DURHAM, NC—Dennis Michael Nouri, who resigned as CEO of business software company Smart Online yesterday, his brother and four stock brokers were arrested Tuesday and charged with trying to “pump and dump” the company’s stock.

Nouris and his brother Reeza Eric Nouri are accused of one count of securities fraud each and could face up to 20-years in prison and a fine of up to $5 million.

Federal prosecutors say they recorded Nouri talking about the alleged scheme, which involved paying New York brokers Ruben Serrano, Anthony Martin, James Doolan and Alain Lustig more than $100,000 in bribes to pump up the company’s stock price.

In January 2006, the Securities and Exchange Commission suspended trading of Smart Online stock for suspected stock manipulation, but an internal investigation did not reveal any wrong-doing on the part of officers or directors the company said in an SEC filing. Smart Online did replace Nouri with Jeff LeRose as chairman.

The company’s stock, once as high as $11 a share in 2005, fell to $2 in March 2006, and yesterday plunged to 68 cents. It trades on the over-the-counter market.

Smart Online’s board has appointed David Colburn interim CEO. The company sells customer relationship management software as a service. The SEC says it is not seeking fines and did not name the company in the criminal complaint.

In a prepared statement, the company said “Smart Online does not believe its ongoing operations should be affected by the charges.”

On the Web: www.smartonline.com

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