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Stock Detective Light - November 2, 1998...
Last week's giant bust by the SEC of more than 40 stock promoters and their companies was quite an education for many investors. The Stock Detective learned a thing or two, as well. Although our List of paid promoters included many of the toutsheets and scam artists nailed by the SEC, there were a few that had escaped our attention. We bring them to you now, as additions to the list. Some are defunct, or have suspended operations. But we include them here as a reference for readers, and as a reminder that they can pop back up at any time. Because even though the SEC can punish the hacks for not complying with government regulations, they can't shut down the companies' websites. It's a little thing called the First Amendment, the SEC's top enforcement officer, Richard Walker, reminded everyone at last week's press conference.
Here we present a roundup of the sites we're adding to The List, followed by a rundown of shenanigans by those who were already on it.
We begin with High Growth Publishing Group, which publishes Portfolio Prospects and The High Growth Newsletter. Owner Everett Gust failed to disclose how much he was paid during a four-year period to promote penny stocks in these two publications. As of Nov. 2, High Growth Publishing's web site was not accessible and the only trace of Portfolio Prospects or High Growth Newsletter was through links from other sites. Gust agreed to a cease and desist order from the SEC.
Also seemingly defunct is Russ Reports, which was cited by the SEC for failing to disclose that it was paid to promote stocks endorsed in its newsletter. Owner Russell Klein agreed to a cease and desist order.
After a slap on the wrist from the SEC, the National Investors Council is in full compliance with disclosure rules for its Portfolio Picks online publication. But it's not clear whether the promoter is in compliance with its Growth Stock Newsletter, a subscription-only site. NIC's owner, Skip Nordstrom, agreed to stop violating SEC rules once he was caught. Another publication that started playing by the rules after the SEC stepped in is the IBJ Observer. IBJ failed to disclose that it was paid 150,000 shares of stock by BioGenetic Technologies, which trades on the Toronto Stock Exchange. IBJ agreed to a cease and desist order.
One of the few promoters who paid a fine as a result of last week's sweep, Princeton Research, is difficult to find online. Its homepage is non-existent, but a few companies it touted still have Princeton's promotions on their sites. Princeton failed to disclose that it was paid for its promotion. John Wesley Savage, president of the tout sheet that tried to steal some credibility with its name, agreed to pay a $40,000 fine.
Market $avvy has an interesting disclaimer on one of the two stocks it's promoting. While specifically stating that it was not paid to hype Bionet Technologies Inc., the disclaimer at the end of Bionet's also tells readers that the company was paid to tout Great White Marine & Recreation, Inc., apparently the only other stock Market $avvy promotes. The SEC nailed Market $avvy for not disclosing its fee from Great White.
But Market $avvy isn't the only stock promoter associated with Great White that was caught up in the SEC sting. The others are part of a group of promoters charged by the SEC that use the Internet to hype client companies but don't necessarily operate from a website. They use spam email and other means to lure investors without disclosing their relationships with the companies whose stocks they are promoting.
Carlisle Communications, Sitra Enterprises and JAFLC Capital Management, along with Jeffrey Brommer's Market $avvy also were named by the SEC for failing to properly disclose how much Great White paid for their promotion services. In addition, Anita Carlisle and her company were cited for selling off about one-third of the 1.5 million shares paid by Great White and depositing most of the proceeds back into Great White's account. Carlisle allegedly sold the shares while she was actively encouraging others to buy Great White stock, a practice called scalping.
Other people facing charges for violating SEC disclosure rules include Eugene B. Martineau, who is accused of starting a discussion thread on Silicon Investor about a client's stock, and then posting more than 60 messages urging people to buy or hold their shares. Martineau did not disclose that he had a 24-month option to buy 5,000 shares at $1.50 per share.
David A. Wood also started a discussion thread online and used spam to get the word out to more than 100,000 people about a client company. He also wrote "reports" about the company, which it posted on its website. Wood did not disclose that the company had paid him $10,000 and 610,000 shares of stock for these services.
Finally, Stock Detective readers will recall Sloane Fitzgerald for its role in the Eventemp fiasco. Eventemp's trading was halted in August and it has not resumed. Francis A. Tribble, who owns Sloane Fitzgerald, is accused of touting Eventemp and JT's Restaurants, by spamming more than six million unsolicited email accounts with reports that claimed to be independent stock analysis. Tribble did not disclose that he had an interest in the stock's price increasing or that he would be paid in cash by the companies he was promoting.
There were plenty of stock promoters already on The List who found themselves in the SEC's spotlight last week.
Emerging Company Report, Donald Baillargeon - failed to disclose compensation from more than 50 clients. Agreed to a cease and desist order.
Next Wave Stocks, Core Communications Group, Joshua Levine - failed to disclose compensation in the form of cash and stock for producing third party reports. Agreed to cease and desist order.
Investment Hotlines Online, James E. Grady - insufficient disclosure of compensation for providing client companies with Internet services. Hearing pending.
The Equity Journal, Darin S. Ruebel - failure to disclose compensation. Agreed to permanent injunction against violating SEC disclosure rules and $5,000 fine.
Stock-Line.com, Starwood Media Group, Jack Marks - inaccurate disclosure of compensation. Agreed to permanent injunction against violation SEC disclosure rules and $15,000 fine.
Global Penny Stocks, George Schlieben - failure to disclose compensation of at least $105,000. SEC is seeking a permanent injunction.
Investors Edge, Brian M. Volmer, John R. Switzer, International Alliance Trading, Inc. and Sun Pacific Capital Group, Inc. - failed to disclose compensation. SEC is seeking an injunction.
Liberty Capital Group, Jason Greig - failure to disclose compensation of at least $1.2 million. SEC relief unknown.
Taxin Network, Edward B. Taxin - failure to disclose compensation. SEC is seeking civil penalties and permanent injunction.
Stocktowatch.com Inc., Steven A. King - failure to disclose compensation of at least $1 million and scalping. SEC is seeking a permanent injunction, disgorgement of unjust profits and fines.
Barrow Street Research, John Attalienti - failure to adequately disclose compensation. Agreed to permanent injunction and $25,000 fine.
The Future SuperStock - failure to disclose compensation, making misleading statements and scalping. SEC is seeking a permanent injunction, disgorgement and fines.
As always, tread lightly??
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