Public relations representative blasts Phoenix Metals.
By Cole, Benjamin Mark Los Angeles Business Journal
Date: Nov 14 1994
Firm hired to tout miner's prospects now calls it a 'scam'
The financial and public relations company that represented the Beverly Hills-based Phoenix Metals U.S.A. II Inc., a purported gold-mining bonanza, now says the outfit is a fraud.
The Business Journal reported on Aug. 1 that Phoenix Metals, founded and majority-owned by a former felon, Alhambra resident Robert Francis Flaherty, 59, had a market capitalization (shares times price) of $234 million -- but no operating history.
Phoenix Metals is traded under the symbol PMTU on the NASDAQ Bulletin Board.
Flaherty claimed in August he already had a mine producing 400 pounds of gold a day, and soon would boost production to "one ton an hour" of precious metals.
Flaherty is permanently barred from the securities industry in New York, and served jail time in 1984 after pleading guilty to a scheme to defraud investors, according to records provided by the National Association of Securities Dealers, a securities industry regulatory and trade body. He was ordered to pay restitution in that matter.
Flashy growth
Regarding Phoenix Metals, Flaherty engaged Timberline Consultants, a Parker, Colo.-based financial and public relations firm, to promote his company. Timberline helped to rev Phoenix Metals' 52 million shares up to $4.63 each in late July.
Company literature suggested Phoenix Metals would become the largest gold producer in the Western world, based upon extracting precious metals out of volcanic cinder cones through a patented process. The company claimed to own tracts of land around extinct volcanoes.
After the Business Journal reported on Phoenix Metals, the company's stock went into a nose dive.
Apparently alerted by the trading action and the media, regulatory officials are looking into possible fraud at Phoenix Metals, according to people who have been questioned by authorities.
Former associates of Phoenix Metals were interviewed last week in Los Angeles by federal officials, the Business Journal has learned.
Last week, Phoenix Metals traded for 62.5 cents a share -- remarkably, still a market capitalization of $32.5 million.
Join the club
Now, Timberline Consultants, which helped to pump up Phoenix Metals stock, says it too was taken for a ride by Flaherty.
"He said they had $375 million in assets, and we can't find anything (any assets)," said Greg Vernon, account executive of Timberline Consultants. "After some pretty thorough research, it appears they don't have any gold mines, or claims on land, or patents."
Timberline hired a private investigator in September, who issued a report on Oct. 16 which concluded, in part, "I am very sorry to confirm the fears of you and other investors. In my opinion, Phoenix Metals USA II is a sham, and all officers thereof have perpetrated a fraud." |
