SEC Sues Telemarketers for Fraudulent "Wrong Number" Stock Tips
summary
Michael O'Grady and his companies broadcast hundreds of thousands of fraudulent 'wrong number' voicemail stock tips to inflate six microcap stocks, enabling $4.5M in illicit sales and $179M in artificial market gains, leading to a $75,786 penalty and criminal obstruction conviction, while David Whittemore and Peter Cahill ran a similar scheme touting two stocks, netting $508K in profits.
paragraph
The SEC charged Michael O'Grady and his companies, Telephone Broadcast Company and Telephony Leasing Corporation, with orchestrating a fraudulent 'wrong number' voicemail scheme that promoted six microcap stocks, artificially inflating their combined market capitalization by $179 million and facilitating $4.5 million in illicit sales. O'Grady consented to a judgment requiring $50,786 in disgorgement, a $25,000 civil penalty, and a permanent injunction, and separately pled guilty to criminal obstruction of justice. In a related scheme, David Whittemore, Whittemore Management, Peter Cahill, and Clearlake Venture Group broadcasted similar voicemails touting two microcap stocks, with Cahill selling 680,000 shares for $508,000 in proceeds, prompting the SEC to seek disgorgement, penalties, and injunctive relief against them for violating Section 10(b) and Rule 10b-5.
narrative
The SEC filed civil charges against Michael O'Grady and his companies, Telephone Broadcast Company and Telephony Leasing Corporation, for broadcasting hundreds of thousands of deceptive 'wrong number' voicemail messages designed to trick recipients into believing they had accidentally received a stock tip, primarily promoting six microcap stocks. The scheme artificially inflated the combined market capitalization of these stocks by $179 million and enabled insiders to sell approximately $4.5 million in shares through a Tampa broker-dealer, with O'Grady paid in cash from a blue duffel bag during a casino trip and personally trading in three of the touted stocks. O'Grady consented to a final judgment ordering $50,786 in disgorgement and prejudgment interest plus a $25,000 penalty, and was permanently enjoined from violating securities antifraud laws, while also pleading guilty to criminal obstruction of justice. Separately, the SEC charged David E. Whittemore, Whittemore Management, Peter Cahill, and Clearlake Venture Group with running a copycat scheme touting two microcap stocks, where Cahill sold 680,000 shares for $508,000 in proceeds while Whittemore received cash and stock payments for broadcasting the messages. The fraud exploited emerging voicemail technology to evade detection, prompting the SEC’s first public warning in August 2004, after which O'Grady temporarily halted operations. The Commission acknowledged assistance from multiple federal and state agencies and the public, and emphasized that such inventive frauds would be aggressively pursued, with investigations still ongoing against other participants, including 'Debbie,' the wife of an Altamonte Springs promoter who allegedly provided the voicemail scripts.
Classified pump-and-dump(confidence 95%). EDGAR detection: forms S-8/S-1/424B/8-K· recall 69% / precision 12%. detection rule →
Parties
Clearlake Venture GroupDavid E. Whittemorefinal judgmentPeter S. CahillSecurities and Exchange Commissionstock promoterstelephone broadcast company, llcTelephony Leasing Corporation, LLCWhittemore Management, Inc.
Keywords
wrong numbermessagessecwrongnumberfraudulent wrongo'gradystockstocksnumber stocktouted stockscommissionwhittemorebroadcastingmicrocap
Extracted insights
Dollar amounts 5
- $179.00M $179 million $100M–$1B
- $4.50M $4.5 million $1M–$10M
- $508K $508,000 $100K–$1M
- $51K $50,786 $10K–$100K
- $25K $25,000 $10K–$100K
Entities 9
- company Clearlake Venture Group
- person David E. Whittemore
- person final judgment
- person Peter S. Cahill
- agency Securities and Exchange Commission
- person stock promoters
- company telephone broadcast company, llc
- company Telephony Leasing Corporation, LLC
- company Whittemore Management, Inc.
Triples 14
- SEC Sues Telemarketers
- SEC Filed Complaint
- SEC Charges Michael O'Grady
- SEC Charges Telephone Broadcast Company, LLC
- SEC Charges Telephony Leasing Corporation, LLC
- Stock Promoters Sold $4.5 Million of Stocks
- Scheme Inflated Market Capitalization by $179 Million
- SEC Charged David E. Whittemore
- SEC Charged Whittemore Management, Inc.
- SEC Charged Peter S. Cahill
- SEC Charged Clearlake Venture Group
- Michael O'Grady Pled Guilty To Obstruction of Justice
- Michael O'Grady Consented To Final Judgment
- Final Judgment Orders Michael O'Grady to Pay $50,786
Extracted body text (5,948c)
SEC SUES TELEMARKETERS FOR FRAUDULENT "WRONG NUMBER" STOCK TIPS FOR IMMEDIATE RELEASE 2005-70 Telemarketers Broadcast Hundreds of Thousands of Misleading Stock Tip Voicemail Messages Throughout the United States Washington, D.C., May 3, 2005 - The Securities and Exchange Commission today announced the filing of civil charges against two voicemail broadcasters and their associates for broadcasting hundreds of thousands of fraudulent "wrong number" stock tip messages. The messages, which were left on telephone voicemail recording machines throughout the country, were designed to make each recipient believe the caller had dialed the number by mistake. Many of the messages were left by a woman calling herself "Debbie," and sounded as if she had misdialed when calling a friend to pass along a hot stock tip. The SEC filed a complaint in the District of Columbia that charges Michael O'Grady and two affiliated Augusta, Ga.-based telemarketing companies, Telephone Broadcast Company, LLC and Telephony Leasing Corporation, LLC, with broadcasting "wrong number" touts of at least six microcap stocks. The complaint alleges that the messages were part of a larger scheme enabling Houston-based stock promoters to sell approximately $4.5 million of one of the touted stocks through a Tampa, Fla.-based broker-dealer. The scheme drove up the price of each of the touted stocks, temporarily inflating their combined market capitalization by approximately $179 million. In a separate complaint, the SEC charged David E. Whittemore of Dallas, Texas, and his privately-held corporation Whittemore Management, Inc., with broadcasting hundreds of thousands of similar fraudulent "wrong number" voicemail messages in a copycat scheme involving two microcap stocks. Also charged in that complaint were Peter S. Cahill of Houston, Texas, and Clearlake Venture Group, an entity Cahill controls. "This 'wrong number' scam is the first of its kind to hit the microcap market and it generated more complaints from the public than any other microcap fraud in recent memory," noted Peter H. Bresnan, Associate Director of the Division of Enforcement. "The cases filed today demonstrate that even when fraudsters are resourceful and inventive in misusing new technologies, the Commission can be equally resourceful and inventive when it comes to tracking them down and stopping them." "These actions are a clear signal that the Commission is fully committed to the vigorous prosecution of those involved in the manipulation of the microcap market," commented John Reed Stark, Chief of the SEC's Office of Internet Enforcement. "Those who harm investors through greed-driven frauds like this 'vicemail' scheme will be found, and they will be punished." Without admitting or denying the allegations made by the Commission, O'Grady consented to a final judgment ordering him to pay $50,786 in disgorgement and prejudgment interest and a $25,000 penalty. In addition, O'Grady and his companies consented to being permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC's action against O'Grady was brought contemporaneously with a related action by the U. S. Attorney's Office for the District of Columbia in which O'Grady pled guilty to one count of a criminal information charging him with obstruction of justice. The SEC's complaint against O'Grady alleges that he was paid for broadcasting the messages in cash taken from a blue duffel bag during a trip to a Gulfport, Miss., casino and that he also used his knowledge of the campaign to profit by trading in three of the touted stocks. The complaint also alleges that "Debbie" is the wife of an Altamonte Springs, Fla.-based promoter who hired O'Grady and his companies to broadcast the messages. In the actions against Whittemore, WMI, Cahill and Clearlake, the Commission seeks permanent injunctive relief, disgorgement of illegal profits with prejudgment interest, and civil monetary penalties based on the defendants' alleged violations of the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Whittemore and WMI's alleged aiding and abetting of those violations. The SEC alleges that Cahill and Clearlake hired Whittemore to broadcast messages touting one of the companies. According to the complaint, Whittemore received cash and stock payments for broadcasting the messages while Cahill sold approximately 680,000 shares of one of the touted stocks while the messages were being broadcast, generating proceeds of $508,000. The Commission first cautioned the public about these and similar messages touting small, thinly traded stocks, commonly known as "microcap" stocks, in an August 2004 Investor Alert, after which O'Grady and his companies stopped broadcasting the messages. The Commission would like to acknowledge the assistance of the United States Attorney for the District of Columbia, the Washington Division of the U.S. Postal Inspection Service, NASD, the Division of Securities of the Wisconsin Department of Financial Institutions, and the many members of the public who responded to the Commission's Investor Alert by sending in information about the "wrong number" messages they had received. The Commission's investigation is continuing. The SEC's investor alert is at http://www.sec.gov/investor/pubs/wrongnumberscam.htm. Listen to one of the "wrong number" voicemails here. Read a transcript of one of the "wrong number" calls. Litigation Release SEC Complaint in this matter (Michael O'Grady, et al.) SEC Complaint in this matter (David E. Whittemore, et al.) For more information, contact Peter H. Bresnan Associate Director Division of Enforcement (202) 942-4550 John Reed Stark Chief, SEC Office of Internet Enforcement & Counselor to the Director (202) 942-4803 http://www.sec.gov/news/press/2005-70.htm Home | Previous Page Modified: 05/03/2005
OCR text (5,948c · plain-text · 99% conf)
SEC SUES TELEMARKETERS FOR FRAUDULENT "WRONG NUMBER" STOCK TIPS FOR IMMEDIATE RELEASE 2005-70 Telemarketers Broadcast Hundreds of Thousands of Misleading Stock Tip Voicemail Messages Throughout the United States Washington, D.C., May 3, 2005 - The Securities and Exchange Commission today announced the filing of civil charges against two voicemail broadcasters and their associates for broadcasting hundreds of thousands of fraudulent "wrong number" stock tip messages. The messages, which were left on telephone voicemail recording machines throughout the country, were designed to make each recipient believe the caller had dialed the number by mistake. Many of the messages were left by a woman calling herself "Debbie," and sounded as if she had misdialed when calling a friend to pass along a hot stock tip. The SEC filed a complaint in the District of Columbia that charges Michael O'Grady and two affiliated Augusta, Ga.-based telemarketing companies, Telephone Broadcast Company, LLC and Telephony Leasing Corporation, LLC, with broadcasting "wrong number" touts of at least six microcap stocks. The complaint alleges that the messages were part of a larger scheme enabling Houston-based stock promoters to sell approximately $4.5 million of one of the touted stocks through a Tampa, Fla.-based broker-dealer. The scheme drove up the price of each of the touted stocks, temporarily inflating their combined market capitalization by approximately $179 million. In a separate complaint, the SEC charged David E. Whittemore of Dallas, Texas, and his privately-held corporation Whittemore Management, Inc., with broadcasting hundreds of thousands of similar fraudulent "wrong number" voicemail messages in a copycat scheme involving two microcap stocks. Also charged in that complaint were Peter S. Cahill of Houston, Texas, and Clearlake Venture Group, an entity Cahill controls. "This 'wrong number' scam is the first of its kind to hit the microcap market and it generated more complaints from the public than any other microcap fraud in recent memory," noted Peter H. Bresnan, Associate Director of the Division of Enforcement. "The cases filed today demonstrate that even when fraudsters are resourceful and inventive in misusing new technologies, the Commission can be equally resourceful and inventive when it comes to tracking them down and stopping them." "These actions are a clear signal that the Commission is fully committed to the vigorous prosecution of those involved in the manipulation of the microcap market," commented John Reed Stark, Chief of the SEC's Office of Internet Enforcement. "Those who harm investors through greed-driven frauds like this 'vicemail' scheme will be found, and they will be punished." Without admitting or denying the allegations made by the Commission, O'Grady consented to a final judgment ordering him to pay $50,786 in disgorgement and prejudgment interest and a $25,000 penalty. In addition, O'Grady and his companies consented to being permanently enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC's action against O'Grady was brought contemporaneously with a related action by the U. S. Attorney's Office for the District of Columbia in which O'Grady pled guilty to one count of a criminal information charging him with obstruction of justice. The SEC's complaint against O'Grady alleges that he was paid for broadcasting the messages in cash taken from a blue duffel bag during a trip to a Gulfport, Miss., casino and that he also used his knowledge of the campaign to profit by trading in three of the touted stocks. The complaint also alleges that "Debbie" is the wife of an Altamonte Springs, Fla.-based promoter who hired O'Grady and his companies to broadcast the messages. In the actions against Whittemore, WMI, Cahill and Clearlake, the Commission seeks permanent injunctive relief, disgorgement of illegal profits with prejudgment interest, and civil monetary penalties based on the defendants' alleged violations of the antifraud provisions of the federal securities laws, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Whittemore and WMI's alleged aiding and abetting of those violations. The SEC alleges that Cahill and Clearlake hired Whittemore to broadcast messages touting one of the companies. According to the complaint, Whittemore received cash and stock payments for broadcasting the messages while Cahill sold approximately 680,000 shares of one of the touted stocks while the messages were being broadcast, generating proceeds of $508,000. The Commission first cautioned the public about these and similar messages touting small, thinly traded stocks, commonly known as "microcap" stocks, in an August 2004 Investor Alert, after which O'Grady and his companies stopped broadcasting the messages. The Commission would like to acknowledge the assistance of the United States Attorney for the District of Columbia, the Washington Division of the U.S. Postal Inspection Service, NASD, the Division of Securities of the Wisconsin Department of Financial Institutions, and the many members of the public who responded to the Commission's Investor Alert by sending in information about the "wrong number" messages they had received. The Commission's investigation is continuing. The SEC's investor alert is at http://www.sec.gov/investor/pubs/wrongnumberscam.htm. Listen to one of the "wrong number" voicemails here. Read a transcript of one of the "wrong number" calls. Litigation Release SEC Complaint in this matter (Michael O'Grady, et al.) SEC Complaint in this matter (David E. Whittemore, et al.) For more information, contact Peter H. Bresnan Associate Director Division of Enforcement (202) 942-4550 John Reed Stark Chief, SEC Office of Internet Enforcement & Counselor to the Director (202) 942-4803 http://www.sec.gov/news/press/2005-70.htm Home | Previous Page Modified: 05/03/2005