ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, and MARK J. MERSHON, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office, today announced the unsealing of an indictment charging LENNOX PARRIS, a director of Queénch, Inc. ("Queénch"), a distributor of bottled water products formerly headquartered in Jericho, New York, and his brother LESTER PARRIS, a former director and current Queénch consultant, arising from their participation in a securities fraud scheme that repeatedly misrepresented the company's prospects and performance and generated $2.55 million in illegal trading profits.¹ Queénch securities are publicly traded under the symbol "QENC" on the "Pink Sheets," a quotation service for over-the-counter stocks.

The defendants were arrested this morning, and their arraignments are scheduled this afternoon before United States Magistrate Judge Cheryl L. Pollak at the United States Courthouse, 225 Cadman Plaza, Brooklyn, New York. The case has been assigned to United States District Judge Frederic Block.

The investigation resulting in the criminal charges announced today was conducted by the FBI, with assistance from the United States Securities and Exchange Commission ("SEC"), and coordinated by the United States Attorney's Office. Previously, on January 20, 2005, the SEC filed a civil complaint against the defendants and others in the United States District Court for the Southern District of Florida in connection with the same securities fraud scheme.

According to the indictment, between January 2004 and March 2004, the defendants and others manipulated the price of Queénch's stock through a series of fraudulent actions. First, they caused Queénch to issue 28.6 million shares of common stock to two companies that purported to provide Queénch with investment advice and financial services - Sprout Investments, LLC ("Sprout") and Alpine Equity, LLC ("Alpine"), both headquartered in Boca Raton, Florida. Thereafter, the defendants caused several materially false and misleading public statements to be made in order to artificially inflate the market price of Queénch's common stock, including:

(a) On January 15, 2004, Queénch issued a press release entitled "Queénch, Inc. Continues Partnership With Time Warner, Inc.," that falsely claimed Queénch had entered into talks with Time Warner, Inc. for the purchase of Queénch water products.

(b) On January 16, 2004, Queénch issued a press release falsely stating that the

U.S. Army Veterinary Command, which is responsible for food safety and quality assurance for the military, had completed its inspection and approval of Queénch's water bottling plants.

(c) On January 28, 2004, Queénch issued a press release falsely stating that it was in negotiations with 7-Eleven for a nationwide launch of Queénch water products.

(d) On February 2, 2004, Queénch issued a press release that falsely represented it had entered into a joint venture with Thump/Universal to distribute Queénch products in vending machines at schools and shopping malls.

(e) In order to provide further assurances to the investing public, on February 4, 2004, Queénch issued a press release that falsely represented that its financial statements had been audited, when in fact no audit had yet been performed.

(f) Thereafter, Sprout caused portions of the false and misleading press releases to be incorporated into faxes and e-mails, which were sent to approximately two million potential Queénch investors.

As a result of these false and fraudulent representations, on January 29, 2004, Queénch's share price, which during the six-month period before the defendants implemented their fraud scheme had averaged $.15 on an average daily trading volume of under 30,000 shares, peaked at $.32 per share, an increase of over 100%, and, while the false press releases, emails, and faxes were being circulated, Queénch stock averaged a daily trading volume of 1.65 million shares, a 5,400% increase.

As Queénch's stock price was manipulated upward, Sprout and Alpine sold at a substantial profit numerous of the 28.6 million Queénch shares they held. Thereafter, between January 9, 2004 and March 18, 2004, Sprout wire transferred a total of nearly $2.55 million of these profits to a bank account in the name of Parris Global Sports Network, LLC, which was controlled by the defendant LESTER PARRIS. According to the indictment, the defendants spent a large portion of these funds on personal expenses and investments.

As of August 26, 2005, Queénch stock closed at $.01 per share, with a daily trading volume of 5,900 shares.

In addition, the indictment alleges that the defendants conspired to obstruct the SEC investigation and the grand jury investigation in the Eastern District of New York into their securities fraud scheme, and also attempted to tamper with a witness in the same investigations.

"The defendants knew no limits when it came to fraudulently manipulating the price of Queénchstock for their own personal gain," stated United States Attorney MAUSKOPF. "The scheme not only violated the law by defrauding investors, but as the director of a public company LENNOX PARRIS also violated his fiduciary duties to Queénch's stockholders." Ms. MAUSKOPF thanked the Securities and Exchange Commission for its assistance and stated that the investigation is continuing.

FBI Assistant Director-in-Charge MERSHON stated, "These defendants demonstrated not only boundless greed, but a willingness to lie to prospective investors to feed the greed. On top of that, they attempted to obstruct justice and tamper with a witness when they realized investigators were onto the scheme. How the defendants thought we could fail to uncover such a blatant litany of lies is the only unsolved aspect of the case."

If convicted, the defendants face the following maximum sentences: as to each securities fraud count, 20 years imprisonment, three years supervised release, a $5,000,000 fine (or twice the gross gain or loss as a result of the offense) and an order of restitution; as to the conspiracy to commit securities fraud count, five years imprisonment, three years supervised release, a $250,000 fine (or twice the gross gain or loss) and an order of restitution; as to the conspiracy to obstruct justice count, 20 years imprisonment, three years supervised release, and a $250,000 fine; and as to the attempted witness tampering count, 10 years imprisonment, three years supervised release, and a $250,000 fine.

The government's case is being prosecuted by Assistant United States Attorney Alyssa A. Qualls.

The Defendants:

Name: LENNOX PARRIS
Residence: Beverly Hills, California
DOB: 7/30/69

LESTER PARRIS
Residence: Westbury, New York
DOB: 12/21/72

 

 

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¹ The charges announced today are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

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