Wednesday, February 8, 2005
Financial Advisor Arrested on U.S. Charges He Was Paid by Now-Defunct Corporation Whose Stock He Boosted
By a MetNews Staff Writer
The president of a New York financial advisory firm who made numerous television appearances to recommend stocks was arrested yesterday on charges he touted the stock of a company from which he received undisclosed payments.
Courtney Smith, 53, was arrested at his Manhattan apartment pursuant to a nine-count indictment that was returned by a federal grand jury in Los Angeles Feb. 3, the U.S. Attorneyís Office for the Central District of California said in a press release.
Smith, who allegedly received $100,000 in cash and tens of thousands of shares of GenesisIntermedia, Inc. stock in exchange for his recommendations, was is expected to make his first court appearance yesterday afternoon in U.S. District Court in Manhattan
The corporation, an Internet marketing company that traded on the NASDAQ exchange under the symbol GENI, was located in Van Nuys before it went belly up in 2001. GENI was best known for marketing products like the “Ab Twister” and the “Men are from Mars, Women are from Venus” relationship products via infomercials broadcast on cable television channels.
According to the indictment, between late 1999 and mid-2001, Smith made numerous appearances on financial programs televised on CNN, CNBC, and Bloomberg Television. During those appearances, he promoted GENI as a “very hot speculative pick” with a business that was “exploding in revenues.”
GENI, however, suffered net losses of $8.2 million in 1999, $33.5 million in 2000, and $119 million for the first three quarters of 2001, right before shutting down operations entirely, the U.S. Attorneyís Office said. Nevertheless, Smith’s television appearances were followed by increases in the price of GENI stock.
Prosecutors cited a Feb. 25, 2000, appearance in which Smith recommended GENI as his “Double Your Money Pick” during a morning appearance on CNBC Market Watch. The price of GENI shares rose 58 percent.
In exchange for promoting GENI, Smith received money and shares of GENI stock from the company, the indictment alleged.. Smith allegedly was paid $100,000 from GENI, which was secretly routed to Smith through a vitamin-importing company that his girlfriend owned at the time.
The indictment further alleges that Smith received 72,000 shares of GENI stock—valued at $1.2 million at the time of transfer—which were also secretly transferred to Smith through his girlfriend’s company. Smith did not disclose either payment to the investing public.
Instead, Smith allegedly attempted to disguise the payments through a series of fraudulent transactions in which he purported to have sold a customer mailing list and an internet website to GENI. According to the indictment, the mailing list and website had little or no commercial value.
The indictment charges Smith with conspiring with a high-ranking officer and substantial shareholder of GENI to violate the securities laws through his paid promotion of the stock. Smith is also charged with eight substantive counts of violating federal securities laws for failing to disclose the payments he received for promoting GENI on television. If he is convicted of the nine counts in the indictment, Smith faces a maximum possible sentence of 45 years in federal prison, prosecutors said.
The U.S. Attorneyís Office credited the FBI and the SEC with investigating the charges leading to the indictment. The case is being prosecuted by Assistant U.S. Attorneys Curtis A. Kin and Douglas A. Axel.
The allegations in the indictment largely track those of several civil suits, including Philippinesa class action brought against Smith, GENI and two GENI executives by San Diego attorney William Lerachís firm in 2001.
Copyright 2005, Metropolitan News Company