According to the U.S. Attorney’s office, Edward Adams and his law firm partner, referred to as MM in the indictment, created Scio Diamond Technology Corp. to purchase Apollo Diamond Inc. — a company founded by Adams’ father-in-law — for $2 million, but the money used in the purchase was funneled into bank accounts controlled by Adams.
In all, Adams — a member of the University of Minnesota School of Law faculty — is facing eight counts of mail fraud and six counts of wire fraud.
The indictment alleges Adams embezzled over $4 million from 2006 to 2013 and paid his own law firm over $2.5 million over the same time. In addition to the involvement with Scio Diamond, Adams created multiple bank accounts while with Apollo Diamond Inc. and encouraged investors to put money into Apollo Diamond, the indictment says. The money raised was allegedly moved into the various accounts created by Adams — of which the U.S. Attorney’s office said he was sole signatory — then “surreptitiously diverted more than $1.2 million for his own personal use, an additional $101,500 to his law firm’s bank account, and distributed the remainder of the funds to various individuals as determined by Adams,” the indictment says.
“The defendant’s brazen theft of millions of dollars of investors’ funds over the course of several years is compounded by the fact that he holds positions of public trust as an attorney and law school faculty member,” said Richard T. Thornton, FBI special agent in charge for the Minneapolis Division, in a news release announcing the indictment.
According to Scio Diamond, Adams has not been involved with the company since the conclusion of a proxy battle in June 2014, during which Adams and other board members resigned and corporate leadership was replaced when fellow shareholders took over the company, citing a failure “to generate positive earnings.”
In a statement, Scio Diamond officials said the company has been cooperating with the Department of Justice in its investigation and with the Securities and Exchange Commission in a related investigation. The statement also said that the company will look for “all available remedies” to preclude the sale of shares and that the company “is also hopeful these proceedings will result in restitutions to the company for the benefit of all shareholders.”
SEC documents indicate Scio Diamond had an accumulated deficit of $14.5 million from its inception in 2009 through 2014. In its most recent statement, the company said it “has yet to achieve profitability” but added it has had “significant month-to-month sales improvements.”
GSA Business Report has reached out to Scio Diamond for comment beyond its statement.