Spongetech Delivery Systems, Inc. (fka SPNGQ)

[scion]

Cavanagh, Chachas, and defendant William Levy, USM's legal counsel, worked out a reverse stock acquisition, whereby Curbstone would acquire WTS, and WTS's management would replace Curbstone's.4 The resulting merged entity was to be renamed Electro-Optical Systems Corporation ("EOSC").

Police Look Into Business Dealings of 2 Slain Stock Promoters

By IVER PETERSON
Published: October 28, 1999
http://www.nytimes.com/1999/10/28/nyregion/police-look-into-business-dealings-of-2-slain-stock-promoters.html

COLTS NECK, N.J., Oct. 27 — The two partners in an Internet stock promotion operation who were found shot to death on Tuesday inside a mansion here were linked to ''shady'' business dealings and may have been killed to be silenced, the Monmouth County Prosecutor said today.

One victim, Albert Alain Chalem, 41, who lived in the mansion in this wealthy suburb, had worked for the brokerage A. S. Goldmen, which was indicted in July in New York on several charges of stock manipulation and illegal trading; the firm has denied the charges. The other victim, Maier Lehmann, 37, of Woodmere, N.Y., paid $630,000 in penalties and refunds to investors last year to settle a regulatory complaint accusing him of fraud and securities registration violations. The case remains under criminal investigation by Federal prosecutors.

The two men, shot execution style, were found on the marble floor of the foyer of the $1.1 million home by two friends of Mr. Chalem's at 1 A.M. Tuesday. Mr. Lehmann apparently died of a single shot, while Mr. Chalem was shot several times, suggesting that he had tried to get up after being shot. Cell phones belonging to the two men were lying nearby, and are being analyzed.

The house was otherwise undisturbed, and money has been dismissed as a direct motive.

''If someone swindles you out of money, what you want is your money back,'' John Kaye, the County Prosecutor, said. ''You don't murder them, because then you don't get your money and you get caught. So my operating belief is that there was something more here. It was probably related to the victims' business activities, and the killer or killers feared something else more than the loss of money.''

Mr. Kaye called the two men's business practices ''shady'' but said investigators did not know of any illegal operations involving the Web site the men maintained. That site, www.stockinvestor.com, that provided free stock quotes but also recommended that investors buy certain small and obscure stocks, known as penny stocks. Just a little buying or selling can cause big changes in such stocks' prices, which is why the number of Web sites devoted to them has soared, despite warnings from securities regulators that many of these sites are vehicles for stock fraud.

Aggressive penny stock promotions have been a chronic problem for regulators for more than a decade, and have proliferated during the current stock market boom. But until the last few years, these cases have rarely involved violence or threats of violence.

Investigators spent today hauling away vanloads of evidence from the mansion, including paper files and computers. The computer hard drives have been sent to the New Jersey State Police laboratories for analysis and duplication, Mr. Kaye said, and Federal investigators, including officials from securities law enforcement agencies, are helping to sift the financial records taken from the house. No weapon was recovered, said Chief Kevin A. Sauter of the Colts Neck Police Department.

Investigators appeared to be focusing on Mr. Chalem, if only because the slayings took place at his home. But given his involvement in a case under criminal investigation, Mr. Lehman may also have had knowledge that would have made someone want to silence him, Mr. Kaye said.

''We have lots of evidence and lots of leads and lots of suspects, because lots of people didn't like these people,'' he said.

Securities and Exchange Commission records give Mr. Lehmann's wife's name as Tamar, and a phone number for a Tammy Lehmann is listed in Woodmere, N.Y. The number was connected to a fax machine.

Mr. Chalem is listed in his most recent regulatory filing as living in East Hampton, N.Y., at 20 Cross Highway, but Chief Sauter said the broker had moved to Colts Neck in the spring.

The white brick mansion sits on about 10 acres on Blue Bell Lane, with a circular drive surrounding a fountain. It was bought in the spring for $1.1 million by Russell Candela, of Brooklyn, who is the father of Mr. Chalem's girlfriend, Kimberly Scarola, 39.

Ms. Scarola, who lived with Mr. Chalem, was in Florida when the shootings took place, the prosecutor said, and returned to New Jersey today and was questioned.

Mr. Kaye said the two men's Internet site was listed in Web registration documents as having its headquarters in Panama City. But the site's administrative contact was listed as Moos Gabor, with a Budapest telephone number.

''They did stock promotion over the Internet and in mass mailings,'' Mr. Kaye said. ''A lot of these things involve stocks worth around $5 and a lot of them violate S.E.C. rules.''

Stockinvestor's site today offered two stocks, apparently technology-related, that sold for less than $10 a share. Penny stock operations have proliferated in New York, New Jersey and Florida.

Mr. Chalem and Mr. Lehmann had been involved in the seamier side of the securities business, according to regulatory records.

From 1994 through early 1996, Mr. Chalem worked for A. S. Goldmen, a now defunct brokerage firm, according to records maintained by Federal and state securities regulators. Goldmen, which specialized in selling tiny stocks to unsophisticated investors, has a long history of regulatory and legal problems.

In July, the firm, which had offices in Iselin, N.J., as well as in Florida and New York, was indicted along with its owners and more than two dozen brokers by a Manhattan grand jury. Robert M. Morgenthau, the Manhattan District Attorney, said the firm and its employees manipulated stocks, lied to investors, forged documents and made unauthorized trades; lawyers for the firm have denied the charges.

Last spring, Mr. Lehmann, without admitting or denying the charges, agreed to settle a separate complaint by the S.E.C. involving a company called Electro Optical Systems. According to the commission, he was one of a large group of people who conspired to inflate the price of the fledgling company's stock by promoting it on the Internet and by issuing false press releases about it; investors lost about $10 million in the scheme, according to the S.E.C.

http://www.nytimes.com/1999/10/28/nyregion/police-look-into-business-dealings-of-2-slain-stock-promoters.html