SEC Again Cracks Down on Micro-Cap Stock Touts

The Securities and Exchange Commission Thursday continued its crackdown on stock fraud over the Internet, announcing four more enforcement actions that cite 13 people in pump-and-dump schemes and illegal stock touting.

The new cases come a week after the SEC approved regulations designed to combat micro-cap fraud by mandating disclosure by companies that sell unregistered shares and by addressing how stock promoters are paid by the companies they tout.

Thurday's enforcement actions includes a suit by the SEC brought against several individuals involved with Interactive MultiMedia Publishers of Akron, Ohio. The SEC charges that Joseph Vertucci, Interactive's president and chief executive, worked in conjunction with Bruce Straughn, a former broker for La Jolla Capital in Chicago, and others to inflate the price of IMP stock, then sell the shares they owned. The strategy is known as pumping and dumping.

Interestingly, IMP isn't even a real company, according to the SEC. Rather, it simply took the identity of a defunct public company, Fujacorp and began selling securities using Fujacorp as a shell. The complaint also names brokers and stock promoters in Texas, Ohio and New Jersey who were involved with IMP.

"This was an elaborate ruse by a group that purported to be a public company," says Richard Sauer, an attorney for the SEC. Vertucci could not be reached at his home in Florida, and a message left at La Jolla Capital wasn't returned.

In addition to IMP, the SEC cited a number of stock touters, including:

• Scott Flynn, a former stockbroker who had been previously convicted of securities fraud in an unrelated matter. Flynn used spam emails and his company, Strategic Network Development, to promote about 10 public companies without disclosing that he had received about $180,000 and more than 300,000 shares from the companies, the agency said. The SEC issued a cease-and-desist order against Flynn. An attorney for Flynn didn't return a phone call.

• Hastings Communications, the operator of the Stockprofiles.com Web site. The SEC says the company was promoting stocks on its Web site without disclosing that it had been paid for its promotions. Hastings simultaneously settled the order, without admitting to or denying guilt, and agreed to cease and desist from further violation. A phone call to Lou Andreana, who was listed by Network Solutions Interic Registration Services as a contact for Hastings Communications in Fort Lauderdale, Fla., didn't return phone calls.

• RCG Capital Markets Group of Phoenix, which also operates a Web site that features stock promotions. In seeking its cease-and-desist order, the SEC alleges that RCG touted the stocks of nine companies between November and January without properly disclosing it had received cash and stocks for its efforts. Max Ramras, RCG's president, chief executive and sole shareholder, didn't return a phone call.

Earlier this year, the SEC suspended trading in six bulletin-board stocks, citing concerns over information that had been disseminated publicly about the companies, especially on the Internet. And late last year, the SEC brought stock touting and fraud allegations against 44 individuals in 23 separate cases, after its first ever sweep of the Internet to uncover micro-cap stock manipulation.

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