This newsletter touts stocks ...... but read the fine print
By Scott Barancik
Published January 24, 2007
A Massachusetts investment adviser accused by regulators of illegally pumping-and-dumping penny stocks has close ties to a Tampa company he touted last year.
Geoffrey Eiten denies the allegations. He held a 32 percent stake in Dynamic Leisure Corp. and was paid to promote its stock in February when subscribers to his $199-a-year newsletter learned that the travel company's shares were "poised to take off." Two months later he predicted in an online column that Dynamic's stock price would soon leap from $2.20 per share to $5.
But the stock never rose above $3 and closed Tuesday at 50 cents per share.
Dynamic Leisure CEO Daniel Brandano said he was unaware of any wrongdoing by OTC Financial Network, the Eiten-owned entity that briefly handled its investor relations. Dynamic Leisure is not implicated in the complaint.
But Eiten - the 56-year-old millionaire who continued publishing OTC Growth Stock Watch even while serving a drug-related prison term in the 1980s - claims he quit the job after realizing it posed a conflict of interest with his role as a stock adviser.
The administrative complaint filed by Massachusetts securities regulators against Eiten claims he defrauded investors by illegally blending his investor-relations and newsletter publisher roles. According to the complaint, an over-the-counter company would pay OTC Financial Network in stock to handle its investor-relations work. OTC Financial would write "false and misleading" accounts of the company and disseminate them to investors.
Subscribers to Eiten's newsletter would receive a "special situations report," much like the one issued in February about Dynamic Leisure. But his name and his financial stake in the company appeared only in the report's footnote, obscured in extremely small print.
The client company also would pay Eiten a brokerage fee to hook it up with large investors, even though OTC was not a registered broker dealer. As his publicity efforts drove up the liquidity and price of the client's stock, Eiten would sell his own shares, regulators allege.
"Deception is at the core of his business model," the regulatory complaint says.
A 1996 suit filed in Miami federal court made similar accusations about Eiten's work with Systems of Excellence, a Coral Gables stock whose ticker symbol was SEXI. But the claims against Eiten and related entities were dismissed.
Eiten alternately blamed the Massachusetts dispute on gray areas in the law, a statutory bias against small-cap companies, a desire by regulators to destroy him, and a former accountant's failure - for 10 straight years - to re-register him annually as a Massachusetts investment adviser.
Nevertheless, Eiten said he probably will agree to pay a fine in order to limit his expenses and get back to business. "In the microcap world, it's unfortunate that there are a lot of scoundrels out there who don't do the right thing," he said. "And regulators immediately think you're caught up in the wrong thing." A Massachusetts official declined to comment on the case.
None of this has dampened Eiten's enthusiasm for Tampa's Dynamic Leisure, which buys and operates wholesale travel agencies. Eiten said he still owns a substantial stake in the company.
"At the end of the day, I'm going to write a book on all this," he said. "It could be titled, Geoffrey Eiten: Hero or Villain?"
Times staff researcher Caryn Baird contributed to this story. Scott Barancik can be reached at barancik@sptimes.com or (727)893-8751.
A dynamic drop
Geoffrey Eiten owned a third of Dynamic's stock when he promoted it in his newsletter in February.
Dynamic Leisure Group Inc. stock prices, Sept. 2005 - present
[Last modified January 23, 2007, 23:59:17] |
