Tuesday, February 8, 2005

Government Files Civil and Criminal Market Manipulation Charges

The SEC and the U.S. Attorney's Office for the Central District of California (Los Angeles) announced on Feb. 7 the filing of criminal and civil charges against Courtney D. Smith, an investment advisor who wrote the well-known market newsletter Wall Street Winners (company website here).  According to the Litigation Release issued by the SEC, Smith received approximately $1.1 million in cash and stock that was funneled through his girlfriend's small vitamin exporting company to tout the shares of GenesisIntermedia, Inc. (GENI), a now defunct public company:

The Commission alleges that Smith assisted GENI's Chief Executive Officer and his accomplice (a Saudi Arabian national reputed to be an international arms dealer and financier) in a fraudulent stock manipulation and lending scheme that occurred between September 1999 and September 2001. According to the complaint, GENI's CEO secretly paid Smith approximately $1.1 million in cash and GENI stock to tout GENI shares on television. Smith's public statements, many of which were false or misleading, artificially inflated the price of GENI shares and facilitated the misappropriation of approximately $130 million by GENI's CEO and his accomplice.

The SEC's complaint is here, and a copy of the criminal filing will be posted when it is available. (ph)

                                                                         

UPDATE: A press release issued by the U.S. Attorney's Office describes the criminal charges: "The indictment charges Smith with conspiring with a high-ranking officer and substantial shareholder of GENI to violate the securities laws through his paid promotion of the stock. Smith is also charged with eight substantive counts of violating federal securities laws for failing to disclose the payments he received for promoting GENI on television. If he is convicted of the nine counts in the indictment, Smith faces a maximum possible sentence of 45 years in federal prison."

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Civil Enforcement, Prosecutions, Securities | Permalink

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