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Radio Talk Show Host Is Indicted on Stock Fraud

Courts: Jerome M. Wenger of 'The Next SuperStock' is charged with being paid for touting securities.

April 16, 1998|THOMAS S. MULLIGAN | TIMES STAFF WRITER

NEW YORK — A nationally syndicated radio talk show host was indicted Wednesday for allegedly touting penny stocks for pay as part of a scheme that bilked investors around the country of more than $2 million.

Jerome M. "Jerry" Wenger, host of "The Next SuperStock," which is broadcast in Los Angeles, San Diego, New York and six other cities, was among 18 people charged with being part of a ring that promoted stocks on radio and TV, then used "boiler-room" tactics to sell them to investors out of a small New York brokerage.

Law enforcement authorities and other observers said this and other recent cases show how a hot stock market, combined with an explosion of broadcast and Internet outlets for stock promoters, can create a friendly climate for fraud.

"There are more suckers out there in a rapidly rising market, so there are more people to take advantage of," said Alan Bromberg, a professor of securities law at Southern Methodist University.

The victims numbered in the hundreds and included many elderly retirees with limited incomes, according to Mary Jo White, U.S. attorney for the Southern District of New York, who brought the case.

California victims in the alleged scam were from Torrance, La Habra, Hawthorne, Fremont, Oxnard and other communities. Two victims lost more than $100,000 each, authorities said.

Wenger, 52, of Bethesda, Md., was arrested in Maryland on Wednesday morning and faces arraignment in New York next week.

The Securities and Exchange Commission filed a related fraud lawsuit against Wenger seeking disgorgement of any ill-gotten gains, plus penalties. He could not be reached for comment Wednesday.

A stock commentator for years, Wenger has been accused of fraud at least twice before. Charges are still pending against him in an SEC case filed last June, and in 1984 he settled earlier SEC fraud charges, the agency said.

Wenger also publishes a newsletter on small-stock investing and runs several Internet sites touting stocks.

There was confusion at White's office about where Wenger's program airs in Los Angeles and San Diego. Authorities supplied the call letters of a nonexistent Los Angeles station and were unable to name the San Diego station.

A Depression-era law requires promoters to disclose any payment they get for touting stocks, but Bromberg, the SMU professor, said enforcement had been a "dead letter" until SEC Chairman Arthur Levitt recently started focusing on the problem.

Wednesday's indictment followed an SEC lawsuit last month accusing radio host Michael Cardascia of failing to disclose that he was being paid by at least 100 companies to promote their stocks on his "Inside Wall Street" program. Cardascia, through attorneys, has said he made proper disclosures.

Wenger, according to the indictment, made an agreement last June with a Wayne, N.J., company called Transco Research Corp. to promote Transco, a provider of prepaid telephone debit cards.

In return, Transco gave Wenger $4,000 in cash and 59,000 shares of its stock, which he later sold for around $73,000, the indictment states.

The company was not accused of any wrongdoing in the indictment. Company officials could not be reached for comment.

On some shows in which he touted Transco, Wenger called himself a "consultant" for the company, authorities said, but didn't say whether or what amount he was paid.

Transco is the only stock that Wenger was specifically accused of touting for pay, but the indictment says the ring also promoted shares of Enviro Voraxial Technology Inc. and Child/Grip Inc.

On the show, Wenger referred callers to a toll-free phone number to buy the stocks he named. The phone rang at Wise Choice Discount Brokerage in Manhattan, where it was answered by a group of licensed and unlicensed stockbrokers who also were indicted in the alleged scam, authorities said.

The brokers used high-pressure sales pitches, including false and misleading claims for the stocks, to sell them to listeners, according to the indictment.

Transco--which trades on the Nasdaq Bulletin Board, an unregulated electronic marketplace for small stocks--was quoted Wednesday at 40 cents a share, down from a high of $1.49 last August. It had been trading at around $1 when Wenger allegedly made his deal with Transco.

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