOUTHONESY, February 16, 2004

A British business, Michael Newman, who was arrested last September while attempting to smuggle money out of Laos, has been sentenced to seven years and six months imprisonment and ordered to pay nearly US$6 million in fines and back taxes, a local newspaper reported last week.

The Vientiane People's Court sentenced Newman, with two of his Thai friends, in late January. According to a report by the Pathet Lao newspaper, the accused businessmen were charged with many crimes such as owning communication equipment without permission, possession of drugs and breaking the country's tax payment regulation.

Newman, 42, a British national was also found guilty of conducting illegal business operations, which were harmful to the Lao economy.

According a press release from the court given to the newspaper, Newman employed foreigners to work in Laos without permission from the Ministry of Labour and Social Welfare from 2002-2003.

In this case, he was fined US$229,050 and 5 million kip. He was also found guilty of breaking vehicle control regulations and illegally owning radio communication equipment. In this case, he was fined US$46,565.

He was asked to repay US$1,448,800 for illegally making international telephone calls and fined 50 per cent of the smuggled money (US$310, 000).

The press release says that the authority has impounded US$300,000 and some items of value from Newman, and these are now on sale in order to raise the money to pay the fines (which amount to US$5,937,000) while some money left will be returned to him.

Bounlab Luangkhamdeng, a Thai national who was arrested with Newman, was also sentenced to two years and six months imprisonment and fined 500,000 kip and another 800 million kip for income tax, but according to the court, he has already paid 400 million kip. Phongchay Sayaseng another Thai national was given a two- year term of imprisonment and fined 500,000 kip and 365 million kip for income tax.

According to the press statement the court heard that in June 2001, Mr Newman came to Laos to see Mr Bounlab and discuss the possibility of setting up a company. Later the two men formed the Lao-Inter company at Ban Samakyxay. Newman took 80 percent of the total investment while Mr Bounlab took 20 per cent. At first the company secured 200,000 customers through some assistance from a company in the United States. During this period of time, there were 30 foreigners working in the company.

At the beginning of 2002, the company (which was selling shares) formed a branch in Vientiane and invested another US$150,000 in communication equipment. In this branch, Mr Phongchay was given a job as a law co-ordinator. In June 2002, the company invested more than US$400,000 to expand its operations in Vientiane and employed 90 foreign workers.

The company ran its business at night because it was daytime in the target countries and worked the business by telephone, email and the Internet. It operated three Internet channels, 17 telephone numbers and one fax.

The company's income was deposited into an account at the Lao-Viet Bank and the Thai Military Bank in Vientiane so as they could withdraw it easily. The company had registered funds of US$223,000 and a current account of US$ 45,400.

Initially, the business operation of the company looked simple, however it was not. It turned out that the company worked secretly and Bounlab's and Phong's salaries were said to be as high as US$10,000 per month, according to the press release.

According to earlier reports from Associated Press and other foreign news services Newman allegedly ran a so-called "boiler room" in Vientiane for several years, employing dozens of Americans and Britons to fraudulently sell stocks to overseas investors by telephone.

Boiler room workers phone potential investors and sell shares at inflated prices, or in non-existent companies, usually for high commissions.

The reports said Newman and 20 others had also been named in a civil lawsuit filed separately by the US Securities and Exchange Commission (SEC) in the state of Utah on October 16.The suit says the defendants took part in a "massive scheme to defraud foreign investors of more than US$ 16 million".

On October 16, The FBI also raided offices of at least one company linked to the scheme in Salt Lake City.

The SEC lawsuit claims Newman and the other defendants used high-pressure tactics on investors, mainly in Britain, to sell shares in five US companies: Stem Genetics, F10 Oil & Gas Properties, Diversified Financial Resources Corporation, Valesc Holdings and NCI Holdings. The lawsuit says some were front companies with no assets, and their stock prices were manipulated to impress potential investors.

It claims Newman and his US accomplices defrauded more than 1,100 investors and transferred it to offshore accounts.