Related News:
SpongeBob Bath Toymaker's Officers Plead Not Guilty to Securities Fraud
Two top officers of the company that makes the SpongeBob SquarePants soap-filled bath sponges for children pleaded not guilty to securities fraud and other charges.
Michael Metter, chief executive officer of New York-based SpongeTech Delivery Systems Inc., and Steven Moskowitz, its finance chief, pleaded not guilty in federal court in Brooklyn, New York, to a six-count indictment handed up Aug. 4.
“As part of the fraudulent scheme, the defendants Michael Metter and Steven Moskowitz publicly reported false and materially overstated Spongetech sales figures,” according to the indictment.
They were arrested May 5 and charged by the U.S. Attorney’s Office in Brooklyn. They and the company were sued by the U.S. Securities and Exchange Commission the same day. SpongeTech filed for bankruptcy July 9.
Metter, 58, of Greenwich, Connecticut, and Moskowitz, 45, of Flushing, New York, are accused of reporting that SpongeTech got purchase orders from or made sales to five customers that didn’t exist.
For the nine months ended in February 2009, the five nonexistent customers constituted about 99 percent of SpongeTech’s revenue, prosecutors said.
SpongeTech, Metter and Moskowitz, after pumping up the stock by releasing false information, dumped about 2.5 billion shares in unregistered transactions, according to the SEC complaint.
Creating an Aura
The profits were spent on “highly visible sponsorship deals with professional sports teams to further create the aura that SpongeTech was a well-known and prosperous business,” according to an SEC statement.
Metter and Moskowitz allegedly obstructed an SEC investigation into the company by seeking to fabricate websites and virtual offices for the purported customers and furnishing phony purchase orders, prosecutors said.
Metter and Moskowitz are each charged with two counts of conspiracy, including one for money laundering, and one each of securities fraud, obstruction of justice and perjury -- the last for statements made to the SEC in October. They have each been free on $2 million bail.
SpongeTech markets cleaning and bathing supplies including soap-filled children’s bath sponges shaped like television cartoon characters SpongeBob SquarePants, Dora the Explorer and the Pink Panther.
Sea Creature
“SpongeBob SquarePants,” the adventures of a good-natured sea creature who lives in a pineapple on the ocean floor, began airing in 1999 and still runs on Viacom Inc.’s Nickelodeon cable channel.
SpongeTech, whose tagline is “the Smarter Sponge,” also makes sponges preloaded with detergents for car, boat and home cleaning, according to its website.
Metter’s lawyer, Jeffrey B. Sklaroff of Greenberg Traurig LLP in New York, and Moskowitz’s lawyer, Mark M. Baker of Brafman & Associates PC in New York, both declined to comment after today’s court appearance.
Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch, declined to comment.
The criminal case is U.S. v. Metter, 10-cr-600, and the civil case is SEC v. SpongeTech Delivery Systems Inc., 10-cv- 2031, U.S. District Court, Eastern District of New York (Brooklyn). The bankruptcy case is SpongeTech Delivery Systems Inc., 10-13647, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Thom Weidlich in Brooklyn, New York, federal court at tweidlich@bloomberg.net
Rate These Stories
Rate this Page