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Buckey

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Buckey

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Re: None

Monday, 06/25/2007 10:15:21 PM

Monday, June 25, 2007 10:15:21 PM

Post# of 315
Kinda aslap on the wrist really

http://www.nj.com/business/ledger/index.ssf?/base/business-6/1182315343311910.xml&coll=1

Brian Smith was never at a loss when it came to extolling the virtues of a small public company he controlled called Digital Gas.

Then, last fall, state securities regulators sued him, alleging Smith used a variety of lies to lure investors and used their cash for his personal expenses. A judge enjoined him from putting out further news releases or providing investors with misleading information.

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But the Spring Lake resident has continued talking to investors, telling them deals and agreements are almost done and the stock will go up, according to court papers and an attorney for the state.

So yesterday, during a court hearing in Freehold, the Attorney General's Office asked a judge to throw Smith in jail.

Superior Court Judge Alexander Lehrer declined, but warned Smith to change his ways.

"I understand you feel you've done nothing wrong and you feel you have a viable company that can grow," the judge said. But, he added, "You can't go around doing business like you used to do, or I'm going to have no alternative but to do something about it."

Although Lehrer denied the state's request to jail and fine Smith, the judge told Deputy Attorney General Christopher Gerold he could refile the motion if necessary after Sept. 1.

The attorney general and state Bureau of Securities sued Digital Gas, Smith and a Canadian man in October alleging civil securities fraud. The two were accused of improperly issuing millions of shares of stock to themselves and others, then using fake news releases to inflate the price of the stock.

State officials, who along with the FBI and others seized documents at Smith's home during an October search, charged in court documents Digital Gas is nothing more than a shell company with no revenue, bank accounts or known business operations.

James Aaron, who officially became Smith's attorney earlier this month, said there were other ways for the state to accomplish its goals besides holding Smith in contempt. He did not detail those methods.

Yesterday afternoon, after the hearing, Aaron said poor record keeping and innuendo were two reasons why the case has reached this stage. He noted he may ask a judge to lift prior injunctions against Smith if information Smith provides Aaron supports such a request.

Also yesterday, the judge criticized state officials for asking him to sanction Smith's wife, Lynn, for spending $8,500 wired into her bank account from two Digital Gas shareholders for food, clothes, school tuition for her daughters and other living expenses. The state asserted her receipt of the money violated a prior freeze order.



Greg Saitz may be reached at gsaitz@starledger.com or (973) 392-7946.

Investing is for those who don't know how to trade

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