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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission
Washington, D.C.

LITIGATION Release No. 16842 / December 27, 2000

Securities and Exchange Commission v. John Westergaard, et al., U.S. District Court for the Southern District of New York (Civil Action No. 00 Civ.9776)

SEC NAMES WESTERGAARD, TWO ENTITIES IN INTERNET TOUTING CASE

The Commission today sued John Westergaard, Westergaard.com, Inc., and Westergaard Broadcasting Network.com, Inc. (collectively WCI or defendants) for broadly disseminating on the Internet and through press releases purportedly "independent" analysis of publicly-traded securities when in fact defendants had been paid to publish that analysis. The complaint alleges that the defendants charged small-cap publicly traded companies up to $48,000 to publish positive reports about them that were disseminated through three media: press releases, an Internet radio show, and an Internet website. The complaint also alleges that Westergaard misled prospective investors by falsely claiming the analysis was "independent," and that all the defendants failed to comply with mandatory requirements to disclose compensation received in connection with the publication of securities analysis, in violation of Section 17(b) of the Securities Act of 1933. As alleged in the complaint:

  • WCI widely disseminated press releases to draw attention to its positive analysis of companies. WCI received compensation from four issuers that were the subject of five such press releases. Each of these favorable press releases, failed to disclose that WCI was paid to publicize the issuers' securities. Two of the press releases included the false claim that the research was "independent."

  • Westergaard interviewed executives of five client companies on a weekly radio show he hosted known as "Johnny Dot.com," that was broadcast on an Internet radio station featuring investment-oriented programming. The interviews presented favorable views of the companies and their prospects. Westergaard did not disclose on the radio show broadcasts the compensation the companies had paid.

  • The full text of the analysis was disseminated through an Internet site called Westergaard Broadcasting Network, or WBN, that Westergaard founded, and served as publisher and editor-in-chief. During a prior Commission inquiry into Westergaard's disclosure of the amount of compensation received from issuers covered on the Internet site, Westergaaard added the required compensation disclosure to his web site. On or about April 14, 2000, after he was notified that that inquiry was closed, Westergaard deleted the amount of compensation from his disclosure. Thereafter, he continued to publish analyses of six companies for which WCI received compensation, and a seventh that had agreed to pay in the future.

Simultaneously with the filing of the Complaint, Westergaard.com, Inc. and Westergaard Broadcasting Network, Inc. settled the charges against them by consenting, without admitting or denying the Commission's allegations, to the entry of an order permanently enjoining them from violating Section 17(b) of the Securities Act.

As to John Westergaard, the Complaint seeks a permanent injunction against violations of Section 17(b) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and civil penalties.

http://www.sec.gov/litigation/litreleases/lr16842.htm


Modified:12/27/2000