Re: 8/7/02 - [ECNC] Bloomberg: Econnect CEO Hughes Arrested by FBI on Securities Fraud Charge
Econnect CEO Hughes Arrested by FBI on Securities Fraud Charge
By David Evans
San Pedro, California, Aug. 7 (Bloomberg) -- Thomas Hughes, chief executive and chairman of Econnect Inc., was arrested by FBI agents and charged with securities fraud for attempting to boost the Internet security company's stock price by distributing false press releases.
The releases said Econnect received a $20 million dollar investment, was beginning a stock repurchase program and had received a $964,000 order, according to the authorities.
The arrest followed a joint investigation by the Federal Bureau of Investigation and the Securities and Exchange Commission, in the latest examples of federal efforts to crack down on corporate wrongdoing.
Hughes and his company settled earlier fraud charges from the SEC in 2000 by agreeing to abstain from further violations in the future. Hughes, 52, wasn't immediately available for comment.
``The SEC has made clear that it takes recidivism seriously, and will make every effort to seek criminal prosecutions of those who repeatedly violate the securities laws,'' said Randall Lee, director of the SEC's Pacific Region office in Los Angeles.
Econnect, which sold shares to the public for the first time in 1993, makes a device that it says assure the security of Internet purchases. It has reported no revenue from operations as of March 31, while accumulating losses of $167.5 million.
Econnect shares rose to a high of $21.88 on March 9, 2000, after the first set of press releases the SEC said were misleading. Trading of the company's shares, which have been below a dollar for the past year, was halted by the SEC on July 25.
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