SEC-Charged TheSubway.com in Scam-Dunk 'Pick' Thursday
Friday , April 30, 2004 08:06 ET
Apr 30, 2004 (financialwire.net via COMTEX) -- (FinancialWire) As part of a recent series on online "promoters," FinancialWire stated on Thursday that "It will be interesting to see how TheSubway.com, currently charged with 'scalping' by the U.S. Securities and Exchange Commission, characterizes the 'gains' for its Wednesday 'pick,' Rockport Healthcare (OTCBB: RPHL).
Thursday the website promoter headlined that "Immune Response Corp. (NASDAQ: IMNR) is TheSubway.com's Pick of the Day! Yesterday's pick (Rockport Healthcare) up 9%." It had made similar claims for recent "picks" Dyntek (NASDAQ: DYTK) and United Corporation (OTCBB: UCPJ).
TheSubway.com was queried by FinancialWire how it had calculated the gain since the company's trading opened at $0.34, the same as its previous close, never traded above that price, and subsequently lost 11.76%, tanking to $0.30, where it again closed on Thursday. Executives of the website did not respond to questions about whether it is "manufacturing" gains to entice the public to trade its "picks."
Similarly, the "Immune Response pick" was made at 9:30 a.m., long after the stock had been upgraded on spectacular news by various analysts, and TheSubway.com revealed it had received no compensation from anyone for the "pick," leaving observers to wonder if the "scam-dunk," sure-fire "pick" might have been made simply to boost the site's average "gains," just as Rockport's gains appear to have been mythical.
For previous "picks," such as Dyntek (NASDAQ: DYTK), Jurak Corporation World Wide Inc. (OTCBB: JCWW), and United Corporation (OTCBB: UCPJ), most were hyped as having been promotional "successes," with TheSubway.com daily congratulating those who traded such-and-such stock to significant gains that turned out not to have been tradeable gains at all.
Rockport Healthcare, which the site "disclosed" someone ' it's not clear who ' paid $32,500 for the hype campaign.
Capital Research's "disclosure" is so confusing, it's impossible to determine if stock is involved, and who paid the $32,500:
"CRG has been compensated by third party shareholders or with cash from the company on behalf of one or more of the companies mentioned in this opinion. CRG has received thirty two thousand five hundred dollars for rphl. CRG intends to sell its shares. CRG has sold approximately zero shares of rphl to date. CRG may sell its shares for less than any target price given in this opinion. CRG's affiliates, officers, directors and employees may also have bought or may buy the shares discussed in this opinion and may profit in the event those shares rise in value. CRG will not advise as to when it decides to sell and does not and will not offer any opinion as to when others should sell; each investor must make that decision based on his or her judgment of the market."
Not only has Capital Research Group been accused by the SEC, but Rockport Healthcare remains under suspension by Investrend Research for attempting to stop publication of a research downgrade.
Other recent "picks" were Quality Restaurant Ventures (OTC: QRVI) and United Corporation (OTCBB: UCPJ). Tuesday, the website and email promoter offered "Congratulations to everyone who traded Jurak Corporation World Wide Inc. (OTCBB: JCWW) and realized over a 13 percent gain on Tuesday!!!"
In reality, Jurak opened at $1.40 after a previous close of $1.35, gained very temporarily to $1.50, and then nose-dived back down to $1.35, even touching on $1.30, for zero gain on volume of 34,940, almost half the average volume of 59,181.
TheSubway.com appears to have "disclosed" it had received $15,000 for the Jurak promotion, but like most of its disclaimers, it is vague and not at all clear as to who paid for the promotion. The Subway.com is currently spotlighted by StockPatrol.com due to its promiton for Sports Wheels, Inc. (OTC: SSWH), which appears to have been disguised as a research report.
The claims for Jurak follow hard on the heels of similar claims for Dyntek, which closed Friday at $1.38, opened at $1.49, and had a quick trade or two at $1.51, before dropping like a rock back down to $1.35, for a loss of 2.17%. At one point, the stock had dropped all the way to $1.28 before slightly recovering.
Almost no one of the 6,704,730 trades, about twice its average volume of 3,418,727, could have been money-makers for anyone other than sellers who held the stock before Monday.
Whether the sellers included Capital Research Group is unknown. It revealed in its "disclosure" that " CRG has been compensated by third party shareholders or with cash from the company on behalf of one or more of the companies mentioned in this opinion. CRG has not been compensated. CRG intends to sell its shares. CRG has sold approximately zero shares of dytk to date. CRG may sell its shares for less than any target price given in this opinion. CRG's affiliates, officers, directors and employees may also have bought or may buy the shares discussed in this opinion and may profit in the event those shares rise in value. CRG will not advise as to when it decides to sell and does not and will not offer any opinion as to when others should sell; each investor must make that decision based on his or her judgment of the market."
Obviously, the company could not be "compensated" and "not compensated" at the same time, but nevertheless that is what the company said.
Disclosure in all public communications is required by the U.S. Securities and Exchange Commission Regulation 17(b).
The U.S. Securities and Exchange Commission Regulation 17(b) states:
"It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof."
The SEC has told FinancialWire that this regulation means full and complete compensation for research and any other services provided, including amounts and sources, must be disclosed in "every press release" as well as other published documents. The SEC states that third party compensations must include the relationship of the payer to the issuer.
In an email to FinancialWire as recently as January 5, 2004, John J. Nester, a spokesperson for the U.S. Securities and Exchange Commission confirmed that regulators interpret 17(b) to mean that specific compensation information must be contained in press releases, and that a link to a disclosure somewhere else, for example, is a violation of the regulation. He further stated that the compensation disclosure required by the SEC includes "amounts and sources in any press release mentioning the company under research coverage."
The SEC had previously told FinancialWire that it intends to enforce these provisions so that investors may have a fully transparent understanding of any potential agenda or lack thereof.
The SEC has charged that Tamburello and CRG "scalp" investors by selling their shares into the hype they create with their press releases and emails. The SEC allegations are at: sec.gov
Similarly The Subway.com heralded a "21% gain" on Thursday by its hyped United Corporation.
"Congratulations to everyone who traded United Companies Corporation (OTCBB: UCPJ) and realized over a 21% GAIN on Thursday!!!," the site proclaimed on Friday. However, a check of the day's trading revealed that United Companies "opened" trading at $0.145, meaning anyone buying at that price had a big disappointment coming, since it was all downhill from there. The stock closed at $0.1206, down 7.23% from its previous close of $0.13. Volume was 313,300, about nine times its average volume of 33,067, giving "someone" who owned or acquire stock at lower prices ' or no price ' a big selling opportunity, using the P.T. Barnum philosophy of stock trading.
The Subway appears to be appropriately named. A common thread for companies in TheSubway.com "performance" portfolio, at thesubway.com is that most if not all of them are trading closer to the basement than the penthouse, and most observers attribute that to the fact that the promoter receives shares for its promotions, and of course, admittedly sells those shares to those who buy into the hype. In fact, that is exactly what the group is accused by the SEC of doing, "scalping" the public.
The promoter's own "performance portfolio" shows Avenue Group Inc (OTCBB: AVNU), trading at $0.29, versus its high of $0.71 and low of $0.24; Diamond Discoveries Inter (OTCBB: DMDD), trading at $0.10 versus its high of $0.21 and low of $0.06; Family Room Entertainment (OTCBB: FMLY), trading at $0.09 versus its high of $0.16 and low of $0.08; Hesperia Holding Inc (OTCBB: HSPR), trading at $0.73 versus its high of $1.50 and low of $0.50; Locateplus Holds Cp (OTCBB: LPLHA), trading at $0.51 versus its high of $0.65 and low of $0.14; On The Go Healthcare Inc (OTCBB: OGHI), trading at $0.10 versus its high of $0.25 and low of $0.04; Reclamation Cnsltng & Applctns (OTCBB: RCAA), trading at $0.45 versus its high of $0.87 and low of $0.41; Tekron Inc (OTCBB: TKRN), trading at $0.08 versus its high of $0.20 and low of $0.04; United Companies Corp (OTCBB: UCPJ), trading at $0.12 versus its high of $0.24 and low of $0.00; Wireless Frontier Internet (OTC: WFRI), trading at $0.55 verus its high of $0.93 and low of $0.00; and Weight Loss Forever Intl Inc (OTCBB: WLFIE), trading at $0.19 versus its high $0.86 and low of $0.08.
According to Stock Patrol, the normal TheSubway "hype," which runs something like, "watch this company," pretty much says it all for Sports Wheels.
"The Company does not file regular reports with the Securities and Exchange Commission, its financial condition has not been made public, its operations are a mystery, and there is no handy way for the public to determine the number of outstanding shares or to identify the controlling shareholders.
"Considering the absence of meaningful information, it is difficult to understand what would motivate investors to take a chance on Sports Wheels. Just what would they find appealing, the name? That makes the Company's trading history particularly interesting. Sports Wheels stock has languished at between one tenth and two tenths of a cent per share since June 2003. Last week, however, the price spiked to more than one penny, $.016 to be exact - a dramatic increase, even at those minimal prices. Almost 98 million shares changed hands on April 13th, the day Sports Wheels hit $.016, and another 154 million shares changed hands the next day as the stock price dropped to $.008," Stock Patrol chonricled.
"The trend continued on Monday, April 19th, as 100 million shares of Sports Wheels changed hands, reaching an intraday high of almost one cent. Interest in the shares diminished suddenly, on April 20th, as volume dipped more than 70%, to 29 million shares
"Still, there were buyers for those 29 million shares - even though no meaningful information was available. In fact, Sports Wheels routinely trades millions of shares each day, although at far lower prices than those of the past week. Where are all of the shares coming from, and what is motivating the buyers?
"Like Sports Wheels, those matters remain a mystery," concluded Stock Patrol, after outlining what little is known about the company at stockpatrol.com .
Despite this paucity of information, Stock Patrol said TheSubway.com rewarded the company with a "Market Perform" rating, which to the unsuspecting public, sounds like a research rating. However, the site contains no research and no professional credentials for those issuing "ratings."
Rockport Healthcare Group was enrolled in Investrend Research's unique and pioneering professional analyst program, which facilitates independent analysts to provide financial coverage for shareholders and investors in companies that otherwise would have little or no analyst following.
The company was suspended on August 14 at the same time its rating was downgraded to "Speculative" and its target valuation decreased from $0.62 to $0.24 when the company inexplicably sought to suppress the report's issuance by attempting to "retroactively terminate" its coverage in violation of the issuer standards promulgated by the Association for Investment Management and Research.
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