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SEC files complaint against Agora Inc., alleging it made e-mail offers to sell inside information.

The Securities and Exchange Commission filed a complaint in the United States District Court for the District of Maryland, on April 10, 2003, seeking a permanent injunction against Agora Inc., Pirate Investor LLC, and Frank Porter Stansberry, an Agora editor.

The complaint alleges that Agora, Pirate and Stansberry violated the antifraud provisions of the federal securities laws. The complaint also seeks disgorgement and civil money penalties from all three defendants.

In its Litigation Release No. 18090 (, the SEC states: "The complaint alleges that beginning May 14, 2002, Agora, Pirate and Stansberry disseminated unsolicited e-mails to subscribers of more than 15 internet newsletters published by Agora. It is alleged that the e-mails, which were authored by Stansberry, offered to sell inside information concerning government approval, to be announced on May 22, 2002, of a contract which would yield billions of dollars in revenues for an unnamed company listed on the New York Stock Exchange and would enable investors to double their money on the announcement.

"It is further alleged," the SEC release continues, "that the unsolicited e-mails stated that the inside information had been obtained from a senior executive of the company and offered to sell a report, which named the company, for a payment of $1000. The complaint alleges that approximately 1000 subscribers purchased copies of the report yielding revenues of approximately $1,000,000 for Agora.

"Finally, the complaint alleges that the so-called inside information was false in that even the company did not know when government approval of the contract would be received and that such approval was ultimately not received on May 22 as promised in the unsolicited emails and the report."

"SEC'S Agora-Phobia"

The story first broke in the New York Post on April 21, with an article in which columnist Christopher Byron apparently took the SEC's complaint at face value. Headlined "SEC's Agora-Phobia: Fraud Suit Responds to Fears over Internet Tout Sheets," the article stated, 'According to the SEC, Agora Inc. ran a variation on this basic pump-and-dump scheme. As charged in the complaint, the fact that the price of a particular stock may have gotten a boost from Agora's hype was almost a side issue to the newsletter publisher's real objective. What Agora was really after, according to the SEC, was to peddle ultra-expensive company 'reports.'"

Agora president Bill Bonner replied to Byron in a detailed, five-page letter (obtained by NL/NL), displaying Bonner's legendary gifts of literacy and persuasion. Excerpts follow (ellipses are his):

--"In the last three years, almost by accident, because we did not imagine it would happen, our services have moved from paper to the internet. At no time [in 25 years of publishing] have we ever been charged with any crime that I can remember--neither by the SEC nor anyone else. Nor have we ever had a serious complaint from a customer. This happy state, though recently jarred by the SEC, was no accident. It was a consequence of a few simple rules:

"1) We never proposed anything without running it by our lawyer to make sure it was legal.

"2) We never wrote anything that failed to pass our 'Presbyterian test'--would a reasonable Presbyterian find it acceptable, we asked ourselves.

"3) We never bought or sold an investment that we were recommending to readers.

"4) We never received a single dollar from any of the companies we wrote about.

"5) We always gave customers back their money, even when we thought they were taking advantage of us."

--"We don't have anything to do with stocks at Agora--except for having opinions on them. And we don't have any sources of revenue or influence that are not obvious. All our opinions are right out in the open. Words, words, words unadorned ... unadulterated just stark, naked words, There are no corporate clients paying us millions to work out mergers and acquisitions on the 3rd floor, while the guys in the research department pretend not to know about it.

"There are no hidden agendas not even any pretty pictures or advertisements. Just words ideas ... opinions ... and every one of them right there where customers can see them and judge for themselves."

--"Since the landmark Lowe decision, nearly two decades ago, the SEC has been barred from regulating the financial press. The Supreme Court had told the SEC to back off and stop trying to regulate the financial press. As long as the publishers did not have any hidden deals, we all believed, the First Amendment allowed us to say whatever we believed, just like any other publisher.

"That is not to say that we could get away with anything, but merely that-like the Wall Street Journal and Bloomberg--the readers would punish us if we were wrong, not the SEC. Readers could always cancel their subscriptions and get their money back. Or simply not renew. All we had was words ... if the customers didn't think they were honest, or helpful, words ... we were doomed, no matter what the SEC thought."

Elsewhere in the letter, Bonner says that perhaps the SEC has taken this action "as our lawyer believes, because we filed a suit against the SEC last year, in order to get the agency to mind its own business."

Letter to subscribers

Porter Stansberry provided us with a letter he posted on their website for subscribers to read:

"This SEC investigation is nothing new. I first mentioned in back in December 2002, in PSIA [Porter Stansberry Invesment Advisory, 12x, $149/year].

"I am not allowed to speak my mind on this topic--our lawyers have my tongue chained to the bed post. Why? Because the SEC has already proven it will take things we write out of context and use such half-statements to make us look bad in the press. In time, I promise a full and accurate accounting. However, you should be aware of these points:

"I. Our reporting of the facts was accurate. Allegations that we fabricated information, or lied about our interview with USEC employee Steven Wingfield, are simply false. (There is no other way we could have known what we did about USEC's deal with Tenex and the time of the U.S.Russia arms treaty.)

"II. At no time did we attempt to profit from USEC's shares. As with all of our analysis, our USEC reporting was independent and unbiased. We had no financial interest in the company.

"III. Despite the admittedly aggressive headline, we provided plenty of caveats in our sales piece. What we wrote about--for several months--was a chance to double your money in a conservative stock.

"IV. Most importantly, we did offer refunds to everyone who expressed their desire for such and, for those who didn't, we provided additional reports that have proven to be very valuable. USEC report buyers also received our Extreme Value publication ($1,000 per year), which has an extraordinarily good track record."

Agora, 105 Monument St., Baltimore, MD 21201, 410-783-8499.
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Publication:The Newsletter on Newsletters
Date:Apr 30, 2003
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