George Speranza, an independent consultant hired by Spongetech to market its products, copped to one count of perjury in May, admitting to prosecutors that he lied during a U.S. Securities and Exchange Commission investigation about helping the soap-filled sponge maker mislead shareholders with fake client websites.
Speranza faced up to five years in prison, but asked for leniency, calling himself an “unwitting dupe” in the company’s fraud. Spongetech hired him to set up virtual offices for supposed supplier-customers, but he didn’t know at the time the clients were all bogus, Speranza said.
"Mr. Speranza is relieved to have this ordeal behind him, and thankful to the court's understanding of his limited role in the Spongetech affair," his attorney, Richard Rosenberg, told Law360 on Monday. "It was never his intention to mislead investors or contribute to any fraudulent scheme."
The SEC and the U.S. Department of Justice filed parallel suits in May 2010 against Spongetech CEO Michael Metter and senior executive Steven Moskowitz, saying they touted millions of dollars in bogus sales orders to a handful of customers who never existed in order to drive up stock demand.
Prosecutors say Metter, Moskowitz and Spongetech flooded the market with the false information to fraudulently inflate the stock price, and later dumped about 2 1/2 billion shares by illegally selling them to the public through affiliated entities in unregistered transactions.
The company produced phony sales documents in an attempt to legitimize the make-believe customers it hyped to the public, and exaggerated sales figures through bogus press releases and fraudulent regulatory filings, according to court documents.
Spongetech officers then spent portions of their illicit profits in highly visible sponsorship deals with professional sports teams to further create the aura that Spongetech was a well-known and prosperous business, according to the DOJ.
Speranza said Moskowitz handed him a list of suppliers and asked him to set up websites where shareholders could contact them, on the pretense that the companies were being inundated with investor calls.
Speranza oversaw the website designs, using the company’s existing foreign supplier websites as a template and replacing the company names with the new supplier list given to him by Moskowitz, he said.
Speranza used his own identity to establish the virtual offices, unaware of the true purpose Spongetech had in wanting the websites set up, he said.
