EConnect Suspect Denies Fraud Claims

A Los Angeles man accused by federal regulators of netting nearly $1.4 million from a classic “pump-and-dump” stock scheme denied the allegations in an interview Tuesday, saying he never profited from the investment opinions he published touting the shares of a tiny San Pedro Internet firm.

Stephen Sayre, who identified himself as a film producer, said he published opinions about EConnect Inc. to build a reputation for an investment advice Web site he planned to launch for a company called Independent Financial Reports Inc.

But he said he did not own a second company, Silver Screen Industries Inc., whose account the Securities and Exchange Commission alleges he used to sell EConnect shares last month. The sale generated nearly $1.4 million in profit, the SEC said in court documents.

Distributed over an electronic news release service to several Web sites, the opinions from IFR said EConnect shares were undervalued and they could be worth as much as $135 within a year.

The opinions, combined with earlier news releases from EConnect that the commission later alleged were fraudulent, helped boost the company’s share price from $1.39 on Feb. 28 to a high of $21.88 on March 9, the SEC said.

The opinions said IFR held no EConnect stock. But the SEC alleges that Sayre traded EConnect stock through an account he controlled for Silver Screen, buying and selling 177,300 shares. The SEC contends that Sayre is president, secretary and treasurer of Silver Screen, and the only officer of IFR.

The SEC accused Sayre of fraud in a civil case filed Friday in U.S. District Court in Los Angeles. A judge ordered Sayre’s assets frozen Saturday. The SEC also seeks an undetermined amount in fines against him. The SEC said it brought the charges against Sayre “to stop a classic pump-and-dump scheme.”

Sayre, who said he did not know about the SEC’s civil case against him until asked about it by a reporter Tuesday, denied the allegations.

“I don’t own Silver Screen Industries and I don’t control Silver Screen,” he said. “I was strictly advising the individual who owns that account.” He declined to name the owner of Silver Screen.

Last month, the SEC temporarily suspended trading in EConnect shares while it investigated allegedly fraudulent statements made by the company about a licensing deal with Palm Inc. Those statements, the SEC said, led to a surge in the price of EConnect shares. The company agreed last week to a permanent injunction limiting its statements, without admitting any wrongdoing.

Although the SEC identified Sayre as a tree trimmer in a statement Monday, Sayre said he once owned a tree-care business but no longer does so. The commission said Sayre was 43 and had no formal training in financial analysis. Sayre declined to discuss his age but he acknowledged that he does not hold any degrees in finance.

“Research competence is not based on getting your [National Assn. of Securities Dealers] license,” Sayre said. “That just takes somebody who can think clearly and who has studied the market.”

He said his opinions were based on months of research into publicly available information and on analyses issued by brokerages.

“I’m being accused of making the information more digestible to the general public,” Sayre said. “I’m being accused of writing a little too well.”