Re: 12/27/00 - SEC Names Westergaard, two entities in Internet touting case
Note: On August 18, 1997, John Westergaard offered a $5,000 reward for information on "Steve Pluvia" who he claimed was "a person, or persons, circulating disinformation designed to drive down the price of Premier Laser Systems (PLSIA) common shares." Although Pluvia was eventually proven correct about his assessment of PLSIA, this did not prevent Westergaard from starting what may have been the first service designed to "protect" companies from chatboard "naysayers".
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SEC NAMES WESTERGAARD, TWO ENTITIES IN INTERNET TOUTING CASE
The Commission today sued John Westergaard, Westergaard.com, Inc., and Westergaard Broadcasting Network.com, Inc. for broadly disseminating on the Internet and through press releases purportedly "independent" analysis of publicly-traded securities when in fact defendants had been paid to publish that analysis. The complaint alleges that the defendants charged small-cap publicly traded companies up to $48,000 to publish positive reports about them that were disseminated through three media: press releases, an Internet radio show, and an Internet website. The complaint also alleges that Westergaard misled prospective investors by falsely claiming the analysis was "independent," and that all the defendants failed to comply with mandatory requirements to disclose compensation received in connection with the publication of securities analysis, in violation of Section 17(b) of the Securities Act of 1933. Simultaneously with the filing of the complaint, Westergaard.com, Inc. and Westergaard Broadcasting Network, Inc. settled the charges against them by consenting, without admitting or denying the Commission's allegations, to the entry of an order permanently enjoining them from violating Section 17(b) of the Securities Act. As to John Westergaard, the complaint seeks a permanent injunction against violations of Section 17(b) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and civil penalties. [SEC v. John Westergaard, et al., USDC for the Southern District of New York, Civil Action No. 00 Civ. 9776, Judge Batts] (LR-16842)
sec.gov
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Westergaard.com, Former Internet Publisher, Settles SEC Charges
Washington, Dec. 27 (Bloomberg) -- Westergaard.com Inc., a former Internet publisher of investment research about small companies, agreed to settle regulatory charges that it failed to disclose payments received for publishing positive reports about the companies.
Westergaard.com founder John Westergaard, 69, also was charged by the Securities and Exchange Commission with failure to disclose company payments on the Internet radio show he hosted. He presented favorable views of the companies' prospects in return for the payments, the SEC alleged.
Westergaard, who lives in New York City and said he is terminally ill with prostate cancer, is contesting the SEC's civil- fraud charges that were filed in New York federal court.
``These charges are specious,'' Westergaard said in an interview. ``They've been out to get me for three years, and I refuse to back down.''
The SEC alleged that the company and Westergaard, its controlling shareholder, disseminated favorable reports about companies via press releases, an Internet radio show and a Web site. The small companies paid as much as $48,000 for the positive reports, the SEC contended.
Westergaard said he didn't promote paying companies in his weekly radio show on which he interviewed company executives.
The show, which was called ``Johnny Dotcom's Journal'' and appeared on RadioWallStreet.com, ``just described their business and talked about their prospects,'' Westergaard said. It drew as many as 5,000 listeners, he said.
While neither admitting nor denying wrongdoing, New York- based Westergaard.com and its onetime broadcasting unit agreed to be subject to stiffer sanctions if they commit similar violations in the future.
Westergaard.com ceased operations last week and now trades as a shell company on the Nasdaq Stock Market's over-the-counter bulletin board, Westergaard's lawyer Larry Ginsburg of New York said. He declined further comment.
Westergaard.com's stock traded at a 52-week high of $1.03 last Feb. 1. It was trading at 3 cents, down 3 cents to a 52-week low, in midafternoon trading today.
Dec/27/2000 14:13 ET
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December 28, 2000
SEC Sues Analyst John Westergaard,
Two Related Firms for Stock-Touting
By JOHN CONNOR
Dow Jones Newswires
WASHINGTON -- The Securities and Exchange Commission sued analyst John Westergaard and two companies he controls, alleging that they touted stocks on the Internet and through news releases without revealing they had been paid to publish that analysis.
The two corporate entities -- Westergaard.com Inc. and its wholly owned subsidiary, Westergaard Broadcasting Network.com Inc. -- settled the SEC's charges without admitting or denying wrongdoing, consenting to an order that permanently enjoins them from violating federal securities laws. Lawrence Ginsburg, the attorney representing WCI and WBN, said the consent agreement speaks for itself. He declined to comment further.
Mr. Westergaard is fighting the charges, which include an allegation that he violated antifraud provisions of federal securities laws. During the period covered by the SEC's complaint, Mr. Westergaard was chairman, publisher and editorial director of WCI, and chairman of WBN. He also was WCI's majority stockholder.
Mr. Westergaard, who resides in New York City, called the SEC's case against him "bizarre" and accused the agency of conducting a "three-year vendetta" against him.
"This is a stock-touting case," said the SEC in its complaint, filed in U.S. District Court for the Southern District, in Manhattan. The agency is seeking a permanent injunction against Mr. Westergaard to bar him from further violations of federal securities laws, as well as unspecified civil penalties.
The SEC's complaint alleged that the defendants charged small-cap publicly traded companies as much as $48,000 to publish positive reports about them that were disseminated through press releases, an Internet radio show and an Internet Web site. The complaint alleges that Mr. Westergaard misled prospective investors by falsely claiming his analysis was "independent."
The SEC staff previously concluded an earlier investigation into the sufficiency of Mr. Westergaard's disclosures of compensation received in connection with stock recommendations without recommending an enforcement action against him.
Write to John Connor at john.connor@dowjones.com
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