Examples of yesterdays Manipulation/Fraud stories. . .
. . . compliments to Truthseeker for his diligence in compiling such stories.
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MARCH 1, 2001
SEC to announce Internet-related enforcement cases
WASHINGTON, Feb 28 (Reuters) - The Securities and Exchange Commission said on Wednesday that it will likely announce a series of Internet-related enforcement actions Thursday.
"It is likely that tomorrow the commission will announce a significant series of Internet-related enforcement actions," the agency said in a statement.
An SEC spokesman declined to elaborate or discuss the cases.
The Internet became a prime vehicle for fraud in the heady days of the dot-com era because it is inexpensive and provides anonymity for scam artists.
Eighty-two of the 503 enforcement cases the SEC filed in fiscal 2000 cases were related to Internet fraud, up from 69 in 1999. In 1998, there were only 18 Web cases.
As the commission beefed up its staff and technology, it was able to track down people committing fraud quicker. Authorities also filed a string of enforcement sweeps targeting stock touting and other types of illegal behavior.
The deputy director of the SEC's enforcement division recent said in January it may be too soon to tell if online fraud may be on the decline with the souring of the markets.
"It takes awhile for issues like that to catch up to the marketplace," Stephen Cutler said in an interview with Reuters in January."
21:49 02-28-01
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SEC Charges 23 Entities With Securities Fraud on Internet
Washington, March 1 (Bloomberg) -- The Securities and Exchange Commission accused 23 companies and individuals of fraudulently using the Internet to pump up stock prices by more than $300 million and to raise $2.5 million from investors.
In its fifth nationwide Internet fraud ```sweep,'' the SEC said the defendants used ``spam'' e-mails, electronic newsletters, Web sites, hyperlinks, message boards and other Internet media in cases involving both publicly traded securities and privately held companies.
``Today's cases are a sobering reminder for investors that, on the Internet, there is no clearly defined border between reliable and unreliable information,'' said SEC enforcement chief Richard Walker. ``Therefore, investors must exercise extreme caution when they receive investment pitches online.''
With today's actions, the total number of Internet cases filed by the SEC stands at over 200, the agency said.
Walker said the new cases represented a ``virtual checklist'' of common securities fraud techniques. ``Perpetrators lured investors with promises of fast and easy profits in thinly traded, or even privately held, development-stage companies that operate in `hot-button' industries,'' he said.
In one case filed against PinkMonkey.com Inc. and its founder, Patrick R. Greene, the SEC said a company press release claimed that PinkMonkey.com would ``quickly reach a significant market share in the $400+ million study aids market.'' The company's share price nearly tripled within an hour, eventually jumping more than 1,000 percent within two days, the SEC said.
The company projected internally that it would take a year to reach, at most, 5 percent market share of the $160 million study aids market, the SEC said. The company had only $30 in gross sales during the 14-month period before it issued the release, the SEC said.
Mar/01/2001 10:56 ET
For more stories from Bloomberg News, click here.
(C) Copyright 2001 Bloomberg L.P.
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FULL SEC TEXT HERE: sec.gov
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Lucent Trickster Begins Trial for Posting Phony Profit Warning
New York, March 1 (Bloomberg) -- Lucent Technologies Inc. executives were lying about earnings, a Texas day-trader believed, and that's why he posted a fake profit warning for the phone maker on an Internet message board, the man's lawyer told a federal court jury today.
Fred Moldofsky made no money by posting the phony release and never planned to deceive investors, his lawyer said during opening arguments of his trial on fraud charges. Rather, ``he wanted everyone to know that Lucent executives weren't telling the truth about Lucent's earnings,'' lawyer Cecelia Wang said.
Moldofsky faces up to 10 years in prison on securities fraud charges for spreading false information on a Yahoo Inc. message board last year announcing a quarterly earnings shortfall for Lucent. Prosecutors say the Houston man's posting was made to look like a PRNewswire press release, using language copied from a real warning by Lucent two months earlier.
``This case is about a plan to cheat and deceive investors,'' Assistant U.S. Attorney Steven Piekin argued. ``Investors who sold at the lower price were cheated out of millions of dollars.''
Moldofsky tried to defraud investors by attaching the phony press release to his messages, Pieken said, though he never indicated what the defendant's motive might have been. Shares in the world's largest phone-equipment maker fell 3.6 percent after Moldofsky posted the warning 20 times late on March 22 and on March 23.
Appearing in court in a long-sleeve black t-shirt, his public defender beside him, Moldofsky showed no emotion as the attorneys spoke. Among the government's witnesses will be a California investment adviser who sold thousands of shares after seeing the bogus warning. His clients lost more than $50,000, according to prosecutors.
Earnings Shortfall
The profit warning said Lucent expected earnings of 14 cents to 17 cents a share in the quarter. Analysts had expected profits of 22 cents a share.
Shares in the Murray Hill, New Jersey-based company jumped after Lucent discovered the announcement and alerted investors through a Bloomberg News reporter, prosecutors said. Lucent stock, then the most widely held in the U.S., closed on March 23 at $61.68 on the New York Stock Exchange.
``The reaction to the announcement that came across Bloomberg was immediate and dramatic,'' Piekin said. ``The price of its shares rose over $5 in a matter of minutes.''
Lucent shares have tumbled ever since, as the company cut profit forecasts over consecutive quarters. Last month it announced that the U.S. Securities and Exchange Commission was investigating its accounting practices.
Shares were trading today at $11.45, down 14 cents, on the New York Stock Exchange.
Didn't Profit
Prosecutors say Moldofsky, then 43, traded approximately 6,000 shares of Lucent stock before he posted the phony release under different pseudonyms. He made no trades after the postings, however.
Moldofsky's attorney seized on that fact. ``He didn't make any money. He didn't try to make money,'' Wang said.
``Fred said what he thought about a big company,'' she argued, noting that there had been rampant speculation on the Yahoo board that day that Lucent's earnings would fall.
But Piekin said Moldofsky knew exactly what he was doing when he crafted the release. ``He even quoted the company's chairman,'' Piekin said.
Moldofsky's posting was not the first phony business news planted on Yahoo, the biggest Web-navigation company, and home to many of the Internet's most popular message boards for financial information.
In 1999, a Chicago man fabricated a PRNewswire release and posted it on Yahoo, quoting America Online as saying it had forged a four-year, $89 million alliance with Bid.Com.
Mar/01/2001 13:03 ET
For more stories from Bloomberg News, click here.
(C) Copyright 2001 Bloomberg L.P.
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SEC sues diet pill firm for "misleading claims"
WASHINGTON, March 1 (Reuters) - The Securities and Exchange Commission has sued Amazon Natural Treasures Inc. <ANTD.PK>, a dietary supplement maker, alleging that the company overstated sales revenues and made false and misleading claims for some of its products.
The suit, filed on Wednesday in U.S. District Court in Las Vegas, also names the company's president Michael Sylver as a defendant.
It alleges that Amazon made "numerous false and misleading statements and omissions" on its Web site, in press releases and in filings with the Securities and Exchange Commission from at least 1997 through March 2000.
The company, which did not immediately return a telephone call seeking comment, was accused of overstating sales revenue in 1998 and failing to report cash and stock options given to Sylver.
The complaint also alleges that Amazon illegally sold millions of unregistered shares and failed to file timely documents with the SEC.
Amazon's shares traded for 25 cents on Wednesday on the Pink Sheets.
13:04 03-01-01
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[AZNT] Las Vegas Sun: Food company accused of cooking its books
Today: March 01, 2001 at 11:30:38 PST
Food company accused of cooking its books
By David Strow
<strow@lasvegassun.com>
LAS VEGAS SUN
The Securities and Exchange Commission slapped Amazon Natural Treasures Inc. with a federal lawsuit Wednesday, accusing the small Las Vegas company of fraud against investors and customers.
In its civil lawsuit, filed in federal court in Las Vegas, the SEC accused Amazon and its president, Michael Sylver, of accounting fraud, making false statements, securities registration violations and other securities law violations.
The commission said it will seek disgorgement (reimbursement) of ill-gotten gains and civil penalties in an attempt to reimburse investors harmed by the alleged scheme. The SEC is also seeking a court order that would bar Sylver from holding a position as an officer or director of any publicly traded company.
Also named as a defendant was Domingos Loricchio Jr., a Brazilian citizen who ran Amazon's production and operations until resigning in July 2000. Sylver and family members held 37 percent of Amazon's stock at the time of the company's last report, while Loricchio and his family held 30 percent, the SEC said.
The company sells health care products made with ingredients from Brazil's Amazon rainforest.
Meredith Munro, an attorney with the SEC in Denver, said the case was one of the most extreme she'd ever seen, "given the permeation of fraud."
"(Fraud) seems to permeate every aspect of the company," Munro said. "We have had so many complaints from so many different avenues about this company. This case was hard to narrow, because we had a lot of different complaints with respect to this company."
But Amazon officials are denying the charges, and vowing to fight. Sylver blamed the SEC lawsuit on a group of Canadian brokers and American market-makers he says has been illegally short-selling millions of shares of Amazon stock.
Short-selling is the practice of investing in a special security in hopes that the company's stock will decline rather than increase.
"We believe the SEC has been duped into these charges by this group of people (the short-sellers)," Sylver said. "We intend to work hand-in-hand with the SEC ... as co-plaintiffs against these stock manipulators. We hoped the SEC would do this. We wanted the SEC to do this."
Typically, such a lawsuit results in a trading freeze. But since there is virtually no trading in the over-the-counter stock, Munro said the SEC is not seeking a trading freeze at this time. Nor will it seek a shutdown of the company, she said.
"Frankly, there's not much business operations going on there as far as we can tell," Munro said.
The SEC lawsuit accuses the company of four securities law violations: overstatement of revenues in its 1998 annual report; undisclosed cash and stock compensation to Sylver; "baseless and unreasonable" revenue projections and financial information; and false claims about the safety and benefits of Amazon products. The commission also claimed Amazon maintains "deficient" books and records that do not meet the requirements of a publicly traded company.
In its annual report filed in September 1999, Amazon claimed $580,900 in sales revenues for the year ending Dec. 31, 1998. But at least $266,600 of these sales, the SEC claims, came from the sale of stock, not products.
Amazon also claimed in its 1996 and 1997 annual reports that Sylver didn't receive any compensation for his position as president and chief executive. But the SEC claims Sylver did receive substantial compensation during that time -- at least $38,000 in salary, and more than $425,000 in cash withdrawn from company accounts.
Additionally, the SEC claimed Sylver had received stock compensation from Amazon, despite claims from the company that he had not. From January 1997 to May 1998, the SEC lawsuit states, 2 million shares of Amazon stock were issued to a Sylver-controlled entity called Titan Investments. Some of the shares were sold on the open market, the SEC said, while other were sold "at very reduced prices" to Sylver's family, friends and company consultants.
Sylver directed $514,000 in proceeds from these sales to a Titan bank account, and later withdrew $316,000 for personal uses, the SEC said.
While these stock sales were occurring, the SEC said Amazon was making grossly inflated revenue projections and false inventory statements to investors. In 1996, the company estimated it would achieve $1.5 million in sales revenue in 1997; by the end of 1997, the SEC said, Amazon was projecting in press releases it would achieve $50 million in net income for 1998 on revenues of $75 million.
This never occurred. In 1998, Amazon reported a net loss of $4.8 million on sales revenue of $392,000.
The SEC complaint also claims the company made false representations about its products. Amazon, the SEC said, claimed it developed a cream product that could protect users against AIDS, while several other products could combat cancer.
Not only were these claims false, the SEC claims the products themselves are dangerous. Three Amazon products, the SEC alleged, "can cause several forms of cancer and are toxic in some dosages."
Sylver said he's heard these charges before. The Amazon CEO said these charges have been circulated by a group of short-sellers for years. Amazon first filed suit against these short-sellers in 1998.
According to Sylver, this short-selling scheme involved a group of Canadian brokers who would sell the same shares repeatedly to different investors through American market-makers. While the brokers held 2.5 million shares, they actually "sold" 15 million shares through the market-makers, Sylver said.
"They've probably made $80 million already selling illegally," Sylver said.
The group then issued false and misleading press releases about the company, floated damaging rumors about Amazon on Internet message boards, and constantly contacted SEC investigators in an effort to trigger an investigation, Sylver said.
In November 2000, Amazon settled its lawsuit with several of these brokers, resulting in the cancellation and return of the 2.5 million shares the brokers held. The company said it has received a default judgment against the remaining defendants, and hopes to collect a "sizable judgment" from them at a later date.
"This is an ongoing thing," Sylver said. "They went after 43 companies, and we're the only ones still in business."
Amazon, meanwhile, is in the process of trading its old shares of stock for shares of a new company called Amazon Natural Treasures.com Inc., in an attempt to bring an end to the claimed short-selling scheme. These shares will trade on a members-only Internet-based stock exchange called Niphix -- and currently carry a trading price of $49 to $125 per share.
That's well above the 25 cents per share now fetched by Amazon shares on the open market.
But short-selling isn't an excuse for what has occurred over the past several years, Munro said.
"It's possible people are shorting the stock," Munro said. "I understand Mr. Sylver's complaints and concerns, however, any short-selling activity does not absolve him and his company of SEC violations. To claim such is perhaps a red herring."
All contents copyright 2001 Las Vegas SUN, Inc.
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The SEC has launched a much more organized website at sec.gov. It is always worth your time to nose around the site. There is much to be learned there.
Thanks,
Rande Is |
