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Ex-CEO of Smart Online out on bond(News & Observer, The (Raleigh, NC) (KRT) Via Thomson Dialog NewsEdge) Sep. 14--Michael Nouri, the former CEO of a Durham technology company, was released on bail Thursday after being arrested two days earlier in an alleged stock-fraud scheme. Federal prosecutors say Nouri, who was terminated Tuesday as president and CEO of Smart Online, conspired with his brother and office manager Eric Nouri and four New York brokers to artificially drive up the value of the company's shares. When reached by phone later Thursday, Michael Nouri, 53, said he had been advised by attorneys not to comment. Asked about the securities fraud accusations, he said, "There are a number of mistakes, and that will all come out." The former CEO was released on a $1 million bond secured by $100,000 cash and equity in his home, according to the U.S District Court in Durham. His brother Eric Nouri, 40, was released on a $500,000 bond. They had been jailed in Durham since Tuesday and are scheduled to appear in federal court in New York on Wednesday for indictment. The Nouris were required to surrender their passports and restrict travel between their homes in North Carolina and New York, the U.S. Attorney's Office in New York said. The judge ordered them confined to their homes and said they must wear electronic monitoring devices. Their lawyer, David Long, offered no comment Thursday. A third brother, Henry Nouri, was not named in the complaints but was terminated as executive vice president of Smart Online on Wednesday. Henry and Michael Nouri co-founded Smart Online in 1993. Henry Nouri's termination came a day after the board of directors hired independent board member Dave Colburn to step in as interim CEO. Colburn and chief strategy officer Tom Furr declined to say whether the former vice president was fired for reasons related to the alleged scandal. In 2005 and 2006, Michael and Eric Nouri paid the four brokers at least $170,000 in bribes to sell the stock to investment clients, according to criminal and civil complaints from the U.S. attorney for the Southern District of New York and the Securities and Exchange Commission. The men are charged with securities fraud, which carries a maximum 20-year prison term and a fine of as much as $5 million. They are also charged with conspiracy to commit securities fraud, which carries a maximum sentence of five years. Smart Online stock traded above $11 in 2005 and dropped to less than $2 in 2006. It fell 15 cents Thursday to close at $1.30. As of May, Michael Nouri was Smart Online's fifth-largest shareholder with more than 1 million shares, or about 6 percent of the company, according to an SEC filing. His 2006 salary was $170,000 plus options worth $46,461. He and three other executives took temporary pay reductions early this year to cut costs while the company lined up additional financing. He and his wife, Ronna Nouri, who was chief financial officer of Smart Online until being replaced last year, bought a home in Raleigh for $1.1 million in 2005. Wake County tax records show they have since pulled out about $1 million in equity through three transactions, in January, February and March of this year. Suspension in 2006 While CEO of Smart Online, Michael Nouri agreed to hire outside auditors after the SEC had suspended its shares from trading in early 2006 over concerns of stock manipulation. "The trading halt was a huge red flag," said Yolanda Holtzee, a securities watchdog who co-manages a hedge fund in Seattle. A few months after the stock suspension, auditing firm Sherb & Co. of New York gave Smart Online a clean bill of health. Smart Online executives told the SEC there was no indication of fraudulent activity. The company also named a new chairman. Holtzee, who does not own shares of Smart Online, said she has a difficult time believing in the audit. Sherb & Co. has been named in at least one civil suit over an alleged pump-and-dump scheme and was auditor for another firm under investigation by the SEC and the Commodity Futures Trading Commission, she said. (News researcher Becky Ogburn contributed to this report.) Staff writer Frank Norton can be reached at 829-8926 or [email protected]. To see more of The News & Observer, or to subscribe to the newspaper, go to http://www.newsobserver.com. Copyright (c) 2007, The News & Observer, Raleigh, N.C. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |