WASHINGTON — It seemed like an innovative way to buy a beer company: Start an online campaign to purchase the iconic Pabst Brewing Co. and sell shares on Facebook and Twitter to cover the $300 million cost.
Michael Migliozzi II and Brian William Flatow found 5 million people who said they would invest a total of $200 million. But the federal government halted the venture after it informed the two men of one major oversight — they neglected to register the public offering with the Securities and Exchange Commission, a violation of federal law.
The SEC said Wednesday that it reached a settlement with the two advertising executives. The men, who collected no money and neither admitted nor denied wrongdoing, agreed to stop selling shares to the public.
The case spotlights a growing challenge for regulators, who must patrol online business ventures and ferret out scams disguised as stock offerings. The SEC has an entire enforcement unit devoted to Internet surveillance, with a staff of more than 200 people. By law, public stock offerings must be registered with the SEC before their promoters begin to sell shares. When they register to sell shares in a company, they must provide information about the company’s financial condition and other data to help investors decide whether they should buy in.
“It never dawned on them” that they needed to register the offering without any shares being sold, their lawyer Steven Berkowitz said. The Associated Press; Craig F. Walker, Post file photo
