Re: Buying a Lie (transcript of 20/20 broadcast)
Buying a Lie
20/20
Friday, July 7, 2000
(This is an unedited, uncorrected transcript.)
Prepared by Burrelle’s Information Services, which takes sole responsibility for accuracy of transcription.
CYNTHIA MCFADDEN, ABCNEWS Now you’re going to meet a man who police say pulled off an elaborate and clever stock hoax that cost hundreds of investors millions of dollars. The scam played on people’s hopes by claiming a breakthrough treatment for AIDS. Then it played on their greed. Arnold Diaz has a warning for people who like to play the market and believe what they see on the Internet.
ARNOLD DIAZ, ABCNEWS (VO) The market has been on a roller coaster and all across America, investors have taken a wild ride in search of a winner stock.
TRADER You’re up clean.
ARNOLD DIAZ (VO) Fortunes are being made and lost on the Internet merely with the stroke of a computer key.
JOHN PUMALARO I call it going to Las Vegas from the desktop.
ROB ABRAMSON All of a sudden, something happens, and it just skyrockets.
ARNOLD DIAZ (VO) It was exactly that, a skyrocketing stock, that last year caught the attention of scores of online investors like Rob Abramson, Chuck Perry, and John Pumalaro. An obscure Nevada company called Uniprime Capital just announced a medical miracle, a major breakthrough in AIDS treatment. The press release said documentation from the government of Spain showed a drug called Plasma Plus resulted in complete reversal of the HIV virus. And the company’s over-the-counter stock had been trading for pennies a share.
JOHN PUMALARO I was going to ride this all the way to 100. And I could turn around and tell the wife, ‘Guess what, we’re going to the mall.’
ROB ABRAMSON It was good for society, it was good for humanity, and it was good for my wallet, too.
ARNOLD DIAZ (VO) It certainly would have been great for society if any of it was true. But it turned out to be a scam and hundreds of investors lost an estimated $20 million. In a two-month investigation, we learned what they had no way of knowing—the lies behind Plasma Plus and the man who invented the so-called miracle drug, Alfred Flores.
ALFRED FLORES Chemistry has always been one of my favorite topics since I was small.
ARNOLD DIAZ (VO) It sure sounded like Alfred Flores knew what he was talking about. According to the press release, he was an honors graduate from the University of Madrid who had been doing immunology research for the past 15 years.
(OC) What is it in Plasma Plus that makes it effective?
ALFRED FLORES I guess Coca-Cola would call it the Coca-Cola secret. I call it my secret.
ARNOLD DIAZ Your secret?
ALFRED FLORES Yeah.
ARNOLD DIAZ (VO) Two years ago, Flores took his secret formula to Uniprime Capital’s CEO, Gary Taft (ph).
GARY TAFT Out of courtesy to somebody else, I just said, ‘OK, I’ll give him five minutes. Bring him in.’
ARNOLD DIAZ (VO) Flores brought Taft a bottle of Plasma Plus and a thick binder filled with what appeared to be sophisticated scientific formulas. Still, Taft said before he agreed to form a partnership with Flores and give him stock, he demanded evidence that the product worked.
GARY TAFT We were waiting for good news that he kept telling us he had. And we kept saying, ‘Alfred, show it to us. Show it to us.’
ARNOLD DIAZ (VO) Then he says Flores came up with the proof he needed—actual testimonials from five HIV patients in Madrid, Spain, who said they’d been treated with Plasma Plus by Dr. Flores and his team and were completely healed. The testimonials gave patients’ names and addresses, even had what appeared to be official stamps. That’s when Taft put out the press release.
JOHN PUMALARO Boy, that message board was on fire. They were—they were posting about two or three posts a minute.
ARNOLD DIAZ (VO) The Internet message boards were flooded. A once-in-a-lifetime opportunity. ‘I’m turning into a millionaire, and if you don’t buy, I’ll be laughing in your face.’ In just a few days, Uniprime’s stock shot up from under $1 to nearly $8 a share. Millions of shares were traded.
CAM FUNKHOUSER I’m thinking in my own mind that this has got to be a scam.
ARNOLD DIAZ (VO) All the hype and frenzy caught the attention of Cam Funkhouser, a regulator with the National Association of Securities Dealers. His skepticism was right on the money. It turns out Alfred Flores is not the man investors thought he was. Our investigation of Flores took us here to the small rural town of Delta, Colorado, where Flores spent much of his life. He is well-known, we found out, but not for his scientific achievements.
DEPUTY SHERIFF JOHN HINGS He’s got talent as an actor and a con artist.
OFFSCREEN VOICE (From police car radio) Tell dispatch we have information on the...
ARNOLD DIAZ (VO) Colorado Deputy Sheriff John Hings knows as well as anyone. He first met Flores in 1983 when he arrested him on murder charges. It turns out during the years the press release claims Flores was doing research in a lab in Portugal, he was actually here at the Colorado state prison doing nine years for conspiring with a friend to murder the friend’s parents.
JOHN HINGS Alfred wasn’t just the driver of the car that sat outside. Alfred was right there at the time those people died.
ARNOLD DIAZ (VO) While we were in Colorado, we also tracked down Alfred Flores’ ex-wife Suzie who said she first met him 25 years ago.
SUZIE He was working at a carnival in town that had came in, and he was one of the guys on the rides, working the rides.
ARNOLD DIAZ (VO) But what about all his academic achievements on his resume?
SUZIE All of these things that are here, I’ve never even known him to do.
ARNOLD DIAZ So this entire resume is—is false? It’s a fabrication?
SUZIE It has to be because we got married in ’76. Because I graduated high school in ’75.
ARNOLD DIAZ Mm-hmm.
SUZIE And he was working as a lettuce picker and doing field work, hauling onions out of the onion fields.
ARNOLD DIAZ (VO) We took what we learned to the man behind the press releases, Gary Taft.
GARY TAFT The background that we checked out was the background of what work that he accomplished. And we did hundreds and hundreds of phone calls.
ARNOLD DIAZ Who told you he was an honors graduate of the University of Madrid and the University of Colorado?
GARY TAFT He did.
ARNOLD DIAZ He did?
GARY TAFT Yeah. Nobody else.
ARNOLD DIAZ He never even went there.
GARY TAFT Right. And—and then he finally admits it.
ARNOLD DIAZ And he didn’t work at Panrac Chemicals during these years. He was in prison for murder.
GARY TAFT I know that. But the thing about it is how do you ask somebody like this—do you walk up to somebody and say, ‘Have you been in prison?’ You don’t do it. I didn’t do it, and that was a mistake. I made a mistake there.
ARNOLD DIAZ (VO) And what about those convincing testimonials from the HIV patients? We did some checking. In fact, we went to Madrid looking for them. Three of the five addresses don’t even exist. We did find two of the people. They didn’t want to appear on camera, but both said they’d never heard of Alfred Flores or Plasma Plus and, in fact, didn’t have AIDS.
(OC) Why did it say in the press release that you had documentation from the government of Spain verifying these patients?
GARY TAFT He told me these stamps were from the government.
ARNOLD DIAZ He told you the stamps were from the government and you believed him?
GARY TAFT I didn’t read anything else. I mean, I had 200 documents. You understand? I had to go by what I saw. It looked official to me.
ARNOLD DIAZ (VO) That could be in part because as Taft readily admits, he was in over his head. He’s not exactly a scientific expert and Uniprime isn’t a biotech firm. It’s a Las Vegas company that owns car dealerships.
GARY TAFT I didn’t know nothing about AIDS. I had no idea. I was like 99 percent focused on the car business so I might have not put the effort into that as I should have but I did have other people put a lot of effort into that.
ARNOLD DIAZ But nobody did a basic background check of his resume?
GARY TAFT I really can’t say.
ARNOLD DIAZ (VO) When federal agents checked, they uncovered the mountain of lies and arrested Alfred Flores. He’s now incarcerated awaiting trial on securities fraud charges. As for his miracle drug Plasma Plus, investigators say there’s no evidence it’s anything more than a useless hodge podge of vitamins and minerals.
(OC) How do you know it works if you don’t know any patients that have actually taken it and gotten any better?
ALFRED FLORES Well, I know it works. There’s a lot of people that believed in me. And I’m talking about hospital administrators, doctors, people like that believed in what I had.
ARNOLD DIAZ Who are they?
ALFRED FLORES I am not supposed to mention their names right now.
ARNOLD DIAZ (VO) Even during our interview, he spoke out of both sides of his mouth. Take that chemistry degree from the University of Madrid, he insists he has one, but then admits someone bought it for him.
ALFRED FLORES Now, I didn’t. I did not attend no classes in Madrid. The degree costs $5,000. A questionnaire. And that was it.
ARNOLD DIAZ So you didn’t have to take any course work?
ALFRED FLORES No, I never did.
ARNOLD DIAZ So it is not a legitimate master’s degree.
ALFRED FLORES Well, a lot of people, like I said, in Europe have them that way.
ARNOLD DIAZ (VO) Not that we know of.
(OC) It is not just the lies in the press releases investigators are looking at. It is who profited from the scam. Just as the government was about to halt trading on the stock, a number of investors cashed in, dumping their Uniprime shares at a high price, sending the stock into a free fall. It is what’s known as a pump-and-dump scheme.
(VO) At the stock’s high point, Alfred Flores was a millionaire on paper. And the Securities and Exchange Commission is still investigating whether he and anyone else connected with Uniprime dumped the stock.
ALFRED FLORES I didn’t go in there to sell stock. I didn’t go in there to get money from nobody.
ARNOLD DIAZ Maybe, maybe not. His ex-wife says he talked to her about stock.
SUZIE He just wanted people to buy stock. I don’t know from where he had stock, but that’s what he used to say.
ARNOLD DIAZ What do you mean?
SUZIE He—he wouldn’t come into details with me. He says, ‘I got to get people to buy stocks so I am able to keep this thing going.’
ARNOLD DIAZ Was this a pump and dump, where you pump up the stock with this press release, and then you sell it, dump it at a high price?
GARY TAFT Obviously, it was, but not by Uniprime.
ARNOLD DIAZ Did you make any money?
GARY TAFT I didn’t make one dime.
ARNOLD DIAZ Mr. Taft, car dealers are pretty shrewd businessmen.
GARY TAFT Yeah, usually.
ARNOLD DIAZ It is hard to con a car dealer. You’re saying this guy did it?
GARY TAFT Well, I’ll tell you what. You look at all the evidence and everything we went through and you tell me.
ARNOLD DIAZ (VO) There’s no doubt a lot of investors got conned. In just matter of days, Uniprime went from a high of nearly $8 a share to pennies. So you bought it around $5?
JOHN PUMALARO Just over $5.
ARNOLD DIAZ What is it now?
JOHN PUMALARO I believe that last time I saw it, trade was zero.
ARNOLD DIAZ What were you thinking when you heard that the SEC shut it down? The trading?
CHUCK PERRY I was thinking that, basically, I had been had.
JOHN PUMALARO I guess what surprised me the most was that anybody could think they could get away with it. I paid for it, but there will be people on their end that are going to pay worse than I will.
ARNOLD DIAZ (VO) Alfred Flores faces up to 10 years in prison if found guilty. As for Gary Taft, the SEC says it is still investigating his role. And the last time we checked, Uniprime Capital was selling for less than a penny a share.
JOHN STOSSEL So, Arnold, what’s the moral here?
ARNOLD DIAZ The morale is you’ve got to be a fool to invest money in a stock based on what you read about it on an Internet message board. Those could simply be modern-day versions of boiler room operations.
JOHN STOSSEL A boiler room is a room full of scam artists reading a sales pitch. Now you just need one clever lie and the Internet spreads it by itself.
ARNOLD DIAZ That’s right. You’ve got to do your—your homework. If you would have checked out this company, you would have seen it was an automobile company. What did they know about AIDS research?
JOHN STOSSEL Good—good point. For more on how you can avoid investment scams like this, visit our Web site, 2020.abcnews.com.
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