sec.gov
FOR IMMEDIATE RELEASE 2000-81
SEC, U.S. Attorney, and FBI Announce Major Attack Against
Microcap Fraud
Those Charged Include Alleged Members of Organized Crime
New York, NY, June 14, 2000 -- The Securities and Exchange
Commission today sued 63 individuals and entities in five
enforcement actions as part of its continuing campaign to clean
up fraud in the market for low-priced securities, i.e., the
microcap market. The actions allege a wide array of illegal
conduct including "pump and dump" manipulation schemes, private
placement fraud and investment adviser pay-to-play violations.
All told, those charged reaped millions of dollars in illicit
profits. Also today, the Commission suspended trading in the
securities of WAMEX Holdings, Inc. and E-Pawn.com, Inc.
Simultaneously, in related criminal prosecutions, the U.S.
Attorney for the Southern District of New York and the Federal
Bureau of Investigation announced the unsealing of indictments
and the filing of criminal complaints naming more than 100
defendants in securities fraud schemes. The criminal indictments
announced by the U.S. Attorney and the FBI name 11 members and
associates of five different organized crime families in
connection with several securities fraud scams. These
individuals are charged with participating in numerous
manipulations of microcap stocks, extortion, money laundering,
bribery and kickbacks, witness tampering, and murder
solicitation.
SEC Director of Enforcement Richard H. Walker said, "The
securities fraud involved in today's actions is among the most
egregious witnessed in recent years. These manipulations of
numerous stocks were designed for the sole purpose of stealing
investors' hard-earned dollars. The prosecutions announced today
rid the vital market for low-priced securities of unscrupulous
operators and reaffirm regulators' commitment to keeping this
market safe and fair."
1. Microcap Fraud/Manipulation Schemes
The Division of Enforcement (Division) instituted two
administrative proceedings charging a broad range of fraudulent
activity affecting nine microcap stocks.
a. Piazza Proceeding
The Division charges that in 1995 and 1996, 32 individuals
participated in a scheme to inflate the stock prices of Spaceplex
Amusement Centers International, Ltd., Reclaim, Inc., Beachport
Entertainment Group, Inc., and International Nursing Services,
Inc. The Division alleges that each of these schemes involved
payment of bribes to brokers in exchange for the brokers causing
their retail customers to purchase the securities. The
respondents sold shares at the artificially inflated prices. The
respondents are charged with obtaining at least $8 million in
illegal profits from these schemes.
b. Wolfson Proceeding
The Division charges that from January 1999 through at least
March 2000, Allen Z. Wolfson fraudulently inflated the stock
prices of BeautyMerchant.com (formerly known as ATR Industries,
Inc.), Learner's World, Inc., Rollerball International, Inc.,
Healthwatch, Inc. and HYTK Industries, Inc. The Division alleges
that in connection with these manipulations, Wolfson obtained
control of large blocks of shares, caused sham trades to be made
to give the appearance of an increasing demand for the shares in
the market, paid bribes to six brokers to create demand, and sold
into that demand. The six brokers are also being charged today
for their roles in the manipulation. The Division contends that
the respondents received at least $7 million in illicit profits
from these manipulations.
2. Investment Adviser Pay-to-Play
The Division charges William M. Stephens with participating
in a kickback and bribery scheme concerning the investment assets
of certain labor union pension funds. Stephens is the Chief
Investment Strategist of Husic Capital Management, a registered
investment adviser in San Francisco. The Division alleges that
in order to land the pension funds as advisory clients, Stephens
agreed in advance to channel a portion of the funds' assets into
rigged investment vehicles. The Division also contends that
Stephens understood that a portion of the funds' assets would be
then siphoned out of the rigged investments to be paid as bribes
and kickbacks to trustees of the funds.
3. Private Placements
The Commission filed two civil injunctive actions charging
14 individuals and nine companies with fraudulent private
placement offerings that raised approximately $3.5 million from
investors. The Commission contends that in these actions, among
other things, various unregistered salespeople working in "boiler
rooms" cold-called investors making misrepresentations about the
offerings using high pressure sales tactics. More than 300
investors fell victim to these schemes.
4. Trading Suspensions
The SEC also temporarily suspended trading in the securities
of WAMEX Holdings, Inc. and E-Pawn.com, Inc., due to the lack of
accurate public information available to investors concerning
these issuers. The shares of both of these companies are quoted
on the OTC Bulletin Board. The Commission contends that,
contrary to the company's public claims, WAMEX is not lawfully
authorized to operate an Alternative Trading System and that
questions exist regarding the company's claims to have raised
funding from private investors. The SEC also contends that
inaccurate information existed as to the identity of the persons
in control of E-Pawn.com.
For further information, please contact Wayne Carlin at
(212) 748-8178 or Robert Knuts at (212) 748-8192. |
