More Poop on Dimples Diapers!
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I have taken the liberty of publishing the Globe and Mail article in full because the link will expire tomorrow.
BUSINESS WEST
A fitting end to Dimples saga
Tuesday, July 21, 1998
By Mathew Ingram
Calgary
Calgary -- Somewhere out there are some former Dimples Diapers'
shareholders, not to mention Rhonda Maxwell -- later known as
Rhonda Windsor-Maxwell -- whose brainchild Dimples was in the first
place. She lost the company through a kind of corporate coup, and
thousands of Dimples' shareholders subsequently lost everything when
the company finally went under.
All this happened more than five years ago, and there are no doubt
many investors who have long since forgotten the whole sad affair --
but perhaps there are also a few who allowed themselves a secret smile
while reading a tiny news item carried in several newspapers recently.
The item said a judgement was handed down in California District
Court on July 10 against one Robert Reid in a securities fraud case
involving Dimples Diapers. In the early 1990s, Dimples' stock leaped in
value on the Vancouver Stock Exchange and the U.S.
over-the-counter market, based on the company's ambitious plans to
sell biodegradable cloth diapers.
Mr. Reid -- who at various times has been based in Portland, Ore.,
and Vancouver, B.C. -- was ordered to pay $4.75-million (U.S.) to
resolve a case launched by the U.S. Securities and Exchange
Commission in 1992, in which he and former Dimples president J.
Douglas Elliott were accused of orchestrating a stock promotion in the
United States in 1991 and 1992.
According to the SEC, the two men falsely told investors that Dimples
would have revenue of between $25-million and $35-million in its first
year, and that Dimples diapers had been successfully test-marketed in
New York and had generated more than $1-million in sales.
Mr. Elliott settled with the SEC last month by agreeing to a statement
of fact that said he "knew or should have known that he caused
[Dimples] to make material misrepresentations and omissions in
violation of anti-fraud provisions of the federal securities laws during
1991 and 1992." He also agreed not to engage in any fraudulent
activities in the future.
The SEC said Mr. Reid -- Dimples' director of corporate finance --
distributed 90,000 newsletters to investors in the United States in
which he repeated the claims about Dimples' operations, and he
arranged for radio interviews in which Mr. Elliott and others repeated
the claims.
Mr. Reid was ordered to repay $4.75-million he made by selling
Dimples' stock in 1991 and 1992, a period in which the shares soared
to $8.75 (Canadian) from 98 cents. However, the court waived the
order for a repayment of funds because of a "demonstrated financial
inability to pay."
The Dimples saga was surely one of the most bizarre to hit the stock
market this decade, although it has some stiff competition. The
company was started in 1989 by Rhonda Maxwell, who later changed
her name to Rhonda Windsor-Maxwell. Ms. Maxwell decided that
what the world needed was biodegradable cloth diapers, and she set
out to design some, called Dimples.
She enlisted the help of a former construction company executive
named Tony Boyden, who in turn brought in an Ontario businessman
he had gotten to know: Douglas Elliott. In true Dimples fashion, one of
the reasons Mr. Boyden recruited Mr. Elliott was that Mr. Boyden was
awaiting trial on a charge of counselling to commit murder (he was
convicted).
Mr. Elliott in turn brought in Robert Reid, a man who had been
involved in several VSE stocks and had gained the nickname "The
Preacher" because he carried around little pieces of paper with Biblical
quotations on them. The two men eventually took control of Dimples,
forcing Mr. Boyden and Ms. Windsor-Maxwell out of the company in
early 1991.
Ms. Windsor-Maxwell pursued the company through the courts for
several years, including at one point trying to petition Dimples into
bankruptcy. Although an Ontario court judge ruled in September of
1992 that the company was effectively insolvent, he denied Ms.
Windsor-Maxwell's motion, saying it was simply an attempt to regain
control of Dimples.
Dimples was delisted from the VSE in 1994. Mr. Reid's whereabouts
are unclear, as are Ms. Windsor-Maxwell's. Mr. Elliott, however, is
running another penny stock company -- listed on the Alberta Stock
Exchange -- called Power Plus Corp. Formerly known as Battery
One-Stop Inc., the company has plans for a chain of kiosks selling
pagers and hand-held computers.
Battery One-Stop went bankrupt in 1996, and Power Plus (of which
Mr. Elliott is president, CEO and chairman) took control of most of its
assets. The shares were consolidated on a one-for-20 basis and a new
financial plan was instituted. Power Plus bought a Florida chain, and
says it plans to open hundreds of kiosks under the "Powerful Stuff"
name.
However, the company says it needs to raise $30-million or so, and its
Canadian subsidiary was placed under bankruptcy protection in May.
The company lost $10-million in the most recent fiscal year, although it
says this was the result of the cost of winding down Battery One-Stop
and implementing its new plan. Mr. Elliott couldn't be reached for
comment.
Business West readers can reach Mathew Ingram by fax at (403)
244-9809 or by E-mail at
mingram@globeandmail.ca
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