I am still researching your question. I came upon this!!!!!!
READ THE PART ABOUT PINK SHEETS CAUSE IF THERE ISN'T A SHAREHOLDERS MEETING SOON THAT IS WHERE THIS STOCK COULD END UP!!!!
DON'T BELIEVE IT--------LOOK FOR THEIR ROOMMATE ADVI!!!!!!!
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Subject: CCEE Breaking Out
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To: +Thomas Stanton (3827 )
From: +Rick
Apr 12 1997 9:06PM EST
Reply #3829 of 6510
RE: RICK IS A LIAR BEWARE OF HIM SCAM ON THIS THREAD!!!!
Tom,
You and other "newbies/potential victims" here might want to read the following and
then discuss it's merits.
Penny Stock Frauds
Consumer Information Sponsored by Member Businesses
Penny stock swindles are now the number 1 threat of fraud and abuse facing small
investors in the
United States. A September 1989 report by the North American Securities
Administrators
Association (NASAA) to the U.S. House Telecommunications and Finance
Subcommittee
estimates that Americans lose at least $2 billion each year as a result of schemes
involving penny
stocks - the shadowy netherworld of the U.S. equity markets. NASAA found that the
penny stock
industry increasingly is dominated by utterly worthless or highly dubious securities
offerings that are
systematically manipulated by repeat offenders of state and federal securities laws and
other felons,
some of whom have been identified as having ties to organized crime.
Since unmanipulated penny stock investors are believed to lose all or some of their
investment 70
percent of the time and the presence of fraud pushes up that figure to 90 percent,
abusive
promoters of these low-priced securities rely on sophisticated, high-pressure
telemarketing
techniques to lure in hundreds of thousands of new, unsophisticated investors, a
majority of whom
appear to be first time entrants to the market and are clearly unsuitable candidates for
risky penny
stoc
The consumer bulletin is a joint effort of NASAA, the national organization of the 50
state
securities agencies and the Council of Better Business Bureaus (CBBB). Research for
this
NASAA/CBBB bulletin revealed numerous indications of the growing national scope
of the penny
stock problem. New penny stock investigations opened by state securities agencies of
penny stock
cases rose 97 percent from 1987 to 1988, according to the September 1989 NASAA
report.
During the same period, small investor reports of penny stock fraud and abuse climbed
51 percent.
State securities agencies reported a two-year total of almost 4,500 penny stock related
consumer
complaints, with 1,767 logged in 1987 and another 2,660 made in 1988.
PENNY STOCKS: FROM COTTAGE INDUSTRY TO THE BIG TIME
Abuse of penny stocks, which are low-priced securities trading from as little as a
penny to as much
as $5 a share, is not new and dates back at least to the 1940's and 1950's, a period
when
worthless shares in uranium mine stocks were bought and sold over the counter of a
Salt Lake City
coffee shop. However, it is only in the last decade that broker-dealers specializing in
penny stocks
have grown from a handful of small firms plagued by fits and starts to a booming,
multi-billion
dollar national growth industry. Since 1983, the U.S. penny stock marketplace has
undergone
dramatic and disturbing changes:
Penny stocks have evolved from a primarily regional phenomenon (with active penny
markets in
Denver, Utah and Spokane), to a problem of truly national proportions. The number of
firms
specializing in penny stock trading has increased almost five-fold in recent years. Half a
decade
ago, 55 penny stock firms were headquartered in fewer than 6 states. Today, an
estimated 325
penny stock firms have set up main offices in 29 states employing several thousand
brokers at
more than a thousand branch offices that now reach down into even the smallest
communities of
America.
Trading in penny stocks is extremely lucrative, with broker-dealers and individual
stockbrokers
taking in massive profits far in excess of what is attainable in the mainstream of the
securities
brokerage industry. In 1987, the president of one penny stock firm drew a salary of
between
$7.4-$9 million, more than the combined reported salaries and bonuses of the chief
executive
officers (CEO's) of Merrill Lynch & Co., Shearson Lehman Hutton and First Boston.
Many
individual penny stock brokers earn $20,000 to $50,000 a month or more. A
now-defunct penny
stock firm has at $19 million advertising budget in 1984 and ran ads on evening
network news
shows and the Super Bowl, where 30 second spots were sold for $300,000. The
penny firm's
advertising budget was just $1 million dollars under the promotional allocation of the
largest
brokerage firm in the U.S. In one case, the branch office of a penny stock brokerage
made more
than $1 million in profit in a single day through its penny stock activities.
The recent ascendancy of so-called "blank-check" blind pools, in which the new
company
generally has no assets, no employees and no stated business plan, has fueled the
spread of fraud
and abuse in the penny stock market. Once relatively rare, blind pools accounted for
an estimated
70 percent of new penny stock offerings in 1988 and the first half of 1989, compared
to less than
5 percent as recently as 1983. A high percentage of blind pools frequently are
indirectly controlled
by broker-dealers and unnamed promoters, many of whom have been identified as
repeat violators
of securities laws and felons, who use the offerings as a vehicle for systematic market
manipulation.
A number of direct links have been made between promoters of "blank-check" blind
pool penny
stocks and organized crime, according to the NASAA report to Congress.
The names of one or more individuals with a background of violations of securities
laws, felony
indictments and/or convictions or reported ties to organized crime were found in more
than four
out of five of the major penny stock enforcement cases examined in the NASAA
report to
Congress. Two individuals with organized crime backgrounds have been involved in
some way at
least 40 (11 percent) of the 360 "blank-check" blind pool offerings registered by the
SEC since
1985. One of this pair is now in prison in Paris for his alleged part in a global penny
stock scheme
involving a U.S. take that may have reached $1 billion. The penny stock promoter in
question has
been identified before Congress and by the Federal Bureau of Investigation as being
involved in
organized crime, particularly the Genovese crime family in New York. He was barred
for life from
the securities industry by the SEC in 1966.
HOW THE MARKET WORKS - IN THEORY
Historically, the over the counter (OTC) stockmarket has acted as the birth-place and
cradle for
many new and expanding companies. It is in this marketplace that many of these
companies raise
the capital needed to commence, or build upon, existing operations. The process of
distributing
ownership certificates (stock) is called "initial public offering" (IPO) or a "new issue."
Trades in exchange-listed stocks are facilitated by a stockbroker who seeks the best
available
price in an auction system, with the transaction taking place on the floor of the New
York Stock
Exchange (NYSE), or other national or regional stock exchange. OTC trades are
carried out
within, or between, the trading departments of brokerage firms. These brokerages or,
a single
brokerage firm, as often is the case in penny stocks, are called "market makers" when
they carry
an inventory of the stock and quote the prices at which they are willing to buy and sell
securities.
The difference between the "bid" (the price at which a customer may sell a security)
and the
"asked" (the price at which a customer may buy a security) is known as the "spread".
For instance,
if a penny stock in bid at 1 1/2 ($1.50) and asked at 2 ($2), then the spread in 50
cents or 33
percent. This latter amount is the minimum that an investor would have to recoup in
order to break
even on an investment in the stock.
Since the creation of the National Association of Securities Dealers Automated
Quotation
(NASDAQ) system in 1971, price information on may OTC stocks has appeared in
all major
newspapers, allowing investors to track bid and ask quotations. However, this same
information is
almost unavailable for "pink" sheet penny stocks, leaving the unwary investor at the
mercy of
whatever quotes are supplied by the broker-dealer, who, in any event, may be the only
market
maker trading in the stock. The competitive pressures that act as a check on the
manipulation of
the spreads of upper echelon OTC securities is absent in the penny stock market. As a
result,
abusive and unreasonable markups and spreads on penny stocks are widespread in the
pink
sheets.
THE MYSTERY OF THE PINK SHEETS
There are 18,000 or more publicly-traded corporations in the United States. About
2,500 of the
largest and most established firms trade on national stock exchanges, including 1,600
that are listed
on the New York Stock Exchange (NYSE). Another 4,600 firms are listed on the
NASDAQ
system, which is home to most of the major firms in the over-the-counter (OTC)
market. More
than 2,800 NASDAQ securities are listed on the NASDAQ/National Market System,
which
imposes the highest standards on OTC stocks. Outside of regional exchanges, the
balance of
publicly-held firms are traded in the murky netherworld of U.S. equity transactions
known as the
"non-NASDAQ OTC" market. Almost all of these securities - more than 11,000 - are
quoted in a
daily circular known as the "pink sheets," so named for the color of the paper on which
they are
printed.
The pink sheets are home to almost all penny stocks, which, with very few exceptions,
are not
traded on the exchanges or NASDAQ. Unlike exchange-listed stocks and those on
NASDAQ,
pink sheet securities are subject to no meaningful listing requirements and escape
almost all of the
computer-guided surveillance and policing of the other segments of the equities market.
For this
reason, the pink sheets also are the primary playing field of penny stock swindlers, who
thrive in
the obscurity of the lowest rung on the ladder of the U.S. securities market. Some
non-U.S.
companies whose financial statement do not conform to American accounting
standards and
formats also appear in the pink sheets.
Why would companies choose to be listed in the pink sheets? Most have no choice;
they are
unable to satisfy the minimum listing standards for the NASDAQ market. Some of the
securities
are those of dormant or bankrupt companies - "shells" that are made to order vehicles
for
manipulative secondary market trading.
Some pink sheets stocks are those of low-profile, closely-held firms, a number of
which trade at
$50 a share or even in multiples of hundreds of dollars. A number of small and medium
sized
financial institutions of primarily or entirely local and regional interest have their market
in the pink
sheets.
Not all pink sheets securities are penny stocks, but virtually all penny stocks are found
in the pink
sheets. While a number of even the low-priced securities are perfectly legitimate, it is
apparent that
the pink sheets are increasingly being overrun by abusive promoters of manipulated
penny stocks.
Even in unmanipulated pink sheet securities, the absence of meaningful information for
decision-making purposes poses a serious hazard. An investor's risk of losing all or
some of his or
her funds in penny stocks is all but assured when the considerable handicap of
manipulation is
combined with the almost total "black out" on information in the pink sheets.
THE RISK TO INVESTORS
There is convincing and growing evidence that the non-NASDAQ OTC market - the
13,000
stocks trading in the "pink sheets" - has been substantially overrun by fraud and abuse
at the hands
of unscrupulous promoters. It is for this reason that securities regulators say that "penny
stocks are
bought and not sold." While there are reputable dealers in low priced securities and
legitimate pink
sheet stocks do exist, the rise of fraud in the penny stocks has seriously imperiled the
current and
future potential of this marketplace as the "starting line" for new and growing
companies.
Recent cases and enforcement trends suggest that $2 billion or more of investor funds
are lost each
year due to fraud and abuse in the penny stock market. This loss to the U.S. economy
is profound.
For example, the estimated penny stock fraud toll is equal to two-thirds of the $3
billion raised by
U.S. venture capitalists in 1988. Taking the rule of thumb that $25,000 in outside
financing is
needed to get a small business off the ground, the amount is reflective of the loss of
80,000
potential new firms, which would employ well over 150,000 workers. Ironically, penny
stock
boosters promote the market as a contributor of new businesses and jobs. However, it
appears
unlikely that the non-NASDAQ OTC market is actually a net "plus" to the U.S.
economy.
The $2 billion in penny stock fraud and abuse is in addition to the estimated 70 percent
profitability
that an unmanipulated penny stock investor will lose some or all of his or her
investment.
Combining this inherent high degree of risk with the staggering amount of penny stock
fraud and
abuse results in an extremely bleak picture of the prospects for investors in the
low-priced
securities. These figures suggest that there is only about one chance in ten that many
penny stock
investors will break even, much less earn a single dollar in net profit through trading in
the
low-priced securities. This is a degree of risk that is slightly greater than that generally
associated
with commodity futures trading. It may be that use of the term "risk" is inappropriate in
the context
of the rigged marketplace of penny stocks, since there is, in fact, a virtual certainty of
loss of funds
by investors.
Penny stocks are thinly traded and subject to domination and control by a single
market maker. As
such, unlisted securities are attractive vehicles for manipulative, artificial schemes which
are
intended to raise the price or volume of the securities, primarily for the benefit of often
unnamed
insiders and, frequently, the brokerage firm itself, which may unload its own shares of a
stock into
the market it has helped send skyward.
The hallmarks of penny stock manipulation include: control by one or only a few
brokers who
often have contacts with the promoter or the issuer; matched purchases and sales to
drive up
prices, a practice also known as cross-trading; excessive spreads between "bid" and
"ask" prices;
false and misleading rumor-mongering and hype to inflate the prospects for a stock;
and, the
dumping of the securities at inflated prices by the promoters or brokers who then move
on to the
next manipulation. Penny stock investors routinely are victimized by grossly-inflated
markups,
which have been reported as high as 400, 500 and even over 1,000 percent. Other
penny stock
market abuses include refusing "net sales" (insisting that customers roll over paper
profits), trading
by unregistered salespersons, unauthorized trading in customer accounts, sales prior to
the
registration of a new issue, and over-subscription of initial public offerings.
A fundamental abuse that seems deeply rooted in the penny stock market (and, most
likely, is
crucial to its continued expansion) is the placement of unsuitable investors in the risky,
volatile
securities, including low-income elderly individuals whose primary sources of income
are Social
Security and other retirement benefits and those who are seeking low-risk investments
with strong
income potential. Documented cases of abuse include those in which penny
stockbrokers have
convinced clients to place penny stocks in their IRA accounts. It may be said that the
suitability test
applied by abusive penny stock firms is, quite simply, the ability to pay.
THE "BLANK CHECK" BLIND POOL PROBLEM
An estimated 70 percent of penny stock new issues floated in 1988 and through
mid-1989 were
blind pools, virtually all of them "blank check" offerings, so named because investors
are provided
with almost no meaningful information about the company in which they have placed
their money.
For example, "blank check" business plans are not detailed in the offerings'
prospectuses.
Frequently, "blank check" blind pools are merely sham corporations that are brought
public as
vehicles for future manipulative conduct, which is widespread. In a matter of weeks
after a "blank
check" offering closes, a "reverse merger" or "reverse acquisition" may be announced
and the
underlying blind pool becomes and immediate candidate for hype and manipulation in
the
secondary marketplace, which is where stocks trade after an initial public offering
(IPO) has been
made. Similar abusive activity also takes place with so-called "shell corporations,"
which are
generally inactive or bankrupt publicly-traded companies that are "raised from the
dead" and
merged with private companies.
The result of "blank check" and "shell game" craze is the sale to the public each year of
stocks in
hundreds of insubstantial and, in many cases, failing firms which, if they had attempted
to come to
market in a traditional IPO, most likely would have never passed the muster of state
securities law.
No academic literature or anecdotal evidence suggests that a net economic benefit
results from the
existence of "blank check" blind pools. In fact, it appears that the dollars raised in these
offerings
are matched several times over by the volume of resulting market manipulation, which,
in short,
means that the cost of "blank check" blind pools to society far outweighs any benefit
they are
known to bring about.
STATE EFFORTS TO COMBAT PENNY STOCK FRAUD
A number of state initiatives are either in place or underway to curb the rising tide of
penny stock
fraud and abuse, including:
A total of 36 states have outright prohibitions or substantial restrictions of the
registration of
"blank check" blind pools. Utah, once the home of the "blank check" blind pools, has
acted to
clean up its soiled reputation. New regulations passed in Utah in 1986 imposed escrow
and other
requirements on blind pool offerings. In fiscal 1983, 217 blind pools in Utah raised
$19.8 million.
That number fell to 116 in 1986, 17 in 1987 and 5 in 1988, raising just $500,000. The
New
Jersey Bureau of Securities recently was given the discretion to deny registration to
blind pools. In
April 1989, the membership of the North American Securities Administrators
Association
(NASAA), declared "blank check" blind pools to be abusive "per se" and called for
their
elimination.
A number of states, including Missouri, Florida and Connecticut, have developed
innovative
and extensive programs to keep as much penny stock fraud as possible outside of their
borders.
The three states are among those that have developed extensive penny stock branch
office auditing
programs, which have generated dozens of enforcement actions. Missouri and Florida
also have
been trend-setters in the use of existing disciplinary information as the basis for
pre-registration
screening of individual stockbrokers and the handling of requests for the opening of
new branch
offices. Both states routinely deny registration to penny stockbrokers with established
histories of
disciplinary infractions.
A total of 36 states use "merit review" powers to screen out securities offerings that
would be
patently unfair, abusive or fraudulent to investors. This authority has been a major tool
in the
campaign by states to squelch problem initial public offerings (IPO's) of penny stocks.
States also are working together with the SEC and NASD on joint examinations of
problem
penny stock firms. Cooperative enforcement projects have also been undertaken, in
order to more
effectively ration the small pool of state, federal and industry regulatory manpower.
Eight states
joined earlier this spring in the joint examination of a Denver-based penny stock firm,
including the
simultaneous entry of the firm's eight branch offices around the nation. The state of
Oklahoma, the
SEC and NASD collaborated in 1987 and 1988 on actions taken against a
Tulsa-based penny
stock brokerage firm that engaged in driving up the market valuation of a bogus gold
mining stock
from $2 million to $315 million.
IF YOU DECIDE TO GAMBLE ON PENNY STOCKS...
Few investors are likely to be suitable candidates for penny stocks, which involve a
high or total
degree of risk of the entire amount invested. As a result, penny stocks should be
looked upon as
being on the same order as playing the lottery or betting at the horse track. There are
some means
by which investors can minimize their risk of total loss in penny stocks. Consider the
following tips
before investing:
Determine how much you can afford to lose. Don't gamble on penny stocks any of the
money
you need for regular expenses or future plans.
Get it in writing - and read it. Don't rely on the glib talk of a penny stock salesperson.
Get
everything in writing about the investment in question. If the stock is more than a year
old, ask the
broker for the most recent 10K. If the company is a new one, ask to see the
prospectus and then
read it. Pay particular attention to the sections of the prospectus that discuss the risk
factors and
firm's management, outstanding litigation and financial status. Keep in mind that these
factors all
could be crucial to the firm's success.
Hang up on abusive, high pressure telephone salesmen. Remember that penny stocks
salespeople will go to any lengths to get a sale. If you are not interested in making a
purchase, say
so and then get off the line.
Try to get independent verification of the "bid" and "ask" prices that are quoted. Ask
the broker
for the names of at least two other firms trading in the stock. Call those firms and
determine if the
prices quoted to reflect other market activity in the stock. (Keep in mind, however,
that many
penny stocks are traded in earnest by as few as one brokerage firm.)
Beware of claims of advance knowledge about pending announcements that will drive
up the
price of the stock. When it comes to penny stocks almost all such claims are phony.
Insider trading
is against the law; no legitimate brokerage firm is going to encourage you to invest on
the basis of
"secret" or "not yet announced" information.
Don't be impressed that the brokerage firm owns a big chunk of the stock. A penny
stock
salesperson may attempt to woo a prospective customer by pointing out that his or her
brokerage
firm holds a major portion of the outstanding float of a stock. Keep in mind that the
firm may have
paid little or nothing for the stock - possibly a very small fraction of what you are being
asked to
shell out. Such a holding may actually be a sign of trouble, since the holding can be sold
into the
stock's rising market, thereby causing the value of outstanding stock held by public
investors to
plummet in value.
Exercise caution when it comes to profit predictions and special analysis. If the broker
indicates
that his firm is recommending the stock, ask to see a copy of the related research
report.
Established brokerage firms have research department that publish detailed analysis on
the pros
and cons of individual stocks. If there is no such report available on the stock then the
chances are
good that you are getting nothing more than hot air.
Check out the brokerage firm and the stockbroker. Call your state securities agencies
for a
report on their track record of disciplinary infractions, if any. For the number of your
state agency,
call NASAA at 202-737-0900.
Use common sense. The chances of a penny stock becoming the next Apple
Computer or
Standard Oil are extremely thin. Don't listen to hype and feverish talk about
"guaranteed," "can't
lose," or "no risk" investments. They don't exist in the world of penny stocks. |
