SEC Charges 82 Individuals and Companies in Second Nationwide Microcap Fraud Sweep
FOR IMMEDIATE RELEASE
26 Actions Involve More Than $12 Million
Washington, D.C., August 3, 1999 The Securities and Exchange Commission today announced the filing of 26 enforcement actions against 82 defendants and respondents across the country for engaging in fraudulent microcap schemes from which they profited by more than $12 million and cost investors untold millions. This is the SEC's second nationwide sweep targeted at microcap fraud.
SEC Director of Enforcement Richard H. Walker said, "Today's microcap fraud sweep demonstrates that the Commission will continue to bring maximum resources to bear in cleaning up the microcap market. This market is too vital to our nation's small businesses to allow it to be spoiled by a corrupt few. Today's sweep caps off a successful string of actions over the last few years where, working with the NASD, federal, state and local authorities, we have locked the gate of some of the most notorious boiler rooms including Stratton Oakmont, A.S. Goldmen, A.R. Baron and Sterling Foster. Together, we have made great progress and we will not let up in our efforts until the job is done."
Today's actions take aim at all of the participants in a microcap fraud from the dealmakers who orchestrate manipulations, to the salespeople in boiler rooms who help carry them out. Issuers, officers, directors, promoters, accountants, attorneys, broker-dealers (both introducing and clearing firms), and transfer agents were rounded up in these enforcement actions. In four cases, investors were lured into the market for a manipulated stock by false information communicated on the Internet.
Importantly, the actions include stiff sanctions against accountants and attorneys who create and file the necessary documents and put their professional stamp of approval on a fraud.
Selected Case Summaries
Today's cases include the following schemes:
The Commission had previously suspended trading in the stock of three issuers involved in today's actions (American Telephone + Data, Comparator Systems, and PanWorld International) for a single ten-day period based on the dissemination of false and misleading information about the companies. The Commission's suspension of trading stopped the ongoing manipulations and placed an additional burden on broker-dealers to update their files with accurate information about the companies before they resumed or began quoting the securities. Since the Commission's first microcap fraud sweep in September 1998, it has suspended trading in the stock of 19 microcap issuers.
These enforcement actions are part of the Commission's four- pronged approach to attacking microcap fraud: enforcement, inspections, investor education, and regulation. For information about the SEC's response to microcap fraud and the litigation releases for each of these cases, visit the SEC's Microcap Fraud Information Center at www.sec.gov/divisions/enforce/microcap.htm.
The SEC acknowledges the valuable assistance of the National Association of Securities Dealers in a number of these cases.
SEC Encourages Investors to Get the Facts
Information is an investor's best tool for investing wisely and avoiding fraud. But many microcap companies do not file reports with the SEC, making it difficult to get the facts about the company's management, products, services, and finances. When reliable information is scarce, fraudsters can easily spread false information about microcap companies especially on the Internet making profits for themselves while creating losses for unsuspecting investors.
"Get the facts before you invest don't risk losing your life savings to fraud," said Nancy M. Smith, Director of the SEC Office of Investor Education and Assistance. "Sometimes, just one phone call to your state securities regulator to check out brokers and investments can save you from losing money."
Before investing in microcap stocks:
List of Cases and SEC Contacts