Wall Street Journal
By Ashby Jones
If anyone out there knows a real lawyer named David Bomart (we’re sure they exist), that’s not the lawyer we’re currently referring to.
No, the David Bomart we’re referring to doesn’t exist; he’s a lawyer made up by the head honchos at a New York company called SpongeTech Delivery Systems, according to an SEC filing made on Wednesday.
Let us explain: The FBI on Wednesday arrested SpongeTech’s CFO, Steven Moskowitz, and CEO, Michael Metter, charging the pair with conspiracy to commit securities fraud and with obstruction of justice.
Loretta Lynch, the new 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 SEC filed also civil fraud charges against them and the company, which makes sponges filled with soap. Click here for the SEC’s complaint; here for Floyd Norris’s story in the NYT;here for coverage from Slate’s “Big Money” column.
The SEC has alleged that the company filed false financial reports by claiming sales to companies that don’t exist. They say the two executives led a large “pump and dump” scheme that allowed insiders to secretly hand out billions of shares of stock.
The NYT was unable to reach anyone from the company for comment after the arrests. But, on Tuesday — prior to the arrests — Moskowitz told the NYT that the SEC’s investigation was minor and seemed to be running out of steam.
The SEC’s allegations are pretty surprising. It says some of the SpongeTech shares were sold pursuant to “legal opinions” that were supposedly signed by a nonexistent lawyer named, yes, David Bomart and also used the same fax number as Moskowitz. The commission further alleges that the stock was sold by a company controlled by Moskowitz and Metter.
If the name SpongeTech sounds familiar, it might be because over the last few years, it’s plastered its advertisements all over baseball stadiums. The SEC now says some of those deals were financed through illegal stock sales.
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