ORIGINALLY PUBLISHED NOV. 21, 2004:

Gregory R. Swarn flew to the Dominican Republic this month to open a securities boiler room designed to take millions of dollars a month from foreign investors.

Instead, the 32-year-old American wound up in the custody of U.S. authorities who were monitoring his activities through an informant inside his operation.

Swarn was arrested Nov. 12 in Santo Domingo after arriving on a jet from Spain. He traveled first class, wore a Rolex watch and carried more than $10,000.

Federal prosecutors in Miami last week charged that he was behind a string of six boiler rooms that use high-pressure sales tactics to persuade customers to make risky or fraudulent investments.

Prosecutors said the operations relied on bogus Web sites and forged government documents to create the appearance of legitimacy and to persuade investors to part with their money.

One of the boiler rooms, Thompson & Whitehurst Acquisition Consultants, was included in a Post-Dispatch investigative series in June on unlicensed securities firms that target foreign investors. The Post-Dispatch described how Thompson & Whitehurst and other boiler rooms assembled impressive-looking Web sites, often using text and images taken from investment firms.

The U.S. attorney's office in Miami filed criminal complaints against Swarn and two other men who allegedly worked in the boiler rooms and were planning the new Caribbean call center.

An affidavit said the ring had operated since May 2002. It identified Swarn, a one-time commodities broker, as the architect behind the boiler rooms.

The affidavit, prepared by an agent for the U.S. Postal Inspection Service, said Swarn devised the fraud schemes, drafted the sales scripts, provided the database of investor names and was one of the main pitchmen.

It noted that Swarn also supervised the creation of the Internet sites, copying and altering text, computer code and graphics from the sites of legitimate companies.

Swarn already faced fraud charges in connection with an unrelated scheme that took in more than $5 million from American investors who thought they were speculating on foreign currency. He fled the United States in January after learning he'd been indicted in that case and was added to the Miami FBI's most-wanted list.

In a separate action, the Securities and Exchange Commission filed civil charges Monday against Thompson & Whitehurst and its five affiliated boiler rooms, saying they defrauded investors from the United Kingdom to Australia and Sweden to South Africa. The SEC suit said the operations appropriated nearly all the content on their Web sites from other companies.

The Internet plagiarism in the case was particularly brazen, because the material came from high-profile investment firms, said Josh Felker, an assistant director in the SEC's enforcement division.

"Even Merrill Lynch and Alex Brown had parts of their Web sites taken," he said.

The SEC suit said the Internet site for one of the six boiler rooms that Swarn helped to create was registered in late July -- while he was a fugitive.

The firms facing SEC charges are Thompson & Whitehurst, McKenzie Goldstein and Associates, Crescent Financial Group Inc., Berkshire Tax Consultants Co., Warfield Capital Management Co. and SpencerFerguson Ltd.

They claimed to operate from Miami, New York and London. However, all but one of the headquarters addresses were virtual offices, which provide telephone-answering services and mail forwarding for a monthly fee.

According to court filings, the call centers were in a warehouse complex in Medley, Fla., and an office building in Coral Gables, Fla.

Sure thing?

The previous investigation by the Post-Dispatch identified more than 100 publicly traded U.S. companies, some with ties to Missouri and Illinois, whose stock has been peddled by international boiler rooms.

Most of those companies are fledgling enterprises whose shares would have little appeal without a listing on the U.S. market and trading approval by the SEC.

The boiler rooms profit by obtaining discounted stock from the companies and immediately reselling it at big markups, a practice that is illegal in the United States.

With few exceptions, the stocks promoted as sure things become big losers.

The boiler rooms also have sold shares in 100 privately held companies that were supposedly poised for initial public stock offerings. None has made it to market, leaving buyers with no way to cash out.

Authorities say Swarn's operations targeted people who had lost money to other boiler rooms. His operations offered to help those who were stuck with worthless shares to salvage their investments.

Thompson & Whitehurst and McKenzie Goldstein told investors that they had clients who wanted to take over the lackluster companies and were willing to pay a premium to assemble a majority stake, the SEC said. The other firms purported to represent clients who wanted the shares to claim tax losses and would replace them with shares of Microsoft Corp. and other blue-chip companies.

The catch, the suit said, was that the investors had to pay an upfront fee to cover a refundable performance bond or other costs.

Some investors who paid the fees then got letters purporting to be from the SEC saying additional payments were necessary for the transactions to proceed, the suit said. The letters were on fake SEC letterheads with a forged agency seal.

About 60 investors told the SEC that they sent money to the boiler rooms; none received the promised shares or cash.

The boiler rooms took in at least $650,000, the SEC says, a figure that's likely to rise as more investors come forward.

Inside glimpse

Federal prosecutors in Miami declined to discuss particulars of their case beyond what was disclosed in court documents. But the filings offer a tantalizing glimpse into the boiler-room world, where almost nothing is what it seems.

They show how the participants incorporated businesses and opened bank accounts under false names and used false addresses to conceal their true locations.

The filings also reveal that federal authorities taped hours of conversation between the inside informant, Swarn and two other alleged participants in the boiler-room ring. The tapes help to document the mechanics of the schemes and might also identify other participants.

The Justice Department also filed criminal complaints against two of Swarn's alleged partners, John W. Eckhardt, 40, and Craig W. Moncrieffe, 34, both of the Miami area. Prosecutors say they worked as account representatives at the boiler rooms, communicating with investors under a variety of aliases.

The confidential informant in the case told authorities that he was the main administrator for five of the boiler rooms. He acknowledged that he engaged in fraud, setting up bank accounts, prepaid cell-phone accounts and virtual-office services under false names.

Since last spring, many of the informant's meetings, phone calls and e-mail exchanges with Swarn, Eckhardt and Moncrieffe have been captured and preserved as evidence, the affidavits in the case say.

In some of those conversations, Swarn, Eckhardt and Moncrieffe reminisced about setting up and operating the older boiler rooms, the affidavit said.

The informant met with Eckhardt and Moncrieffe in September and October to plan the boiler room in the Dominican Republic. Swarn participated by phone from his hiding place overseas, according to court filings.

The meeting spot, in Hollywood, Fla., was wired to record audio and video.

Authorities provided a detailed account of the discussions in their criminal complaint:

- They say the men agreed that the call center would have two divisions: one to continue the type of recovery scheme operated by Thompson & Whitehurst and another to sell shares in a new company.

- The boiler room, however, would keep 80 percent of the money raised through those share sales, meaning the unidentified company would get only a fraction of the capital raised from investors.

- Swarn and his partners projected that the boiler room would bring in $1 million a month by March and ultimately could take in $2 million to $5 million monthly, the court filings said.

- Swarn and Eckhardt were supposed to move to Santo Domingo this month to begin operations.

The SEC and Justice Department filings made no mention of two other entities whose Internet sites are identical to Thompson & Whitehurst's.

The Post-Dispatch reported in June that the sites for the Davis Goldberg Group and the Dellbar Group featured the same text and graphics as Thompson & Whitehurst's site, as well as the same photographs of supposed top executives, though with differing names.

For example, the photo identified as Jack Hammer on the Davis Goldberg and Dellbar pages is labeled Larry Weiner on the Thompson & Whitehurst site.

The SEC said its investigation into the case is ongoing.