Tuesday, July 19, 2005

Beware the "Misdirected" Fax

Similar to the scam that involved leaving fake "misdirected" voicemail messages touting a stock, three defendants were charged criminally and civilly with sending out hundreds of thousands of faxes addressed to one "Dr. Mitchel" urging the purchase of penny stocks.  Joshua Yafa's part of the scheme involved a company called AVL Global, Inc., and after sending the fax Yafa sold shares in the company for a profit of $300,000 when the price rose.  Proving that imitation is truly the sincerest form of flattery (and that there's no honor among thieves, as long as I'm throwing out aphorisms), Michael Pickens received one of the faxes and recognized for what it was.  He then put the names of three different companies on the fax and resent them to almost a million recipients, then selling the shares to reap his own profits of over $300,000.  Pickens was assisted by Serafin  Sierra, whose company handled the "blast" copycat faxing for him.  The SEC Litigation Release (here) describes the claims against the three defendants.  Like any good B-School teaches its students, take the best practices from a competitor and make them your own, in this case taking advantage of the greed of others. (ph)

                                                                                                         

UPDATE (7/19) What's In a Name:  A Wall Street Journal article (here) about the "misdirected" fax scam points out that Michael Pickens is the son of famed 1980s corporate raider T. Boone Pickens, whose hostile offer for Unocal in 1985 became the cornerstone precedent  in Delaware for reviewing hostile tender offer defenses in Delaware (Unocal v. Mesa Petroleum, 493 A.2d 946 (Del. 1985)).  The article also notes that faxes reached two SEC offices, which is not a great idea for conducting an investment scam.  (ph)

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Civil Enforcement, Fraud, Securities | Permalink

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