A moral for people like Westergard.
WASHINGTON -- The publisher of SGA Goldstar Whisper Stocks, a daily
stocks newsletter published on the Internet, was sentenced to one
year in prison and fined $20,000 Friday after pleading guilty to one
count of securities fraud.
Theodore Melcher Jr.'s case is believed to be the first involving a
criminal conviction for securities fraud on the Internet, an
environment that the Securities and Exchange Commission is grappling
to come to terms with both in enforcement and company registration
and disclosure proceedings.
The SEC and the U.S. Attorney's office for the eastern district of
Virginia, said Mr. Melcher, 51, of Brentwood, Tenn., pleaded guilty
to publishing favorable commentary on, and recommending the purchase
of, Systems of Excellence Inc. securities.
He was accused of receiving 250,000 shares of Systems of Excellence
stock in exchange for the recommendations, a fact that he didn't
disclose in the newsletter. He also sold the stock while recommending
his subscribers purchase it, the SEC said. He was sentenced in U.S.
District Court in Alexandria, Va. The U.S. attorney's office said he
obtained about $515,802 in trading profits from his conduct.
Systems of Excellence is a McLean, Va., teleconferencing company that
filed for bankruptcy March 7. Last year it elected a new board and
officers after former chairman Charles Huttoe was sentenced to 46
months in prison on securities-fraud and money-laundering charges.
In November, the SEC filed a civil complaint against Mr. Melcher and
others based on its complaint alleging massive securities fraud at
Systems of Excellence. It amended its complaint in January to allege
that Mr. Melcher systematically published favorable coverage of other
issuers in exchange for compensation, with disclosing it. In addition
to his prison term and fine, Mr. Melcher was sentenced to two years
of supervised release.
"This important case should be a clear signal to those who use the
remarkable technology of the Internet to snare vulnerable citizens in
a world-wide web of deception," U.S. Attorney Helen Fahey said in a
statement.
SEC officials weren't available for comment. The investigation
continues. |
