Before YouTube was a twinkle in its founders' eyes, the CEOcast Website (www.ceocast.com1) was hosting video investment clips and e-mailing newsletters about small-cap stocks. Like a boiler room broker, CEOcast's newsletters start out talking about the market and large-cap stocks like Disney or Cisco Systems, then switch suddenly to penny stocks. You've got to read the newsletter's fine print -- or filings at the Securities and Exchange Commission -- to learn that CEOcast is shilling penny stocks in exchange for hundreds of thousands of dollars in cash and shares. But those disclosures still don't tell you what you need to know about an ersatz news site like CEOcast.
Three years back, I reported evidence that CEOcast was run by a big-time financial felon named Michael S. Wachs ("On the Internet, a Second Act2," July 28, 2003). In 1997, Wachs had pleaded guilty to diverting $20.8 million in assets as an executive at Chase Manhattan Bank. He made restitution, served 11 months in federal prison in Allenwood, Pa., and agreed to be barred from the banking and brokerage industries. As I reported, CEOcast and Wachs told me that Wachs didn't own or control the firm. Instead, ownership and control rested with a fellow named Kenneth Sgro.
