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To: Jim Bishop who wrote (70226)11/7/2000 6:48:02 AM
From: StocksDATsoar  Read Replies (2) of 150063
 
Canadian Venture Exchange - Street Wire

BCSC assists ASIC's jailing of Wolverton client

Fri 3 Nov 2000 Street Wire

See B.C. Securities Commission (BCSEC) Street Wire

by Brent Mudry

Until now, Howe Street brokerages have only had the misfortune of being
used as conduits for experienced U.S. securities violators in alleged OTC
Bulletin Board stock promotions, but apparently even rookie violators from
halfway around the world are coming to do their business through Vancouver.
An Australian Internet spam touter was sent to jail for three months this
week for illegally touting Rentech Inc. in May of 1999 and splitting modest
profits of about $14,000 with his partner. (All figures are in U.S.
dollars.) Australian officials believe this is the first Internet stock
spamming prosecution in the world which has resulted in a prison term.
Steven George Hourmouzis, 23, of Donvale, Victoria, pleaded guilty to
charges brought by the Australian Securities and Investments Commission and
was sentenced to two years, including three months imprisonment by Judge
Stott in Victoria County Court earlier this week.
The judge was told that Mr. Hourmouzis used an account opened at Wolverton
Securities in Vancouver, which itself was not accused of any wrongdoing. It
is unclear how Mr. Hourmouzis chose a relatively small Canadian brokerage
so far from home to use for his touting scheme. Australian regulators
confirm Mr. Hourmouzis is believed to be a relative market rookie.
Mr. Hourmouzis's co-conspirator, Wayne John Loughnan, 38, of Cawarral,
Queensland, has pleaded not guilty.
Mr. Loughnan, a New Zealand national, appeared in a committal hearing on
Friday in magistrate's court, similar to a preliminary hearing in Canada,
in which prosecutors must present enough evidence to satisfy a judge a
prima-facie case exists to warrant a criminal trial. No date has yet been
set for Mr. Loughnan's trial, but it is expected to be in the middle of
next year.
While Mr. Hourmouzis's jail sentence may surprise market followers in
Canada, where convicted veteran securities violators usually get a judge's
slap-on-the-wrist conditional discharge or an electronic monitoring anklet
at worst, Australian officials hope the case sends a strong message to
Internet touters in that country.
"The message is that a judge found this serious enough to warrant a term of
imprisonment," Jamie Orchard, the ASIC's Victorian Director of Enforcement,
told Stockwatch.
Mr. Orchard confirms the British Columbia Securities Commission was of
great assistance to the ASIC and the U.S. Securities and Exchange
Commission in their investigations of the case. "They were very helpful and
co-operative," he says.
ASIC and SEC officials claim Mr. Hourmouzis and Mr. Loughnan sent six to
seven million unsolicited and masked E-mails over a three-day period
touting Rentech, and touted the stock over 10 different chat-site message
boards. The orchestrated touting campaign more than doubled Rentech's share
price on a 16-fold increase in trading volume.
In its 10-page civil complaint filed in the U.S. District Court for the
District of Colorado in May, the SEC claims the Australian pair's spam and
chat-site messages contained numerous false and misleading statements,
including that analysts had predicted a 900-per-cent rise in the price of
Rentech shares over the next few months.
Rentech was trading at less than 50 cents a share at the time and faced a
pending delisting from the Nasdaq SmallCap Market. Rentech, a Denver
company, develops, markets and licenses patented technology for the
conversion of natural gases, liquids and solids into fuels, related
products and chemicals.
The stock subsequently traded on the OTC Bulletin Board until gaining a
listing on the American Stock Exchange on April 4.
The SEC claims Mr. Hourmouzis and Mr. Loughnan specifically targeted U.S.
investors with their spam campaign of six to seven million messages, of
which an estimated three million were delivered.
While the pair's profits were modest, their touting campaign was relatively
advanced, and even included the use of slave servers.
Mr. Hourmouzis pleaded guilty to spreading false stock information over the
Internet to induce investors to buy shares of Rentech.
In the U.S. case, the SEC also claims the pair "used various tactics to
avoid being identified as the authors and disseminators of the message:
they sent the messages through multiple Australian Internet service
providers, relayed the messages through multiple intermediary servers
(computers) belonging to various Australian entities without the knowledge
of those entities, attributed the messages to fictitious entities, and used
phony return E-mail addresses."
Mr. Hourmouzis also pleaded guilty to violating and enslaving file servers
operated by SAAB Automobile Australia, Australian Business Access, Apache
Global IT, Brisbane Internet Group, Viper Productions, OE & DR Pope, Tour
Hosts, the Department of Health and Human Services of Tasmania, the Lost
Dog's Home and Mondial Net.
The pair's "Dear Investor" messages mimicked analysts' reports and
contained substantive information about Rentech. The SEC notes the spam
messages were purportedly sent by Growth Success Strategies, on behalf of
VSP Financial, although both entities were fictitious.
In conjunction with the spam campaign, Mr. Hourmouzis and Mr. Loughnan
touted Rentech on 10 different Internet message boards maintained by Raging
Bull, Yahoo! and InsidetheWeb.com. The messages, captioned "RNTK 900%+,"
consisted of two or three sentences touting the stock, based on the poster
allegedly having done "close research" on the stock.
The Australian-based pair falsely claimed that Rentech sold patented
technology that oil and gas companies "CANNOT do without," the company had
new patented technology slated for release, Nasdaq would soon hold a
hearing on Rentech's "proposed promotion of its stock and upcoming news,"
and the 1998 stock picks of fictitious VSP Financial "generated in excess
of 980 per cent profit."
The heavy trading activity prompted Nasdaq officials to halt trading
pending an explanation from Rentech officials. The company subsequently
published a press release disavowing any association with the E-mail and
postings campaign.
The guilty pleas and prison sentence mark a setback for Internet Promotions
Pty Ltd., an Australian Internet marketer. "Headed by our managing director
Steven Hourmouzis, we have some of the most experienced promotional staff.
Steven has planned, supervised and conducted countless enormously
successful on-line and off-line promotions, as well as consulted for an
abundance of multimillion-dollar companies," states the firm on its home
page at www.site-promotion.com.
"Wayne Loughnan and Theo Schermacher similarly have worked aside some of
the most successful companies on the Internet today. Our team's experience
and dedication to creating a genuine and invaluable service is the hallmark
of our phenomenal growth rate," states Site Promotion.
"Unfortunately, the truth about site promotion is often clouded by hype
created by dishonest entrepreneurs marketing convenient yet ineffective
products," states Site Promotion. "We pride ourselves on honesty with
clients concerning the true effectiveness of tools, products and services,
and providing realistic promises supported by full guarantees."
Mr. Loughnan will get a chance to present his defence next year and explain
how he and his partner Mr. Loughnan picked a small Vancouver firm,
Wolverton, for their Rentech scheme.
(Readers wishing further details of the case, including comments from Mr.
Hourmouzis's mother, may refer to a Streetwire dated May 2.)

(c) Copyright 2000 Canjex Publishing Ltd. stockwatch.com
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