An Internet company being investigated by the US Securities and Exchange Commission for unusual trading activity and possible ties to a convicted Canadian stock manipulator used a private placement through Bermuda-based intermediary Lines Overseas Management to sell $8 million worth of its stock to 15 anonymous investors between 2002-2003.

The SEC has been investigating Mamma.com ? which bills itself as the ?mother of all search engines? and is a small competitor to Google, Yahoo and MSN ? after the share price jumped more than 300 percent from US$3.91 to US$15.80 between March 2-3, 2004.

Early this year, the company confirmed media reports that the SEC had also requested information on any connections between it, Irving Kott and members of his family including sons Michael and Ian.

Mamma.com has refused media requests to reveal the identities of the 15 anonymous investors in the LOM placement. Mr. Kott, 74, is well-known for high-profile run-ins with regulators. Last May, he agreed to pay $1 million in fines and serve five years of probation after being charged with concealing his ownership of the precursor company to Beverly Hills discount brokerage firm J.B. Oxford Inc.

In 1990, he paid a $4 million fine to Dutch regulators to settle a criminal investigation into his activities there, by way of a notorious Amsterdam ?boiler-room? operation, First Commerce Securities. In 1976, he was fined $500,000 after pleading guilty in an Ontario court to stock fraud involving Somed Mines Ltd.

LOM?s relationship to Mamma.com dates back to a private placement agreement signed by recently departed LOM president Brian Lines in October 2002.

The agreement made LOM a special advisor to assist in securing purchasers and closing the sale of up to 2.1 million units at a price of US $1.32 each. It also stipulated that the units were to be issued under Regulation S, which is an SEC exemption which allows corporations to issue unregistered securities to non-American investors. Under Bahamas law, the investors? identities are also protected.

The Montreal newspaper La Presse recently reported that 15 anonymous investors bought 1.9 million units for US $2.5 million. Each unit came with two warrants, allowing investors to purchase a share of common stock at $1.40 and a subsequent share at $1.50 giving them the option to buy a total of some 5.8 million shares of Mamma.com for around $8 million US.

La Presse reported that all of these options had been exercised by the end of 2003, just months before the bubble brought shares of Mamma.com to a peak of $17.49 on April 8 last year.

The LOM-facilitated placement doubled the number of shares in circulation to some 12 million and no other financing for Mamma.com, before or after it, has come close.

A LOM spokesman said yesterday that as public records show ?LOM has participated in the company?s private placement financing in past years, just as LOM has purchased private placement stock from hundreds of other public and private companies in markets around the world?.

Public trading data reveals that Mamma.com was also the most actively traded stock in LOM?s OTC portfolio between August, 2003-September, 2004. While LOM made numerous trades during the stock market bubble period of March-August 2004, on March 2, 2004 in particular, the day the bubble came under SEC scrutiny, LOM made 35 consecutive sells totalling 607,362 shares.

The SEC investigation and resulting plunge in the price of Mamma.com shares has prompted shareholders to file numerous class action suits accusing the company of allegedly hiding Mr. Kott?s role and manipulating prices with a ?pump and dump? strategy.

Mamma.com has said the complaints are based on unsubstantiated rumours and it has now completed an internal investigation into possible stock manipulation without finding any no evidence of a controlling influence on the company by Mr. Kott. It continues to cooperate with the ongoing SEC investigation. Mamma.com?s connection to LOM and alleged connection to Mr. Kott has also become a subject for investors on Internet forums such as Naked Shorts.

Dallas Mavericks owner Mark Cuban, who took a 6.3 percent stake in Mamma.com just before the spike told the forum that he sold his stake soon after because he did not approve of the a PIPE financing that the company did in June, 2004.

He also pointed to LOM?s involvement and the fact that it is currently involved in an unrelated two-and-a-half-year-old SEC investigation for alleged securities fraud involving bulletin-board listed Sedona Software Solutions Inc. and SHEP Technologies Inc., both of Vancouver, Canada, and HiEnergy Technologies Inc., of Irvine, California.

LOM has recently claimed that it has spent US$2.75 million on legal fees associated with the probe and president Brian Lines was recently replaced by his father Donald, 73, in hopes that his departure from LOM might improve the company?s ability to resolve the matter and move forward.

?Turns out this is the same company that Mamma.com?s current CFO used for a private placement for Mamma,? Mr. Cuban told the forum. ?I found some interesting things in this [forum thread, this was probably the most interesting. I will leave you to make your own decision as to whether this connection matters of not. I?m glad I sold my stock.?

A LOM spokesperson told that there is no relationship between the Lines family or LOM and Irving Kott. Neither Scott Lines nor Brian Lines know Mr. Kott and the SEC has not made any enquiries to LOM about Mamma.com, Mr. Kott or any private placement agreements.

LOM and the Lines brothers deny any wrongdoing in the unrelated SEC investigation of trading in Sedona, SHEP and HIEnergy. The regulator is currently waging a court battle to enforce four subpoenas for information that it served on LOM and Scott Lines last year in a bid to secure ?the essential information that would identify the persons (other than the Lines brothers) who directed the suspected fraudulent trades in question?.

The Bermuda parties assert that that they have fully co-operated with the SEC through their own regulators and that they would be breaching confidentiality laws in Bermuda, the Bahamas and the Cayman Islands if they turned over client records.

The company?s brokerage subsidiaries also recently began curtailing client activity in the US bulletin board and pink sheet over the counter markets due to regulatory scrutiny and resulting negative publicity.