Risky Business

How did state representative Allen Fletcher, the chairman of a House subcommittee on white-collar crime, find his very own company tangled up in, well, a white-collar-crime investigation?
House Oversight: Fletcher, photographed on April 6, 2009, says he fell prey to financial con artists three times in two and a half years.

There is a proverb that Tomball state representative Allen Fletcher likes to put on brochures for the private security company he owns: “The man of integrity walks securely, but he who takes crooked paths will be found out.” Fletcher, who was elected last fall to represent District 130, in northwest Harris County, has made a career out of finding crooks. He founded his security company, Resource Protection Management, or RPM, after retiring from a thirty-year career in law enforcement, the high point of which was supervising a unit in the Houston Police Department that investigated public corruption and contracting fraud. All of which might explain why Fletcher had some difficulty during a two-hour interview in his office at the state capitol in April explaining how his own business became embroiled in a stock fraud investigation.

On December 18, 2007, two of Fletcher’s business associates, Lois Newman and her son-in-law Evan “Nick” Jarvis, had their homes raided by the U.S. attorney’s office, which seized more than $3 million in assets and bank holdings controlled by the pair. Jarvis was arrested on a robbery charge related to the alleged stock fraud. “When I agreed to run for this office, I did not have a clue—not a clue—that Nick Jarvis was fixing to get arrested in a few days,” Fletcher said. “And when I heard that, I thought, ‘Well, that’s some shit. I hope that doesn’t hit the front page.’ ” It didn’t hit the papers, and Fletcher’s association with Jarvis and Newman stayed off the radar through the primary season, during which Fletcher picked up a high-profile endorsement from Houston state senator Dan Patrick. It was still off the radar when he won the election and was assigned to the House Criminal Jurisprudence Committee, where his experience as an investigator earned him the chairmanship of the Subcommittee on White Collar Crime.

No criminal case has been filed in the alleged fraud, and an attempt to confiscate the assets and cash seized in the raid stalled in November 2008, at which time the money was returned. Federal authorities left themselves the option of trying again, however, and spokespersons for both the U.S. attorney’s office and the FBI have declined to describe the investigation as closed. A federal complaint filed in the case, obtained recently by Texas Monthly, together with other documents reviewed for this story, raises a question about the freshman legislator’s business dealings: How does a man like Allen Fletcher find himself in business with a group of alleged con artists?

Fletcher’s company, RPM, provides security guards and other security services and, until recently, sold burglar- and fire-alarm systems. In May 2007 Fletcher took on Newman as a business partner. Through her company, NuTech, she purchased half of RPM. Acting on a tip received that same spring, the Harris County district attorney’s office began investigating NuTech along with another company that Newman once helped direct, Grifco International, and began building a case that both companies were being used for a stock-manipulation scheme known as scalping. Investigators concluded that Newman and Jarvis, a stock promoter, and others were artificially inflating the prices of NuTech and Grifco stock and benefiting from sales of those stocks, which they did not disclose to shareholders. (This type of scam is also known as a pump and dump.) Both companies are penny stocks, which trade through brokerage vehicles commonly known as pink sheets, which operate largely below the radar of federal regulators.

In the case of Grifco, which purported to be an oil field equipment firm, the stock was allegedly inflated in part through a series of bogus press releases about Coil Tubing Technology, a company Grifco had recently acquired. According to the federal complaint, Grifco stock promoters falsely claimed that the company had developed and shipped an improved type of jet motor, when in fact work on the motor was still two years from completion. The complaint also identifies a series of press releases that Jarvis prepared for NuTech. Although Fletcher and RPM are not mentioned by name in the complaint, Texas Monthly has reviewed the NuTech press releases cited by the complaint, and virtually all of them tout Fletcher’s alleged accomplishments and promising developments at RPM. In particular, NuTech flogged a new type of burglar alarm system known as dual notification, which was said to use proprietary technology developed by RPM to drastically reduce police-response time. Fletcher’s entry into politics was also used as a selling point; in one press release, NuTech informed potential stock buyers that Fletcher had decided to run for state office, noting that he had the support of Senator Dan Patrick.

According to the federal complaint, the press releases, in conjunction with a spam campaign, helped boost NuTech’s stock to $3.50 by August 2007, by which time Newman had issued millions of shares to herself and Jarvis. Though Jarvis was urging investors to buy NuTech stock at the time, the complaint alleges that he quickly sold his own stock for about $950,000. According to the complaint, Jarvis then kicked some of the proceeds back to Newman. Jarvis also made about $2 million on sales of Grifco stock. According to the complaint, investors should have been informed that Jarvis was selling large volumes of the same stocks he was promoting and that insiders in the two companies were being issued millions of shares of stock.

But things were already beginning to unravel. Back in March 2007, Coil Tubing’s chief financial officer, Edwin Leonard, became suspicious about his new business associates. According to a search warrant affidavit filed by the Harris County district attorney’s office, Jarvis allegedly hired an acquaintance to stage a robbery of Leonard at his home, apparently in the hope of recovering a laptop containing the company’s accounting files. Leonard suspected Jarvis’s involvement and went to the police. A nine-month investigation followed, culminating in the December 18, 2007, raid on Jarvis and Newman. When Harris County authorities decided to turn the case over to federal investigators, in early 2008, the robbery charge against

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