Three Charged in Phone Stock Scam
Friday, July 28, 2006
Federal prosecutors yesterday filed criminal charges against three people who allegedly preyed on unsuspecting investors with voice mail messages disguised as confidential stock tips left on the wrong answering machine.
At the same time, the Securities and Exchange Commission lodged civil fraud charges against the trio, who authorities say stood at the center of a plot to drum up interest in six thinly traded stocks by using a previously unknown method known as "vice mail."
The phone messages, which reached hundreds of thousands of households from July 25, 2004, to Aug. 18, 2004, apparently had the desired effect, securities officials said. The trading volume of the six stocks at issue rose by 1,500 percent, and their market capitalization grew by $179 million, according to the SEC complaint. In all, more than 1,700 people from 43 states and the District called regulators with concerns about the phone messages when they were broadcast two years ago.
Authorities say many of the breezy calls were recorded by Anna A. Boling of Altamonte Springs, Fla., while her former husband, Roderick L. Boling III, prodded a telemarketer to disseminate them. Along with stock promoter Jeffrey S. Mills and his company, Direct Results of Sweetwater LLC, the Bolings face multiple wire fraud, conspiracy and securities fraud charges, according to a statement by U.S. Attorney Kenneth L. Wainstein.
The lawsuits, filed in federal court in Washington yesterday, include claims that Mills and Roderick Boling traveled in August 2004 to a casino in Gulfport, Miss. There, Mills allegedly gave a blue duffel bag filled with cash to Boling, who passed along $40,000 of the funds to telemarketer Michael J. O'Grady. O'Grady, of Augusta, Ga., pleaded guilty in May 2005 to obstructing justice and agreed to assist prosecutors with the investigation.
Lawyers for Roderick Boling and Mills did not return calls. An attorney for Anna Boling declined to comment.
Roderick Boling instructed telemarketers to leave messages only on answering machines or voice mail systems and told them to never call the same number twice, the SEC lawsuit says.
The stocks in question are American Multiplexer Corp., Donini Inc., 5G Wireless Communications Inc., Innovative Food Holdings Inc., Maui General Store Inc. and Power3 Medical Products Inc. Other stock promoters not yet named in court filings also took part in the scheme, officials said. The investigation continues.
Peter H. Bresnan, deputy director of the SEC's enforcement division, said that watchdogs were able to uncover the "electronic footprints" through "careful, side-by-side analysis of phone and stock trading records."
John Reed Stark, who leads the agency's office of Internet enforcement, said the case underscored investors' responsibility to "do their homework" and "never take investment advice from a stranger."