A former PairGain Technologies employee who pleaded guilty to posting a fake corporate takeover story on the Internet, was sentenced to five years probation and ordered to pay more than US$93,000 in restitution, a US attorney said on Monday.
Gary Hoke of Raleigh, North Carolina, must spend five months under home detention after pleading guilty in June to two felony counts of securities fraud in what prosecutors said was the first stock manipulation scheme perpetrated via a fraudulent Web site.
Hoke was arrested in April and charged with posting a bogus story that said PairGain, a Tustin, California, telecommunications equipment company, would be bought by an Israeli company in a billion-dollar deal.
The fabricated news story appeared on a Web site purporting to carry stories from Bloomberg News. The story sent PairGain's stock soaring until the hoax was revealed.
By pleading guilty, Hoke acknowledged in court that he spread false information about PairGain in order to defraud buyers and sellers of the company's stock, said Alejandro Mayorkas, US attorney for the Central District of California, in a statement.
Hoke owned PairGain shares and options and intended to sell them as part of his scheme to make a substantial profit, the statement said. However, the US attorney's office added that once his plan was put into motion, Hoke did not trade his own stock or encourage others to do so.
Hoke also settled civil charges brought by the Securities and Exchange Commission and he was permanently enjoined from future violations of the anti-fraud provisions of securities laws.
Hoke will pay no fine in the criminal or civil case.
A spokesman for PairGain did not immediately return a telephone call seeking comment.
Hoke will be allowed to work while under house arrest, and the $93,086.77 in restitution to the people who fell for his scheme will be paid over several years, said his attorney, Sam Currin.
"Mr. Hoke is really a very fine young man who just a made a one-time serious error in judgment," Hoke's attorney said.
Copyright 1999 Reuters Limited.
