Silicon Investor makes the news again ===>
Net Newsletter Publisher Sentenced For Securities Fraud
(09/12/97; 4:30 p.m. EDT)
By Larry Dignan, TechInvestor
On Friday, the Securities and Exchange Commission said the publisher of a daily stock Internet newsletter was sentenced to a year in prison and fined $20,000 after pleading guilty to one count of securities fraud.
The case is considered to be the first involving securities fraud on the Internet.
Theodore Melcher, 51, the publisher of SGA Goldstar Whisper Stocks, pleaded guilty to pumping up shares of Systems of Excellence, a McLean, Va.-based video teleconferencing company that has since gone bankrupt. The company used to trade under the ticker SEXI on the Nasdaq.
The SEC and the U.S. Attorney's office for the eastern district of Virginia charged Melcher received 250,000 SEXI shares in exchange for his good recommendation. The publisher recommended the shares without disclosing he owned a chunk of the company, the SEC said in a November 1996 civil complaint.
The SEC then beefed up the complaint in January, alleging Melcher "systematically published favorable coverage of other issuers in exchange for compensation, without disclosing that fact."
The SEC built its case by posting notices on investor hot spots on the Internet such as Silicon Investor.
Melcher, who was also sentenced to two years' supervised release, captained a newsletter that gathered a following by touting unknown stocks. On SGA Goldstar's Website, the company says: "We're proud of the fact that we give you 'Whisper' information before the 'rest of the street' finds out."
Systems of Excellence was one such company, but the enterprise unraveled last year after its former chairman Charles Huttoe was sentenced to 46 months in prison on securities fraud and money-laundering charges. At the time, SEXI stated it would return to the market after it reorganized.
So far, the company hasn't. A call to Systems of Excellence was answered by an outdated message from acting general manager Robert Dutton confirming the March 7 bankruptcy filing. In the message, Dutton said the company "will soon emerge from Chapter 11 protection fully equipped to compete effectively in the marketplace for video teleconferencing systems."
At least SGA Goldstar can't say it didn't warn investors.
Here's the disclaimer on the Website:
"SGA Goldstar Research is not an investment adviser! Information contained in SGA Goldstar is obtained from sources believed to be reliable; however, in certain instances such information involves rumors or other time-sensitive materials that cannot adequately be verified. SGA makes no representation or warranty as to the accuracy or adequacy of the information provided. This material is not deemed as a solicitation for the purchase or sale of a security. Use of the information is at the subscriber's sole risk. Personnel associated with SGA may own shares in the companies mentioned herein or may act as consultants thereto for compensation. Prudent investors are advised to use mental stop losses to protect their gains or limit their losses. All stocks priced under $5 per share are deemed "penny stocks" and are extremely risky and speculative!" |
