XDSL CEO settles SEC charges: Should they look at XDSL?

Honest and ethical management is a sine qua non of a good stock, and investors should always be on the lookout for red flags that might raise questions about that.

So the fact that MPhase Technologies (OTC BB: XDSL) CEO Ronald Durando just settled charges with the SEC related to an alleged pump and dump scheme involving shares of a company called PacketPort might raise some questions for investors. According to the SEC's litigation release, Durando was ordered to disgorge $150,000 as part of the settlement.

What's even more disconcerting is that there appear to be points of similarity between Durando's conduct at PacketPort and the way the MPhase has been run. Back in February, I wrote about MPhase's PR campaign that consisted of posting videos on YouTube touting its stock. Mr. Durando and MPhase also have ties with Jonathan Lebed, a notorious penny stock promoter who settled charges of stock manipulation with the SEC at the tender age of 15. From an email that Mr. Lebed sent to subscribers to his newsletter:

My firm Lebed Biz LLC has been compensated by XDSL 400,000 restricted shares for a one-year investor relations contract. XDSL has agreed to register these shares in their next registration statement. We were previously compensated by XDSL a total of 450,000 restricted shares, $55,000 cash, and 175,000 warrants to purchase shares at $0.35 for past investor relations contracts which have since expired. We already sold all of the previously compensated restricted shares but still hold all of our warrants. Never invest into a stock we discuss unless you can afford to lose your entire investment. For our full disclaimer go to: www.lebed.biz/disclaimer.htm

To date, MPhase's primary product appears to the the press release. The company had sales of just $154 thousand in 2007.