Florida may have sandy soil, but it's fertile ground for hucksters, scams of the week, Ponzi schemes and stock "pump and dumps."
This last category of shame is worth a closer look, thanks to a court case with some unusual flair brought by the Securities and Exchange Commission against a former area business and its operators.
A "pump and dump" is an investment scheme in which a typically obscure stock gets falsely hyped, thus "pumping" up its share prices. Those pitching the stock then sell or "dump" their higher-priced shares to buyers caught up in the rising hype. When the stock plummets, the hypesters are richer. New investors are stuck with low-priced, if not worthless, shares.
In March, the SEC filed a complaint against an alleged pump-and-dump business operating in Tampa and Clearwater called Sky Way Global. In 2002 and 2003, to sell shares in Sky Way Global, Brent Kovar, his father, Glenn Kovar, and other executives "made numerous material misrepresentations and omissions to investors," the SEC says.
This is the best one: Global, these execs claimed, possessed a nationwide network of broadcasting towers and "anti-terrorism technology" that enabled the government to monitor and take control of an airplane.
"These claims were patently false," the SEC alleges. Global had neither towers nor technology to take control of airplanes.
But what a claim! And think of the timing, with such a pitch coming only five months after the terrorist attacks in 2001.
"They were doing this while preying on people's fears of 9/11," SEC senior trial attorney Aimee Riggle Berlin said Friday.
By 2003, Sky Way Global became known as Sky Way Communications Holdings Corp. and, under the Kovars, inherited the purported anti-terrorism technology and also promised in-flight Internet service on airplanes.
In one 2004 press release, Sky Way claims the "DuPont Trust" — described as one of the "modern world's premier trusts and foundations" — is one of its investors. The pitch makes the public think it's the DuPont family investing. But this DuPont Trust was set up in Belize in 2003, the SEC says.
By pumping up such notions, Sky Way Communications' stock rose — enough, the SEC says, for this group to dump more than 76 million shares and reap $12 million-plus in profits.
Responding in court documents, the Kovars and others deny wrongdoing. More details will emerge as the SEC digs deeper before heading to trial.
Here's one big tipoff of what may lie ahead: In 2007, St. Petersburg Times reporter Leonora LaPeter Anton investigated claims made in the late 1990s by Brent Kovar that he had a "magic cube" revolutionizing the speed of the still-young Internet. A movie that then would take half a day to download could be sent in seconds. (Even today, we don't do that on a commercial scale.)
Back then, Kovar urged investors to join in his tech revolution controlled by his downtown St. Pete company, Satellite Access Systems. After experts doubted such claims, the company disappeared. It was replaced by the post-9/11 pitch of Sky Way, which filed for bankruptcy in 2005.
In real time, these were not obvious schemes. Look how long it took the SEC to step in. But, hey, at least they showed up.
Robert Trigaux can be reached at firstname.lastname@example.org.