Thursday January 7, 8:15 pm Eastern Time
SEC sues four, continuing its microcap fraud fight
WASHINGTON, Jan 7 (Reuters) - The Securities and Exchange Commission Thursday sued four people who allegedly hawked thinly traded, or microcap, companies through a stock promoting firm without divulging that they were being paid to do so.
The defendants, Wayne Gorsek, Lyndell Parks, P. Brenden Gebben and Troy Justus, fraudulently promoted about 20 microcap companies between 1993 and 1997 in exchange for over $700,000 in cash and securities through Strategic Investment Advisory Inc, a stock promoter based in Springfield, Ill.
Gorsek, 31, was the former owner and president of the firm; Parks, 33, was the chief operating officer; Gebben, 29, was the lead analyst; and Justus, also 29, was a broker.
They allegedly deceived investors into thinking that Strategic Investment was an independent securities research firm that was providing objective investment advice about ''undiscovered'' companies, according to the SEC.
In fact, regulators said, Strategic Investment was merely a paid promotional firm that published ''glowingly optimistic'' recommendations of the securities of its clients in exchange for cash and securities.
In some instances, the firm quietly sold the securities it received from its microcap clients at the same time it was recommending that the public buy them, an illegal practice called ''scalping.''
The agency said it filed its complaint in U.S. District Court for the District of Columbia because the four allegedly touted the stocks through the Internet, mailings, scripted phone calls and faxes to people in the nation's capital.
None of the attorneys representing them immediately returned telephone calls seeking comment.
It is the latest chapter in the commission's continuing fight against microcap fraud, particularly when it is committed over the Internet.
Last October, the agency filed 23 enforcement actions against 44 people and companies for allegedly lying about more than 235 microcaps they touted online.
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