SEC Charges 13 With Internet Fraud
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) — Continuing their ''sweep'' against Internet investment
scams,
federal
securities regulators announced Thursday they had charged nine people and four
companies with fraud online.
The Securities and Exchange Commission alleged separate schemes that deceived
investors around the world by fraudulently promoting stocks in Internet junk
mail, online newsletters, Internet message board postings and Web sites.
The market watchdog agency made the allegations in a civil lawsuit and three
administrative actions. All four cases involved people allegedly promoting
stocks without disclosing they were paid for it. The lawsuit also involved an
alleged ''pump and dump'' scheme, in which promoters pushed up a stock's price
by making false claims about the company and later sold their own shares to
cash in on the artificially high price.
The accused individuals, including one current and two former stockbrokers,
promoted more than 56 publicly traded companies and received more than
$450,000
for doing so, the SEC said. The companies are fairly small and their stocks
are
relatively cheap, risky and thinly traded.
The agency ''continues to be vigilant in its efforts to stamp out fraud on the
Internet,'' said SEC Enforcement Director Richard Walker. ''If you're
trying to
cheat investors on the Internet, we are watching and we will catch you.''
The actions were the latest moves in a nationwide crackdown against investment
fraud in
cyberspace started by the SEC in October. The agency has been targeting people
promoting stocks over the Internet who don't disclose they are paid to do so.
Such stock promotions are known as ''touting.'' Stock touting is not
illegal in
and of itself, but any compensation received from the companies must be fully
disclosed, including the nature and amount of payment in cash or stock.
In the new lawsuit, the SEC alleged that P. Joseph Vertucci, an insider of
Interactive MultiMedia Publishers, and Bruce Straughn, a former Chicago
stockbroker, manipulated the company's stock price in a ''pump and dump''
scheme.
Vertucci and Straughn also are accused of arranging for publications to tout
Interactive
MultiMedia, a software development company, on the Internet and elsewhere.
They
allegedly
paid the touters with cheap or free company stock, which the touters failed to
disclose.
Interactive MultiMedia's stock later collapsed and the company ceased
operating, the SEC said. The agency sued Vertucci, Straughn and five other
people allegedly involved in the scheme, seeking unspecified civil penalties
and repayment of illegal profits from some of them.
Vertucci denied any wrongdoing, saying he was deceived when he bought
Interactive MultiMedia. The SEC ''missed the point. ... What they're doing is
wrong,'' he said in a telephone interview.
Straughn said he hadn't seen the details of the case yet and had no
immediate comment.
In the three administrative actions, the SEC alleged that:
— Scott Flynn and his company, Strategic Network Development Inc., used
Internet junk mail and a Web site called Stockprofiles.com to disseminate
favorable information about several companies without fully disclosing his
payments from the companies.
Flynn, a former stockbroker convicted of securities fraud in another case, is
said to have received at least $183,200 in cash and 322,500 shares of stock
from at least 10 of the companies.
Flynn could not immediately be reached for comment.
—Hastings Communications, the owner and publisher of Stockprofiles.com,
promoted the
companies without fully disclosing its payments from the same companies.
In a settlement with the SEC, Hastings Communications agreed to refrain from
such violations in the future. The company neither admitted nor denied
wrongdoing.
—Max Ramras, through a business named RCG Capital Markets Group Inc.,
touted
the stocks of nine companies on a Web site without disclosing payments in cash
and stock options from the companies. RCG Capital Markets allegedly made more
than $100,000 from the companies since November.
Don Wall, an attorney in Phoenix for Ramras and his company, did not
immediately return a
telephone call seeking comment.
The Flynn and Ramras cases will be heard by SEC administrative law judges, who
will determine whether the allegations are true and whether any remedial
actions should be imposed.
———
EDITOR'S NOTE: The SEC advises investors to read its Cyberspace Alert before
buying any
investment promoted on the Internet. The publication is available on the
investor assistance and complaints link of the agency's Web site at
<http://www.sec.gov/>www.sec.gov. It also is available by calling
1-800-SEC-0330.
Investors also are urged to report suspicious investment offerings to
enforcement@sec.gov.
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