|SEXI GEOFFREY EITEN:|
"Companies that are still in the process of developing their businesses find it ''very difficult to get press, so they have to pay for it,'' said Geoffrey J. Eiten, who provided public relations for Systems of Excellence and another SGA client."
December 15, 1996
Stock Tipsters Praised, and Profited
By LESLIE EATON
WHEN the stock of an obscure outfit called Systems of Excellence started to jump last spring, Internet-savvy investors knew whom to thank: SGA Goldstar, an on-line tip sheet.
When the Securities and Exchange Commission discovered this fall that Systems' stock was being manipulated, it knew whom to blame: SGA Goldstar, which regulators say received shares from the company's president to promote the stock.
And now it appears that Systems was not the only company that paid SGA to praise its stock. In fact, according to the S.E.C., there were at least nine more.
Last week, the S.E.C. filed an amended complaint against SGA and its proprietors, Theodore R. Melcher Jr. and Shannon B. Terry, whom the commission had sued on Nov. 7.
The new complaint contends that since 1991, Mr. Melcher and Mr. Terry secretly received shares in companies that they wrote about, and dumped some of those shares while telling investors to buy.
SGA plans to argue that there was adequate disclosure, said Michael R. Koblenz, a lawyer who represents the newsletter and Mr. Melcher. He pointed to a disclaimer on the newsletter that said, among other things, that ''personnel associated with SGA may own shares in the companies mentioned herein or may act as consultants thereto.''
Mr. Terry made almost $350,000 selling shares of seven of the nine companies he wrote about in return for stock, according to the S.E.C.
Most of these outfits are money-losers with few or no sales, and trade on Nasdaq's bulletin board, which has no listing standards. But three trade on Nasdaq, and one on the New York Stock Exchange (albeit for less than $1 a share). Most have changed their names -- and their businesses -- within the last few years.
Companies that are still in the process of developing their businesses find it ''very difficult to get press, so they have to pay for it,'' said Geoffrey J. Eiten, who provided public relations for Systems of Excellence and another SGA client.
The nine companies listed by the S.E.C. are:
* American Bio Medica of Ancramdale, N.Y., which is trying to sell drug tests. The company did pay SGA with stock, Mr. Eiten said, but is not to blame ''if SGA did something wrong.'' The stock has fallen from $8.50 in September to about $3.50.
* Affinity Teleproductions of Tampa, Fla., now known as Affinity Entertainment, says it produces films and television shows. A spokeswoman for Affinity referred questions about SGA to William J. Bosso, the company's chief executive, who did not return a telephone call. The company's shares rose as high as $10 in June, but now trade for about $2.
* Century Technologies of Beverly Hills, Calif., which has been bought by Affinity. In filings with the S.E.C., Century said the commission staff had recommended enforcement action against it, though the problems ''are with prior management.''
* Ameriquest Technologies of Hollywood, Fla., which sells computer hardware. Richard McIntire, vice president of sales and marketing, said he was unfamiliar with SGA. The company's shares hit $1.50 in May and are now under 45 cents.
* NVID International of Sarasota, Fla., which says it has developed a nontoxic disinfectant. After SGA promoted NVID, the company did hire it briefly as a consultant, said Robert Bunte, president of NVID. The stock, which reached only 65 cents last June, now trades for 18 cents.
* Chancellor Group, which is run from Sidney, Australia. The company has or plans to be in a variety of businesses, including gas production and investment banking. The company referred questions to its president, Neil A. Green, who could not be reached for comment. The shares, which topped $7 in May, now go for $1.
* The Aimrite Holdings Corporation of Las Vegas, Nev. The company, which hopes to start producing auto suspensions early next year, was written up by SGA, said Kenneth P. Coleman, the company's chairman. ''I told them to cease and desist.'' The stock had a reverse split of 1 for 20 in May, and now trades for 62.5 cents.
* Standard Brands of America of Pompano Beach, Fla., which used to run television and appliance stores. The company said in July it might file for bankruptcy; its phone has been disconnected. A year ago its shares brushed $3; they are now about 5 cents.
* International Standards Group of Boca Raton, Fla., which in October changed its name to Total World Telecommunications. The company ''had no relationship with SGA, nor did we pay them,'' said its chairman, Joseph L. Lents, who added that other consultants paid in stock might have passed some shares on to SGA. In October, the stock had a 1-for-15 reverse split and now trades for about $7.
At Systems of Excellence, meanwhile, the new management cheered the news that the S.E.C. had added to its complaint against SGA and against Charles Huttoe, the company's former president. The S.E.C. said Mr. Huttoe had issued millions of unregistered shares to accounts he controlled and, while promoting the stock, sold off shares, making more than $12 million.
Mr. Huttoe's lawyer could not be reached for comment on Friday, but has said in the past that his client is attempting to resolve his difficulties. The new S.E.C. action seeks to freeze the assets of 21 people and firms that received some of those profits.
Correction: December 22, 1996, Sunday
An article last Sunday about SGA Goldstar, an on-line tip sheet that the Securities and Exchange Commission has accused of manipulating small-company stocks, misstated the number of those stocks that trade on the Nasdaq market. It is two, not three.