Power 3 Medical, a Woodlands, Tex., biotechnology firm, issued a statement yesterday afternoon saying "the company is not a party to any of these activities, nor approves of them." It attributed some of the recent volatility in its stock price to the fraud.
Food Innovations is a Naples, Fla., subsidiary of Innovative Food Holdings. The specialty food purveyor is led by Joe DiMaggio Jr., a relative of the late baseball star. Spokeswoman Angeline Cook said DiMaggio is "furious" about the scheme. She said the company is working with the SEC to "get to the bottom of this and find out who is doing this and why."
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Audio: Listen to a sample of one of the scam voice mail messages. (Courtesy SEC).
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Press Release: Con Artists Using "Wrong Number" Answering Machine Messages to Snare Victims in New Scam Sweeping Nation (Aug. 19, 2004)
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Wrong Number Investor Alert
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The SEC routinely polices "pump-and-dump" stock schemes, designed to fraudulently drive up the price of a stock so the perpetrator can sell at a profit. But answering-machine messages dispensing bogus inside information are a new twist, according to John R. Stark, chief of the SEC Office of Internet Enforcement.
"This is something that we've never seen before," he said. Yesterday's announcement marks the first time this year that the SEC has issued a formal alert to investors about stock fraud.
The contrived message is carefully casual. "He said it's cheap now, like 50 cents. Sorry I'm eating, but I'm starving," the phony friend says with what sounds like a mouthful of food.
Regulators have not identified who is behind the scheme. But in other cases, they have analyzed stock-trading patterns and subpoenaed phone records to track the source of the fraud. SEC officials would not discuss the investigation or confirm its existence yesterday.
Such schemes may violate the anti-fraud statutes and could result in the repayment of any profits generated as a result of the illegal activity, SEC spokesman John Nester said.
SEC officials advised anyone who receives such a message to try to capture the phone number from which the call was generated by using caller identification. The SEC also wants to know the exact time and date of the calls and the names of companies mentioned in the messages. Message recipients can share that information by sending an e-mail to enforcement@sec.gov.
Sometimes advice is worth repeating, even when it's obvious.
"You should never buy stock on the basis of a hot tip you receive, particularly if it's from a stranger," Wyderko said.
"What better spiel than the implication you've got some valuable financial information that's mistakenly passed along?" said Robert J. Stevenson, author of a book on telephone scams. "It will energize those people who are greedy, who think they will get something for nothing."
