To All:
Are the mice are turning on each other?
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TAMPA -- Matthew Klenovic, a stock promoter who has pleaded guilty to hyping the shares of a Sarasota-based company, NVID International, is now helping federal prosecutors nail down evidence against his former business partner.
Assistant U.S. Attorney Michael Runyon told a federal judge Wednesday that prosecutors have been holding long, regular interviews with Klenovic as they prepare for the complicated stock scam case against Robert Bunte.
That case is scheduled for trial starting March 2. Bunte was president of NVID, a company that distributed and installed home water purification systems and also claimed to own the rights to a nontoxic but powerful disinfectant called Axen.
Klenovic never had a formal title at NVID, although he was an active member of top management. In late 1996, Klenovic was able to settle a previous stock scam case with the Securities and Exchange Commission by promising to refrain from serving as an officer or director of a public company for five years. When he made the promise, he was already deeply involved in running NVID, a fact that he admitted as part of his NVID plea agreement.
Klenovic's sentencing was supposed to take place Wednesday, but it was delayed.
If Judge Susan Bucklew had sentenced Klenovic to go to prison immediately, Runyon said, he would have asked for postponement of the prison time until after the Bunte trial.
''I need him,'' Runyon said of Klenovic. ''He is essential to that case.''
Klenovic pleaded guilty in August 1997 to six felony counts of wire and mail fraud and conspiracy to defraud. The guilty pleas could theoretically land him in prison for 35 years and make him liable for a large fine, although his cooperation with prosecutors might mitigate his punishment.
When he pleaded guilty, Klenovic promised to make restitution to the 1,000-plus investors who put money into NVID, a struggling penny stock firm.
Bucklew on Wednesday reconfirmed the earlier finding, admitted to as part of his plea, that Klenovic should make good on $3.3 million of investor losses. She postponed sentencing for 2 1/2 months.
The case is complicated by the fact that the Securities and Exchange Commission is pressing a civil lawsuit against the two men and NVID.
The SEC, which was represented in court by two of its attorneys, is also seeking restitution for investors.
Runyon suggested to the judge that she forgo a financial sentence against Klenovic and let the SEC's civil action provide whatever restitution is possible.
About 200 investors bought NVID stock directly from Bunte and Klenovic, who are both alleged to have taken the money directly out the back door and used it to buy expensive Sarasota homes.
Some investors paid 50 or 60 cents a share, which would have been a retail price. Others, including public relations companies and other business associates, received stock for pennies and may have aided and abetted the hyping that was going on.
The rest of investors -- estimated by prosecutors at 800 or more -- bought and sold stock on the over-the-counter market. Some actually made money as NVID ran a volatile course from 50 cents to 90 cents before plummeting to its current level of 4 cents a share.
During 1996, when the stock became a hot discussion area on Internet-based chat groups, an astounding 79 million shares changed hands.
Runyon said he felt that returning money to all those traders ''would be an unbelievably complicated task.''
''It isn't the numbers,'' Runyon said. ''It's all this trading. This stock was going crazy because of the fraud.
''Just so you don't think I'm leaving the investors out in the cold, they will be part of the SEC's program, when the bulk of the assets are liquidated,'' Runyon said.
SEC attorney Josie Raymon assured the judge that Klenovic ''signed a letter of intent to turn over all his hard assets to us.''
However, Bucklew remained unconvinced that she should pass up a chance for a fine aimed at restitution, given that the SEC case settlement has not been made final.
''I would feel a lot more comfortable if the civil case were resolved,'' the judge said.
She set a new sentencing date of April 21.
Story Filed By The HERALD TRIBUNE, SARASOTA, FLORIDA
NYT-02-04-98 1944EST<
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Comment from Eric: In contrast to the fourth paragraph of the article; Klenovic, in fact, used official titles within written documentation before and during the period of soliciting stock which was forbidden by a previous judgement. Those of you who received the stock package should clearly see that executive title insert which appears (to me) to be a violation of the court order mentioned in that paragraph. |
