After multi-year investigation, SEC charges Sky Way Global execs
Mar 19, 2009
Tampa Bay Business Journal–March 19, 2009
by Alexis Muellner Editor
The Securities and Exchange Commission has filed a civil injunctive action against Sky Way Global LLC and its principals – Brent C. Kovar, Glenn A. Kovar and James S. Kent – alleging they defrauded investors through an unregistered fraudulent offering of stock and orchestrated a pump-and-dump scheme of Sky Way Communications Holding Corp.
Kovar authored a patented compression algorithm, which was the bedrock for the company’s publicly promoted plans to provide wireless communication that would aid in anti-terrorism efforts.
Sky Way Global was never a very large company and was thinly traded.
But the saga of the Clearwater company combined many elements of great business theater: trendy consumer-based entertainment technology; the potential exploitation of post-Sept. 11 fear related to homeland security business; entrepreneurs who, despite warnings their company was in a development stage, attracted vulnerable investors, many of whom sunk college and life savings into the promising idea; a fleet of airplanes and Humvees, one of which was used to retain a local bankruptcy lawyer; a giant cash infusion from Arab investors that quickly went dry; a contempt of court actions against Joy Kovar, Brent Kovar’s mother, for making no effort to produce relevant documents during a deposition; the interest of federal regulators and investigators for different reasons, and the involvement of U.S. senators and political cronies.
The Tampa Bay Business Journal first reported the SEC’s investigation into the company in 2004 in a series of reports.
The Commission’s complaint, filed in the U.S. District Court for the Middle District of Florida, also charged Kenneth Bruce Baker and Kenneth R. Kramer, alleged unregistered broker-dealers who found investors for Sky Way and sold Sky Way stock, a release said.
The filing alleges that from at least February 2002 until December 2005, Sky Way executives and officers Brent Kovar , Kent and Glenn Kovar raised about $1.38 million from 18 investors by offering and selling unregistered shares of the company’s stock.
“In connection with the offer and sale of Sky Way Global’s securities, the company, Brent Kovar, Kent, and Glenn Kovar made numerous material misrepresentations and omissions to investors through marketing and offering materials, including, among other things, that Global possessed a nationwide network of broadcasting towers and anti-terrorism technology that would allow the government to monitor and, if necessary, take control of an airplane,” the SEC release said.
These claims were patently false because Global had no towers and no technology to monitor and take control of airplanes, the government said.
Complaint details web of transactions
The complaint further alleges that after a Sky Way Global subsidiary merged with a public shell to become Sky Way in June 2003 and Global transferred its purported technology and assets to Sky Way, Brent Kovar and Kent, and with Glenn Kovar’s assistance, carried out a pump-and-dump scheme of Sky Way stock.
From August 2003 to May 2005, Brent Kovar, Sky Way’s president, and Kent, SkyWay’s chief executive officer and chief financial officer, issued false press releases to increase SkyWay’s stock price and trading volume, the SEC said. The press releases stated, among other things, that Sky Way had a national network of broadcasting towers, and the same purported anti-terrorism technology that Global had claimed to have. The press releases also claimed Sky Way had technology for providing Internet services on airplanes.
During the same period, Sky Way Global, Brent and Glenn Kovar, and Kent dumped 76.65 million shares of their Sky Way stock on the unsuspecting public and made more than $12 million in profits, the SEC said. “Brent Kovar and Kent also engaged in other misconduct in connection with the Sky Way pump-and-dump scheme by improperly issuing S-8 stock to promoters Baker and Kramer in exchange for finding investors and selling Sky Way stock.”
The Commission’s complaint charges the principals with violating the registration and anti-fraud provisions of the federal securities laws, and further charges Glenn Kovar with aiding and abetting Sky Way’s violations of Section 10(b) of the Exchange Act and Rule 10b-5.
The complaint further charges Brent Kovar and Kent with aiding and abetting Sky Way’s violations of disclosure provisions and charges Baker and Kramer with violating the broker-dealer registration provisions, the release said.
The complaint seeks permanent injunctive relief against all defendants, enjoining them from future violations of the provisions charged and an order requiring them to disgorge their ill-gotten gains with prejudgment interest, the release said. It also imposes civil penalties against each of them, imposing a penny stock bar against the individual defendants as well as an officer and director bar against Brent Kovar and Kent.
‘Doing this for free’
In September 2005, executives Brent Kovar and Jim Kent spoke on the record about the company, claiming they relied on commitments of $40 million and even $100 million from a group of well-heeled Kuwaiti investors that was then fighting them in court.
At that point in time, the tailspin of Skyway and its entities had left a trail of litigation and furious investors, including 24 Kuwaiti and Saudi nationals and shareholders around United States. They included nearly 100 investors in Kentucky who told the Tampa Bay Business Journal they sunk retirement savings and college funds into a company that promised to protect airplanes from terrorism and provide high-speed Internet at 30,000 feet.
But Brent Kovar and James S. Kent told the TBBJ in that September 2005 interview that they had been misunderstood and weren’t paid in a year, pouring their own cash into the company after its main investors parachuted.
“We didn’t get anything out of this,” Kovar said at the time. “We’re still doing this for free,” he said.
Skyway’s case also attracted the FBI, Kovar confirmed in the 2005 interview. The FBI could neither confirm nor deny whether an investigation was active at the time.