Digital Gas, Inc.(fka DIGGQ)

[Buckey]

9/30/09 Asbury Park Press Article

A Digital Gas official said in response to an e-mail sent by the Asbury Park Press: "This will be appealed to protect the shareholders of Digital Gas."


http://www.app.com/article/20090930/BUSINESS/909300356/1003/Spring+Lake+man+accused+of+scam

September 30, 2009

Spring Lake man accused of scam

Ordered to pay almost $5.2 million

By MICHAEL L. DIAMOND
BUSINESS WRITER

A Spring Lake man was ordered to pay almost $5.2 million in penalties and restitution for selling stock to investors in what authorities said was a penny stock scheme involving a shell company he operated.

Brian Smith, 56, was barred from the securities industry, and his wife, Lynn, was ordered to pay back $809,237 that she received through the scheme, authorities said.

"This case is another example of why investors need to carefully research company backgrounds before investing their hard-earned money," Attorney General Anne Milgram said.

Digital Gas Inc., based in Livonia, Mich., billed itself as an energy company that traded its stock over the counter, independent of any exchange. Its price could be found through the Pink Sheets quotation service, and it typically was valued at less than $1 a share.

The company beginning in 2004 issued press releases, touting agreements with other companies to use its services and provide financing. And it sold stock to at least 200 investors, promising in one case a return of 10 percent within two months of the investment, along with a stake in the company, according to court documents.

A lawsuit filed by the state in 2006, however, said Digital Gas was a shell company with no business operations, employees, corporate offices or bank accounts.

Superior Court Judge Thomas W. Cavanagh after a 10-day trial this week found:

Brian Smith sold unregistered Digital Gas securities to investors, but was not a registered agent.

Smith issued press releases that manipulated the price and demand for Digital Gas.

Brian and Lynn Smith used investor money for their personal benefit, including home improvement and mortgage expenses for their Spring Lake home.

Smith and Digital Gas were ordered to pay a total of $4.7 million in restitution. They also were ordered each pay $500,000 in civil penalties.

Digital Gas filed for Chapter 7 bankruptcy in Michigan in June 2008. But the Smiths' assets, including their home, are subject to collection by the New Jersey Bureau of Securities, the state said.

A Digital Gas official said in response to an e-mail sent by the Asbury Park Press: "This will be appealed to protect the shareholders of Digital Gas."