SEC Sues Waldron Over Trading of Shopping.com
In a nationwide crackdown on the allegedly fraudulent trading of small-company stocks, federal regulators Thursday filed 13 lawsuits, one against the Irvine brokerage suspected of inflating the shares of troubled Internet shopping service Shopping.com.
A Securities and Exchange Commission suit charged that Waldron & Co. and its former president, Cery B. Perle, illegally boosted Shopping.com shares by executing unauthorized trades for the brokerage’s clients, parking stock in fictitious customer accounts and restricting clients from selling shares in the Corona del Mar-based firm.
From November 1997 to March 1998, Waldron realized more than $4.1 million in gains from its stock fraud, the suit alleges.
Tom Fehn, an attorney for Waldron and Perle, denied any wrongdoing.
“Many of the things in the complaint are based on fabrication and fantasy,” Fehn said. “The lawsuit is based on a misguided attempt by the [SEC] staff to file something that will get in the paper.”
SEC officials said the suits are an attempt to focus attention on an increase in the fraudulent trading among “micro-cap” stocks during the recent bull market. “We wanted to send a strong message about this segment of the market,” said Richard Walker, the SEC’s director of enforcement. “The bull market has attracted a lot of unsavory types who have chosen to ‘follow the money.’ ”
The SEC alleged that 41 defendants including businesses, brokerages, promoters, and publishers manipulated stocks by falsely claiming medical breakthroughs, hotel renovations and other advances. All told, the SEC said investors were bilked of $25 million in the 13 cases, which included an alleged Ponzi scheme that cheated 350 investors of $15 million that had been put into Florida company Legend Sports Inc., which builds golf entertainment facilities.
Four of the 13 alleged frauds occurred in Florida, where the large population of retirees is considered a good target, Walker said.
In the case of Shopping.com, the SEC alleged that Waldron at one point controlled more than 90% of the company’s 1.3 million publicly traded shares.
Fehn, Waldron’s attorney, said at no point did the company restrict customers from trading or “park” stock in customers’ accounts.
The SEC has been investigating Waldron and Shopping.com since March, and continues to investigate Shopping.com, although the company was not party to the suit announced Thursday.
Since mid-August, Shopping.com stock has fallen from $25 to its close of $1 on Thursday on the largely unregulated electronic Bulletin Board market.
