Spongetech is all wet
Ex-attorney claims forgery
By KAJA WHITEHOUSE
Last Updated: 2:12 AM, September 22, 2009
Posted: 2:12 AM, September 22, 2009
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A former attorney for SpongeTech, a New York company known for making soap-filled sponges it sells through infomercials, says the company forged dozens of legal documents tied to its issuance of stock.
SpongeTech, which boasts that sales skyrocketed 900 percent this year, received international attention earlier this month when tennis star Serena Williams screamed at a US Open tennis championship line judge in front of one of its ads.
But on Friday the company's stock was tagged with the financial equivalent of a scarlet letter: The letter "e" was appended to its ticker for failing to file financial results with the SEC. The company says it had to restate its last two years of financial results because of a problem with its auditor, and as a result is late with its annual filing.
The accusations of forgery and "identity theft" come from Norfolk, Conn. attorney Joel Pensley, who said in a letter to the Securities and Exchange Commission that he was "dumbfounded" to learn that his name was being used in "as many as one hundred opinion letters for various shareholders."
Pensley told the SEC that he would not have written such letters. "I question the legality of the transactions," he wrote.
A copy of the letter obtained by The Post shows it was addressed to Robert Khuzami, head of the SEC's enforcement division.
Neither Pensley nor the SEC responded to repeated requests for comment, but Pensley's business partner, Maureen Abato, confirmed the letter's authenticity.
"Why would they want to run that risk? I don't get it," said Abato, who is based in Brooklyn and whose name and address is on the letterhead with Pensley's. "It raises questions about their whole operation."
Abato said that after learning about the documents, their firm, Pensley & Abato, sent a cease-and-desist letter to SpongeTech. She said SpongeTech CFO Steve Moskowitz claimed the company had authority to use the law firm's name in the legal documents, but agreed to stop.
In June SpongeTech projected a whopping $50 million in revenue for the fiscal year ended in May, up from $5.6 million for 2008. But those numbers have raised questions within the industry.
Michael Popovsky, CEO of LA-based sponge maker Spongeables, a SpongeTech rival, scoffs at the idea that a company that sells sponges with soap in them can generate $50 million in annual revenue.
"Impossible," he said. "Categorically not."
Popovsky said industry sales tend to be in the $5 million to $10 million range.
Among Popovsky's biggest customers are national retailers such as Wal-Mart, CVS/Caremark and Rite-Aid.
SpongeTech, by contrast, lists among its biggest customers several lesser-known companies, like New Century Media, which a SpongeTech spokesman said is "based in Europe," declining to provide further specifics. Another company, SA Trading, is based in Caracas, Venezuela, he said. The only US record of an SA Trading shows a now-defunct company incorporated in Illinois.
It's also unclear how many shares SpongeTech currently has outstanding. Prior to its last quarterly filing, the company had 1.2 billion shares outstanding, putting it on par with eBay and overshadowing shares outstanding at both Apple and Pfizer combined.
"I am shocked and aggrieved that my name and reputation could be sullied in this manner," Pensley said in the letter to Khuzami. Pensley said in the letter that he learned of the forgery from New Jersey stock services company Olde Monmouth Stock Transfer Co.
A letter from Olde Monmouth's attorney, Richard Fox, also addressed to Khuzami, said the forged documents relate to stock issued to RM Enterprises, SpongeTech's largest shareholder. RM Enterprises is controlled by the company's executives, including Moskowitz and CEO Michael Metter, according to SEC filings. Metter recently denied to The Post that he's a director or officer of the company.
Fox, when reached by The Post, said he couldn't comment before abruptly hanging up the phone. kaja.whitehouse@nypost.com
Ex-attorney claims forgery
By KAJA WHITEHOUSE
Last Updated: 2:12 AM, September 22, 2009
Posted: 2:12 AM, September 22, 2009
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A former attorney for SpongeTech, a New York company known for making soap-filled sponges it sells through infomercials, says the company forged dozens of legal documents tied to its issuance of stock.
SpongeTech, which boasts that sales skyrocketed 900 percent this year, received international attention earlier this month when tennis star Serena Williams screamed at a US Open tennis championship line judge in front of one of its ads.
But on Friday the company's stock was tagged with the financial equivalent of a scarlet letter: The letter "e" was appended to its ticker for failing to file financial results with the SEC. The company says it had to restate its last two years of financial results because of a problem with its auditor, and as a result is late with its annual filing.
The accusations of forgery and "identity theft" come from Norfolk, Conn. attorney Joel Pensley, who said in a letter to the Securities and Exchange Commission that he was "dumbfounded" to learn that his name was being used in "as many as one hundred opinion letters for various shareholders."
Pensley told the SEC that he would not have written such letters. "I question the legality of the transactions," he wrote.
A copy of the letter obtained by The Post shows it was addressed to Robert Khuzami, head of the SEC's enforcement division.
Neither Pensley nor the SEC responded to repeated requests for comment, but Pensley's business partner, Maureen Abato, confirmed the letter's authenticity.
"Why would they want to run that risk? I don't get it," said Abato, who is based in Brooklyn and whose name and address is on the letterhead with Pensley's. "It raises questions about their whole operation."
Abato said that after learning about the documents, their firm, Pensley & Abato, sent a cease-and-desist letter to SpongeTech. She said SpongeTech CFO Steve Moskowitz claimed the company had authority to use the law firm's name in the legal documents, but agreed to stop.
In June SpongeTech projected a whopping $50 million in revenue for the fiscal year ended in May, up from $5.6 million for 2008. But those numbers have raised questions within the industry.
Michael Popovsky, CEO of LA-based sponge maker Spongeables, a SpongeTech rival, scoffs at the idea that a company that sells sponges with soap in them can generate $50 million in annual revenue.
"Impossible," he said. "Categorically not."
Popovsky said industry sales tend to be in the $5 million to $10 million range.
Among Popovsky's biggest customers are national retailers such as Wal-Mart, CVS/Caremark and Rite-Aid.
SpongeTech, by contrast, lists among its biggest customers several lesser-known companies, like New Century Media, which a SpongeTech spokesman said is "based in Europe," declining to provide further specifics. Another company, SA Trading, is based in Caracas, Venezuela, he said. The only US record of an SA Trading shows a now-defunct company incorporated in Illinois.
It's also unclear how many shares SpongeTech currently has outstanding. Prior to its last quarterly filing, the company had 1.2 billion shares outstanding, putting it on par with eBay and overshadowing shares outstanding at both Apple and Pfizer combined.
"I am shocked and aggrieved that my name and reputation could be sullied in this manner," Pensley said in the letter to Khuzami. Pensley said in the letter that he learned of the forgery from New Jersey stock services company Olde Monmouth Stock Transfer Co.
A letter from Olde Monmouth's attorney, Richard Fox, also addressed to Khuzami, said the forged documents relate to stock issued to RM Enterprises, SpongeTech's largest shareholder. RM Enterprises is controlled by the company's executives, including Moskowitz and CEO Michael Metter, according to SEC filings. Metter recently denied to The Post that he's a director or officer of the company.
Fox, when reached by The Post, said he couldn't comment before abruptly hanging up the phone. kaja.whitehouse@nypost.com
