Looks like Glen Landry (NORX) got away with millions.
SEC target Dany asks judge to dismiss Norstra case
2016-06-21 10:44 ET - Street Wire
Also Street Wire (U-*SEC) U S Securities and Exchange Commission
Also Street Wire (U-NORX) Norstra Energy Inc
by Mike Caswell
Newsletter writer Eric Dany, charged for touting B.C.-linked oil explorer Norstra Energy Inc. with a misleading 8.5-billion-barrel oil figure, has asked that the judge throw the case out. He claims that he had little to do with a scheme that saw the stock go to $2.06 from 35 cents. (All figures are in U.S. dollars.) The only thing he did was accept $20,000 so that others could use his likeness in promotional materials, he says.
The U.S. Securities and Exchange Commission claims that Mr. Dany participated in a spam campaign that boosted Norstra in 2013. He arranged for materials that made "wildly optimistic" projections about the company, the SEC says. Among other things, he repeated and inflated misleading oil reserve figures, according to the regulator.
Mr. Dany, however, portrays his role in the scheme as minimal. In a motion filed in New York on Friday, June 17, he says that he was only a small part of a multimillion-dollar "investor awareness campaign." People other than him planned the campaign and distributed the related materials. The only thing that Mr. Dany did was act as an endorser, receiving $20,000 so that his likeness could be used in the campaign, his motion states.
The person running the campaign, according to Mr. Dany, was a man called William Kaitz. An offshore entity (Arista Theme Ltd.) paid Mr. Kaitz's company $3.54-million to tout the stock, Mr. Dany says. According to the motion, Mr. Kaitz arraigned e-mail and print materials, and only Mr. Kaitz had the ability to stop the campaign. As Mr. Dany tells it, he agreed to allow the campaign to use his name in the hope of expanding the readership of his two newsletters (the Mutual Fund Prospector and the Stock Prospector). He did not tout Norstra to readers of his newsletters, he says. In fact, he had no idea who would receive the materials, his motion states.
According to Mr. Dany, most of the SEC's allegations are directed toward Norstra and the company's chief executive officer, Glen Landry (who was also a defendant). If others must accept liability, then the parties who actually drafted and finalized the company's public statements should be among them, Mr. Dany says. For those reasons, Mr. Dany asks that the judge dismiss the case.
Mr. Dany's request comes just months after his co-defendant, Mr. Landry, settled out of court. He agreed to a permanent ban from penny stocks and from serving as an officer and director. He also accepted $40,659 in financial penalties, all without admitting any wrongdoing.
The small financial penalty for Mr. Landry reflected the SEC's allegation that he only made $20,000 from the scheme. The regulator separately claimed that somebody made $12.5-million selling Norstra, but so far the identity of that somebody remains a mystery. (The regulator is also pursuing Vancouver-linked Panamanian brokerage Verdmont Securities Ltd. for handling the selling. Verdmont denies any wrongdoing, and that case remains outstanding.)
The charges against Mr. Dany and Mr. Landry are contained in a civil complaint that the SEC filed on June 18, 2015, in the Southern District of New York. The complaint identified Mr. Dany as a 68-year-old resident of Moline, Ill., and Mr. Landry as a 65-year-old geologist from Spokane, Wash. The SEC complained that the men published false and misleading information about Norstra between April, 2013, and June, 2013.
With Mr. Landry, the SEC said that he released a report stating that Norstra had 16.7 million barrels of original oil in place. He distributed the initial misleading figure, and continued to do so even after the geologist who calculated the oil in place expressed concerns about it, the complaint stated. According to the SEC, the company failed to disclose that the amount of recoverable oil was substantially lower.
Meanwhile Mr. Dany arranged a spam campaign that touted Norstra, the SEC claimed. According to the complaint, the spam recommended that investors buy the company based on projections that had no basis in reality. Among other things, the messages proclaimed that Norstra "could be sitting on top of as much as 8.5 billion barrels of oil!"
As this material went out, the stock was steadily rising. The company traded at 35 cents on March 5, 2013, when Mr. Landry became Norstra's president. By June 6, 2013, it was at $2.06. The SEC halted Norstra three weeks later, citing concerns about the accuracy of its disclosures. The stock has since fallen considerably, and was last at 0.01 cent.
The SEC is seeking an appropriate civil penalty for Mr. Dany.
