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Net newsletter owner sentenced for fraud
WASHINGTON -- The owner of an Internet stock newsletter, who
had pleaded guilty to stock fraud, was sentenced to a year in prison
and fined $20,000 by a federal judge on Friday.
Theodore R. Melcher Jr., owner and president of SGA Goldstar
Research, is one of the figures in an ongoing investigation of an alleged
$12 million stock manipulation scheme.
U.S. Attorney Helen Fahey in Alexandria, Va., said the case "should be
a clear signal to those who use the remarkable technology of the
Internet to snare vulnerable citizens in a worldwide web of deception."
At the Securities and Exchange Commission, Thomas Newkirk, the
agency's associate enforcement director, said Melcher's sentence
"shows that we and the criminal (law enforcement) authorities take it
seriously." The SEC worked on the case with Fahey's office and the
Internal Revenue Service.
U.S. District Judge Albert V. Bryan Jr. sentenced Melcher, who
pleaded guilty in June to conspiring to violate federal securities and tax
laws by engaging in fraud through the purchase and sale of stock in
Systems of Excellence. Melcher received shares of the company, a
maker of video teleconference equipment, in exchange for publishing
favorable reports about it, some of which included false statements.
Melcher, 51, of Brentwood, Tenn., obtained some $515,802 in trading
profits from the fraud, according to a statement issued by Fahey on
Friday. Most of the money came through an offshore company that
Melcher controlled "for the specific purpose of avoiding" personal
income taxes, the statement said.
Melcher's attorney, Michael Koblenz, didn't immediately return a
telephone call seeking comment.
Charles O. Huttoe, the former Systems of Excellence chairman and
chief executive officer, pleaded guilty last November to violating
securities laws and engaging in money laundering. He received a
46-month prison sentence in January.
The Securities and Exchange Commission had accused Huttoe of
manipulating the market by issuing false, favorable press releases about
Systems of Excellence, then selling his shares into an inflated market.
He also was accused of secretly distributing millions of the shares to his
mother, wife and niece and corporations he controlled.
The SEC also had accused SGA Goldstar, a Nashville, Tenn.-based
publisher of an Internet stock newsletter, of writing about Systems of
Excellence "on nearly 100 occasions, almost always in a highly
promotional tone" in its newsletter, "SGA Goldstar Whisper Stocks."
Melcher and SGA Goldstar's other employee, Shannon B. Terry,
received Systems of Excellence stock and then began selling the shares
as the price rose due to investor interest sparked by their newsletter,
the SEC said. Some of the stock also allegedly was given to two
companies controlled by the men, Alpha Securities and Dunbar
Holdings.
In addition, the SEC charged that SGA Goldstar received stock from
nine other companies and the two executives "sold stock in several of
these companies while SGA Goldstar was touting the companies in its
newsletter."
Systems of Excellence has offices in McLean, Va., and Coral Gables,
Fla. |
