• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Knoxville, Tenn.-Based Technology Company Blames Stock Seller in Fraud Case

Posted on: Friday, 22 July 2005, 18:00 CDT

Jul. 22--A company with St. Louis ties that was caught up in an international securities-fraud case posted a defense on its Web site Thursday, saying it was duped by a firm that raised capital on its behalf.

Netspan Inc. said the other firm, Roth Group GmbH, sold Netspan shares at inflated prices and deviated from their original deal.

The case against two Netspan executives, Samuel W. Wood of Defiance and Bijan Moradi of Knoxville, Tenn., was transferred Thursday to Southwark Crown Court in London, with an initial hearing set for Nov. 2. In the British justice system, crown courts handle serious criminal cases.

Wood and Moradi were detained July 2 after making a presentation to current and prospective Netspan shareholders at a hotel near London's Heathrow Airport.

Wood, Netspan's chief technology officer, and Moradi, chairman and chief executive, were formally charged last week with conspiracy to defraud. They are free on bail but have surrendered their passports and are not to leave the country.

Netspan says it has developed technology that permits easy online audio and video communication -- including face-to-face business meetings -- without the need to download software or install special equipment.

The Roth Group, a purported brokerage, has been calling foreign investors in recent months, urging them to buy shares in a British entity called Netspan International Ltd.

Netspan International has a license to use Netspan's technology in Europe and was supposed to be owned solely by investors in the United Kingdom, Netspan said in its online message.

Netspan said it was approached by a man who identified himself as Jack Prather of Private Placement Management with a proposal to raise money for Netspan International's expansion.

Netspan said the deal called for Private Placement to sell shares for 33 cents each to qualified investors, and that Private Placement assigned the job to the Roth Group.

Netspan said its executives aided the Roth Group by participating in daily conference calls with investors, and relied on the firm for legal advice because their own British attorney had stepped down.

Netspan said it later discovered that the Roth Group was selling shares for far more than the agreed-upon price, and that it had switched banks.

British authorities say Roth Group was little more than a telemarketing "boiler room," using high-pressure sales tactics to peddle the shares by phone.

At least $1 million worth of Netspan shares were placed with investors, said Nigel Howard, a detective sergeant with the City of London Police who has been investigating the case.

Authorities brought charges against Wood and Moradi, he said, because announcements Netspan distributed about contracts and other business relationships exaggerated the scope of the deals and falsely inflated the presumed value of the stock.

The Roth Group lists an address and telephone number in Frankfurt, Germany, but investigators have determined that calls are routed to another location, most likely in Spain, he said.

More than 80 percent of the investor money traced by investigators went to Roth Group bank accounts in Spain and Singapore, Howard said. A lesser amount, roughly $175,000, went to a Netspan account in Atlanta, he said.

Authorities in Singapore have arrested a third man, Michael Lee Port, in connection with Roth's share sales. He has implicated three other people, two of whom previously have been linked to boiler-room operations.

One, an American named Mark Hutcherson, was mentioned in a series of Post-Dispatch stories last year on unlicensed, offshore brokerages. The series showed how the boiler rooms took in hundreds of millions of dollars by selling stock in roughly 200 public and private U.S. companies, shares that invariably plunged in value.

The brokerages typically operate from hidden locations, and their brokers often use false names.

Britain's Financial Services Authority issued a warning in April about Roth Group, saying the firm was not authorized to offer investments in the United Kingdom.

Netspan, a privately held company, lists headquarters in Knoxville, a technology office in Defiance and a sales office in Atlanta. The Defiance address is Wood's home.

Philip J. Bryce, Netspan's attorney, could not be reached for comment Thursday.

-----

To see more of the St. Louis Post-Dispatch, or to subscribe to the newspaper, go to http://www.stltoday.com.

Copyright (c) 2005, St. Louis Post-Dispatch

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

Source: St. Louis Post-Dispatch

More News in this Category