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Case Number: 1:20-cr-00534-GHW
Judge: Gregory H. Woods
Court: United States District Court for the Southern District of New York (New York County)
Plaintiff's Attorney: United States Attorney’s Office
Description: New York, New York criminal defense lawyer represented defendant charged with securities fraud.
Jeffrey Hastings, the former Chief Executive Officer and Chairman of the Board of Directors of SAExploration Holdings, Inc. (“SAEX” or the “Company”), a publicly traded seismic data company based in Houston, Texas, was sentenced today in Manhattan federal court to three years in prison for his role in a scheme to fraudulently and materially inflate the publicly reported revenue of SAEX by tens of millions of dollars, in 2015 and 2016, and also for misappropriating millions of dollars from the Company. On August 13, 2021 HASTINGS pled guilty before U.S. District Judge Gregory H. Woods, who imposed today’s sentence.
According to the Superseding Information, the Superseding Indictment, and the Complaint filed in this case, and statements made in connection with sentencing:
At all times relevant to the Information until August 2016, HASTINGS was the Executive Chairman of the Board of Directors of SAEX (the “Board”). After August 2016, HASTINGS served as both the Chairman of the Board and the Chief Executive Officer (“CEO”) of SAEX until he separated from the company in August 2019. SAEX was a publicly-traded seismic data acquisition company headquartered in Houston, Texas, that traded under the symbol “SAEX” on the NASDAQ. In May 2020, SAEX was delisted from the NASDAQ and, in December 2020, was taken private. SAEX provided land and marine-based seismic acquisition services including program design, planning and permitting, camp services, survey, drilling, recording and processing. Seismic data is used by oil and gas companies to identify and analyze drilling prospects and maximize successful drilling.
From February 2015 through May 2019, HASTINGS, together with Brent Whiteley, the then Chief Financial Officer and General Counsel of SAEX; Michael Scott, the then Executive Vice President of Operations at SAEX; and the founder, and at various times the President, CEO, and Chief Operating Officer of SAEX (“CC-1”), devised and carried out a scheme to defraud SAEX’s shareholders, bondholders, and the investing public by artificially and materially inflating SAEX’s reported revenue by making it appear that Alaskan Seismic Ventures, LLC (“ASV”) was an independent and reliable source of tens of millions of dollars of revenue.
In February 2015, HASTINGS and Whiteley discussed finding a way for SAEX to take advantage of certain tax credits offered by the State of Alaska to seismic data library companies, to offset the costs of exploring for oil and gas in Alaska (the “Alaska Tax Credits”). The Board of SAEX was opposed to operating its own data library company because of concerns about the ability to ensure payment to SAEX, including through the monetization of Alaska Tax Credits, among other reasons. To avoid the appearance that SAEX was operating a data library company that licensed data to third parties, HASTINGS and Whiteley set up ASV, to purport to operate as an independent customer purchasing seismic data from SAEX and licensing it to third parties. HASTINGS recruited an acquaintance to serve as the owner and sole employee of ASV. In truth and in fact, and as hidden from investors, ASV was not independent and could not pay SAEX for its seismic data.
After setting up ASV, HASTINGS and Whiteley created and caused to be created a number of shell companies (the “Shell Companies”) for the purpose of secretly transferring funds from SAEX into ASV. One of the Shell Companies, Global Equipment Solutions (“Global Equipment”), was purportedly an equipment rental company from which SAEX rented seismic acquisition equipment. In truth and in fact, and as HASTINGS and his co-conspirators well knew, SAEX did not rent any equipment from Global Equipment and did not owe Global Equipment any money. The co-conspirators took steps to make the payments from SAEX to Global Equipment appear legitimate to others at SAEX; for example, Whiteley drafted a lease agreement between SAEX and Global Equipment, and Scott caused fake purchase orders to be created that purported to show expenses incurred by SAEX as a result of renting equipment from Global Equipment.
By the end of 2015, SAEX had recorded on its books approximately $12 million in payables to Global Equipment. HASTINGS and his co-conspirators ultimately routed approximately $5.8 million of SAEX’s funds through Global Equipment, and the other Shell Companies, to ASV. That money then went from ASV back to SAEX to pay outstanding receivables. The fact that these funds belonged to and originated with SAEX was not disclosed to investors. HASTINGS and his co-conspirators referred to this portion of the scheme as “round-tripping.” In addition, HASTINGS and Whiteley then misappropriated more than $5 million of the funds that SAEX transferred to Global Equipment for their own use, including making payments to Scott and CC-1, among others.
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In addition to his prison term, HASTINGS, 63, of Anchorage, Alaska and British Columbia, Canada, was sentenced to two years of supervised release and ordered to pay a forfeiture money judgment in the amount of $590,807. Judge Woods deferred determination of restitution for 90 days.
Two co-defendants – Brent Whiteley and Michael Scott – have already pled guilty and await sentencing before Judge Woods.
Mr. Williams praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which brought a separate civil action.
The case is being handled by the Office’s Securities and Commodities Fraud Unit. Assistant U.S. Attorneys Christine I. Magdo and Gina Castellano are in charge of the prosecution.
15:78F.F SECURITIES FRAUD; 17:240.12b-20.F FALSE STATEMENTS IN ANNUAL AND QUARTERLY /SEC REPORTS, 18:371.F CONSPIRACY TO COMMIT SECURITIES FRAUD AND MAKE FALSE STATEMENTS IN ANNUAL AND QUARTERLY SEC REPORTS;, 18:1343.F WIRE FRAUD, 18:1349.F CONSPIRACY TO COMMIT WIRE FRAUD
Outcome: 11/15/2021 99 LETTER by SAExploration Holdings, Inc. as to Jeffrey Hastings addressed to Judge Gregory H. Woods from Joan Loughnane dated November 12, 2021 re: Restitution Submission and Request to Seal Exhibits 2-5 Document filed by SAExploration Holdings, Inc.. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2 (Requested to be Filed Under Seal), # 3 Exhibit 3 (Requested to be Filed Under Seal), # 4 Exhibit 4 (Requested to be Filed Under Seal), # 5 Exhibit 5 (Requested to be Filed Under Seal))(Loughnane, Joan) (Entered: 11/15/2021)
11/15/2021 Minute Entry for proceedings held before Judge Gregory H. Woods: Sentencing held on 11/15/2021 for Jeffrey Hastings (1) Count 1ss,2ss. Defendant Jeffrey Hastings (out on bail) present with attorneys Michael S. Dry and Daniel Wallmuth. AUSAs Christine I. Magdo and Gina M. Castellano present. Court Reporter Khris Sellin present. The defendant is sentenced to 36 months of imprisonment for each of Counts 1 and 2, to be served concurrently; to be followed by 2 years of supervised release for each of Count 1 and Count 2, with those terms to be served concurrently. Mandatory, standard and special conditions of supervised release apply. The defendant shall forfeit $590,807 in U.S. Currency. A special assessment fee of $200.00 is due immediately. Restitution deferred to 90 days. The defendant shall self-surrender to the facility designated by the BOP on January 30, 2022 no later than 12:00 noon or to the United States Marshal for this district if a facility has not been designated by that date. Bail continued. See Transcript. (jbo) (Entered: 11/15/2021)
11/15/2021 100 CONSENT PRELIMINARY ORDER OF FORFEITURE/MONEY JUDGMENT as to Jeffrey Hastings. (Signed by Judge Gregory H. Woods on 11/15/2021) (See ORDER set forth) (ap) (Entered: 11/15/2021)