SEC, U.S. Attorney, and FBI Announce Major Attack Against Microcap Fraud FOR IMMEDIATE RELEASE
2000-81
Those Charged Include Alleged Members of Organized Crime
New York, N.Y., June 14, 2000 ? The Securities and Exchange Commission
today sued 63 individuals and entities in five enforcement actions as part of its
continuing campaign to clean up fraud in the market for low-priced securities,
i.e., the microcap market. The actions allege a wide array of illegal conduct
including "pump and dump" manipulation schemes, private placement fraud
and investment adviser pay-to-play violations. All told, those charged reaped
millions of dollars in illicit profits. Also today, the Commission suspended
trading in the securities of WAMEX Holdings, Inc. and E-Pawn.com, Inc.
Simultaneously, in related criminal prosecutions, the U.S. Attorney for the
Southern District of New York and the Federal Bureau of Investigation
announced the unsealing of indictments and the filing of criminal complaints
naming more than 100 defendants in securities fraud schemes. The criminal
indictments announced by the U.S. Attorney and the FBI name 11 members
and associates of five different organized crime families in connection with
several securities fraud scams. These individuals are charged with participating
in numerous manipulations of microcap stocks, extortion, money laundering,
bribery and kickbacks, witness tampering, and murder solicitation.
SEC Director of Enforcement Richard H. Walker said, "The securities fraud
involved in today's actions is among the most egregious witnessed in recent
years. These manipulations of numerous stocks were designed for the sole
purpose of stealing investors' hard-earned dollars. The prosecutions
announced today rid the vital market for low-priced securities of unscrupulous
operators and reaffirm regulators' commitment to keeping this market safe and
fair."
1. Microcap Fraud/Manipulation Schemes
The Division of Enforcement (Division) instituted two administrative
proceedings charging a broad range of fraudulent activity affecting nine
microcap stocks.
a. Piazza Proceeding
The Division charges that in 1995 and 1996, 32 individuals participated in a
scheme to inflate the stock prices of Spaceplex Amusement Centers
International, Ltd., Reclaim, Inc., Beachport Entertainment Group, Inc., and
International Nursing Services, Inc. The Division alleges that each of these
schemes involved payment of bribes to brokers in exchange for the brokers
causing their retail customers to purchase the securities. The respondents sold
shares at the artificially inflated prices. The respondents are charged with
obtaining at least $8 million in illegal profits from these schemes.
b. Wolfson Proceeding
The Division charges that from January 1999 through at least March 2000,
Allen Z. Wolfson fraudulently inflated the stock prices of
BeautyMerchant.com (formerly known as ATR Industries, Inc.), Learner's
World, Inc., Rollerball International, Inc., Healthwatch, Inc. and HYTK
Industries, Inc. The Division alleges that in connection with these
manipulations, Wolfson obtained control of large blocks of shares, caused
sham trades to be made to give the appearance of an increasing demand for
the shares in the market, paid bribes to six brokers to create demand, and
sold into that demand. The six brokers are also being charged today for their
roles in the manipulation. The Division contends that the respondents received
at least $7 million in illicit profits from these manipulations.
2. Investment Adviser Pay-to-Play
The Division charges William M. Stephens with participating in a kickback
and bribery scheme concerning the investment assets of certain labor union
pension funds. Stephens is the Chief Investment Strategist of Husic Capital
Management, a registered investment adviser in San Francisco. The Division
alleges that in order to land the pension funds as advisory clients, Stephens
agreed in advance to channel a portion of the funds' assets into rigged
investment vehicles. The Division also contends that Stephens understood that
a portion of the funds' assets would be then siphoned out of the rigged
investments to be paid as bribes and kickbacks to trustees of the funds.
3. Private Placements
The Commission filed two civil injunctive actions charging 14 individuals and
nine companies with fraudulent private placement offerings that raised
approximately $3.5 million from investors. The Commission contends that in
these actions, among other things, various unregistered salespeople working in
"boiler rooms" cold-called investors making misrepresentations about the
offerings using high pressure sales tactics. More than 300 investors fell victim
to these schemes.
4. Trading Suspensions
The SEC also temporarily suspended trading in the securities of WAMEX
Holdings, Inc. and E-Pawn.com, Inc., due to the lack of accurate public
information available to investors concerning these issuers. The shares of both
of these companies are quoted on the OTC Bulletin Board. The Commission
contends that, contrary to the company's public claims, WAMEX is not
lawfully authorized to operate an Alternative Trading System and that
questions exist regarding the company's claims to have raised funding from
private investors. The SEC also contends that inaccurate information existed
as to the identity of the persons in control of E-Pawn.com.
For further information, please contact Wayne Carlin at (212) 748-8178
or Robert Knuts at (212) 748-8192.
Additional Materials Available on This Topic
Microcap Stock: A Guide for Investors (on-line brochure)
In re Salvatore Piazza et al. (Release No. 33-7864)
In re Allen Z. Wolfson et al. (Release No. 33-7865)
In re William M. Stephens (Release No. 33-7866)
SEC vs. Bruce M. Follick et al. (Litigation Release No. 16588)
SEC vs. Diagnostic Professional Imaging Services, Inc. (Litigation
Release No. 16589)
sec.gov |
