AN interesting news release crossed my desk the other day. It was from the Securities and Exchange Commission, and it announced that a fraud suit had been filed by the SEC in Maryland against an Internet newsletter publisher named Agora Inc.
I've always had very serious doubts about this outfit. Some of their investment claims are utterly outrageous. Their alternative medicine publishing outfit is real snake oil stuff; doubly despicable when one considers that desperately ill people are putting their faith and cash in these hucksters.
Starting right now -- today -- this very morning -- please call up the local SEC and get a permit for tying your shoelaces. You DO know that one is needed, don't you? I mean if shoelaces aren't tied right, why people trip and fall -- major catastrophies happen. They -- the SEC -- have an exam, a registration process. It's quite comprehensive. Just what a free nation needs. After all, we can't afford to be endangered by fools like you who tie their shoes in a way that risks us all. Or are you some radical anarchist that believes people should be able to tie their own shoes. Move to Uganda then, you bozo!
"Starting right now -- today -- this very morning -- please call up the local SEC and get a permit for tying your shoelaces. You DO know that one is needed, don't you? I mean if shoelaces aren't tied right, why people trip and fall -- major catastrophies happen. They -- the SEC -- have an exam, a registration process. It's quite comprehensive. Just what a free nation needs. After all, we can't afford to be endangered by fools like you who tie their shoes in a way that risks us all. Or are you some radical anarchist that believes people should be able to tie their own shoes. Move to Uganda then, you bozo!"
If you have a problem with the laws pertaining to fraud or this article, take it up with the relevant legislature, the president, the SEC and the newspaper who published this story.
In actual fact, as you're so in love with immorality I think it's you who needs to move to Uganda; America is way too law-abiding a society for individuals of your evidently low character.
Their daily newsletter is emailed; Bonner writes most of it from his home in France. At one time (perhaps still current) the newsletter was hyped by NewsMax, which is why I get the daily.
Bonner's a pessimist but not "off the wall" in his outlook; the "make millions in 20 seconds" ads which appear are, to any reasonable individual, pure foofoodust.
Read the subsequent article I posted then. If Agora hasn't been charged with fraud then the New York Post, the Baltimore Sun and the SEC are operating in some alternative dimension.
Agora's marketing tactics bring success, accusations
Publisher: Accused of selling false insider information, Agora Inc. says the SEC is retaliating for a lawsuit.
By Paul Adams
Sun Staff
Originally published April 19, 2003
Baltimore publishing company Agora Inc. isn't in the business of subtlety.
The 25-year-old firm markets its 50 financial, travel and health newsletters with bombastic pitches that promise subscribers advice that will lead to riches and better living, or your money back. Guaranteed.
It's a hard sell designed to grab attention in a market crowded with big-name market gurus and forecasters, and it works. Agora's success has paid for founder and President William Bonner's chateau in France, and placed him and a few partners among the top five newsletter publishers in the United States.
"I would say what makes [Bonner] tick is creating and publishing ideas," said Myles Norin, chief executive of Agora's U.S. operations, which account for 60 percent to 70 percent of its sales. "It's not just chasing profits."
But the Securities and Exchange Commission says the company's aggressive tactics have pushed the legal envelope. In a complaint filed last week in U.S. District Court in Baltimore, the federal agency claims that Agora defrauded its readers last year by charging $1,000 for false insider information about USEC Inc., a Maryland company that supplies nuclear power plants with enriched uranium.
USEC said it never gave Agora editor Frank Porter Stansberry inside information and is cooperating with the SEC.
The allegation is part of a pattern of behavior at Agora that the SEC says goes too far. It is asking the court to order the company to stop making false statements in its newsletters and return profits of more than $1 million, among other things.
"We feel there is a need for the court to issue an injunction because we believe there is a likelihood they will do this again," said Ken Israel, an SEC attorney familiar with the case.
Agora denies the charges, saying the case is retaliation for a lawsuit the company filed against the SEC last year. Agora attorney Matthew J. Turner also says the complaint contains factual errors and won't hold up in court.
"We always give a 100 percent refund anytime for any of our products," he said. "It's disconcerting when the SEC is pushing for disgorgement [of profits] when we already voluntarily [do that]."
Headquartered in a historic Mount Vernon mansion, Agora is described by people familiar with the company as an entrepreneurial success story. The privately held company won't disclose numbers, but hundreds of thousands of people subscribe to its newsletters and annual sales could easily exceed $75 million, judging by industry estimates and Bonner's past interviews with media. The company says its sales have increased an average of 20 percent annually during the past 10 years.
Agora is best known locally for renovating a handful of rowhouse mansions in the Mount Vernon area, creating a business campus filled with original oil paintings, polished woodwork and leaded glass windows. The company contributes generously to community clubs, helping to revitalize the city's once-beleaguered Mid-Town Belvedere area.
'They're always there'
"They encourage their people to get involved," said Lisa Keir, executive director of the Mount Vernon Cultural District. "They're always there with a 'yes' when you need something for Mount Vernon."
Bonner's career has been anything but traditional. The Annapolis native studied at the University of Maryland and the Sorbonne before flirting with a career in law. Looking for a job after college in the late 1970s, he linked up with a childhood friend, James Davidson, to form the National Taxpayers Union in Washington. It was during that time that Bonner discovered his knack for direct marketing.
"I discovered the world of direct-response advertising," Bonner told The Sun in a 1994 interview about his growing business. "That you could ask people for money in the mail and they'd send you some."
After several failed ventures, Bonner found success in 1979 with International Living, a newsletter filled with advice about overseas travel and real estate investing. Among other things, the newsletter achieved notoriety by ranking the best places in the world to live. Bonner marketed through direct mail and produced the newsletter with his wife, Elizabeth.
A few years later, Bonner, Davidson and Davidson's former college roommate, Mark Hulbert, started The Hulbert Financial Digest. That newsletter, which Agora has since sold, was sought for its ratings of other financial newsletters. That led to a major foray into investment newsletters, which make up a significant portion of Agora's portfolio today. Subscribers to the company's newsletters pay $39 to $99 for a subscription.
The company also owns the titles to more than 20 books, sells travel tours and investing seminars and owns about 3,000 acres in Nicaragua that it markets to members in one of its many franchises.
In 1994, it went on a buying spree that included the purchase of Pickering & Chatto, an English publisher of academic titles. Bonner, who wasn't available for an interview, spends most of his time in France, but remains in regular contact with the Baltimore operations, which have about 175 employees.
Agora, which employs about 300 worldwide, doesn't downplay its aggressive marketing tactics or its contrarian views on investing, health care or other topics covered in its newsletters.
'Outside the fold'
Its target market is an audience that doesn't want to be spoon-fed advice by brokers or the traditional financial press. Its editors tend to be former financial advisers or brokers who got fed up with Wall Street and wanted to give unfettered advice, company officials said.
"[Our subscribers] don't want to just get their information from the mainstream press," said Norin, the Baltimore chief executive. "They want ideas that came from outside the fold, and that's what they get."
The company markets through direct mail and e-mail, which by its nature requires an edge in order to persuade people to keep reading instead of tossing it into the trash. The investment report targeted by the SEC was marketed through an e-mail with a heading that read: "DOUBLE YOUR MONEY ON MAY 22ND ON THIS SUPER INSIDER TIP." The SEC alleges that the report was filled with "baseless speculation" and "lies."
But the company says it backs up its statements with facts and a proven track record. When put into context, its marketing statements aren't sensational, Norin said.
How the boss sees it
"The sensationalism, if there is any in our marketing, should be backed up by actual events," Norin said. "When we quote our subscribers as saying, 'This was the best thing I ever did in my life by getting hooked up with this publication,' that's real. There's a name behind it, there's a file in our records."
Giving advice that runs contrary to popular opinion is part of the company's niche.
"Part of our philosophy is almost to say, 'au contraire,'" Norin said. "What's another way of viewing this?"
"To me, that's what stands out about Agora," said Walter Pearce, publisher for KCI Communications, an investment newsletter publisher in McLean, Va. "They really specialize in marketing. As [Bonner] says, they're often wrong about their investment forecasts, but they're just really giving a voice to opinions outside of the mainstream."
Pearce said Agora has a reputation for being a little further outside the mainstream than most. But he says sensational marketing pitches are just part of getting a reader's attention so that he reads on.
"Firms like Agora get a bad rap," he said. "If you're The Wall Street Journal, you're a big dog. Big dogs don't have to bark to get noticed. Little firms, to get noticed, have to do some barking."
http://www.sunspot.net/business/bal-bz.agora19apr19,0,1871728.story?coll=bal-business-headlines
What is it that you don't understand about the following extract from the article? I repeat: are you accusing me of lying? My headline indicated fraud because that's exactly what the New York Post article suggested.
"AN interesting news release crossed my desk the other day. It was from the Securities and Exchange Commission, and it announced that a fraud suit had been filed by the SEC in Maryland against an Internet newsletter publisher named Agora Inc."
I repeat: are you accusing me of lying? My headline indicated fraud because that's exactly what the New York Post article is suggesting quite explicitly.
The actual complaint as filed by the SEC. Note well the following:
"Defendants engaged in an ongoing scheme to defraud public investors by disseminating false information in several Internet newsletters published by Agora or its wholly owned subsidiaries such as Pirate."
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION,
Plaintiff,
v.
AGORA, INC., PIRATE INVESTOR,
LLC and FRANK PORTER STANSBERRY
Defendants.
)
)
)
)
)
)
Case No. MJG 03 1042
COMPLAINT
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against Agora, Inc. ("Agora"), Pirate Investor LLC ("Pirate") and Frank Porter Stansberry ("Stansberry") (collectivley referred to as "defendants"), hereby alleges as follows:
INTRODUCTION
1. Defendants engaged in an ongoing scheme to defraud public investors by disseminating false information in several Internet newsletters published by Agora or its wholly owned subsidiaries such as Pirate. Through various publications, defendants claimed to have inside information about certain public companies. Defendants suggested that its readers could cash in on the inside information and make quick profits. The defendants offered to sell the inside information to newsletter subscribers for a fee of $1,000.
2. Numerous subscribers purchased the defendants "inside tips" and made investment decisions based on that information. The purported inside information was false and, as a result, the subscribers did not realize the profits the defendants promised.
3. The defendants, however, profited handsomely. On information and belief, Agora received in excess of $1 million from the sale of false information to its newsletter subscribers.
STATUTES AND RULES ALLEGED TO HAVE BEEN VIOLATED
4. Defendants Agora, Pirate, and Stansberry have engaged and, unless enjoined, will continue to engage, directly or indirectly, in transactions, acts, practices, and courses of business which constitute violations of Section 10(b) of the Exchange Act of 1934 ("Exchange Act") [15 U.S.C. §§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
5. Defendants' conduct occurred in connection with the purchase and sale of securities of public companies, including but not limited to, USEC, Inc. ("USEC").
JURISDICTION AND VENUE
6. The Court has jurisdiction over this action pursuant to Section 22(a) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. § 77u(a)] and Section 21(d) of the Exchange Act, [15 U.S.C. § 78u(d)].
7. The defendants, directly or indirectly, have made use of the mails, means or instruments of transportation or communication in interstate commerce, or means or instrumentalities of interstate commerce in connection with the transactions, acts, practices and courses of business described in this Complaint.
8. Venue over this action is proper pursuant to Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §§ 77v(a) and 78aa].
9. Venue lies in the District of Maryland because certain of the transactions, acts, practices and courses of business constituting violations alleged herein occurred within the state of Maryland. In addition, Agora is a Maryland corporation with its principal place of business in Baltimore, Maryland. Pirate Investor LLC is a Maryland limited liability company with its principal place of business in Baltimore, Maryland. Defendant Frank Porter Stansberry is a Maryland resident.
AUTHORITY FOR PROMULGATED RULES CITED HEREIN
10. Plaintiff Commission brings this action pursuant to Sections 20(b) and 20(d) of the Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the Exchange Act [15 U.S.C. §§ 78u(d)(3) and 78u(e)], to restrain and enjoin the defendants from engaging in the transactions, acts, practices and courses of business described herein which violate the federal securities laws, and transactions, acts, practices and courses of business of similar purport and object, to order defendants to disgorge all ill-gotten gains received during the period of violative conduct, and to impose civil money penalties pursuant to Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act against defendants.
11. Pursuant to authority conferred upon the Commission by Sections 10(b) and 23(a) of the Exchange Act [15 U.S.C. §§ 78j(b) and 78w(a)], the Commission promulgated Rule 10b-5 [17 C.F.R. §§ 240.10b-5]. Rule 10b-5 was in effect at the time of the transactions and events alleged in the Complaint and remains in effect.
DEFENDANTS
12. Agora, Inc. is a Maryland corporation based in Baltimore. Agora publishes books, magazines, newsletters and operates at least 15 financial web sites in the United States and Europe. Agora's publications include The Cutting Edge, Penny Stock Advisory, The Red Zone, Taipan, Rogue Trader, The Flying V Lockup Trader, CSX Trader, Fleet Street Letter, Options Hotline, Outstanding Investments, Richebacher Letter, Daily Reckoning Investment Advisory, Carpathia Letter, Strategic Opportunities, Jim Davidson's Vantage Point Investing, and the Contrarian Speculator. Agora publications have well over 21,500 paid subscribers.
13. Pirate Investor, LLC, is a Maryland Limited Liability Company that runs a financial advisory web site and newsletter, PirateInvestor.com. Pirate is wholly owned by Agora. Defendant Frank Porter Stansberry is the editor of PriateInvestor.com.
14. Frank Porter Stansberry, resides in Baltimore, Maryland. He is the editor of two of Agora's Internet financial newsletters: Porter Stansberry's Investment Advisory and PirateInvestor.com. Stansberry's compensation is based in part, on a percentage of the revenues realized by those on-line publications.
THE FRAUDULENT SCHEME
Marketing the False Inside Information
15. Agora's newsletters, including PirateInvestor.com, claim to be "a service featuring independent, original and thoughtful research into the process of wealth creation."
16. Instead, the 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.
17. The subscribers paid Agora for the alleged insider information only to later discover that the inside information was false.
18. On or about May 14, 2002, at least 15 of Agora's Internet newsletters disseminated an e-mail, written by Stansberry promising quick profits based on inside information. The heading on the e-mail stated: "DOUBLE YOUR MONEY ON MAY 22ND ON THIS SUPER INSIDER TIP." A true and correct copy of the May 14, 2002, e-mail is attached hereto as Exhibit A.
19. The e-mail claimed analysts at PirateInvestor.com had come into possession of certain details about the pending approval of a major international agreement that "will create more than $2.5 billion in profits for one small company." The e-mail identified the issuer as a company that was involved in the nuclear energy field and would benefit from the arms reduction treaty between the U.S. and Russia.
20. Stansberry's May 14, 2002, e-mail maintained investors would "make a fortune" because PirateInvestor.com had a "senior executive inside the company" as a source for its inside information. PirateInvestor.com claimed this executive was "definitely in a position to know the intimate deals of this agreement" and when it would be approved. Therefore, the e-mail announced that PirateInvestor.com was in a position to "tell you EXACTLY WHEN the deal will be finalized and announced to the public."
21. The e-mail encouraged recipients to stake their entire investment portfolios on this unnamed company and suggested investors would be able to double their "investment dollar in a single day." Finally, the e-mail stated PirateInvestor.com "can even tell you exactly which day to buy (May 21st) and which day to sell (May 23rd). There is nothing else you have to do."
22. The e-mail did not give the name of the company but indicated it was listed on the NYSE and offered to sell a full report including the name of the company to subscribers for $1,000.
The USEC Report Contains False Information.
23. Once the reader purchased the tip for $1,000, the reader received a report that identified USEC as the company with the impending contract approval ("USEC report"). A true and correct copy of the USEC Report is attached hereto as Exhibit B.
24. Agora's web site attributed the May 14, 2002 e-mail and the USEC report to Jay McDaniels. Jay McDaniels is a pseudonym for Stansberry.
25. The USEC report claimed USEC and Tenex, a Russian governmental agent corporation, had reached an agreement for Tenex to sell dismantled nuclear warheads to USEC at a reduced rate under a pricing agreement.
26. The USEC report indicated that both the U.S. and Russian governments were required to approve the pricing agreement before it became effective. The USEC report claims that, based on information from a company insider, the pricing "agreement will be approved just prior to the upcoming Bush-Putin Summit." Referring again to the pricing agreement, the USEC report states that "[a]ll it needs are the politicians to sign off on the deal" and "according to my source, that will happen-finally-on May 22nd."
27. Stansberry eventually identified Steven A. Wingfield as the insider who purportedly provided the inside information regarding the May 22nd signing date of the arms reduction treaty between U.S. and Russia. Steven A. Wingfield is USEC's Director of Investor Relations.
28. Stansberry claimed Wingfield told him the U.S. and Russian governments would approve the agreement between USEC and Tenex on May 22, 2002, the day before the start of the Bush-Putin Summit. Wingfield made no such statement to Stansberry.
29. Wingfield told Stansberry the same thing he told all analysts who called the investor relations department at USEC. Stansberry asked Wingfield about the pending approval of the USEC-Tenex contract by the U.S. and Russian governments. Wingfield responded to Stansberry, as he did to all analysts, by saying USEC "expected it would be approved in the near future."
30. Wingfield did not tell Stansberry, directly or indirectly, that the pricing agreement with Tenex would be approved by any governmental entity on May 22, 2002. No one at USEC knew when or if the pricing agreement would be approved.
31. Stansberry had no basis whatsoever for the claim in the USEC Report that the approval of the USEC-Tennex contract would occur on May 22, 2002.
32. The pricing agreement between USEC and Tennex was approved on June 19, 2002. On that date the Department of State and USEC separately announced approval of the pricing agreement by both the U.S. and Russian governments.
Market Activity in Response to Agora's False Information
33. From January 2, 2002, through May 13, 2002, trading volume in USEC common stock averaged approximately 189,000 shares a day at prices ranging from $5.78 to $7.37 a share.
34. From May 14 through May 23 volume averaged 3,340,138 shares a day with closing prices ranging from $7.85 a share on May 14 to a high of $9.98 a share on May 20. There was also a significant increase in the volume of options trading in USEC stock during this period.
35. On May 22, USEC failed to make the announcement promised by the Agora e-mails and the USEC report and that day the price of USEC stock fell from $9.54 to $8.20 a share, a drop of nearly 15%.
Agora's On-going Efforts to Disseminate False Information to the Investing Public
36. Agora promoted other securities in its newsletters. Even after Agora became aware of the Commission's investigation, its newsletters have continued to publish e-mails promoting numerous securities accompanied by fantastic claims of quick profits or inside information.
37. For example, Agora publications have touted stocks that it claims will double or triple in value over the next year. Other Agora publications claim to provide information that allows an investor to "turn $10,000 into $114,280 by April 18, 2003."
38. Agora continues to promise its subscribers, "Almost Unbelievable Profits - 4.5 Times Your Money in 48 Hours."
39. As recently as the first week in April 2003, Agora published articles making similar claims of exorbitant profits. In each instance, recipients of the e-mails are offered "free" copies of the headlined reports if they subscribe to one of the various Agora newsletters at a cost of from $69 to $1250 a year. The money-making investments featured in the reports are typically microcap issuers with cures for cancer or AIDS or a technological breakthrough. Some of the tips are characterized as being based on "secret" or "inside" information.
40. In some instances, the individual writing the reports Agora provides to its subscribers has an undisclosed relationship to the company being promoted.
41. For example, James Dale Davidson is the editor of Agora's Vantage Point Investment Advisory, a financial newsletter with a worldwide circulation. In December 2002 and January 2003, Agora distributed e-mails written by Davidson to its subscriber base. These e-mails promote several unnamed microcap issuers and offer to provide reports naming these issuers if the recipient of the e-mail paid $149 to subscribe to the Vantage Point newsletter.
42. Among the issuers promoted in this manner have been GeneMax Corp. and Endovasc Ltd., Inc. Davidson is an officer, director and, indirectly, a substantial shareholder of these two issuers. Neither the soliciting e-mail nor the subsequent company report discloses Davidson's relationship to the companies.
FIRST CLAIM FOR RELIEF
FRAUD IN CONNECTION WITH THE PURCHASE
OR SALE OF SECURITIES
Violations of Section 10(b) of the Exchange Act, 15 U.S.C. §78j(b),
And Rule 10b-5 thereunder, 17 C.F.R. § 10b-5
43. The Commission repeats and realleges each and every allegation contained in paragraphs 1 through 42, as if fully set forth herein.
44. Defendants, by engaging in the conduct described above, directly or indirectly, in connection with the purchase or sale of securities, by the use of means or instrumentalities of interstate commerce, or of the mails, or of a facility of a national securities exchange, with scienter:
employed devices, schemes or artifices to defraud;
made untrue statements of material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
engaged in acts, practices or courses of business which operated or would operate as a fraud or deceit upon other persons;
in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
45. By reason of the foregoing, defendants violated, and unless restrained and enjoined will continue to violate, Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.
PRAYER FOR RELIEF
WHEREFORE, plaintiff Commission respectfully requests that this Court:
I.
Issue findings of fact and conclusions of law that Defendants committed the violations alleged herein.
II.
Issue an Order Issue in a form consistent with Rule 65(d) of the Federal Rules of Civil Procedure, permanently enjoining defendants Agora, Pirate and Stansberry, and their officers, agents, servants, employees, attorneys, and accountants, and those persons in active concert or participation with any of them, who receive actual notice of the order by personal service or otherwise, and each of them, from engaging in the transactions, acts, practices and courses of business described herein, and from engaging in conduct of similar purport and object in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
III.
Enter an order that defendants Agora, Stansberry and Pirate, provide an accounting and disgorge their ill-gotten gains from the illegal conduct alleged in this Complaint and to pay prejudgment interest thereon.
IV.
Enter an Order that Defendants Agora, Stansberry and Pirate pay civil penalties pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d), for the violations alleged herein.
V.
Retain jurisdiction of this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.
DATED: April 9, 2003 Respectfully submitted
/s/ Karen L.Martinez___
KAREN L. MARTINEZ
THOMAS M. MELTO
BRENT R. BAKER
Securities and Exchange Commission
50 South Main Street, Suite 500
Salt Lake City, Utah 84144
(801) 524-5796 (801) 524-3558 (fax)
Attorneys for the Plaintiff
Securities and Exhange Commission
http://www.sec.gov/litigation/complaints/comp18090.htm