Larry Wilcox from CHiPs Gets Pulled Over By SEC

October 7th, 2010 Joel Beattie Leave a comment Go to comments

As a star of the 1970s hit show “CHiPs,” Larry Wilcox should have known that you can never outrun the long arm of the law. Yet the former actor turned alleged penny-stock pushing CEO has been nabbed by the Securities and Exchange Commission for attempting to bribe a pension fund manager to help manipulate its stock.

Wilcox, who played second-fiddle Jon to Erik Estrada’s superstar, Ponch, struggled to get his acting career off the ground after CHiPs ended. So, he turned to up-start businesses and became the CEO of UC Hub Group, which supposedly focuses its operations on the highly speculative precious metals and minerals sector.

What’s a Penny Stock?

For many naive investors, penny stocks seem appealing because they promise astronomical returns that are as close to a guarantee as you can get. Even better, shares are usually around $5 or less, so investors who don’t know any better think they’re “cheap.” In reality, penny stocks are manipulated to inflate the price with artificial interest.

How pump and dump operators inflate penny stocks:

Find a Target: First they find a public company that has a stock that isn’t worth anything, usually around a few cents per share–hence “penny stock.” They will either own the company or own a substantial amount of shares.
Pump Stock: What happens next is the pushers buy large blocks of shares to make the price go up, then do a mass campaign through emails, forums, etc. to tell people how the stock is about to explode. Gullible investors will believe that they’re getting in the ground floor of the next Google and start buying loads of shares, thinking that they’re about to win the lottery.
Dump Stock: The last step of your typical “pump and dump” is to do exactly that: dump shares. The original owners who inflated the stock’s price and interest will then sell their shares, leaving their victims holding the bag. Without the pushers driving up the stock and interest, share prices will collapse.

Most investors understand that if an investment sounds too good to be true, chances are it is. That’s why safe investors stay away from the penny stocks like the plague.

Should You Trust Celebrity Financial Advice?

Celebrities endorsing investments is nothing new. Many financial products are promoted by TV and movie stars throughout history. The reason isn’t because of their investment acumen, it’s because they’re a familiar face that people trust. That trust is based on a popular character they’ve played as an actor.

Companies leverage that trust to get audiences to buy into whatever it is they’re selling. Ben Stein, Lenny Dykstra, Glen Beck, Donald Trump and that guy from Law & Order are just a few in the long line of celebrities pushing product. It’s no different than Lebron James selling McDonald’s or Brittney Spears promoting Pepsi.

If you’re actually interested in an investment or financial service, don’t base it on the famous face telling you how great it is. Do your own research and see if it’s right for you.

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