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 | From November 9 through 12, 1999, the defendants accumulated large
blocks of stock in NEI Webworld, Inc. (NEIP), for pennies per share.
NEIP, formerly a Dallas, Texas-based commercial printer, was in
bankruptcy liquidation and had no assets or business operations. During
the weeks before the defendants began accumulating NEIP there was
virtually no market activity in the company's common stock.
| Beginning on the afternoon of Friday, November 12, and continuing
through the weekend, the defendants used public access computers at a
University of California at Los Angeles library to create numerous
accounts with Internet message board services.
| Commencing on Friday evening, shortly following the final purchases
of NEIP stock by each of the defendants, and continuing throughout the
weekend, the defendants used certain of those accounts to post messages
on the Internet message boards falsely stating that the outstanding
shares of NEIP would be acquired by LGC Wireless, Inc., a privately-held
telecommunications company. One widely circulated message described the
acquisition and predicted that NEIP would be "a fast mover" with a
target price of "$5-10" per share. Other of the accounts were used to
post what appear to be comments by third parties discussing the
acquisition.
| In fact, there were never any discussions between NEIP and LGC
Wireless.
| The defendants' Internet postings caused investors to order NEIP
stock over the weekend of November 13-14. As a result, NEIP stock, which
closed at a price of $.13 on Friday, November 12, opened at a price of
$8 per share on Monday, November 15, and rose to a high of over $15 per
share that morning during the first hour of trading, before the price
declined precipitously.
| The defendants sold their positions in NEIP on Monday the
15th, realizing approximately $364,000 in profits.
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The Commission's action also seeks preliminary and permanent injunctive relief, disgorgement of illegal proceeds with prejudgment interest, and civil money penalties based upon the defendants' alleged violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The Commission is grateful for the able assistance of NASD Regulation, Inc. in this matter.
http://www.sec.gov/litigation/litreleases/lr16391.htm
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Modified:12/15/1999 |