RICHMOND, VA—Michael F. Harris, 49, of Luray, Virginia,
was found guilty of defrauding investors of more than $700,000 from a
project aimed at purportedly developing a treatment for Human
Immunodeficiency Virus infection/Acquired Immunodeficiency Syndrome
(HIV/AIDS).
Following the five-day jury trial before United States District Judge Henry E. Hudson in which Harris was found guilty of securities fraud, wire fraud, and mail fraud, he was immediately remanded into custody of the United States Marshals Service. Harris faces a maximum sentence of 90 years’ imprisonment when he is sentenced on June 11, 2013.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia; and Jeffrey C. Mazanec, Special Agent in Charge of the FBI’s Richmond Field office, made the announcement.
“Mr. Harris used hundreds of thousands of investor funds to travel the world and improve his home and farm,” said U.S. Attorney MacBride. “Thanks to the ongoing efforts of the Virginia Financial and Securities Fraud Task Force, Mr. Harris is another fraudster who has been caught and held accountable for his crimes.”
“Mr. Harris’ fraudulent misrepresentations to investors regarding his proposed HIV/AIDS treatment ended in substantial proceeds being misappropriated for his personal use,” said FBI SAC Mazanec. “This multi-agency investigative effort and today’s conviction demonstrates the zero-tolerance we have for this type of criminal behavior.”
According to evidence presented at trial, Harris was the president and majority shareholder of M.F. Harris Research Inc. (MFH), a company incorporated under the laws of North Carolina in December 2003. He formed MFH to develop a treatment for HIV/AIDS. At various times in the past, Harris claimed to have discovered that the use of hyperbaric chambers to treat divers infected with HIV/AIDS for decompression sickness (also referred to as “the bends”), unexpectedly inhibited the virus. Harris claimed that MFH was devoted to pursuing a potential treatment regimen for HIV/AIDS using the hyperbaric chambers.
Evidence established that prior to October 2005 and continuing through at least July 2011, Harris solicited more than 80 investors for funds for MFH to use for: (a) obtaining MFH patents, both in the United States and abroad; (b) conducting human trials or assisting with advancing human trials using the treatment method; (c) continuing research on the treatment method; and (d) developing a treatment for HIV/AIDS. In connection with those investments, the defendant sold equity shares of MFH original issue stock and represented that invested funds would largely be used to pursue those objectives. From 2005 through 2011, Harris solicited most investors to pay $1 per share and, in many instances, he promised that MFH shares would be worth 10 to 20 times that amount once the patents were approved and clinical trials completed. On several occasions, Harris solicited investors with a sense of urgency and immediate need for funds in order to meet deadlines associated with the United States or foreign patent applications.
At trial, the United States established that Harris made material misrepresentations and omissions in connection with handling investors’ funds, including: (a) misrepresentations regarding MFH’s actual and proposed ownership of the United States patent; (b) misrepresentations about the security of the investments; (c) affirmative acts of concealing financial information regarding MFH and the defendant’s use of MFH investment funds; and (d) omissions regarding Harris’ intended use of the MFH investment funds for his own personal use and benefit. In reality, the defendant retained the United States patent in his own name and diverted the overwhelming majority of MFH investment funds for his own personal use and benefit. Between October 2005 and July 2011, Harris received over $880,000 in funds from the investors for MFH. A financial analyst from the National White Collar Crime Center (NW3C) testified at trial that of this money Harris misappropriated over $700,000 for his own use and benefit, unrelated to the MFH-related areas identified by the defendant to the investors. He used those funds to, among other things: (a) spend more than $250,000 for the costs associated with the purchase, improvements, and utilities associated with the defendant’s primary residence in Luray, Virginia; (b) pay over $70,000 for the his horse and farm expenses; (c) spend more than $25,000 at firearms stores; and (d) pay other personal expenses, including automobile, entertainment, restaurant, spa, international travel to competitive kayaking events, and other personal expenses.
The investigation was led by the Fredericksburg Resident Agency of the Federal Bureau of Investigation (FBI) and the Virginia State Corporation Commission (SCC). Those agencies received assistance in the financial investigation from the National White Collar Crime Center (NW3C). Assistant United States Attorney Michael Gill and Special Assistant United States Attorney and Counsel with the SCC Gauhar Naseem prosecuted the case on behalf of the United States.
This investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is comprised of several federal and state agencies, including the Virginia Attorney General’s Office. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force (FFETF), an interagency national task force.
The FFETF was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae.
Following the five-day jury trial before United States District Judge Henry E. Hudson in which Harris was found guilty of securities fraud, wire fraud, and mail fraud, he was immediately remanded into custody of the United States Marshals Service. Harris faces a maximum sentence of 90 years’ imprisonment when he is sentenced on June 11, 2013.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia; and Jeffrey C. Mazanec, Special Agent in Charge of the FBI’s Richmond Field office, made the announcement.
“Mr. Harris used hundreds of thousands of investor funds to travel the world and improve his home and farm,” said U.S. Attorney MacBride. “Thanks to the ongoing efforts of the Virginia Financial and Securities Fraud Task Force, Mr. Harris is another fraudster who has been caught and held accountable for his crimes.”
“Mr. Harris’ fraudulent misrepresentations to investors regarding his proposed HIV/AIDS treatment ended in substantial proceeds being misappropriated for his personal use,” said FBI SAC Mazanec. “This multi-agency investigative effort and today’s conviction demonstrates the zero-tolerance we have for this type of criminal behavior.”
According to evidence presented at trial, Harris was the president and majority shareholder of M.F. Harris Research Inc. (MFH), a company incorporated under the laws of North Carolina in December 2003. He formed MFH to develop a treatment for HIV/AIDS. At various times in the past, Harris claimed to have discovered that the use of hyperbaric chambers to treat divers infected with HIV/AIDS for decompression sickness (also referred to as “the bends”), unexpectedly inhibited the virus. Harris claimed that MFH was devoted to pursuing a potential treatment regimen for HIV/AIDS using the hyperbaric chambers.
Evidence established that prior to October 2005 and continuing through at least July 2011, Harris solicited more than 80 investors for funds for MFH to use for: (a) obtaining MFH patents, both in the United States and abroad; (b) conducting human trials or assisting with advancing human trials using the treatment method; (c) continuing research on the treatment method; and (d) developing a treatment for HIV/AIDS. In connection with those investments, the defendant sold equity shares of MFH original issue stock and represented that invested funds would largely be used to pursue those objectives. From 2005 through 2011, Harris solicited most investors to pay $1 per share and, in many instances, he promised that MFH shares would be worth 10 to 20 times that amount once the patents were approved and clinical trials completed. On several occasions, Harris solicited investors with a sense of urgency and immediate need for funds in order to meet deadlines associated with the United States or foreign patent applications.
At trial, the United States established that Harris made material misrepresentations and omissions in connection with handling investors’ funds, including: (a) misrepresentations regarding MFH’s actual and proposed ownership of the United States patent; (b) misrepresentations about the security of the investments; (c) affirmative acts of concealing financial information regarding MFH and the defendant’s use of MFH investment funds; and (d) omissions regarding Harris’ intended use of the MFH investment funds for his own personal use and benefit. In reality, the defendant retained the United States patent in his own name and diverted the overwhelming majority of MFH investment funds for his own personal use and benefit. Between October 2005 and July 2011, Harris received over $880,000 in funds from the investors for MFH. A financial analyst from the National White Collar Crime Center (NW3C) testified at trial that of this money Harris misappropriated over $700,000 for his own use and benefit, unrelated to the MFH-related areas identified by the defendant to the investors. He used those funds to, among other things: (a) spend more than $250,000 for the costs associated with the purchase, improvements, and utilities associated with the defendant’s primary residence in Luray, Virginia; (b) pay over $70,000 for the his horse and farm expenses; (c) spend more than $25,000 at firearms stores; and (d) pay other personal expenses, including automobile, entertainment, restaurant, spa, international travel to competitive kayaking events, and other personal expenses.
The investigation was led by the Fredericksburg Resident Agency of the Federal Bureau of Investigation (FBI) and the Virginia State Corporation Commission (SCC). Those agencies received assistance in the financial investigation from the National White Collar Crime Center (NW3C). Assistant United States Attorney Michael Gill and Special Assistant United States Attorney and Counsel with the SCC Gauhar Naseem prosecuted the case on behalf of the United States.
This investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is comprised of several federal and state agencies, including the Virginia Attorney General’s Office. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force (FFETF), an interagency national task force.
The FFETF was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae.
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