DD Support Board and Research Team

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SEC target Wall Street Capital denies wrongdoing

2011-03-02 14:20 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-FDEI) Fidelis Energy Inc
Also Street Wire (U-PGNE) Primegen Energy Corp
Also Street Wire (U-SAEI) Supatcha Resources Inc
by Mike Caswell

Wall Street Capital Funding LLC, the Florida tout service facing civil fraud charges for promoting questionable pink sheets companies, denies that it did anything wrong. In an answer filed on Feb. 28, the firm admits that it distributed promotional materials for four stocks, but it denies misleading the public.

The U.S. Securities and Exchange Commission claims that Wall Street Capital, operating as Wall Street News Alerts, issued overly optimistic stock opinions for four dubious promotions in 2009 and 2010. The examples include PrimeGen Energy Corp., a purported oil and gas explorer that had former Vancouver stock promoter William Scott Marshall as an officer. (The complaint does not name Mr. Marshall as a defendant or accuse him of any wrongdoing.)

According to the SEC, PrimeGen was a "pure scam." Its corporate headquarters was a rented mail box, its phone line was unattended and its website was a copy of another company's site. In spite of this, Wall Street Capital listed it as a "stock to watch" and touted its growing revenues.

Wall Street's answer

Wall Street Capital and the other defendants in the case filed a joint answer to the charges on Feb. 28, 2011. In it, they generally deny any wrongdoing, and ask for a trial by jury. Most of the answer contains bare denials, and says little of the defendants' side of the story.

With PrimeGen, Wall Street admits that two of its principals, defendants Phillip Cardwell and Roy Campbell, distributed materials for the company from April, 2009, to January, 2010. Wall Street also admits that it received shares of PrimeGen in exchange for promoting the stock, and that it sold shares during the promotion. The answer provides no other specifics for PrimeGen, only stating that the defendants deny any wrongdoing.

As Wall Street Capital sees it, the firm did not have a duty to investigate any of the companies it promoted. It says that a reasonable investor would not have considered such an investigation important in making an investment decision. Furthermore, any losses that investors suffered were caused by external market factors, according to the answer.

The answer also claims there is no evidence that any of the stocks mentioned in the charges were fraudulent. The SEC has allowed each one to continue trading. If investors did suffer any losses, then the SEC failed to mitigate any damages because it allowed people to continue buying shares in companies that it knew were fraudulent, the answer states.

The defendants are represented by Fort Lauderdale lawyer Jay Kim.

SEC's complaint

The SEC initially filed its suit against Wall Street Capital on Feb. 7, 2011, in the Southern District of Florida. The complaint identified Wall Street as a tout service operating from Miami. The other defendants are Mr. Cardwell, 47; Mr. Campbell, 33; and a Wall Street employee, Aaron Hume, 32.

The suit claimed that Wall Street Capital knowingly or recklessly aided in numerous penny stock scams over its 10-year existence. The complaint listed four examples, including PrimeGen Energy. According to the SEC, Wall Street Capital issued as many as 50 misleading investment opinions about PrimeGen, which it disseminated through newswires and e-mails.

A July 9, 2009, opinion listed PrimeGen as a "stock to watch" along with three widely known companies, including Exxon Mobile Corp. The SEC said that Wall Street Capital also sent out millions of spam e-mails touting PrimeGen. One, dated Dec. 15, 2009, had a header that stated, "Finally a Small Cap Company worth looking at!" It then repeated the company's claims about having revenue-producing wells in Russia and advised investors to "Think about getting in on this explosive stock now before it takes off."

According to the complaint, Wall Street Capital continued touting PrimeGen ever after it knew that people were complaining about the accuracy of the company's news. Wall Street Capital received an e-mail on Sept. 17, 2009, which stated there were serious concerns PrimeGen was acting fraudulently. The SEC said Wall Street Capital ignored the problem. "Even when they have ample warning signs that a scam is afoot, Defendants always do the same thing: they close their eyes and publish," the complaint read.

While the SEC only named four stocks in the complaint (the other three were Supatcha Resources Inc., Fidelis Energy Inc. and Caliber Energy Inc.), it said that Wall Street Capital had been promoting stocks for 10 years. In that time it had disseminated misinformation for hundreds of companies, the complaint stated.

The SEC sought penny stock bans, disgorgement of ill-gotten gains and appropriate civil penalties.

William Scott Marshall

Of the four stocks that the SEC mentioned, three have links to Mr. Marshall. He was an officer of PrimeGen and Fidelis in 2007. Another, Supatcha Resources, listed him as a director in December, 2010.

In 2004 the RCMP investigated Mr. Marshall for his role with an OTC Bulletin Board company, Silver Star Energy Inc. According to a warrant obtained to search the company's office, he and five others had run the company as a pump-and-dump. While the search made many headlines, it did not lead to any charges.

Mr. Marshall left town in 2007, after somebody shot at his Shaughnessy home.


Thanks to scion for the links to the updated court dockets regarding this case:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=60505598

http://investorshub.advfn.com/boards/replies.aspx?msg=60505598