SEC suit says firm made up stock tips

Local publisher allegedly lied to gain Web client

April 17, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

The Securities and Exchange Commission has charged Agora Inc., a Baltimore financial information publisher, with defrauding readers of its Internet newsletters by selling them false insider information for $1,000.

The civil complaint, filed last week in U.S. District Court in Baltimore, alleges that Agora Inc.'s newsletters "contain nothing more than baseless speculation and outright lies, fabricated to induce investors to pay Agora (or its subsidiaries) for subscriptions or purported inside information."

Agora's lawyer claimed yesterday that the SEC's lawsuit is "retaliation" for a suit the company filed against the agency last year.

The SEC asked the court to order Agora to stop making false statements in its newsletters and return profits estimated to be more than $1 million, and is seeking civil monetary penalties, said Ken Israel, an SEC attorney familiar with the case.

"We have filed a number of these in recent years, mainly against Internet newsletters that promote stocks," Israel said.

Agora Inc., founded in 1979, employs 200 people in Mount Vernon, according to its Web site. Pirate Investor LLC, an Agora subsidiary, and Frank Porter Stans-berry, an editor of two of Agora's Internet financial newsletters, also are named in the complaint.

Matthew J. Turner, Agora's general counsel, said the company will ask the court to dismiss the lawsuit because the SEC does not have jurisdiction over the company.

"We don't purchase and sell securities," Turner said.

In a written statement to The Sun yesterday, Turner said the SEC's lawsuit was a "direct response" to a previous lawsuit Agora filed against the government agency. The SEC opened an investigation into Agora in June concerning the sale of a financial report by its affiliate, Pirate Investor, Turner wrote.

Agora cooperated with the SEC investigation, but "drew the line" at handing over its list of subscribers, and chose to file a federal lawsuit in Baltimore to protect the disclosure of its subscriber base. The company said it had First Amendment protection under the Constitution, according to Turner's statement.

The SEC's suit is "clearly a retaliation for filing a valid First Amendment claim for a publisher protecting its subscriber base from having to be placed in the government's hands for scrutiny," Turner said yesterday.

The SEC lawsuit refers to an e-mail sent May 14 by at least 15 of Agora's Internet newsletters. The e-mail, written by Stans-berry, promised quick profits based on inside information, the complaint states. The e-mail heading read: "DOUBLE YOUR MONEY ON MAY 22ND ON THIS SUPER INSIDER TIP," the complaint states.

The e-mail claimed that analysts at had learned details of the pending approval of a major international agreement "that will create more than $2.5 billion in profits [for] one small company," the SEC's complaint said.

The e-mail did not name the company, but claimed that it was involved in nuclear energy and would benefit financially from the arms reduction treaty between the United States and Russia, the complaint states. The company's name was revealed to readers only after they bought the report for $1,000, the complaint said.

The report claimed that the company had reached an agreement with Tenex, a Russian government nuclear fuel company, to buy dismantled nuclear warheads from Tenex at a reduced rate. If readers bought stock in the company the day before the purported deal was approved by the U.S. and Russian governments, they could sell the shares afterward and reap windfall profits, the SEC alleged.

The complaint also alleged that Agora had promoted and "touted" other stocks, even after it was made aware of the SEC's investigation. One publication claimed that information provided by Agora would allow an investor to "turn $10,000 into $114,280 by April 18, 2003," the SEC said.

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