Fox Analyst Charles Payne Was Paid To Push Now Worthless Stocks
Last Week Fox Fired A Contributor For Similar Actions
UPDATE: Fox's Charles Payne Responds To Paid Stock Pushing Inquiry By Ducking Questions, Scrubbing Webpage
Charles Payne, a contributor and frequent guest host for Fox News and Fox Business, was compensated to promote the stocks of at least three companies since joining Fox. The practice of compensated stock endorsements is currently prohibited by Fox rules, and resulted in the recent contract termination of contributor Tobin Smith.
According to a Media Matters review, Payne was paid $40,000 to promote The Brainy Brands Company, "$25,000 by a third party" to promote NXT Nutritionals Holdings, and an undisclosed amount for a "consulting arrangement" to promote Generex Biotechnology Corporate.
The share prices of the companies Payne was paid to tout are now essentially worthless.
Payne forecasted lofty gains for investors who bought those stocks. He projected in 2011 that Brainy Brands could hit $4.50 a share in three years. At the time of the pitch, Brainy Brands was trading at around $1.35 -- it's now below 1 cent. Payne claimed in 2009 that NXT could "turn $10,000 into $25,000." At the time, NXT was trading for $2.00 -- it's now below 1/10th of a cent. And Payne claimed in November 2007 that Generex, then at $1.58, was a long term "screaming buy" which could hit $7.00. It's now trading at roughly 4 cents.
Aside from rosy projections, Payne's sponsored stock pitches shared a common theme: using his cable news and Fox credentials to assure skeptical investors that his advice was trustworthy. A direct marketing company which worked with Payne stated it brandished Payne's Fox News connections "to build credibility" with his potential customers. The stock pitches were also used as a vehicle to entice readers to join Payne's subscription newsletter.
Fox policy prohibits contributors from receiving compensation to promote a stock. MarketWatch -- which, like Fox, is owned by News Corp. -- reported on June 18 that a spokesman said "no Contributor to FBN, nor his/her firm, and/or family members are allowed to accept financial consideration of any kind whatsoever to issue research, advertisements, or to otherwise promote individual stocks or securities." As a result of the rule, Fox News fired contributor Tobin Smith, who regularly releases sponsored research reports (Smith claimed his contract "did NOT include any exclusion from me or my company sponsored research").
While Fox currently prohibits financial arrangements like Payne's, it's not clear whether his actions specifically violated Fox rules. MarketWatch quoted Smith claiming that the rule was instituted in "late" 2012, or after the three Payne stock promotions studied in this report first occurred. It's also not clear if Payne has been compensated for stock promotions after 2011. Regardless, even if Payne's actions occurred before an official Fox policy, he still used Fox's brand to engage in practices that the network now thinks is problematic enough to prohibit and fire an employee.
Fox and Payne did not respond to requests for comment.
Payne and his company, Wall Street Strategies, have a problematic history related to the disclosure of paid stock endorsements. In 1999, the Securities and Exchange Commission (SEC) announced that while not "admitting or denying" wrongdoings, Payne "agreed to pay a civil penalty of $25,000." The SEC alleged of Payne:
The Complaint alleges that on at least eight occasions, Wall Street Strategies recommended that its clients purchase Members stock through recorded messages on its telephonic stock recommendation service. The Complaint also alleges that Payne failed to disclose that he received payments from Members to promote Members stock.