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The former chief executive officer of a wireless technology company once based in Fremont was sentenced in federal court in San Francisco today to 21 years and one month in prison for securities fraud. Jasper Knabb, 46, of East Wenatchee, Wash., the former CEO of Pegasus Wireless Corp., was given the prison term by U.S. District Judge Jeffrey White. He pleaded guilty before White in July to three counts of conspiracy to commit securities fraud, securities fraud, and falsifying books and records of his company. Pegasus Wireless was based in Fremont until 2007, when it moved to West Palm Beach, Fla.
It filed for Chapter 11 bankruptcy reorganization in 2008. U.S. Attorney Melinda Haag said the fraud scheme concerned the issuing of 490 million shares of company stock between May 2005 and January 2008. Haag said the shares were issued to satisfy bogus debt and that the proceeds of the sales went to Knapp and some of his associates instead of being used to pay a legitimate debt. Prosecutors said in a sentencing memorandum that Knapp received $29 million from the stock sales, his family and friends got $6.9 million and former Pegasus Chief Financial Officer Stephen Durland received $2.1 million.
Last year, Durland pleaded guilty to the same three counts and was sentenced by White to two years and nine months in prison. In a separate civil lawsuit filed by the U.S. Securities and Exchange Commission, White in March ordered Knabb to forfeit $29 million in ill-gotten gains and pay $11.8 million in interest. He ordered Durland to forfeit $2.1 million in gains and pay $850,000 in interest. Haag said Pegasus stock traded for more $18 per share at the height of the scheme in May 2006 but fell to less than $1 per share by September 2006.