TheSubway.com is Back, Dubiously Promoting LocatePLUS ( financialwire.net )
May 5, 2004 (financialwire.net via COMTEX) -- (FinancialWire) LocatePLUS
(OTCBB: LPHLA) was Tuesday's "pick" by TheSubway.com, whose operators
have been accused by the U.S. Securities and Exchange Commission for
"scalping" investors. Today's "pick" is Tekron Inc. (OTCBB:
TKRN).
LocatePLUS closed up 8.42% for the day, a fairly unique event, as bowing to
pressure from FinancialWire, TheSubway.com, which runs a huge daily press
release campaign, has begun describing any stock advance by its "picks"
as "intraday." The company has been accused by investors and others of
"lying" about gains for companies such as Family Room Entertainment
(OTCBB: FMLY). A similar inconsistency was tracked for the site's Rockport
Healthcare (OTCBB: RPHL) "pick" last week, which it said gained
"9%" when the charts didn't even indicate any "intraday" gains.
Jonathan Stolzenberg, MD, of Hartford, CT, is a small investor who said he
"followed their 'picks' for about 6 weeks earlier this year and found that
they consistently lied about 'gains' - also would introduce the same stock, such
as Family Room Entertainment, several times as their 'new' hot pick. I wrote
them more than once asking how they figured out 'gains' as there were sometimes
losses, no gains, or smaller gains than they trumpeted. I never received a
response of any kind."
TheSubway.com disclosed that it had receive 965,972 shares and $146,500, and can
receive up to 1,200,000 shares of LocatePLUS, an usually exhorbitant fee, even
in the stock hyping business. The site revealed that while it has been hyping
LocatePLUS it has sold approximately 900,000 shares of the company, and admitted
that it may sell shares for less thatn the target price. It doesn't reveal,
however, the source of its largesse, which the SEC has told FinancialWire is
troubling.
Similarly, TheSubway.com disclosed that it has received 800,000 shares of
today's "pick," Tektron, which it proclaimed last evening is
"new" to TheSubway.com, and has sold approximately 500,000 shares
already. Again, there is no disclosure as to specifically who compensated the
site, press release and email hype machine.
TheSubway.com landed squarely in FinancialWire's radar in October, 2003, when it
appears to have touted an announcement of research coverage on LocatePLUS issued
by Investrend Research, a sister company to Investrend Information,
FinancialWire's publisher, finally indirectly admitting it had sold into buying,
causing the price to drop on four times the company's average volume.
LocatePLUS stenuously objected to FinancialWire's reporting, asking to terminate
the research project that had been jointly announced to investors and
shareholders. Investrend Research refused, and subsequently issued the report
that was viewed as reasonably favorable to the company's prospects at the time,
but LocatePLUS later refused to participate in a webcast that had also been
announced.
Coincidentally, Rockport Healthcare was suspended by Investrend Research for
attempting to terminate its research coverage when it became aware that the
analyst covering the company was downgrading the company's shares. That report,
too, was issued as scheduled.
TheStockPatrol.com notes that "the SEC has been actively targeting small-cap
fraud. In September 2003 the Commission filed a civil complaint charging
promoter Charles T. Tamburello, and his firms, Capital Research Group, Inc. and
thesubway.com, with stock manipulation. Seven months later TheSubway.com is
still in business, touting some of Wall Street's more obscure micro-cap
companies."
Other recent "picks" were Quality Restaurant Ventures (OTC: QRVI) and
United Corporation (OTCBB: UCPJ). Recently, 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 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."
On Nov. 25, Investrend Research analyst Michael Whitney, CFA, in a Focus Report,
stated that LocatePlus is poised for a "tremendous potential market
opportunity" arising out of the U.S. Patriot Act. The company has since
issued new financials, meaning the Focus Report may be stale. The company had
enrolled for a "Company of the Week [tm]" webcast with the analyst but
cancelled that due to its disagreement with FinancialWire news coverage of
company activities.
LocatePLUS enrollment fees for the Investrend Focus Research platform is $2,840,
and enrollment in the Investrend Broadcast "Company of the Week""
platform is $2,840. These enrollment fees were believed to have been paid by the
company.
Rockport Healthcare Group was enrolled in Investrend Research's analyst program,
but 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. Enrollment fees for Institutional coverage were $23,400, and the fees
were paid by the company.
The Investrend Research program is the largest in the world and includes a
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