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A leader of a company accused of selling securities in a fake Web-based business with a trendy name has been ordered to pay a penalty of nearly $1.7 million. All but $740,000 of the penalty will be forgiven if Kenneth Grossfeld pays it within six months and is honest about his financial condition in a report filed with the court. The Securities and Exchange Commission charged that Grossfeld was one of five leaders in a fraud that offered partnerships in a Miami Internet company called Web Hosting Headquarters Inc. Web Hosting Headquarters is unrelated to SBC Communications’ webhosting.com Web site. Investigators obtained a court order freezing the company’s assets in December, and U.S. District Judge Shelby Highsmith of the Southern District of Florida specified accounts where $70,000 in frozen Grossfeld accounts could be obtained earlier this month. Grossfeld agreed to the permanent injunction and penalty without admitting or denying any of the SEC allegations. Starting in 1999, Web Hosting raised $2.5 million from investors in 38 states in a telephone boiler room operation that promised to use the money to expand company operations, the SEC charged. In reality, 92 percent of company money came from securities sales, not the Internet business, and 62 percent of investments went to the principals and the sales staff, the SEC said. Grossfeld, 53, of Miami Beach, was barred for life from trading by the Commodity Futures Trading Commission in 1995 and fined $1.8 million in a previous misrepresentation case. He also was fined in other cases in 1986 and 1988. Copyright 2001 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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