“Question 17 — Criminal Proceedings
During the past ten years, have you been convicted in a criminal proceeding or are you a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses)?
- Yes x No"
Mr. Gad’s answer was false and misleading. In 2008 Mr. Gad had pleaded guilty to multiple felony counts of “Theft by Taking.” In 2011 he was indicted for the additional felony of “False Statements/writings/Concealment of Facts,” which indictment is still pending. A correct answer to the above Question 17 should have been “yes” both because of the felony theft conviction and because of the still pending additional felony indictment despite the fact that under Georgia’s First Offender Statute, after Mr. Gad made full restitution of the amounts stolen, completed mandatory community service, paid certain court fees and served part of his two-year suspended sentence, he was exonerated. Conversations between our General Counsel and the SEC’s Office of Chief Counsel have confirmed that the SEC does not condone a failure to disclose criminal convictions because of subsequent exoneration under Georgia law. Other federal agencies take a similar view. For example, Mr. Gad’s immigration attorney has admitted that “the Department of Homeland Security…has labeled Mr. Gad an “Aggravated Felon” who has been convicted of a “Crime Involving Moral Turpitude.” Since, if Mr. Gad were to become a director of SED, his felony conviction would have to be disclosed, and since the court documents might help SED’s Nominating Committee assess his integrity, morals, honesty and reputation in evaluating his suitability for a Board position, I asked Mr. Gad to provide me with all court documents relating to these matters. He refused to do so. Our counsel then asked Mr. Gad’s securities counsel, Derek Bork, Esq., of Thompson Hine LLP for these documents. Mr. Bork also refused, on the following disingenuous and misleading grounds:
- “The case you note is not a theft charge. Sham was charged, years after the fact, with making an alleged unauthorized payment to a third party in connection with an employment during his college years.
- These charges are not the type of charges, and are not within the timeframes, that are addressed by SEC, OTC or stock market questionnaires and disclosures.
- The other charge relates to Sham checking the incorrect box on his driver’s license application, stemming from his uncertain and unknown immigration status that resulted from the application of technical immigration laws when Sham was a child.
- …(criminal court documents are short and conclusory in nature) and we don’t have any to provide. ”
Given that Mr. Gad would not provide the documents related to these cases, SED requested these documents from the Court as they are public records. The documents show that contrary to the statements by Mr. Gad and Mr. Bork, in fact:
- The case is one for “Theft by Taking”, a fact acknowledged by Mr. Gad’s own immigration attorney. It involved the theft by Mr. Gad of monies from both his employer’s account and the account of Keep Athens-Clarke County Beautiful, a non-profit entity of which Mr. Gad served as Treasurer. On six separate occasions over nearly a year and half Mr. Gad transferred monies to his own bank account or the account of an association controlled by him. In his guilty plea, Mr. Gad explicitly acknowledged the details of the felony crimes.
- Felony charges are exactly the type of charges addressed by the SEC’s rules and the time period during which disclosure is required runs for 10 years from the date of conviction (in Mr. Gad’s case 5/8/2008).
- The charge “False Statements/writings/Concealment of Facts” is not as innocuous and trivial as Mr. Bork suggests. It relates to Mr. Gad’s falsely claiming to be a citizen of the United States.
- The documents are not short and conclusory – Mr. Gad’s guilty plea alone runs 12 pages (before certification) and the motion papers filed by Mr. Gad for a new trial or to withdraw his guilty plea run another 12 pages before numerous affidavits which we have been unable to obtain and which Mr. Gad and his counsel refuse to disclose to the Company. Additionally, Mr. Bork’s claim that he does not have any [documents] seems at variance with his claimed detailed knowledge of these papers and, alternatively, his refusal to obtain any documents from Mr. Gad’s criminal defense counsel, as we suggested.