Posted on: Monday, August 23, 2004

Voice mail used for stock scam

By Sandra Block
USA Today

The breathless phone message from a young woman whose boyfriend works in the investment business sounds like something out of "Sex and the City." But the seemingly misdialed voice mail is a clever investment scam that's sweeping the country, the Securities and Exchange Commission said last week.

In the voice mails, a young woman, appearing to have dialed a wrong number, tells a friend that the "hot stock exchange guy" she's dating has passed on information about a small company. She says the company is planning to make a big news announcement that will cause its stock price to skyrocket.

In one message, the woman claims the company "is supposed to be like the next Tommy Bahama," a popular clothing and accessories brand. The woman, who identifies herself as Debbie, says the stock is expected to rise from 50 cents to $5 or $6 a share.

The SEC said the messages are part of a "pump-and-dump" scam in which con artists promote shares of a thinly traded company, claiming the price is about to soar. Once demand has driven up the stock price, the scammers dump their shares and pocket the profits. Then the price falls, leaving investors with big losses.

The promoters target small companies that trade for less than $1, because there's little information about them, making their stock easier to manipulate. Most aren't aware of the con.

Richard Miller, chief executive of Maui General Store, a specialty retailer of Island products, says he didn't know fraudsters were touting his company's stock until he started getting calls from people who received the voice mail. "Because people don't read between the lines, they think I'm the scammer," he says.

The SEC has received calls and e-mails about the messages from across the country, says Susan Wyderko, investor education director. Some companies named in the messages have seen sharp increases in their stock prices and trading volume, she says.

In the past, pump-and-dump scams have taken advantage of Internet message boards, chat rooms and spam e-mails, "But this is a new wrinkle," Wyderko says. "The messages are very cleverly done. They appear to contain inside information mistakenly left on your phone or cell phone."

The SEC's advice to investors: "It's never a good idea to buy stock on the basis of a hot tip," Wyderko says, particularly from a stranger.