U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19505 / December 21, 2005
Securities And Exchange Commission v. Richard Glen Spradling, Case No. 1:05CV01150 (JDB) (D.D.C.) (filed December 16, 2005)
SEC Obtains Over $1.8 Million in a Final Judgment Against Stock Promoter Richard Spradling for Fraud, Illegal Touting and Scalping
On December 16, 2005, the Honorable John D. Bates of the United States District Court for the District of Columbia entered a final judgment against Richard Glen Spradling ("Spradling"), a Houston-area penny stock promoter and author of various investment newsletters and websites, including "Market News Alert" and "investmentreport.com."
In its Complaint, the Commission alleged that, through his newsletters and websites, Spradling illegally touted stocks without adequately disclosing the amount and nature of his compensation. In fact, Spradling's compensation most often came from the very companies he promoted or persons associated with the companies that he promoted. The Complaint also alleged that Spradling "scalped" stocks he promoted by selling into the demand that his newsletters and website promotions created. Specifically, the Commission's Complaint alleged that between April 2001 and September 2003, Spradling promoted more than 44 penny stock issues by faxing newsletters to hundreds of thousands of individuals. The Complaint further alleged that Spradling received compensation in the form of stock for at least 36 of the penny stocks he promoted and that he sold at least 32 of the stocks during the promotion of the stock. By his conduct, Spradling yielded net proceeds of over $1.6 million. In addition, the Commission alleged in the Complaint that Spradling falsely stated that "Market News Alert is an independent research firm with paid subscribers." In fact, the production and dissemination of each newsletter was paid for by the subject company or a related promoter and Spradling's newsletter had no paid subscribers. The Complaint also alleged that Spradling disseminated fraudulent annual revenues and revenue forecasts on behalf of at least one company.
The Final Judgment permanently enjoins Spradling from violating Section 17(b) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition, the Final Judgment orders Spradling to pay $1,893,075.83, comprised of $1.6 million in disgorgement, $173,075.83 in prejudgment interest thereon, and a $120,000 civil penalty for Spradling's violations of the federal securities laws. The Final Judgment also permanently barred Spradling from participating in any offering of penny stocks.
Additional information concerning the Commission's civil enforcement action against Spradling can be found in Litigation Release No. 19263 (June 9, 2005).