SEC target Eiten denies wrongdoing, seeks jury trial
2012-03-02 13:57 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-CPOW) Clean Power Concepts Inc
Also Street Wire (U-EDVP) Endeavor Power Corp
Also Street Wire (U-GSTP) Gold Standard Mining Corp
Also Street Wire (U-NXWI) Nexaira Wireless Inc
by Mike Caswell
Geoffrey Eiten, the Boston-area stock tout facing a civil suit for overstating the prospects of junior companies in his OTC Special Situations Report, denies that he did anything wrong. The U.S. Securities and Exchange Commission claims that he issued overly optimistic reports touting four stocks, including Vancouver-based Nexaira Wireless Corp. According to the regulator, he made projections that had no basis in reality, among them a claim that Nexaira had developed the "fastest router in the world."
Mr. Eiten, 61, filed a brief answer to the charges on Tuesday, Feb. 28, in which he flatly denies any wrongdoing. The self-filed document provides no details of his denials (in response to most of the complaint's 55 paragraphs it simply states "Deny"). He filed the answer on behalf of himself and a private company he controls called National Financial Communications Corp., which is also a defendant. The only specific information contained in the answer is a demand that he face a trial by jury.
SEC's complaint
The answer comes over three months after the SEC filed a civil complaint against Mr. Eiten in the District of Massachusetts. It identified him as a former broker from Dover, Mass., whose business since the mid-1990s has been promoting penny stock for paying clients. The complaint cited Mr. Eiten for stocks he touted in 2010 through his OTC Special Situations Report, a newsletter he sent through mass mailings or through spam e-mails.
According to the SEC, the newsletter simply repeated information provided to Mr. Eiten by third parties. He knew nothing about the background of his clients, including their identities. In fact, he generally considered the companies he was touting to be "crap-shooting stocks" that would be out of business within a year or two if they did not obtain adequate financing, the complaint stated.
In his touting of Nexaira, he told potential investors that the company had developed the "fastest router in the world" and was receiving revenue from Sprint and Comcast. The reality, according to the SEC, was that the company's router had not received approval from the Federal Communications Commission, and the company had no relationships with Sprint or Comcast. (The stock, which traded around 45 cents when he issued the report in June, 2010, was at nine cents by year-end.)
Another of the four companies that the SEC cited Mr. Eiten for promoting was Clean Power Concepts Inc. of Regina, Sask. He told readers that the company, which made fuel additives from crushed seed oil, had positive cash flow and was making money. In reality, its most recent financial statements at the time stated that its cash flow was only positive because of financings, and its auditors considered the business a "going concern." (The stock, which was around $1 when he wrote the report, was last at 1.45 cents.)
The complaint also described how Mr. Eiten touted a California company called Gold Standard Mining Corp., which was purportedly working in Russia. In an Oct. 15, 2010, report, he said that Gold Standard was "now producing $9.5 BILLION of pure gold -- and you can get in around $2 a share!" His report predicted the company would have revenue of $42-million, but Gold Standard had no expectation of generating any such revenue from operations, the SEC said.
Throughout his reports, Mr. Eiten failed to fully disclose his compensation, according to the complaint. With Nexaria, he listed a payment of $16,500 from an entity called Dynamic International, but bank records showed he received two payments that substantially exceeded that amount, the SEC claimed.
The complaint sought an order prohibiting Mr. Eiten from promoting penny stocks, disgorgement of ill-gotten gains and an appropriate civil penalty.
While the case marked the first time the SEC filed charges against Mr. Eiten, the regulator did mention his OTC Special Situations Report in at least one prior suit. In its March, 2009, case against Vancouver promoter Joseph Fernando and others, the SEC claimed that Mr. Fernando paid for misleading coverage of Xpention Genetics Inc., a company that was purportedly developing a cancer vaccine. The regulator ultimately obtained $2.87-million default judgment against Mr. Fernando. There were no allegations against Mr. Eiten in that case.
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