EConnect, CEO Could Face Added SEC Charges

EConnect Inc. and its chief executive, who were charged Thursday with securities fraud by regulators, could face additional charges, an official at the Securities and Exchange Commission said Friday.

EConnect and Thomas S. Hughes, its chairman and chief executive, consented to a temporary restraining order sought by the SEC and issued by U.S. District Judge Margaret Morrow on Friday. The court action could result in stiffer sanctions if the company commits securities fraud in the future.

“The court’s order allows the SEC to continue gathering evidence which could result in additional charges,” said Lisa Gok, assistant western regional director of the SEC.

The SEC’s civil fraud suit alleges that EConnect falsely claimed in news releases over the Internet that the company and a joint venture partner had a unique licensing arrangement with Palm Inc., maker of hand-held electronic organizers. Hughes, 52, was also charged.

The suit was the SEC’s second move against EConnect this month. On March 13, the agency halted trading in the stock for two weeks, citing questions about the accuracy of its news releases.

Neither Hughes nor other company executives were available for comment.

The trading halt expired at 11:59 p.m. Friday.

The San Pedro-based company’s shares have attracted intense interest from investors.

EConnect distributed its news releases electronically and posted them on Ragingbull.com, causing the company’s stock to rise as high as $21.88 on March 9 from $1.39 on Feb. 28, the SEC contended.