Online charter broker attracts SEC scrutiny
The Securities and Exchange Commission (SEC) suspended the trading of Connect-A-Jet securities for 11 days last month, from October 1 to October 12, due to alleged “deceptive practices” by the online charter broker. The SEC institutes a suspension when questions arise regarding a company’s assets, operations or financial information, Paul Montoya, assistant regional director of the commission’s division of enforcement, told AIN.
“It appears that the market for Connect-A-Jet securities may be reacting to manipulative forces,” the SEC stated, “and…there is a lack of current and accurate information about Connect-A-Jet upon which an informed investment decision can be made.” The SEC also said there appeared to be “inaccurate assertions by Connect-A-Jet in publicly disseminated press releases and on Connect-A-Jet’s Web site about, among other things, the existence of the company’s partnerships and affiliations with aviation companies.”
The Austin, Texas-based enterprise claimed affiliation with companies such as ARG/US; Flight- Aware, an online company that provides a free flight tracking system on its Web site; and Executive Jet Management (the aircraft management/charter arm of NetJets).
As of the middle of last month, the following information was available on the Connect-A-Jet Web site: “At [Connect-A-Jet] our number one priority is the safety of every passenger and crewmember. For this reason we have taken every measure to ensure that all operators affiliated with CAJ are reviewed by Aviation Research Group/US (ARG/US).”
The Web site also states, “One of the many benefits to using CAJ.com for your private charter needs is our affiliation with FlightAware.”
And in a September 6 press release, Connect-A-Jet stated it had “submitted a Letter of Intent (LOI) to enter into a charter partnership with Executive Jet Management, a NetJets and Berkshire Hathaway company. Successful signing of the described LOI would provide [Connect-A-Jet] booking access to one of the world’s largest private aviation fleets rendering un-capped revenue and profit potentials to the [Connect-A-Jet] reservation platform.”
ARG/US president Joe Moeggenberg told AIN that his company sent a “cease and desist” letter on September 12, specifically stating that his company’s name should be removed from the Connect-A-Jet Web site. “We’re going to speak with our attorney to see what the next step is,” he said.
Daniel Baker, president of FlightAware, said his company sent a “cease and desist” letter to Connect-A-Jet as well. “We hadn’t even heard about the company until these shenanigans began,” he told AIN, adding that FlightAware has not yet received a reply to the letter. “We don’t really expect one,” he said.
Likewise, a NetJets spokeswoman told AIN that NetJets does not have a partnership with the online broker. The fractional company has also sent Connect-A-Jet a formal “cease and desist” letter to stop the broker from using the EJM name in its advertising and press releases.
In addition, aviation photographer Paul Bowen told AIN that it appears as though the Connect-A-Jet Web site might be using a number of his photographs without permission. “There is one image in particular that I cannot imagine we would have given release to,” Bowen said.
Aggressive Advertising Practices Challenged
Connect-A-Jet president Martin Cantu told AIN, “We’re taking this entire situation…very seriously.” He said the company is still taking reservation requests and booking orders, despite the SEC suspension, and in a statement October 12 added that he extends his “sincerest apologies for any inconveniences the present-day issues may have caused any of our supportive shareholders.”
He added, “[Connect-A-Jet] and I have in no way attempted to defraud our shareholders or the general public. Since the date of inception [Connect-A-Jet] has attempted to be as forthcoming as possible to ensure the investment of our shareholders and to excel as an organization within the aviation industry.”
The SEC in its filing also accused Connect-A-Jet of sending “spam e-mails and a blast fax touting the company’s shares.” Eli Portnoy, founder and CEO of the Portnoy Group, a consumer trend and marketing company with offices in Los Angeles and Orlando, Fla., said that few companies have used such aggressive advertising techniques as Connect-A-Jet has. The Portnoy Group has been tracking Connect-A-Jet’s activities since August.
“Junk faxes are blatantly illegal, and they disrupt people’s lives,” Portnoy told AIN, adding that the Federal Communications Commission (FCC) has fined companies as much as $1,500 per junk fax for violating laws prohibiting their use. “If a company uses an illegal tool to advertise, then you have to wonder how honorable its actual business practices are. Connect-A-Jet has used questionable, unethical business practices, and it’s great that it’s being called out on it.” Portnoy said many of the faxes were sent between 2 a.m. and 4 a.m.
The 2005 Junk Fax Prevention Act deems it unlawful to send unsolicited advertisements to any fax machine, including those at businesses and residences, without the recipient’s prior express invitation or permission, according to the FCC. The agency issues warning citations and imposes fines against companies violating or suspected of violating the junk fax rules.
Cantu denies that his company used spam e-mails or faxes. “I would like to state that [Connect-A-Jet] in no way participated in, or was ever aware of, any fraudulent type ‘spamming’ that was taking place relating to its organization until being notified by our shareholders in the recent past,” he said. “[Connect-A-Jet] never at any time paid for any such spamming, never created or participated in creating any such spamming, never provided information to anyone creating such spamming and never approved any such spamming.”
Portnoy claims, however, that the investor relations group Connect-A-Jet uses, The Cervelle Group of Altamonte Springs, Fla., “shows up as the investor relations group for a number of companies using illegal junk faxes to promote their stock.” Connect-A-Jet lists David Donlin as its investor relations contact on the Web site, and the same phone number provided as a contact number for Donlin is listed on the Cervelle Group’s Web site.
The SEC has cautioned consumers about the information Connect-A-Jet has provided to date. “The [SEC] cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company,” the SEC stated.
According to Cantu, “[Connect-A-Jet] is a legitimate and fully operating and growing company that will continue to operate within the aviation industry. We fully intend [to act] and are already aggressively acting to coordinate with the SEC in attempt to have the trading suspension lifted as no fraudulent activity has been committed. It is our intent to become as fully transparent as possible to the SEC, our shareholders and the general public.”
In addition to serving as president of Connect-A-Jet, Cantu is president of AFM Mortgages, which lists the same Austin, Texas address as Connect-A-Jet. On April 27, the North Carolina Commissioner of Banks suspended Cantu’s mortgage lender license (No. L-109167). The docket (07:039:MBB) states that the “respondent poses a present and continuous danger to the borrowing public as there are insufficient safeguards…to secure the faithful performance of its obligations under the Mortgage Lending Act.”
Connect-A-Jet entered the charter scene in late August, with an announcement August 23 stating that it had completed and formalized all necessary steps to initiate trading. Shares reached a high of $3 last month, before the SEC suspension. Also last month, the company announced that it had received more than 4,000 flight requests, representing a 1,600-percent increase over a 25-day period.
The company was formed, according to press releases, full-page ads in USA Today and TV spots on CNBC, “to eliminate the world of private jet charter brokers, and, for the first time in history, allow customers to directly access aircraft operators through one online portal.” In addition to booking flights, the company said it would “coordinate all ground transportation, in-flight catering, and…provide real-time flight tracking 24 hours for passengers’ convenience.”