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Coventry Internet Firm In US Fraud Probe

Coventry internet firm Internet Solutions for Business (IS4B; Nasdaq ISFB) has been accused by American fraud investigators of making false claims about billions of dollars of business to inflate its company value.

The Securities and Exchange Commission (SEC) alleges that the company and its founder and chief executive officer Lawrence Shaw hyped its products and business relationships without any basis.

Shaw, once dubbed Coventry's first internet millionaire, could face a stiff financial penalty if the case is proven.

IS4B, which is based at Coventry Canal Basin, floated on the technology-driven NASDAQ amid a great fanfare in 1999. But its share price has dropped from a high of over $7 to as low as a few cents and numerous staff have left the company.

In a charge filed in the US District Court, Southern District of Nevada (Las Vegas Division), the SEC says that Shaw held IS4B out to be a sophisticated high-tech internet company through press releases, reports and boasts on its website.

But the SEC says many of the claims were "either outright lies or gross exaggerations" made at a time that the company was in a "precarious financial position."

In a statement issued today as part of clampdown on internet companies, SEC said:

"The SEC alleges that ISFB's supposed cutting-edge products never reached the point of commercial viability.

"For example, a "$4.1 billion website audit service," repeatedly hyped by the company, was nothing more than a concept which was never developed.

"Similarly, announcements of business relationships with "blue chip" companies were either outright lies or gross exaggerations.

"Further, ISFB's stock price projections, 300 per cent increase over the mid-term, were without any reasonable basis and were made at a time during which the company was in a precarious financial position.

"Notwithstanding dire financial problems, ISFB's stock price and trading volume substantially increased contemporaneously with the company's fraudulent promotional activities.

"The SEC seeks permanent injunctions against future violations of the antifraud provisions of the federal securities laws, against ISFB and Shaw."

SEC Director of Enforcement Richard H Walker said:

"Today's cases are a sobering reminder for investors that, on the Internet, there is no clearly defined border between reliable and unreliable information.

"Therefore, investors must exercise extreme caution when they receive investment pitches online.

"These actions involve a virtual checklist of common securities fraud techniques.

"Perpetrators lured investors with promises of fast and easy profits in thinly-traded, or even privately-held, development stage companies that operate in 'hot button' industries."

A spokesman for IS4B in Coventry said Lawrence Shaw was "overseas" and would be out of the country until Monday.

He added:

"There's no comment because we don't know anything about it."

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CWN / Business / A-Z / Internet Solutions for Business / 1 Mar 01
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