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Two Texas men settle charges in spam scam case

By Sue Asci

March 19, 2009 1:04 pm ET

The Securities and Exchange Commission yesterday said two men settled charges that they conducted a massive e-mail spam campaign to drive up the demand for penny stocks they owned.

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The enforcement action arose from a spam e-mail received by an SEC staff attorney in August 2005 that had the subject line: “Experts are jumping all over this stock,” according to the SEC. Several more e-mails to the SEC followed.

The e-mails were sent by two Texas men, Darrel T. Uselton and his uncle Jack E. Uselton, who generated more than $4 million through the scheme, which involved buying and selling shares in 13 penny stock companies.

The SEC’s complaint said the men would “sell those shares into an artificially active, and oftentimes rising, market that they created through manipulative trading, spam e-mails, direct mailers and internet-based promotional activities.”

The e-mail campaigns lasted 20 months, the SEC said.

The charges were brought against the men in July 2007.

According to the settlement, in judgments made by Judge Kenneth Hoyt of the U.S. District Court in Houston, both men no longer will be able to trade in penny stocks. Darrel Uselton will pay more than $2.8 million in disgorgement and prejudgment interest, and a $1 million penalty.

Both men settled the action without admitting or denying the allegations.

Defense counsel Dan L. Cogdell and James M. Ardoin III of the Houston-based Cogdell Law Firm were not immediately available for comment.

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