ONLINE INVESTING Mystery of PABN At Heart of Chatter
newsday.com
Charles Zehren. Charles V. Zehren can be contacted by e-mail at zehren@newsday.com
Painful losses and margin calls have annihilated more than a few online investors in recent weeks as reality has finally intruded upon the often surreal world of Internet trading.
But like hardier breeds of insects after Armageddon, so-called "Hypesters" and "Bashers" have crawled out from underneath the rubble, back on to the Wall Street message boards, to buzz over the fates and fortunes of their favorite highfliers.
Just follow the threads of conversation at www.ragingbull.com, www.siliconinvestor.com, www.fool.com and other popular discussion sites and you'll find that despite the great Web wipeout of 2000, vast numbers of anonymous players still view buying and selling stocks as an expensive and risky form of entertainment, like casino gambling or Formula 1 racing.
Here corporate profits, revenues, business plans and quality management still remain irrelevant. All that continues to matter is the latest rumor, gossip and news of how fast a particular stock-usually priced under $5 per share-is going up or down at any given point in time.
Bluff and bluster reign supreme in this fantasy subculture. Unscrupulous stock promoters struggle mightily to push up the value of their penny stock holdings over a few days by papering Web sites with false corporate claims.
They hope to post quick profits by dumping their shares at inflated prices into the laps of the greater fool.
Paid performers shill for thinly traded securities, filling the boards with what amounts to little more than clever advertising copy. Short-sellers and obsessed instigators spend hours each day conducting their own investigations, posting facts and disinformation, all the while flaming their enemies. No one here needs to get a life. Theirs is in cyberspace.
Curious? Log on and experience the absurdity firsthand by punching the letters P-A-B-N into your search window. Welcome to the financial soap opera that is PanAmerican BanCorp, ranked by Raging Bull as one of the nation's most bookmarked financial message boards. Each day, BigBertha, PatP, termin8r, colleenb and dozens of other regulars joust with each other as CEO John A. Schmitz and other executives for the company and their supporters issue a torrent of upbeat online press releases and self-serving postings.
Emotions run high. PABN bulls and bears swap insults, accuse each other of lying, threaten fistfights, and vow to run the stock up to the stars or haul executives for the company before the Securities and Exchange Commission, the NASD, the Justice Department, and whatever district attorney might be interested.
"Who really cares about the company's financials or how many 'promises' they have not lived up to. I am married to this company, the only thing that matters is how much $$$$$$ I can make. Does anyone feel differently," a PABN player using the screen name vtskier wrote in a representative comment over Raging Bull on April 10.
Amid all the chatter, PanAmerican remains shrouded in mystery. In interviews, PABN investors expressed concerns that their money might be tied up in a sham. Over the past 18 months, PABN (www.panambancorp.com) has issued no fewer than 65 official public statements on the Internet and its Web site, promising everything from Florida online trading centers, Belize-based home builders, Nevada mortgage lenders, Argentinian banks, health services corporations, Silicon Alley programers, and a "community of neighborhood portal sites" dedicated to forwarding "philanthropic endeavors" dubbed www.ourevillage.com.
But so far the ventures are still under development. The company has not made public its earnings or other financials and has remained silent on key issues affecting the value of its stock, which now trades around 2« cents, but has shot up as high as 22 cents fueled by rampant speculation.
PanAmerican operates out of Suite 101 at 300 Wheeler Rd. in Hauppauge. Its name is not on the door.
In telephone interviews, Schmitz and his lieutenants assert PanAmerican is a legitimate enterprise with a solid business plan and a bright future. But court records, NASD documents, and interviews with traders reveal PABN as a speculative bet at best.
What is known is that PanAmerican BanCorp filed its creation as a Limited Liability Co. with the New York State Secretary of State's office on Oct. 6, 1997. The company states that in June, 1998, it incorporated and affected a reverse merger into Purewater Sciences International, Inc., which had been incorporated in Delaware in 1985. Today such reverse mergers raise the eyebrows of federal regulators who worry that the resulting company may be able to restrict the public from receiving information about its finances or trade all of its shares, NASD officials said.
The Over the Counter Bulletin Board trading symbol (PABN) went into effect in March, 1999. Subsequently, PABN was "delisted" for not filing its financials with the Securities and Exchange Commission. Today PABN trades on the so-called "Pink Sheets," an esoteric market where investors often don't know the level of buying or selling interest, and trades can often take days to complete.
PanAmerican spokesman Adam Schuman said the company now has 1.1 billion shares outstanding and 650 million restricted shares. Most days the trading is light, but some days the stock will spike more than a thousandfold with millions of shares changing hands, meaning profits and losses running in the tens of thousands of dollars for typical investors.
Yet Schuman laughs at the suggestion that the company he works for is an Internet shell buoyed by nothing but hype. "If we are trying to bully-up [PABN] we are not doing a good job at 2«" cents per share, he said.
To the great frustration of shareholders, though, Schmitz has yet to keep his promise to submit the company's financials to the SEC so that PABN may once again be listed and release audited results on a routine basis. Earlier this week, Schmitz and Schuman told me they are waiting for their accountants to finish the audit so that PABN can be listed by June 15.
At the same time, however, Schmitz said PABN is moving to get listed on the American Stock Exchange by merging with a currently listed Amex company he would not identify. There have been no fewer than four negotiating sessions, Schmitz said, but talks remain ongoing.
Schmitz said PanAmerican also intends to spin off at least three other publicly traded financial services companies, along with exploring the acquisition of a broker-dealer. That could be problematic, though, given that Schmitz confirmed that NASD regulators have barred him from the securities business.
In an Aug. 2, 1995, decision I obtained, the NASD determined that "the evidence reflects deliberate misconduct by [Schmitz] and is indicative of his complete contempt for the rules and regulations which govern this industry." As a result, the NASD censured Schmitz, fined him $100,000, ordered him to pay $20,739.72 in restitution and be "barred from associating with any member firm in any capacity." The sanctions stem from actions Schmitz took early in the 1990s as a broker for Robert Todd Financial Corp., a now-defunct Long Island firm, in which regulators said he schemed to defraud his client, a disabled woman from Westbury. In related litigation, the Nassau County Supreme Court ordered Schmitz to pay the same woman $125,575 in damages on May 17, 1993.
"My impression of this fellow Schmitz is that he took advantage of a person who was disabled," said the plaintiff's attorney Kevin Danow of Manhattan.
Schmitz has not made either payment and says he is still fighting the judgments against him. He dismissed the NASD action as a "kangaroo court" and denied the claims contained in the Nassau County lawsuit.
Then on April 12, the Queens-Long Island Medical Group PC sued Schmitz, PanAmerican, and several of its health care-related holdings for fraud and breach of an April 13, 1999, contract, alleging that the companies failed, neglected and refused to provide encounter and transaction reporting systems for all HIP Health Plans of New York after receiving an initial $30,000 payment. An attorney for the medical group declined to comment.
"There's my truth. There's their truth. Every story has three sides," Schmitz said, denying wrongdoing and asserting that he will fight the action in court.
Meanwhile, as the Bashers and Hypesters fill the boards with hundreds of PABN messages every day, the company's chief marketing officer, Raymond Gamble, blames the controversy on a failure to communicate. PABN is, after all, a start-up that's still finding its way. "You can," Gamble said, "surmise what you want." And that we will. |
