by Mike Caswell
The Ontario Securities Commission has secured $150,000 in penalties againstAgoracom Investor Relations Corp. and two of its directors, George Tsiolis andApostolis Kondakos, and has terminated the limited dealer registration ofAgoracom Capital Inc. The penalties are part of a negotiated settlementannounced Friday, in which the men admitted that they had Agoracom employeescreate over 24,000 forum posts about client companies. Mr. Kondakos alsoadmitted to snooping through private messages sent by users of Agoracom'sforums.
The settlement comes seven months after the OSC initially filed a statementof allegations against Mr. Kondakos, Mr. Tsiolis and Agoracom InvestorRelations. The regulator claimed that the men had Agoracom employees creatingthe forum posts over nearly three years, starting on Sept. 1, 2006. Neither thepublic nor Agoracom's clients were aware that Agoracom employees were writingthe posts.
OSC's statement of allegations
The five-page statement of allegations identified Agoracom as a company that"caters to the IR and marketing needs of small and micro cap public companies."The OSC listed its founder as Mr. Tsiolis, who lives in Toronto, and one of itsdirectors as Mr. Kondakos, who also lives in Toronto.
As with most IR firms, Agoracom performed investor relations work in returnfor a monthly fee, plus stock options. Agoracom would usually ask for an optionto buy 250,000 shares, or 0.5 per cent of a company's float, whichever wasgreater. In return, clients would receive a "hub" on Agoracom's website, whichwould include a discussion forum moderated by Agoracom employees.
According to the OSC, Mr. Tsiolis and Mr. Kondakos required employees toauthor large numbers of anonymous posts in those forums using aliases. Agoracomemployees created fictitious user names and posed as investors, blending in withother users. "Representatives had between 40-50 aliases (some had up to 200) andwere required to make a requisite number of posts per hub per day or risk havingtheir pay docked. On occasion, Agoracom staff conversed with themselves on theforums using different aliases," the statement of allegations read. In all,there were more than 24,000 alias posts created from within Agoracom.
The OSC said the extra posts helped bolster monthly reports that Agoracommade to clients. Agoracom routinely reported traffic and activity to itscustomers, including the number of forum posts. For some clients, posts authoredby Agoracom employees represented a significant portion of the total posts,according to the statement of allegations.
The first public hint that there was a problem appeared in March, 2009, whena company employee, Scott Purkis, revealed that he had created posts in theforums using an alias. Mr. Tsiolis and Mr. Kondakos responded by issuing an"official statement" in which they said that Mr. Purkis was the only employeemaking such posts, and that Agoracom would ensure that there would be no similarproblems in the future. The OSC said that the message "was false and misleadinggiven that Tsiolis and Kondakos knew and instructed many representatives tocreate and use multiple aliases to post on all of the client forums."
(In a separate settlement reached in August, 2010, Mr. Purkis agreed to pay$23,862 and to serve a seven-year officer and director ban. He also agreed totestify in any proceedings against Agoracom.)
Settlement
On Friday, Nov. 12, the OSC announced that it had reached a settlement withAgoracom and its two directors. In settling the case, Mr. Tsiolis and Mr.Kondakos admitted to the information contained in the statement of allegationsand agreed to fines and bans. Mr. Kondakos also admitted that he interceptedprivate messages sent between members of Agoracom's forums. He used the messagesto gather information about companies that he had personally invested in, andforwarded them to a friend who was not associated with Agoracom.
The terms of the settlement call for the two men and Agoracom to jointly paya $125,000 fine, plus $25,000 for the costs of the OSC investigation. The OSCwill also terminate the registration of Agoracom Capital, a limited marketdealer that operates as a subsidiary of Agoracom Investor Relations. Othersanctions include a five-year officer and director ban for Mr. Tsiolis and Mr.Kondakos and a 10-year suspension preventing the two men from acting as aninvestment fund manager or a registrant. Mr. Tsiolis and Mr. Kondakos also mustnot trade shares in any Agoracom client companies. The final term calls forAgoracom to make a copy of the settlement available on its website for sixmonths.