Will Access1Financial & Stockreporter.de be next? --> Penny Stock Promoter Schultz Sued by SEC for 15 Stock Frauds
New York, May 5 (Bloomberg) -- Mark Schultz, a Florida stock promoter, has been accused by federal securities regulators of earning about $2.5 million from 15 companies for touting their stock, even when the shares were worthless.
Schultz, publisher of the Stocks for Tomorrow newsletter, is alleged to have received compensation of up to $500,000 per pick to promote small, obscure companies, some of which had meager sales or were near bankruptcy. Most of the payments to Schultz were in the form of shares in the companies he hyped, authorities said.
Until April 1999, Schultz circulated his picks via e-mail to paid subscribers and through ads he placed in Individual Investor magazine.
``Schultz aggressively promoted the stock of companies and represented his buy recommendations to be the product of independent analysis,'' the U.S. Securities and Exchange Commission said in a federal complaint filed today. ``Schultz failed to disclose that he was paid by the companies to recommend their stocks.''
Schultz was a resident of Jupiter, Florida, until late 1998 and may now be in Spain, authorities said. In his newsletters, he typically described a company's business plan, gave positive financial data, made inflated share-price projections, and concluded with lofty predictions, the SEC said.
What Schultz didn't reveal was that the companies had paid him to tout their prospects, the SEC said. ``We look for stocks that will at least double in 6-12 months,'' Schultz wrote on his ads in Individual Investor, regulators said.
In some instances, the SEC said, Schultz dumped the shares he had received as payment from the companies.
The SEC is seeking fines and penalties. The complaint does not name any of the companies Schultz touted, or Individual Investor magazine as a defendant.
Fifth Network
Schultz, for instance, received shares valued at $172,000 from Lakeland, Florida-based Channel America Broadcasting in 1995, about nine months before predicting ``explosive growth'' for the company, the SEC said.
Saying the broadcaster was ``poised to become the fifth (television) network,'' Schultz predicted that share price would climb to $8 and anticipated that cash flow would top $100 million by late 1997, the SEC says.
In fact, the company suffered millions of dollars in losses in 1996 and ceased operating that year. Its shares now trade at $.015.
Schultz is also alleged to have received $593,750 in stock from Salt Lake City-based American Nortel Communications Inc., a long distance telephone carrier. In return, the SEC said, he promoted the stock in the September 1996 issue of Individual Investor, predicting shares would soon reach $5. The stock never topped $2 and is now trading at $1.17.
Perhaps the most exaggerated claim came when Schultz predicted a ``minimum'' price of $65 per share for Cabec Energy Corp., a Dallas company that had ``serious management and financial problems,'' the SEC said.
By September 1996, just months after he touted it, the company's share price had fallen to 50 cents, the SEC said.
``In exchange for the promotional coverage, Cabec gave Schultz at least 100,000 shares,'' valued in May 1996 at $181,250, the SEC said.
A spokeswoman for Individual Investor did not immediately return a call seeking comment.
May/05/2000 15:07 GMT
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