Lenny Dykstra Betrayed Jim Cramer's Trust And Sullied The Good Name Of TheStreet.com For $250,000

Author:
Publish date:
Updated on

You might not have known it at the time, but in March 2008, circa the same month Jim Cramer called him the greatest mind on Wall Street, Lenny Dykstra was going through some money trubs. This was just prior to Dykstra putting his beloved Thousand Oaks home on the market, at a selling price that indicated he believed it possible to see a 33% return on the place, after having bought it from Wayne Gretzky for $18.5 million in August 2007 and owning it for ten months. As you are probably aware, despite LD's streak of crazy spot on the money calls, this one did not pan out as he'd predicted, and the home was foreclosed on, though not before Nails ripped out the bathroom fixtures, left "unfit to print" items on the walls and floor (knowing Dykstra, one must assume feces), and blamed the whole thing on JPMorgan née WaMu. This was also prior to the former car wash king of California being forced to live out of his car and auction off phone calls with himself on Craigslist. But we're getting ahead of ourselves.

In March 2008, our boy, likely due to the brain damage inflicted by seeing how far he could push a Twizzler into his ear and not stopping when he felt resistance, just thought he need a little cash. Two-hundred and fifty thousand would probably do the trick, and as luck would have it, someone was offering him that exact amount!

In the late winter of 2008, an entrepreneur named Richard O'Connor, who had become Dykstra's favored adviser, introduced him to Shannon Illingworth, the founder of a publicly traded company called Automated Vending Technologies, or AVT, and the two quickly cut a deal. O'Connor told me that on March 25, 2008, Illingworth gave Dykstra roughly $250,000 worth of AVT stock in exchange for plugging the company on Cramer's website, TheStreet.com, and promising to provide a personal introduction to Cramer. O'Connor claims that Dykstra told him he knew the pay-to-plug arrangement was illegal. To avoid getting caught, O'Connor says, the former All-Star baseball player had a solution: "We can just put the stock in Keith's name," referring to his brother-in-law, Keith Peel.

And so it was done. O'Connor provided me copies of stock certificates showing that on March 25, 2008, Keith Peel was issued 250,000 shares of AVT stock, which traded at roughly $1 a share. "Keith didn't know anything about it," says O'Connor, maintaining that using Peel's name was a way to stash the stock away from potential regulatory oversight. The shares were held at Dykstra's mansion, which is where O'Connor retrieved them. Just two weeks later, on June 6, 2008, Dykstra offered his premium subscribers a curious "bonus" recommendation: a plain old penny stock named AVT, "which gives investors a lot of potential upside." Dykstra droned on endlessly about the stock, with all the conviction of a prisoner of war extolling the cause of his captors for the cameras.

When I contacted him shortly before The Zeroes printed, AVT founder Illingworth admitted that he hired Dykstra as a consultant for his "relationships with TheStreet.com, Cramer," and that the idea for Dykstra to tout his company's stock was "mutual." (Despite the certificates, Illingworth denied ever giving Dykstra or Peel $250,000 worth of stock; instead he claims the only money he gave to Dykstra was $15,000 to trade on his behalf, a sum that disappeared.)

O'Connor claims that Illingworth was angry that he didn't get more plugs from Dykstra, or a meeting with Cramer. O'Connor also says while advising Dykstra in the first half of 2008, he saw multiple other offers from small company CEOs offering Dykstra cash in exchange for access to Cramer, though he does not know if Dykstra ever cashed in on those opportunities.

Lenny Dykstra Stock Scandal [TDB]

Related