Re: 10/28/99 - Deaths of Stock Promoters Put Focus on Web Site
Deaths of Stock Promoters Put Focus on Web Site
The shooting deaths of two online stock promoters in New Jersey is putting a spotlight on the murky world of penny-stock promotion.
This article was prepared by Wall Street Journal staff reporter Deborah Lohse, and Jason Anders and Aaron Elstein of The Wall Street Journal Interactive Edition.
Two men who prosecutors say ran a penny-stock promotion Web site, Stock Investor, were found shot to death in Colts Neck, N.J. Local police said the two men, Alain Chalem, 41 years old, and Maier Lehmann, 37, were found early Tuesday in the estate Mr. Chalem shared with a female friend.
Details about the apparent murders, including any suspects being considered by Monmouth County Prosecutor John Kaye, are unclear. Federal investigators also are looking into possible organized-crime connections to the deaths.
Manipulation Case
Mr. Lehmann already was well-known to some securities regulators, and reporters, as both a would-be informant on penny-stock manipulators and as an alleged culprit in a penny-stock manipulation case.
Several years ago, Mr. Lehmann began a failed crusade of sorts to become an informant into the world of penny stocks. He sought out New Jersey securities regulators and reporters, including one from The Wall Street Journal, in an effort to expose tactics of "lower-tier underwriters" of stocks, he said. He told people along the way that he had also been in contact with the U.S. Attorney's office and with the U.S. Securities and Exchange Commission and the National Association of Securities Dealers.
To further his apparent crusade, Mr. Lehmann wrote a 10-page, single-spaced summary of how such underwriters use unregistered foreign shares known as "Regulation S" stock to skirt U.S. securities rules. He outlined how investors could buy such shares abroad at steep discounts, then have unscrupulous firms bring the shares back to the U.S., run them up in price by finding unsuspecting U.S. investors, then unload them for their own profit. He named several firms and stocks that he said had been manipulated in the past, alleging that the firms were secretly run by former stockbrokers who had been banned from the securities industry.
Mr. Lehmann said in one of several interviews that he had been an investor and business associate of at least one such firm, which never paid him for his work. "I'm kind of a woman scorned," he said.
An attorney with the U.S. attorney's office in New York, as well as representatives from the SEC and the NASD each declined to confirm or deny parts of his account relating to his alleged conversations with them.
Seeking a Motive
Robert Honecker, second assistant prosecutor in Monmouth County, N.J., said investigators are looking into the financial dealings of the two men for any possible link to a motive in the shooting.
"That is under review... . Their operation of that Web site is being taken into consideration [but], again, we're at the very beginning of the investigation," Mr. Honecker said. "Certainly, someone who may have lost money is going to be considered a potential suspect," he said.
Between 1994 and 1996, Mr. Chalem worked at brokerage firm A.S. Goldmen in New York (no relation to Goldman Sachs Group Inc.), which was indicted in July in New York on charges connected with stock manipulation, forgery and illegal trading. A.S. Goldmen has denied the accusations, and Mr. Chalem wasn't named in those charges.
Mr. Lehmann, who apparently used a variety of spellings for his name, agreed to pay $630,000 to federal regulators, without admitting or denying wrongdoing, as part of a stock-manipulation case brought by the U.S. attorney's office and the SEC, it was announced in January. The case, which is continuing against many of the accused parties, charges more than 19 people with aiding a scheme to profit illegally from Regulation S shares.
Stock Recommendations
Stock Investor is similar to many other Web sites that dispense stock recommendations on penny stocks. The site, which was still accessible and functioning on the Internet Thursday, includes financial information and news releases on small stocks and collects e-mail addresses from visitors of the site that were used to send monthly "buy" recommendations.
For example, just this month, Stock Investor distributed a "buy" recommendation on Internet Solutions for Business Inc., an Internet-service provider in London, prompting an explosion in trading volume on the NASD's OTC Bulletin Board service and a surge in the penny stock's price. The stock, trading around $5 early in the month, jumped to $8.75 days after the e-mail alert before falling back.
A person who answered the phone at Internet Solutions' headquarters declined to comment. "I'm not allowed to give out any information about the company," said Glen Monks, who identified himself as a network analyst. He referred all questions to Chief Executive Lawrence Shaw, who didn't return messages.
Stock Investor recommends two stocks on its Web site, Global Datatel Inc. and BigHub.com Inc., two other companies whose shares are quoted on the OTC Bulletin Board. But executives for those companies said they have no idea how they came to be featured on the site.
"This is the first I've ever heard of Stock Investor. A shareholder called me this morning and told me we were on the site," said Richard Baker, chief executive officer of Global Datatel, in Delray Beach, Fla.
Frank Denny, chairman of BigHub, in San Antonio, said he, too, had never heard of the site, and was unfamiliar with Messrs. Chalem and Lehmann.
-- Rebecca Buckman and Charles Gasparino contributed to this article.
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