Everyone, I pulled this from the Amigo's thread. Excellent example as to why you need to do research before investing. Don't just take somebody's word for it.SI is mentioned too.
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Man on trial for defrauding investors through the Web
The Internet as an investment medium went on trial Wednesday as the former president of NVID International, Robert Bunte, faced federal charges of defrauding more than 1,000 investors.
In the first day of his federal criminal trial in Tampa, jurors were treated to a live demonstration of a popular investment World Wide Web site called Silicon Investor. It was through that site that one witness said he was lured into buying stock in NVID, a tiny Sarasota company that was touting a revolutionary new disinfectant product.
Kenneth Moss, a Tennessee retiree, told jurors he first decided to buy stock in NVID after he saw a news release written by the company on the Silicon Investor, which he still frequents as he monitors his investment portfolio.
What Moss saw was a string of releases issued by NVID, describing the new disinfectant product as though it were close to being marketable.
The government charges that a string of bogus claims were made via releases written by Bunte, and that he sent them to a service called the Business Wire for dissemination. That process includes not only feeding the releases electronically to newsrooms and brokers, but also directly to the public via the Internet.
As a result, at least 1,000 investors purchased stock in the company, which still exists and is still attempting to develop the disinfectant, now known as Axen.
The government charges that Bunte and fellow NVID executive Matthew Klenovic used the investors' money to buy expensive homes for themselves in Sarasota. They also ran up the price of the stock by issuing cheap shares to insiders who were in a position to help in the promotional campaign, according to prosecutors.
The operators of the web sites were not accused of wrongdoing. The new medium simply became the conduit for bogus information, prosecutors say.
''I saw it with my own eyes that their product went head to head with Lysol. It was straight from the Business Wire,'' said Moss.
Starting in November 1995, NVID issued a string of releases describing remarkable test results and prospects for the disinfectant product, then called Microsafe. One release described the product as having a market potential of $30 billion. Others said federal approval was expected shortly.
''When a company that size comes up with that kind of a miracle product, that gets you excited,'' said Moss, who eventually lost $2,300 on his NVID investment.
While Moss was explaining the investment web sites he frequents, jurors were given a live demonstration, using Moss' logon and password, to see how NVID news releases are funneled to millions of potential investors through sites such as Yahoo Finance, Silicon Investor, and Quote.com. Bunte's defense attorney, David Horrox, objected repeatedly to the questions posed to Moss, on the grounds that Moss was being asked to repeat hearsay.
Judge Richard Lazzara twice overruled Horrox, and instructed jurors specifically on his reasoning for allowing Moss to tell of his Internet experience. ''This testimony is not coming before you to prove whether what he heard was true or not true.It's only to show what motivated him,'' Lazzara instructed the jury.
A task force that included the FBI and the Florida Office of the Comptroller raided NVID's former Sarasota headquarters in April 1997, arresting Bunte and Klenovic on charges of defrauding investors and committing wire and mail fraud.
Klenovic, who ran afoul of the Securities and Exchange Commission in a previous stock scandal, pleaded guilty to the NVID charges in August 1997 and has been cooperating with the U.S. Attorney's Office against his former partner Bunte.
Klenovic is scheduled to be a witness when the trial resumes today.His sentencing has been postponed until after Bunte's trial is over.
Separately, both men are defendants along with their former company in a civil trial being pressed by the SEC in Tampa. The SEC seeks restitution of $3.3 million to investors.
Bunte's trial is expected to take up to 10 days.
Story Filed By The HERALD TRIBUNE, SARASOTA, FLORIDA
NYT-03-04-98 2100EST< |
