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OT: This is new?

Tip from SEC: don't take that call. Fake wrong number calls net millions for scammers

By PAUL WALDIE

Wednesday, May 04, 2005

From Wednesday's Globe and Mail

Next time you get a voice mail from Tara, Debbie, Jill or Kathy about a hot stock tip, think twice before calling your broker.

The message could be part of a new high-tech, pump-and-dump stock scam, according to the U.S. Securities and Exchange Commission.

Yesterday, the SEC charged a group of men with illegally driving up the share price of several small companies, including a couple in Canada, by using automatic dialling machines to send hundreds of thousands of “wrong number” voice mails. The messages were designed to sound like someone misdialled and left a message for a friend about a stock tip.

“Hi Jen, it's Tara,” one message said. “I couldn't find the number you gave me and Sandy said this was your new one, so I hope it is the right one.” The woman goes on to talk about a stock that's about to go up and adds: “My dad and I are gonna be buying a bunch tomorrow and I only told Sam and Ellen about it because it is kind of a secret. Anyway, call me [at a certain number].”

In two lawsuits involving the same alleged scam, the SEC said three men targeted eight companies and drove up their market value by $200-million (U.S.) in total. The group netted at least $5-million in profit, the commission alleged.

“It is novel,” said Peter Bresnan, associate director of enforcement at the SEC, who dubbed the scam “vice mail.”

“It is somewhat creative and these defendants were resourceful for sure. At the same time I think what the case shows is that government investigators can be equally resourceful and creative in unravelling these schemes and stopping them,” he said. “One thing that we hope this case teaches is, people will realize that they shouldn't trade based on advice from people they don't know.” He added that the SEC's investigation into the calls is continuing.

One of the company's targeted was Yap International Inc., an Internet business that is incorporated in Nevada but operates out of Vancouver. Yap's stock trades through the “pink sheet” trading system in the United States, which is used for small companies.

According to the SEC court filings, during a three-day period last summer, thousands of people received “wrong number” voice mails from “Jill” touting the stock.

“Hey Mark, it's Jill,” the message said. “Listen, honey, Gary wanted me to give you a call. Um, I just put him on a plane and he didn't have time, but he wanted me to let you know . . . remember those guys that do those stock promotions?” It went on say that Yap's share price, 68 cents at the time, was going to go up to $6 or $7 and ended with: “Bye sweetie.”

Yap's share price spiked to $1 and the average daily volume increased to 302,000 from 7,380, the SEC said in its filings. The company's market capitalization increased by $10-million during the period, the SEC alleged.

Jan Olivier, Yap's chairman and chief executive officer, said he learned about the scam last summer when his company's share price jumped. Mr. Olivier said he even received one of the voice mail messages pushing another company's stock. “This sweet lady's voice comes on,” he said with a laugh. “Oh my god, I tell you, it sounded authentic.”

Another company targeted was Donini Inc., which operates 29 Donini Pizza restaurants in Montreal and trades over the counter in the United States. In a four-day period last August, Donini's share price went from 10 cents to 30 cents and its average daily volume soared to 3.2 million from 5,250.

John Frohling, a lawyer representing Donini, said the company alerted the SEC to the unusual trading last summer. “We were concerned about this alleged activity,” Mr. Frohling said. He added that he “quizzed the people in [Donini] and I was satisfied that they weren't promoting it. [The company] didn't have any knowledge of it.”