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Westergaard article.

Longtime Securities Analyst

Fights to Protect Reputation

By AARON ELSTEIN

WSJ.COM

May 4, 2001

John Westergaard's battle with the Securities and Exchange Commission comes down to one word: reputation.

The longtime securities analyst has been accused by the SEC of defrauding investors by trying to pass off reports on technology companies he was being paid to promote as "independent" analysis.

Mr. Westergaard, 69 years old and battling cancer, was a well-known analyst during Wall Street's "Go-Go Years" of the 1960s. He is willing to admit one thing: That he committed a minor securities violation of failing to disclose he was paid to promote stocks he pitched on the Internet and on his radio show. But he says he didn't try to mislead or defraud investors.

On Thursday, Mr. Westergaard filed papers in U.S. District Court in Manhattan, contesting the allegations, which were made by the SEC in a civil complaint in December 2000. Mr. Westergaard says he rejected a settlement offer that had required him to pay a $35,000 penalty.

Many stock promoters who face similar charges by the SEC are quick to accept such settlements, which usually don't require the defendants to admit or deny wrongdoing, and move on. But not Mr. Westergaard. He says he doesn't want to accept the SEC's offer and be known as a swindler.

"I have not defrauded anyone. This SEC suit is a direct attack against my reputation and I will fight it to the end," says Mr. Westergaard.

SEC officials declined to comment on the case or any possible settlement offer.

In his answer to the SEC charges, Mr. Westergaard acknowledged that he had failed to disclose he was paid by companies to recommend their stocks on his weekly radio show, which was transmitted over the Net. But he denied the SEC's contention that he was scheming to defraud investors.

Fraud charges can be damaging, securities lawyers say.

"If you're accused of failing to disclose you were being compensated to pitch a stock, you can make a case to customers that you made a mistake, but the stock you were offering was good and you're not a bad guy," says Bill Singer, a New York securities lawyer who has represented people investigated by the SEC for touting. "But if you agree to the charge that you intentionally misled people, that's tantamount to admitting you're a crook. That's a charge that can haunt you for the rest of your professional life."

While the SEC has sued dozens of so-called stock promoters in recent years for failing to disclose they were paid by the companies whose stocks they were recommending, few are as well-known as Mr. Westergaard.

A securities analyst since the 1950s at such firms as Standard & Poor's and Ladenburg Thalmann & Co., Mr. Westergaard was widely quoted in the Wall Street Journal and other publications seeking his insights into stocks through the 1980s. His observations about Saul Steinberg, just before the financer's unsuccessful effort in 1969 to acquire Chemical Bank of New York (now a part of J.P. Morgan Chase & Co.), were cited by John Brooks in his book "The Go-Go Years: The Drama and Crashing Finale of Wall Street's Bullish 60s."

Mr. Westergaard had no run-ins with regulators over his long career, according to the National Association of Securities Dealers, until shortly after he started an investment firm called Westergaard.com Inc.

Founded in 1996, Westergaard.com aimed to capitalize on investor interest in small technology stocks and billed itself as a "leading independent publisher and broadcaster of Internet-based institutional investment research," according to the SEC. The firm prepared research reports about small technology companies ignored by most Wall Street brokerages, such as Edgar Online Inc. It also held conferences at New York's Waldorf-Astoria Hotel where investors could meet corporate executives.

Additionally, Mr. Westergaard, the chairman of Westergaard.com, would feature client companies on his weekly radio show, called Johnny's Dotcom Journal, which was transmitted over the Internet.

The SEC started investigating Mr. Westergaard and Westergaard.com in 1997, according to court papers, and Westergaard.com closed last August when the unprofitable enterprise was unable to raise fresh capital.

SEC officials say in court papers that they alerted Mr. Westergaard that he had to shore up his compensation disclosure statements, but they closed a formal investigation in February 2000 without filing charges.

But in April 2000, the SEC says that Mr. Westergaard removed the necessary disclosure statements on his firm's Web site and never mentioned in press releases or on his radio show that he was being paid. "We told him to stop it and then he went ahead and did it again," said an SEC official. The commission filed suit in late December.

Mr. Westergaard says in court filings that the compensation language was removed because the firm wasn't collecting fees from clients at the time.

Westergaard.com settled the SEC charges without admitting wrongdoing, but Mr. Westergaard has refused to settle with the SEC, which seeks a permanent injunction to prevent him from committing further securities fraud.

An injunction may be a moot issue for Mr. Westergaard. He is now out of the securities business, living with his sister in Maryland while he undergoes medical treatment for prostate cancer.

At a recent gathering for him at New York's Knickerbocker Club sponsored by George J.W. Goodman, better known as Adam Smith on television's Public Broadcasting Service, Mr. Westergaard insisted he will continue to battle the SEC. "I have nothing left but my reputation to defend, and by God I'm going to do that," he said.

Write to Aaron Elstein at aaron.elstein@wsj.com

http://interactive.wsj.com/articles/SB988919892991412663.htm

-- Anonymous, May 09, 2001