A former commentator on Fox News and Fox Business Network, who once pitched a now-defunct Georgia film studio company as a "can't miss" stock, has settled civil charges that he promoted a Virginia penny stock without fully disclosing to investors that he was compensated by the public company.
MIDLAND, TX – FEBRUARY 9: Tobin Smith (pictured), founder and chairman of ChangeWave Research, interviews Parallel Petroleum Corporation’s President & CEO, Larry C. Oldham, on Biz Radio’s “The Tobin Smith Show” at KXYZ 1320 AM in Houston, Texas (1360 AM in Dallas, Texas). (Photo by Business Wire via Getty Images)
The Securities and Exchange Commission said Tuesday that Tobin Smith, of Bethesda, Md., agreed to pay a fine and disgorgement of improper profits totaling $257,793. The SEC alleges that Smith and his firm NBT Group (or “Next Big Thing”) were paid to send emails, blogs and other communications to investors about the stock of IceWEB, a data storage company.
Those messages included false and misleading information about the company and its financial well-being that the SEC said were designed to pump up the value of IceWEB’s stock. Investors, however, weren’t told that part of Smith and NBT’s compensation was tied to IceWEB’s stock price, the SEC said.
“Smith and NBT claimed IceWEB was a ‘perfect tech stock’ in order to manipulate the market and enrich themselves with illicit stock promoter fees,” Michele Wein Layne, director of the SEC’s Los Angeles Regional Office, said in a news release.
The SEC said Smith and NBT have been banned from future penny stock offerings.
An attempt to reach Smith was not immediately successful. Smith and NBT neither admitted nor denied the allegations in the settlement agreement.
Smith worked as a commentator for Fox News from 2000 to 2013, including appearances on the show "Bulls & Bears." The Wall Street Journal reported that Smith's contract with Fox News ended after it was reported that Smith was compensated for promoting a company.
Click here to read the SEC's complaint in the IceWEB case.
In May 2013, The Atlanta Journal-Constitution reported about Manu Kumaran and his movie production and studio business called Medient Studios that planned an ambitious production campus near Savannah.
Backers, including Tobin and NBT, said Medient would revolutionize Hollywood.
This fanciful studio has not gotten off the drawing board. The proposed headquarters of Medient Studios near Savannah. Source: Medient Studios, Inc
But despite glowing promotions about Medient, the company had little business track record and its auditor expressed "substantial doubt" about Medient's viability.
A stock-touting email calls Medient Studios and its $90 million project near Savannah a "can't miss" for investors, thanks in large part to generous state film incentives.
Medient Chairman and CEO Manu Kumaran, it says, is a "movie magician (who) turns movie bombs into movie gold for early investors." It says he'll have help from key "partners": the state of Georgia and Effingham County. It calls Kumaran a "conservative" filmmaker who will school Hollywood.
The email and a supporting report comes from a company paid with 225,000 Medient shares by a Medient shareholder, who would stand to profit if more people buy the stock.
A small print disclaimer discloses the arrangement. But it's a controversial practice in the turbulent world of volatile, over-the-counter penny stocks.
Medient shares had jumped from 40 cents to more than a $1 in late March, when the Savannah project was announced, but had fallen back to 19 cents by May 6.
The marketing email was issued May 9 and included news of a preliminary partnership with a production company that had been announced two days earlier. Shares immediately shot to 84 cents. They traded at about 80 cents Friday.
The company that sent the email and did the report, NBT Equities Research, touts Medient's plan to produce low-cost, high-quality films while using state incentives to build profits.
But Medient's financial disclosures say the company has no cash on hand and is not profitable, while an auditor raised doubts about its ability to stay afloat.
Tobin was never accused by regulators of any wrongdoing in the case of Medient.
Effingham County pinned a lot of hopes on Medient panning out as a major job creator.
"We are stoking the flames of Georgia's film industry," Effingham County Commission Chairman Wendell Kessler said at a ceremonial groundbreaking in August 2013.
Medient Studios Chairman and CEO Manu Kumaran speaks to reporters on the site of the company’s planned movie studio, which at 1,550 acres and a proposed 2 million square feet of soundstages, is pitched as the nation’s largest. J. Scott Trubey/STAFF
Medient’s plans were big, with one executive saying the company would “do to Hollywood what the Japanese did to Detroit.”
But as the AJC reported at the time:
Given its size and apparently meager finances, Medient's plans are bold. This is no Pinewood Studios, the established UK production company that recently started construction of facilities in Fayette County.
The $90 million estimated cost of the first phase of Medient's project is 45 times more than the company's revenue for the first six months of this year.
Medient lost $121,000 in the second quarter of this year, after squeezing out a $561,000 profit in the first quarter. It has a little more than $50,000 in cash on hand, according to the last quarterly report. Medient recently announced it obtained a $5 million credit line.
In June 2014, the SEC shut down trading of the company's stock for two weeks, citing "questions regarding the accuracy and adequacy of publicly available information about the company."
Medient never recovered. The company by that time had fired Kumaran and Jake Shapiro the incoming CEO promised a scaled back studio.
Medient eventually dissolved amid lawsuits and shareholders were out their investments.
A new company led by Shapiro took some of the remnants of Medient and planned Moon River Studios on the site. But that smaller venture also has stumbled out of the gates.
The studio’s parent company, FONU2, trades at less than a penny per share, according to data from Yahoo! Finance.
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