Tag Archives: SpongeTech

This should put an end to SpongeTech’s suit against Teri Buhl

UPDATE: Metter has been arrested, along with the lawyers he used to issue his phony documents, and an international manhunt is underway for the PR firm that collaborated with him. Perhaps they should look in Dubai?

SEC charges WGCH’s Michael Metter with penny stock pump and dump scam. This was, I believe, the story that got Teri fired from Greenwich Time.[Teri Buhl has written that this isn’t so – of course, since she still doesn’t know why she was fired, I choose to believe she was fired for offending someone and Metter, the fat bully, is as good a candidate as any].  Here at FWIW we’ve encouraged Teri to write what she likes and I hope we’ll have her report on this soon. In the meantime, here’s to you, Greenwich Time.

Washington D.C., May 5th 2010 — The Securities and Exchange Commission today charged New York City-based Spongetech Delivery Systems Inc., an affiliate, and five people involved in a massive pump-and-dump scheme that deceived investors into believing they were buying stock in a highly successful company.

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–>The SEC alleges that Spongetech CEO Michael Metter and another senior executive, Steven Moskowitz, hyped fictional customers and grossly exaggerated sales figures through dozens of bogus press releases and fraudulent SEC filings to pump up demand for stock in Spongetech, a company that sells soap-filled sponges. After flooding the market with the false information to fraudulently inflate the stock price, Metter, Moskowitz, and Spongetech dumped approximately 2.5 billion shares by illegally selling them to the public through affiliated entities in unregistered transactions. They 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.

The SEC suspended trading in Spongetech stock on Oct. 5, 2009, due to questions about the accuracy of the company’s press releases and SEC filings. In today’s enforcement action, Spongetech is accused of obstructing the SEC’s investigation by producing phony sales documents in an attempt to legitimize the make-believe customers it hyped to the public. The U.S. Attorney’s Office for the Eastern District of New York today announced a parallel criminal action in the matter.

“Spongetech used a menu of manipulative strategies to perpetuate this scheme, including fake sales orders and public statements as well as obstruction of the SEC’s investigation,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “We will utilize all available means, including referral to criminal authorities, to prosecute those who attempt to thwart our investigations.”

Christopher Conte, Associate Director of the SEC’s Division of Enforcement, added, “Investors were deceived into believing that Spongetech was a successful business, while Spongetech and its senior executives were illegally dumping shares into the market.”

Two of Spongetech’s former attorneys — Jack Halperin and Joel Pensley — and stock promoter George Speranza are also charged in the SEC’s complaint, which was filed in U.S. District Court for the Eastern District of New York. RM Enterprises International Inc., an affiliate through which Spongetech dumped shares, is also charged.

According to the SEC’s complaint, after several years of relatively little business with a single customer comprising the bulk of Spongetech’s limited sales, Metter and Moskowitz began to paint a more promising and misleading picture of Spongetech’s business. Beginning in approximately April 2007, Spongetech issued dozens of phony press releases touting increasingly larger, yet fictitious, sales orders and revenue. The press releases fraudulently exaggerated the demand for pre-soaped sponges by referencing millions of dollars in sales orders, business, and revenue from five primary customers that purportedly accounted for 99 percent of Spongetech’s business, yet none of those customers actually existed.

The SEC’s complaint alleges that Metter, Moskowitz, Spongetech, and RM Enterprises used false and baseless attorney opinion letters by Pensley and Halperin to distribute shares of Spongetech to the public. Metter, Moskowitz, and Spongetech also used false and misleading attorney opinion letters — forged in Pensley’s name and in the name of a fictitious lawyer, David Bomart — which were transmitted to Spongetech’s transfer agents. The SEC further alleges that Speranza created websites and rented unoccupied office space for the fictional customers in an attempt to legitimize them.

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WGCH and Sponge Bob’s Metter

More on phoney sales order rumors. Standard operating procedure for penny stocks is the false claim of huge new orders, which never materialize, from the likes of CVS and Walmart. So this sounds familiar.

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One more shot at Greenwich’s Sponge Bob Kid and then I’ll quit

Until further developments anyway. Here’s Roddy Boyd’s Slate piece from September 2009 that set this off. Its 5 pages, all worth reading, but I especially love this part:

If someone really is buying all of these sponges abroad—despite a marketing effort that is 100 percent focused on the American consumer—the company is stretching out their payment cycle way past the standard 30-day, or even 90-day, cycle. Spongetech is not General Dynamics (GD) or Intel (INTC), so it can’t access overnight funding markets when its customers’ checks are caught in the mail.

I called and e-mailed the company and its public relations firms—Lippert Heilshorn, which resigned from the account late last week, and the Dilenschneider Group—and heard back only from Dilenschneider’s Andrew Osterland. Via e-mail, he said Spongetech’s lawyers retained his firm only to help with one press release and to address the concerns raised in the New York Post stories. An e-mail was also sent to Steven Moskowitz, the company’s CFO, but no substantive reply has been received.

So, since I live near Spongetech CEO Michael Metter, I stopped by his lovely Greenwich, Conn. house on Saturday afternoon for an impromptu chat. A gruff, bald fiftysomething man came to the door and insisted that Michael Metter was not home. When I showed him a picture of Michael Metter I had printed from the Internet and pointed out that he looked almost identical, he became irritated. He refused to answer questions about the SEC investigation, the Post articles, or Michael Metter’s background as the head of a penny-stock boiler room, insisting that “Metter is not going to do any interviews.”

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WGCH and Mr. Metter

A reader thoughtfully points out that non-financial-scandal types might not be acquainted with our local Sponge Bob Kid and his penny stock. I did link to some of that information, but here (some of) it is again: (Note: stock is down to below a nickel since this article appeared)

The company has been making announcements lately that are quite beyond our comprehension. First they announced a television spot that will be viewed by 14 million homes. Then something about being featured in over 900 environmentally friendly magazines. In May, they announcied they received large orders to be shipped later in the year. One order was for $1.5 million and another for $3 million.

What is beyond our comprehension about these announcements is how do they intend to accomplish any of these things when they have no money? According to their latest SEC filing this company has $3,477 (three thousand four hundred seventy seven) dollars in the bank. That doesn’t even pay a month’s rent in a manhattan office.

They originally had incorporated under the name Romantic Scents, Inc. They have had several name changes and business model changes as well. In their 8 years of operations they have never made so much as a dime in profits, and have accumulated a deficit of approximately 3.4 million dollars.

Yet in spite of their operating inefficiencies management finds it perfectly appropriate to pay themselves salaries that exceed the entire revenues of the company. During their Fiscal year 2005, the company’s entire revenue was $1,051 (one thousand fifty one)/ Yet, the three top directors recieved salaries of over $490,000 each.

What is even more odd is that their salaries were in Common Stock that they valued at $0.15. When you receive salary in stock you have a tax liability that you must pay. We estimate the officers will owe $250,000 each yet have not received any actual money as compensation. (I will not be submitting my resume to work as an exec at this company.)

The company has 37 million shares outstanding which puts the total valuation market valuation with the stock at $0.19 about 7.5 million. This valuation is not too high. But given their historical lack of a business, current lack of assets, and lack of taste with their latest video it still looks high to us.

They have not announced any new financings. Quite frankly, we cannot imagine how a company with $297,000 in currently due liabilities and $3,000 in the bank can possibly finance these alleged large orders.

Further, if they did receive orders of the magnitude that they claimed in their recent press releases, that is a material event. An event as such requires a form 8-k to be filed with SEC. As yet the company has not done so.

As much as we enjoyed the video and hot press releases coming out of this company we cannot give any investor who wants to buy this stock at $0.19 our blessing.

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