NEW YORK (Dow Jones)--Five more people have been indicted in an alleged fraud scheme involving a New York company that makes pre-soaped sponges.
Four former employees of Spongetech Delivery Systems Inc. and the operator of a Brooklyn marketing business have been charged with conspiracy, securities fraud and other crimes in a superseding indictment unsealed Thursday.
Three of the former employees were purported members of the company's sales staff, according to court documents.
In August, Michael Metter, Spongetech's former chief executive, and Steven Moskowitz, the company's former chief financial officer, were charged in a six-count indictment. They have denied wrongdoing.
(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)
Prosecutors from the U.S. Attorney's office in Brooklyn have alleged Mr. Metter, Mr. Moskowitz and the others, between January 2007 and May 2010, engaged in a scheme to overstate the company's sales figures in order to increase its share price and to profit from stock sales.
This included publicly reporting that the company had secured purchase orders or made sales to five customers that did not exist, prosecutors said.
Mr. Metter, Mr. Moskowitz and others also allegedly caused large amounts of restricted Spongetech stock to be issued to entities they controlled and then used false legal opinion letters to facilitate improper sales of the stock, prosecutors said.
The U.S. Securities and Exchange Commission has previously filed civil fraud charges in the matter.
-By Chad Bray, The Wall Street Journal; 212-227-2017; chad.bray@wsj.com
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