Looks like radio stations and networks may be getting a little smile on their collective faces, after alleged widespread non-payment of ads by The New York-based seller of soap-filled sponges. CFO/COO Steven Moskowitz and CEO Michael Metter were arrested by FBI agents 5/5 and charged with conspiracy to commit securities fraud and with obstruction of justice. The SEC filed civil fraud charges against them and the company. Metter is also president/a principal of the Business Talk Radio network and a principal at WGCH-AM Greenwich, CT. WGCH(AM) Greenwich CT (Stamford-Norwalk CT market); KNUU(AM) Paradise NV (Las Vegas market); WXBR(AM) Brockton MA (Boston market); and WLFP(AM) Braddock PA (Pittsburgh market). Besides Business Talk Radio, Metter also runs Lifestyle Radio Network. Blue Star Media Group is the holding company of all of Metter’s media properties.
SpongeTech was recently taken to court by CBS Radio for failing to pay more than $366,000 for radio ads. CBS Radio becomes the latest in a growing list of outfits waging a legal war against SpongeTech. So far, the company has been sued locally for more than $1 million in overdue bills by the likes of Citi Field, Madison Square Garden and the New York Giants. The company grabbed the attention of the SEC last year, which launched an investigation into possible securities laws violations.
The suits accuse SpongeTech of falsifying its financial reports by claiming sales to nonexistent companies. They say the two executives led a large “pump and dump” scheme that allowed insiders to distribute 2.5 billion shares of stock while denying that the shares existed, reports The NY Times.
“Investors were deceived into believing that SpongeTech was a successful business, while SpongeTech and its senior executives were illegally dumping shares into the market,” said Christopher Conte, an associate enforcement director for the commission.
Loretta Lynch, the US attorney in Brooklyn, said the defendants were charged “with executing a bold scheme to portray SpongeTech as a company that was performing at a level far above reality. The audacity of their scheme was matched only by their obstructive efforts during the course of the SEC.’s investigation.”
SpongeTech may never have been a successful business, but it did buy a lot of promotions at sports stadiums and on broadcasts. Last year, the company says, it had deals with at least 30 teams, in baseball, hockey, basketball and football. The SEC says some of those deals were financed through the illegal sales of stock, reported The Times. Some of the teams and stadiums have sued SpongeTech for not living up to its obligations.
SpongeTech shares, which traded for more than 28 cents last summer, when the promotion was at its height, fell 3.4 cents to seven-tenths of a penny in over-the-counter trading on 5/5. More than 177 million shares were traded.
Two weeks ago, SpongeTech filed a suit in New York state court seeking $100 million from The New York Post, which has aggressively covered the company’s disputes with sports teams, and from a hedge fund manager and others the company said were involved in a “short and distort stock manipulation scheme” to drive down the price of SpongeTech stock.
“SpongeTech has been, and continues to be, greatly injured in name and reputation including, inter alia, public opinion of SpongeTech as a company and an investment vehicle is unfavorable and the company and its executives have suffered contempt, ridicule, aversion, shame and disgrace among others in their community and in the business world, among citizens of the state of New York, the nation and the world,” the suit asserted.
Moskowitz and Metter were released by a federal magistrate 5/5 afternoon on $2 million bond each, secured by property.