Regulators launch 'scam? Web sites to warn investors about fraud

The Securities and Exchange Com-mission announced Jan. 30 its launch of a series of Web sites designed to warn investors who rush into investment op-portunities on the Internet without fully investigating the offers.

According to a news release from the SEC, the Web sites use tactics similar to those used by stock market con artists, and the sites appear to be investment opportunities offering tremendous financial gains. But anyone who tries to invest is instead led to a page that warns, "If you responded to an investment idea like this, you could get scammed!"

The page also tells investors how to research investment offers and where to call for help.

The SEC quietly launched the first of the fake scam sites, www.mcwhortle .com, earlier this month, then issued a "spoof" press release to promote it. The press release, seemingly issued by McWhortle Enterprises Inc., boasted that SEC had "pre-approved" the fictitious company's initial public offering. In reality, the SEC does not "pre-approve" IPOs.

The false press release was distributed by PR Newswire to hundreds of Web sites and Internet portals Jan. 25 as part of the SEC project.

As a result, the McWhortle site re-ceived more than 150,000 "hits" in just three days.

"We're thrilled with the response," said SEC Chairman Harvey L. Pitt. "In a perfect world, everyone would read our educational brochures before they ran into a scam, but they don't. What we're trying to do is warn investors while their guard is down. The next time, when they en-counter a real scam, these investors won't let excitement cloud their better judgment."

The McWhortle site purports to be that of McWhortle Enterprises Inc., a fictitious company that claims to have developed a handheld, battery-powered biohazard detection device that "emits an audible beep and flashes when in the presence of all known biohazards." The site solicits investments in the company that, in three months, will be "worth more than 400 times the initial investment."

The site features a link to an audio "interview"with the chief executive officer and president of McWhortle Enter-prises, Thomas J. McWhortle III, whose "voice" was provided by SEC staffers. The site also features fictitious "testimonials" from a Wall Street securities analyst, a Fortune 100 chief executive officer and a company customer.

The McWhortle site was launched with the assistance and support of the National Association of Securities Deal-ers Inc., the Federal Trade Commission, and the North American Securities Ad-ministrators Association.

Other government agencies and law enforcement organizations will assist the SEC with similar sites.

The SEC does not intend to publicly identify the additional sites, some of which already have been posted on the Internet.

"The Internet's like a big city with good neighborhoods and bad neighborhoods, so you've got to be careful," said Joseph Borg, NASAA president and director of the Alabama Securities Com-mission. "If you're tempted by an investment on the Internet, call your state securities regulator to make sure the investment and the person pushing it are properly registered. If they're not, forget it."

NASAA's Web site, www.nasaa. org, provides information for regulators in each state.