Very bad news for those of us that still hold any Spng stock.
Read and weep........
By Chad Bray
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The top executives of Spongetech Delivery Systems Inc. (SPNG) were arrested and charged Wednesday in an alleged scheme to defraud investors by reporting falsely and grossly overstated sales figures.
According to a criminal complaint filed Wednesday, Michael Metter, Spongetech's chief executive and president, and Steven Moskowitz, the cleaning-products maker's chief operating officer and chief financial officer, were charged with conspiracy to commit securities fraud and obstruction of justice. They each face up to five years in prison on the conspiracy charge.
Metter, 58 years old, of Greenwich, Conn., and Moskowitz, 45, of Flushing, N.Y., are expected to appear before a U.S. magistrate judge in federal court in Brooklyn later Wednesday.
"The defendants in this case--Spongetech's highest corporate officers--are charged with executing a bold scheme to portray Spongetech as a company that was performing at a level far above reality," U.S. Attorney Loretta Lynch said in a statement. "As detailed in the complaint, the audacity of their scheme was matched only by their obstructive efforts during the course of the SEC's investigation."
The U.S. Securities and Exchange Commission also has filed civil charges in the matter, Lynch said.
In the complaint, prosecutors from the U.S. Attorney's office in Brooklyn alleged Metter and Moskowitz between January 2007 and May 2010 publicly reported the company had secured purchase orders or made sales to five customers that did not exist.
For the nine months ended Feb. 28, 2009, the purported sales to those five customers accounted for as much as 99% of Spongetech's revenue, prosecutors said.
During that time frame, the men allegedly filed multiple false reports with the U.S. Securities and Exchange Commission and issued numerous press releases touting the false sales figures, typically via the Internet, prosecutors said in the complaint.
Since the SEC issued subpoenas in September as part of a formal probe of Spongetech, Metter and Moskowitz allegedly have tried to fabricate the existence of the five purported customers, according to the complaint.
They allegedly sought to create Web sites and virtual offices for the companies, have furnished investigators with phony purchase orders and produced "questionable documentation" purportedly constituting proof of payments by the customers, prosecutors said in the complaint.
The SEC suspended trading of the company's stock Oct. 5, according to the complaint. The suspension expired Oct. 16, and Spongetech has been trading only in the "grey market," a market for securities not listed on any stock exchange, the Over-the-Counter Bulletin Board or the pink sheets, according to the complaint.
A phone call to Spongetech wasn't immediately returned Wednesday.
An automated message on the company's investor relations phone line said the company would make no comment during the SEC investigation and would only make public comments via press releases.
-By Chad Bray, Dow Jones Newswires; 212-227-2017; [email protected]