SEC Gets Spongetech fraudster to pay $1.3 million

The SEC scored its first victory in their case against the penny stock scam at Spongetech. Last spring Greenwich radio station owner (WGCH) Michael Metter and his pal from Queens, Steven Moskowitz, were arrested at their homes by the FBI for interfering in a SEC investigation and slew of investor fraud claims. The SEC sued a long time friend of Moskowitz last month, Myron Weiner, for selling unregistered shares of Spongetech and basically laundering the cash for Moskowitz and Metter. Well it looks like Weiner folded pretty fast because yesterday the SEC said he agreed to pay a hefty fine of $1.3 million. Weiner’s civil penalty was only $50,000 and he doesn’t have to admit to wrong doing.

The SEC says Weiner lives in Hoboken, owns a restaurant in New York City, is 69, and had this little problem with manipulating the price of certain stock back in the early 70’s. The complaint goes on to claim Moskowitz and Weiner met in 1970 while working at Kenneth Bove (the firm where the stock manipulation went down so many years ago). Weiner became a shareholder of RM Enterprises, the firm Metter and Moskowitz allegedly used to funnel Spongetech stock sales through, when he was gifted shares in 2001. Then in 2009 he got a bucket of Spongetech shares for 5 cents and sold them for 20 cents. To whom those profits went is still in question and I have some doubts that Weiner actually has $1.3 million to pay the SEC fine. So while this is a win for the SEC because Weiner likely spilled some dirt on Metter and Moskowitz to get a deal with the SEC; defrauded investors in Spongetech shouldn’t count it as a big score until we see the SEC actually collect the dollars.

As Aaron Elstein at Crain’s New York first reported, Moskowitz made a plea deal with the DOJ a few months ago, and the SEC has finally released a little money for him to live on. But we still have no plea deal with Moskowitz and the SEC, nor do we have a sentencing date for Moskowitz in his DOJ case. Legal filings in the SEC v. Metter case show he’s still fighting the charges tooth and nail. As I reported earlier Metter also still reaps a decent salary from his Greenwich Radio station; although the station’s assets and spending are being monitored by the SEC.

A few lawyers representing Spongetech investors have said they filed motions to get the SEC to share discovery with them, which could help their civil investor fraud suits against Metter and Moskowitz, but the SEC just blows them off; so for now it’s still a bit of a clusterfuck. If the SEC figures out the Spongetech founders funneled money to Israel or Switzerland then they could sue the banks holding the cash under the Hauge Convention but that takes at least a year. So with all the parties involved flipping to get deals with the DOJ I’d imagine we’ll see Metter pleading to something in the new year.

Editors Note: Aaron Elstein of Crain’s New York has some more color on Weiner and reports Avi Tepfer has finally folded also declaring he plans to plead guilty in the DOJ’s case against him early next year. Unlike Metter’s home town paper, Greenwich Time, Elstein via Crain’s has done a bang up job of continuing to cover the Spongetech fraud. You can read more of his coverage here.

Michael Metter’s Spongetech Partner Makes Plea Deal with Feds

It looks like Michael Metter’s Spongetech partner is fessing up to the Brooklyn Dept. of Justice. Last week Steven Moskowitz plead guilty to a criminal charge of securities fraud. Aaron Elstein, of Crain’s New York, first reported the news on Friday. It’s unclear what monetary fines or jail time Moskowitz is facing. Robert Nardoza, DOJ spokesman, told me this morning the case has been sealed and they wouldn’t comment further.

Metter and Moskowitz were both charged by the DOJ last May for, amoung other things, obstruction of justice because the feds say they made up fake customers while the SEC was investigating the accuracies of their public statements about the revenue and sales of Spongetech. People familiar with the investigation say Moskowitz was able to get out of the obstruction of justice charge, which faced a five year jail term, in return for a plea deal. Given the lack of transparency from the DOJ and no documents filed in PACER yet we’ll have to wait and see how much Moskowitz gave up on Metter.

At the time of Metter’s arrest last May his lawyer vigorously denied all charges touting they look forward to their day in court to clear the penny stock CEO’s name. Metter has since gotten rid of his lawyers at Greenberg Traurig and hired Maranda Fritz at Hinshaw & Culbertson. I left a voice mail for Fritz asking what Metter had to say about his partners’ guilty plea but his legal team did not return a call for comment. Moskowitz lawyer, Michael Bachner, did call me back but said he just can’t talk about the case right now.

The feds getting a guilty plea out of Moskowitz is significant because it eases the burden of proof for the SEC. But now the securities regulator still needs to prove how much money Metter and Moskowitz defrauded investors in order to recoup the millions they alledgedly siphoned off shareholders . People involved in the SEC’s case confirmed for me there has been no settlement with Moskowitz yet but I expect one to follow soon. Still finding the millions these two scored could be another challenge. Federal Court documents show the SEC is asking $52 million in disgorgement fines plus $2.5 million in interest from Metter and Moskowitz’s shell company, RM Enterprises, which allegedly funneled money out of Spongetech for the benefit of Metter and Moskowitz.

Metter, who is also CEO and a founding shareholder in BusinessTalkRadio.net (which owns the local Greenwich, CT radio station), is still reaping a bi-weekly salary of $9,375.92. The SEC was able to get the court to put restrictions on how he can spend that money and he’s not allowed to use the revenue or assets of the radio business anymore to benefit himself or Spongetech which filed bankruptcy. Metter’s right hand man in the radio biz, Jeff Weber, is in control of signing all legal documents for the business now.

Greenwich Time reported last month the Greenwich Station, WGCH, is up for sale and Weber hopes to get a $1.25 million for it. You see according to court documents filed by the SEC in June, Metter and Moskowtiz used the radio biz to hide funds from Spongetech. The SEC has attached $5 million of a $6 million loan between the radio biz and RM Enterprise / 5M Marketing along with Metter’s Greenwich home and his yacht called The Phoenix. (The SEC says RM and 5M are both shell companies related to Spongetech) At first I thought Metter was trying to sell the station to pay his high-priced legal defense but it looks more like it’s a move to pay off some of the upcoming SEC fines.

In February 2010, I wrote a front page story at Greenwich Time explaining how Metter could be forced to give up or sale his FCC radio license if he was charged for a penny stock scam. At the time Metter threw a fit that his local paper, which he advertises in for WGCH, would even think of printing the story. When he called for comment the night before we went to print he threaten to call the local Hearst publisher, Michelle McAbee, and uses his influence to get the story pulled. It ran any way the next day. At the time Jeff Weber, Metter’s BusinessTalkRadio.net V.P., had commented he knew nothing about the investigation into Metter’s Spongetech business and it had nothing to do with the radio station. What’s odd about that comment is Federal court documents now show in June 2009 BusinessTalkRadio.net (the parent llc is Blue Star Media Group) had received a $6 million loan from a SpongeTech affiliate company. So either Metter kept Weber in the dark or he wasn’t telling me the truth.

Correction 8-30-2011: The SEC has attached the $5 million they believe Metter funneled through BussinessTalkRadio.net from SpongeTech illegal profits to Metter’s personal assets. There is not a $5 million lein on the radio station. The radio station assets were frozen by the local Greenwich banks it had an account with because Metter was the account signatoree but some of those fund were unfrozen to pay salaries and basic bills.

You can buy a single copy of my full story on the SEC accusing Spongetech of using a PIPE deal with BTR to hide funds at The PIPEs Report: http://pipes.dealflow.com/reports/article.cfm?id=xgsthxktydiaesc

Editors Note: Aaron Elstein has done a good job digging into Metter’s past stockbroker fraud charges. He’s even scored a video of Metter making a hard sell to the poor Spongetech penny stock investors. Elstein deserves a shout out for staying on the SpongeTech case while our local paper, Greenwich Time, is ignoring one of the biggest stock scams by a well know player in the Greenwich community.