The former CEO of Rocky Mountain Energy Corp. (RMEC) was indicted Friday in Houston on 10 counts of securities fraud and three counts of making false or misleading statements in Securities and Exchange Commission (SEC) filings in 2002 and 2003.

The 13-count criminal indictment against John Ehrman was unsealed after he was arrested Friday morning by FBI agents at his home in The Woodlands, TX, a suburb north of Houston. Ehrman appeared before U.S. Magistrate Judge Stephen Smith.

The SEC alleged in 2003 that Ehrman and former general counsel Roderick Johnson conducted a “pump and dump” scheme to raise the company’s stock price (see Daily GPI, April 9, 2003). According to the SEC, a “pump and dump” scheme is used by company insiders to pump up their company’s stock price using false statements, which in turn drive the share price up. The insiders then dump the shares for a profit before the true facts are known. The indictment alleges investors lost about $1.1 million in the RMEC scheme.

Ehrman settled the 2003 SEC case in 2004 by repaying $645,888 in profits and paying a $120,000 civil penalty. He neither admitted nor denied guilt.

RMEC first began actively trading on Aug. 5, 2002. RMEC originated as Cavallo Corp., based in Texas, and it then merged with a Nevada publicly held company named Emission Control Devices, which had no assets. It then was renamed RMEC and it said it was acquiring properties in Wyoming and Montana.

The SEC charged that Ehrman issued several press releases about transactions by the small oil and gas independent to buy valuable assets. However, the SEC claimed that the announcements were “blatantly false and misleading,” and were used to finance deals that never materialized. According to the SEC, RMEC alleged in one press release that it was one of five companies able to fight oil well fires in Iraq and said it was in negotiations to send personnel there to work.

Ehrman was described by the SEC as a “securities recidivist” because he previously had been sued by the commission for securities fraud when he worked for TransWestern Oil and Gas. According to the SEC’s complaint, Ehrman was ordered by a federal judge in 1991 to not violate securities laws in connection with an earlier oil and gas scheme. Ehrman also was barred from associating with any broker, dealer, investment company or municipal securities dealer.

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