fyi
August 3, 1999
SEC Makes Small Stock Fraud 'Sweep'
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Filed at 3:24 p.m. EDT
By The Associated Press
WASHINGTON (AP) -- Securities and Exchange Commission officials announced today their second nationwide sweep against small-company stock fraud, a success tempered by worries over a legislative proposal that could reduce the SEC's budget and hamper future enforcement efforts.
''It certainly would cut into our ability to bring cases,'' SEC Enforcement Director Richard Walker said at a news conference at which he announced enforcement actions against 82 people and companies in 26 cases of alleged stock fraud that bilked investors of millions of dollars.
The House Appropriations Committee proposal, approved last week, includes $324 million in funding next year for the SEC -- less than the agency's requested $361 million and its current operating budget of $337.4 million.
The full House is expected to vote on the legislation this week before Congress adjourns for its summer recess. Parallel legislation already approved by the Senate would give the SEC $370.8 million.
The latest fraud sweep differed from the first, conducted last October, which cracked down on investment fraud over the Internet by people promoting small-company stocks who don't disclose they are paid to do so.
This time, only four of the 26 cases involved the Internet, which allegedly was used to disseminate false information about companies to lure investors to their stocks.
The people and companies targeted in the new sweep raked in some $12.5 million in illegal gains, the SEC said.
The current sweep includes a gamut of small-stock fraud cases, such as stock-price manipulation schemes, sales of unregistered stocks and ''boiler room'' frauds in which brokers make high-pressure, unsolicited phone calls to people to sell stocks.
Among the cases are a California airline whose planes never took off, husband and wife officers of a company who allegedly stole $900,000 in stock proceeds for vacations in Hawaii and Europe, and a Bolivian mining company accused of buying mineral properties in a sham transaction.
The SEC's actions against the 82 people and companies included seeking civil injunctions, barring individuals from the securities industry and imposing sanctions against accountants and attorneys who participated. No fines were imposed. Some of the cases have been settled, with the companies and individuals involved neither admitting to nor denying wrongdoing.
''The new SEC actions are another victory in the war against (small-stock) fraud,'' said Peter Hildreth, president of the North American Securities Administrators Association, which represents state securities regulators.
''But we can't let down our guard,'' Hildreth added. ''Some of these predators are moving on to or starting up smaller firms, hoping to fly beneath the regulators' radar screens.'' |
