All,
This is the latest article by M Pollick
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Today is Mar-09-1998
NVID STOCK SCAM TRIAL
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 ain't over yet!
Eric |
