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Australian jailed for U.S. stock spam fraud

October 30, 2000

MELBOURNE, Oct 30 (Reuters) - An Australian was ordered on Monday to serve three months of a two-year jail sentence for using the Internet illegally to tout the U.S. shares of Rentech Inc, a developer of gas to liquid fuels conversion technology.

Steven Hourmouzis pleaded guilty this month to charges of sending millions of junk e-mails and posting false information on Internet sites in May 1999 in the United States predicting a massive jump in Rentech's share price.

"This is one of the first prosecutions in the world for 'spam'," Jaime Orchard, director of enforcement for the Australian Securities and Investments Commission in the state of Victoria, told Reuters, referring to the huge pile of unsolicited e-mail which clogs up Internet servers.

A Victoria County Court judge sentenced Hourmouzis to two years jail concurrently on each of three charges, but ordered him to serve only three months, with the release tied to him staying out of trouble for two years, a court spokeswoman said.

"This case highlighted the fact that transmission of messages through the Internet is not anonymous as many tend to believe," Orchard said.

Australian and U.S. regulators alleged that Hourmouzis and Wayne Loughnan of the Australian state of Queensland sent out more than four million e-mails and messages to Internet sites in May 1999 with misleading statements that Rentech's stock would rocket 900 percent to $3 once the company released pending patents, in a bid to make others buy Rentech's shares.

The U.S. Securities and Exchange Commission said in May the messages triggered a doubling in Rentech's share price and a 1,600 percent rise in trading volume on May 19, 1999, leading Nasdaq to halt trading on the stock.

Rentech (RTK) shares, now listed on the American Stock Exchange, last traded at $1.625 ($1 5/8). The Australian commission said Hourmouzis sold his 65,000 Rentech shares for about A$17,000 (US$8,800) in profits on the first trading day after sending out the spam e-mails.

The U.S. SEC won a civil judgment ordering Hourmouzis and Loughnan to give up about A$15,000, the Australian commission said.

Loughnan is set to face trial in November, Orchard said.


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