SEC target Sayre sentenced to 57 months
2009-01-07 19:25 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
by Mike Caswell
Stephen Sayre, the Los Angeles stock tout who made $1.43-million in the pump-and-dump of eConnect Inc., has been sentenced in California to 57 months in jail for securities fraud. (All figures are in U.S. dollars.) The sentencing follows a jury verdict on July 29, 2008, finding Mr. Sayre, 52, guilty of securities fraud for selling shares of eConnect after he predicted a price of up to $135 for the stock.
The sentencing comes almost three years after the RCMP arrested Mr. Sayre at an east Vancouver residence on Feb. 3, 2006. The FBI had tracked him to the French West Indies and then to Vancouver. California prosecutors secured an extradition order for him on June 14, 2007.
The SEC case against Sayre
The allegations against Mr. Sayre first became public on April 7, 2000, when the U.S. Securities and Exchange Commission filed a complaint against him in the Central District of California. The SEC identified him as a Los Angeles area tree trimmer who illegally made $1.43-million "masquerading as a financial analyst." The day after it filed the complaint, the SEC secured an order freezing Mr. Sayre's assets and those of his companies, Independent Financial Reports Inc. and Silver Screen Industries Inc.
The judge that froze his assets, California District Judge Margaret Morrow, issued a finding of fact on April 8, 2000, in which she agreed with many of the SEC's allegations. She found that Mr. Sayre began issuing "opinions" touting eConnect on Feb. 29, 2000, after buying 96,100 shares of the company at prices between $1.42 and $1.81. His first opinion said that the stock was "currently trading at an extremely under valued $1.50 - $2.00 a share." He predicted a short-term price of $12 to $25. His opinion also stated, "IFR holds no stock ... and will not be compensated for its opinion in regard to ECNC."
After Mr. Sayre published his opinions, the stock went from $1.39 to $4.81 on volume of 16.9 million shares. "The increases in eConnect's stock price and trading volume are attributable to both a false and misleading press release issued by eConnect on February 28, 2000, and the reinforcement provided to that release by Sayre's 'opinions' issued through IFR," the judge noted.
Mr. Sayre issued further opinions on March 8, March 9 and March 10, 2000, all touting the company, the judge said. In the March 8 opinion, he said that eConnect would "easily be trading at between $100 - $135 a share within the next 9 - 12 months of trading." He again stated that he held no stock. Contrary to those representations, he had been buying and selling the stock through an account at E-Trade, Judge Morrow found. "In total, Sayre bought and sold a total of 177,300 shares of eConnect for total profits from his trading of approximately $1,404,641.85," she stated. Mr. Sayre transferred $1.33-million of that money to an account at the Bank of Montreal in Vancouver in the name of Exchange Bank and Trust.
On May 24, 2001, Judge Morrow issued a default judgment against Mr. Sayre for the eConnect scheme. She ordered the promoter and his companies to disgorge $1.02-million in illegal profits plus $75,000 in interest. She also imposed a $100,000 civil penalty.
Sayre's arrest
California prosecutors filed a criminal complaint against Mr. Sayre on April 21, 2000, and obtained a warrant for his arrest the same day. The FBI later tracked him to the French West Indies, where he had been living since the SEC launched its investigation. In a Nov. 19, 2002, phone interview with an FBI agent, Mr. Sayre admitted that he knew of the criminal case, but said he did not want to return to face charges that "were absurd," according to documents later filed in opposition to his application for release pending trial.
In 2005, he moved to Vancouver and applied to the B.C. Supreme Court to release money from the Exchange Bank and Trust account. He claimed that the BCSC had frozen it based on a "fraudulent" case brought by the the SEC. He did not succeed, and the court activity alerted California prosecutors to his presence in Vancouver. They requested his extradition.
After a surveillance operation, the RCMP located him at an address in east Vancouver and arrested him on Feb. 3, 2006. He unsuccessfully fought the extradition, and the Minister of Justice ordered him surrendered to the U.S. on June 14, 2007.
Although he received a sentence of 57 months, he will receive credit for time served awaiting that sentence. According to the Bureau of Prisons, Mr. Sayre's expected release date is Aug. 29, 2011, and he is incarcerated at the Taft Correction Institution in California. After his release, Mr. Sayre will be subject to three years of supervised release, with one of his conditions being that he not buy or sell any stocks without notifying his probation officer. Mr. Sayre has appealed the judgment and sentence, and has requested that he remain at the same prison so he can have access to his files and a law library.
The Exchange Bank & Trust account
Not mentioned in any detail in the SEC's case is the reason that Mr. Sayre arrived in Vancouver. He came here in 2005 in an attempt to claim part of the $20.2-million Exchange Bank & Trust account. It contained $1.3-million of the proceeds of his eConnect share sales, intermingled with money from other deals, including schemes run by another jailed promoter, Edward Durante, and a broker at Union Securities Ltd., Trevor Koenig. The B.C. Securities Commission had frozen the account in 2000 at the request of the U.S. Securities and Exchange Commission.
On Dec. 8, 2008, the Supreme Court of British Columbia ordered that $15.2-million of the money be given to the SEC for distribution to victims of Mr. Sayre and Mr. Durante's schemes. The remainder was given to other unidentified parties "in settlement of their valid claims" according to a BCSC news release.
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Why even bother with this guy? As far as scam artists go, he's a minuscule piker. The SEC completely missed the biggest admitted Ponzi scheme in the world (Madoff) and aided and abeted the vastly bigger Ponzi scheme known as "subprime" mortgage securitization. I guess they were too busy with this tree trimmer?
And why wasn't Mary Meeker and her fellow "dot com" "analysts" thrown in jail as well? They scammed far more money in an hour than this schmuck could have dreamed of scamming in a life time. Remember "page views", "individual click thrus", "internet doubling every 3 months", "this time it's different" and all the other bogus bullchit they used to spout on a daily basis?
The more I think about it, it's totally outrageous that Sayre was even contacted, let alone convicted. If he was wearing a bespoke suite with an Ivy League MBA like the rest of the WS scammers, he'd never have been investigated in the first place.
Posted by Ron @ 2009-01-08 11:26
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Ron: Your comments are most appropriate. It's to bad this guy wasn't working on Wall Street, he be given a raise and promoted to a Managing Director, Managing Partner or even given an executive position with some of our fine WS firms because of their stellar reputation for making money - for themselves..........screw the shareholder........
Posted by bearcat @ 2009-01-08 15:02
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