SEC cracks down on hijacking (March 17, 2008)

Paramount Gold and Silver (PZG-T, PZG-X) is one of 26 companies that have been temporarily suspended by the United States Securities and Exchange Commission for allegedly hijacking the identities of defunct or inactive public companies.

Paramount CEO Christopher Crupi says the company is disputing the claim and hopes trading will resume after the initial 10-day suspension from the American Stock Exchange.

“It was a total shock,” Crupi says. “It’s simply that there was perhaps we don’t know for sure perhaps there was a problem when the company was formed.”

Paramount, which is based in Ottawa, also trades on the Toronto Stock Exchange. Market Regulation Services halted trading briefly following the initial SEC announcement on March 13, resuming after less than a day.

The suspensions are a result of the SEC’s latest attempt to get tough on fraud.

“Hijackings are a burgeoning problem,” said Linda Chatman Thomsen, director of the SEC’s enforcement division, in a statement.

“The trading suspensions and the actions that that will follow, should leave no doubt that the commission will use all of the weapons in its arsenal to combat those who threaten the integrity of our markets.”

Chatman Thomsen said the suspensions are squarely aimed at putting the market on notice about the risks associated with acquiring non-operational or shell companies, and with investing in microcaps.

The SEC alleges that when the 26 companies were newly incorporated, they used the names of defunct or inactive publicly traded companies. The companies then claimed that officers, directors or agents were from the original company when they got new Nasdaq tickers and CUSIP identification numbers assigned by Standard & Poor’s.

Crupi says Paramount has responded to the SEC regulators with “various pieces of information.”

“This is certainly a technicality,” Crupi says. “It’s not a substantial issue from the company’s perspective and thus the TSX has not taken action they are very generic allegations.”

Paramount was traded over the counter for a few years, both in the pink sheets and the bulletin board, before it was listed on the American Stock Exchange in August 2007, followed by the TSX in September that year.

Crupi says the suspension hasn’t affected the company’s current-day operations in Mexico.

Today Paramount released drill results from San Miguel gold-silver project in Chihuahua state, Mexico.

Highlights include hole SM-20, where a 2.65-metre intersection returned 1.23 grams gold per tonne and 834 grams silver and 6.26-metre grading 2.41 grams gold per tonne and 20 rams silver. The results extend the Clavo 99 deposit by 50 metres to a total width of 350 metres. The deposit also extends to a depth of 200 metres.

Paramount shares fell about 7% in Toronto today, or 13, to $1.85 each on a trading volume of nearly 87,000 shares.