A marketing executive and adjunct professor at Florida Gulf Coast University is facing charges of writing a phony press release that caused the stock price for a local builder to soar last year.
The U.S. Securities and Exchange Commission has charged Fort Myers resident Richard Karp with fraud, saying he wrote the news release to manipulate the stock price for WCI Communities Inc. on July 19 so he could profit.
Karp, 65, who handles marketing for the Mel’s Diner and Big Al’s restaurant chains, said the charges are false.
“This has been going on for six months and it’s extremely untrue,” he said in a phone interview.
In a letter to the SEC, Karp’s attorney said Karp did not issue the press release that’s in question and that he’s been unfairly charged.
The SEC charges that Karp created the press release that falsely reported WCI’s board of directors had received a buyout offer worth $220 million. After it went out to the media and the stock price increased, the SEC says Karp quickly sold his shares to generate $29,000 in profits that are illegal.
“As alleged in our complaint, Karp actively traded in WCI’s stock while hoping that a major shareholder would make a buyout offer,” said David Nelson, director of the SEC’s Miami Regional Office, in a statement.
“When that didn’t happen, Karp tried to take the news into his own hands to enrich himself and cheat the investing public.”
At one time, it was thought that billionaire shareholder activist Carl Icahn might buy out the company.
The SEC’s complaint is filed in the U.S. District Court for the Middle District of Florida.
According to the SEC, Karp had actively traded WCI’s stock throughout late 2007 and early 2008, and in early July he bought 42,000 shares for about $54,700.
On July 14, WCI announced that it was no longer engaged in discussions with Icahn affiliates regarding alternative restructuring proposals. A few days later the press release went out.
The information in the press release was reported by at least four Fort Myers media outlets. The Daily News received it, but did not do a story until after the hoax was discovered.
WCI’s share price increased dramatically the following Monday, July 21.
The SEC’s complaint charges Karp with violating Section 17(a) of the Securities Act of 1933, Sections 9(a)(4) and 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5.
The commission seeks a permanent injunction and wants him to give up his gains, as well as pay interest and fines.
In its complaint, the SEC did not say how big of a fine it will look to charge.
“Certainly we would seek a penalty that we felt was appropriate in light of his misconduct,” said Glenn S. Gordon, an association regional director for the SEC in Miami.
He said a case like this doesn’t happen every day.
“We certainly want to deter individuals from publishing false information in order to profit from it,” Gordon said. WCI, a luxury builder based in Bonita Springs, is currently in Chapter 11 bankruptcy and hopes to reorganize.