RE:SEXI:Former RI Secretary of State, CIA Officer Named in SEC Suit
Washington, Jan. 30 (Bloomberg) -- A former Rhode Island secretary of state and a former Central Intelligence Agency officer were among defendants accused today by the Securities and Exchange Commission of reaping $860,000 from one of the biggest cases of Internet stock promotion fraud.
The SEC filed the civil suit naming former secretary of state Kathleen Connell, 63, in federal court in New York City. The complaint also names Thomas Clines, 71, a former CIA officer and overseas arms buyer convicted in 1990 on felony tax evasion charges, including willfully failing to report profits from secret arms shipments to the Nicaraguan contras during the Iran/Contra affair.
Wall Street Management Group, its president, Robert Ciofalo, 55, its consultant, Calvin Moore, 32, as well as Clines' wife, Heidi Deconde Clines, 66, were also named.
The defendants couldn't be reached for comment, and the SEC declined to provide the names of any of their lawyers.
The case is an outgrowth of a four-year-old case involving the stock of Systems of Excellence Inc., a maker of teleconferencing products whose technology was used to distribute video of the 1997 swearing-in of Congress.
Company Went Bankrupt
Federal prosecutors alleged in 1996 that SOE Chairman Charles O. Huttoe netted $12 million in illegal profit from shares inflated by touting. He was sentenced to 46 months in prison after pleading guilty to securities fraud and money laundering. Law enforcement officials also accused many brokers and promoters of touting the stock in return for payment from Huttoe.
Eventually, ``The manipulation unraveled, leaving many innocent investors with worthless shares,'' the SEC said. Systems of Excellence filed for Chapter 11 bankruptcy protection in 1997 and was subsequently liquidated.
The SEC said it has collected about $12 million in ill-gotten gains from various enforcement actions stemming from its investigation of SOE.
The five people and the firm charged today weren't accused of a direct role in the alleged fraud, just of benefiting from it. The complaint alleges that the defendants sold unregistered SOE stock that they had acquired for free ``into an artificially inflated market that was being manipulated by others.''
The defendants acquired a total of 920,000 unrestricted SOE shares by exchanging services for the shares, the SEC alleged. Connell also acquired an additional 209,484 newly issued, unregistered shares of SOE common stock in a ``private placement'' in early 1996, the SEC said.
For example, Ciofalo, Wall Street Management Group's principal, and Moore, a paid consultant for the firm, were issued the shares to ``promote SOE by bribing brokers to push SOE stock on investors, the SEC said.
The Clineses and Connell were issued shares for allegedly consulting on the merger of WSMG and ICMX Federal Systems Inc., a provider of video teleconferencing equipment, the SEC said.
The SEC seeks restitution of their allegedly ill-gotten gains totaling $347,117 from WSMG and Ciofalo, $23,215 from Moore, $209,288 from Thomas Clines, $90,371 from Heide DeConde Clines, and $190,086 from Connell. It also seeks interest on those amounts, appointment of a court receiver and a court order banning the defendants from violating securities laws in the future.
Jan/30/2001 19:25 ET
For more stories from Bloomberg News, click here.
(C) Copyright 2001 Bloomberg L.P. |
