To all especially; well, never mind:
Ex-executive confesses
to defrauding investors
By Michael Pollick
STAFF WRITER
TAMPA -- Speaking in clipped sentences, former NVID executive Matthew Klenovic
on Thursday confessed to a systematic plan to scam investors in the Sarasota
penny-stock company.
Assistant U.S. Attorney Michael Runyon had Klenovic on stage center on the second
day of the federal criminal trial of Klenovic's former friend and associate, NVID
founder Robert Bunte.
Originally, Bunte and Klenovic were both accused of defrauding hundreds of investors
throughout the country of at least $3.3 million, and using part of the money to buy
themselves lavish Sarasota homes. Klenovic last fall agreed to a plea deal in which he
promised to testify against Bunte.
At one point in his testimony, Klenovic stood less than 10 feet from the jury, Magic
Marker in hand, and highlighted 15 separate phrases in an NVID press release. Each
one, he said, was an exaggeration, a misstatement, or an outright lie.
The release, dated November 1995, announced for the first time the company's
development of a nontoxic, environmentally safe and cost-effective disinfectant,
implied that a U.S. patent and foreign patents were in the works, and claimed
worldwide sales potential as high as $30 billion.
None of those claims was true, Klenovic testified.
No toxicity tests had been done, or have ever been completed, on the new formula,
which was then called Microsafe and is now called Axen, he said. There was no
patent, only a provisional application good for one year.
No tests had been done to prove Microsafe environmentally safe or cost-effective.
The $30 billion figure, admitted Klenovic, ''was an unfounded guesstimate.''
The announcement was crafted by Bunte, said Klenovic, who admitted to reviewing it
before it was released. It was broadcast electronically to news organizations and
brokers, and directly to a potential audience of millions of investors who monitor their
stocks via the Internet.
Some zealous investors even subscribe to services which send them e-mail every
time a news release shows up on a company in which they are interested, as the
prosecution pointed out during an Internet demonstration Wednesday.
Prosecutor Runyon repeated the confessional process with half a dozen press
releases.
One, which Klenovic claimed was solely Bunte's creation, claimed Microsafe was
being tested against ''harmful fungi and mites which are devastating the bee
population.''
Were any tests ever performed involving bees? asked Runyon, as the jury looked on
wide-eyed.
''There was no test performed,'' answered Klenovic.
When Runyon pressed the issue, Klenovic added: ''Was it fabricated? Yes.''
Based on the opening statements by Bunte's attorney, Donald Horrox, Klenovic faces
a brutal grilling when Runyon is through with him.
''The government has been led down the primrose path by people like Mr. Klenovic,''
Horrox warned the jury Wednesday.
Klenovic last fall pleaded guilty to the same charges of which Bunte is now accused.
One reason for this, undoubtedly, is that Klenovic had a previous run-in with the
Securities and Exchange Commission over a stock scam called Standard Oil and
Exploration of Delaware. He settled that case in December 1996 while he was
already an active participant in NVID. He promised the unaware SEC attorneys that
he would refrain from running a stock company for at least five years.
He held no official title at NVID, but admitted Thursday that he was the firm's
''control person.''
Horrox told the jury Wednesday, ''I submit to you the man is scared. Real scared.''
Klenovic and Bunte were arrested in April 1997 in a full-fledged raid on NVID offices,
after an investigation by the Florida Office of the Comptroller, Securities Division.
Investigator Laura Royal went undercover on the Internet, pretending she was an
NVID investor to find out who was interested in the stock, and who was hyping the
shares. Royal is assisting Runyon in the complicated case, which may take a week or
more to conclude.
To put a face on the victims of the NVID stock swindle, Runyon earlier Thursday
took testimony from two victims. One was a young broker from New York who
bought NVID shares for himself, his brother and his father. The other was a retiree
who spends winters in Largo.
The broker, Michael Conticelli, said he and his clients lost $80,000 on the stock. They
got out after Conticelli learned that Bunte had been lying to him about how many
shares were outstanding.
According to the broker, Bunte said repeatedly that there were 20 million shares
outstanding, when there really were more than twice as many, 43 million.
''Automatically, that cuts your profits in half, because you've got to share with twice
as many people,'' Conticelli testified. ''It pretty much throws everything out of whack.''
The retiree, Richard Story, began crying as he told the jury that he spent $58,000 of
his life savings on NVID, after reading press releases about Microsafe and speaking
directly with Bunte by phone.
Story bought the stock during 1996, when Microsafe was being heavily promoted and
the stock was experiencing heavy volume at prices of 40 to 60 cents a share.
Asked what the stock is worth now, Story said, ''About four cents.''
Horrox didn't get far in cross-examination.
He asked Story if he still held the stock, expecting that NVID's disinfectant might still
come through for him.
''There's not much to keep an eye on now,'' said Story.
Story Filed By The HERALD TRIBUNE, SARASOTA, FLORIDA
NYT-03-05-98 2352EST<
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It still ain't over. We're missing a name here.
Eric |
