Many Duped Investors Were Public Safety First Responders
More than 200 investors in an Elk Grove Village company that purportedly made homeland security and food safety products lost more than $9 million through the offer and sale of stock, according to a federal fraud indictment against the company’s majority owner and chief executive. The former CEO of the now-defunct Elk Grove Village company, InfrAegis, was sentenced to nine years in prison for defrauding investors by claiming to sell equipment that would instantly identify terrorists and detect deadly substances.
Gregory Webb, 71, formerly of Arlington Heights, was convicted of wire and mail fraud following a jury trial in July. Gregory Webb faced 20 years in prison, but was only sentenced nine years.
Webb must serve at least 85 percent of his sentence..
Webb, of Dallas and formerly of Arlington Heights, was indicted in 2014. According to the FBI, investigators determined Webb had lied to more than 200 investors about the viability of his company, InfrAegis, from 2007 through 2012, defrauding them out of more than $9 million.
According to the indictment, Webb and InfrAegis obtained more than $9 million from investors by offering and selling stock in the company by making false representations about the solvency and financial condition of InfrAegis, the contracts that it expected to be awarded or had been awarded and the expected and actual returns on investments in the company. Webb formed InfrAegis in 2003 under the name Intelagents Inc. and changed its name to InfrAegis in 2005.
According to the FBI, Webb allegedly knew that stock-offering materials falsely portrayed InfrAegis as a financially successful company that had both high-level connections in the homeland security market and lucrative contracts for the sale of its products. Between 2007 and 2010, Webb and InfrAegis falsely represented in written materials and investor conference calls that the City of Chicago had agreed to install InfrAegis’ iaMedium―a kiosk that purportedly could detect the presence of nuclear or biological weapons―throughout the city and the agreement would result in profits of more than $80 million a year, the indictment alleged. Although InfrAegis engaged in some discussions with the city about the installation of iaMediums in 2007 and 2008, there was never any agreement or contract to install the system in Chicago.
Also, in 2009 and 2010, Webb and InfrAegis allegedly falsely represented that the company had a contract with the Washington Metropolitan Area Transit Authority (WMATA) to install iaMediums throughout the Washington, D.C. Metro train system. Again, there was never any agreement or contract beyond initial negotiations, which were terminated when WMATA determined that InfrAegis was not financially responsible.
The indictment also alleged that Webb and InfrAegis concealed material facts from prospective and existing investors by failing to disclose that in 2007 and again in 2008, the Illinois Secretary of State’s Securities Department issued orders prohibiting Webb and InfrAegis from selling securities in or from Illinois until further order. Those orders were not lifted until June 2010, when Webb and InfrAegis entered into an agreement with the state requiring them to comply with state securities laws in the offer and sale of securities. The U.S. Securities and Exchange Commission also filed a civil enforcement action against Webb and InfrAegis in 2011 in Federal Court in Chicago.
At trial last year, evidence was presented that showed Webb had told investors that federal and local governments agencies were buying products from InfrAegis that claimed to protect the public by instantly identifying people who were on a terrorist watch list and by detecting biological, chemical, radiological and water- or food-borne threats.
The products mentioned had never been fully developed or tested and the company had never signed any contracts for the sale of those products.
Instead of testing and developing the mentioned products, investigators said Webb used the invested funds for personal use, including $800,000 on corporate credit cards to make purchases on an Apple iTunes account, and for personal expenses at restaurants, grocery stores, gas stations, tobacco shops, movie theaters, and sporting goods stores.
Many of the investors duped by Webb were Chicago area public safety first responders who testified at trial they had never received any return on their investments. Webb’s actions “have had and will continue to have long-term consequences for many of these victims,” assistant U.S. attorneys Kruti Trivedi and Rick D. Young said in a sentencing memorandum.
On February 9, 2017, Sean Moran, age 39, of Arlington Heights was sentenced 24 months in prison for causing an investor to lose more than $600,000, claiming the client’s investment was resulting in positive returns from trading activity, while the investments were actually losing money, and while Moran was using some of the money to pay for personal expenses and reduce credit card debt.