Quebecer fined in pump and dump scheme
SEC complaint. Regulator says scammers made $23.4 million
DON MACDONALD
The Gazette
Wednesday, January 10, 2007
A Quebec man and his u.s. business partner have been hit with penalties for their roles in what the U.S. stock-market regulator has described as a pair of classic pump-and-dump schemes.
A Securities and Exchange Commission complaint against the men and their associates offers a fascinating glimpse into how scammers use email, websites, voice messages and faxes to earn millions by promoting penny stocks to naive investors.
Quebecer Bryan Kos agreed to pay almost $650,000 U.S. in fines, repayment of ill-gotten gains and interest as part of a final judgment on the SEC's civil action entered by a Florida judge in late November. Kos's u.s. partner, Donald Oehmke, agreed to pay almost $1.5 million U.S.
In a February 2005 complaint, the SEC accused the pair of earning a total of $23.4 million U.S. by artificially creating demand for shares in two virtually worthless companies. Stock in the companies traded on what is known as the pink sheets, a lightly regulated, over-the-counter market in the U.S.
The two men earned their profits by selling stock in the companies they were fraudulently promoting to the public, the SEC complaint said.
Kos was accused of orchestrating multi-faceted promotional campaigns designed to boost the share prices of the companies.
Kos paid associates to produce analyst reports, press releases, tout sheets and voice-mail scripts containing glowing recommendations for the companies - Concorde America Inc. and Absolute Health and Fitness Inc., the SEC alleged.
This material included outlandish projections for revenue and profit growth and share-price gains. It was disseminated by email, fax or voice-mail spam and on websites controlled by Kos, the SEC alleged. In fact, the SEC said neither Concorde nor Absolute Health had business operations.
Virtually every major fact in one widely disseminated press release promoting Concorde was a lie, the SEC complaint stated.
In the case of Concorde, "investors responded to the unauthorized press releases, tout sheets, faxes and email spams and voice-mail advertising campaign. In just one week in early August 2004, Concorde's stock price rose from $3.70 to $8.90."
Meanwhile, between late July and mid-August 2004, Oehmke and Kos sold 10 million Concorde shares held in a series of offshore companies to the public. Oehmke reaped profits of $7.5 million U.S. while Kos received about $1.5 million U.S., according to the SEC.
From early June to December 2004, Absolute Health's heavily promoted stock rose from 55 cents to more than $5. Oehmke and Kos sold their stock in the company during the "fraudulent touting," reaping about $14.4 million U.S. in illegal profits, the complaint states.
Besides the fines, the judgment permanently bars Kos and Oehmke from participating in a penny-stock offering and from participating in an unregistered offering of securities.
The SEC complaint states that Kos is a resident of Montreal, but other public documents in Quebec indicate he has lived in St. Sauveur.
His lawyer in Florida, William Nortman, said he didn't know where Kos is currently residing. Nortman noted Kos had not admitted or denied the allegations in the complaint.
dmacdonald@thegazette.canwest.com
© The Gazette (Montreal) 2007 |
