Confusion, questions arise as USATalks drops marketer
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February 3, 1999
USATalks.com, the San Diego Internet company whose once-sizzling stock
is now suspended, yesterday announced that it is terminating its
relationship with its multi-level marketing arm.
In its news release, however, USATalks neglected to mention that last
year it signed a letter of intent to buy the controversy-plagued
Memphis-based network marketing organization, TrendMark, for 2.75
million common shares.
A spokeswoman for USATalks, which says it will provide Internet-based
long-distance service, said that this deal now has been terminated.
However, sales material for TrendMark has long indicated that the deal
was consummated some time ago.
Indeed, yesterday afternoon, six hours after the termination
announcement, TrendMark's so-called "Sizzle Line" was still referring to
"TrendMark, the wholly-owned marketing subsidiary of USATalks.com."
Also, several hours after the termination announcement, telephone
operators at TrendMark still were saying that USATalks was the parent.
Later, the operators said they were confused, and didn't know the
status.
USATalks said its chief executive, Allen J. Portnoy, was in Los Angeles
yesterday talking with the Securities and Exchange Commission (SEC),
which suspended the stock's trading Friday because of questions about
the accuracy and adequacy of information disseminated on the company.
The stock zoomed from $3 to above $60 in less than four months, and had
closed at $52.25 the day before the suspension. The SEC refused comment.
On Jan. 23 and Jan. 30, this column revealed that Portnoy has been
bankrupt twice in this decade, had big tax liens that he claims have
been paid, and previously had headed a telecom company whose stock had
soared and crashed, among other things.
The company's president, William J. Ervine Jr., also has filed for two
bankruptcies in recent years and had big tax liens that, Portnoy says,
have been cleared up.
Also, this column revealed that around the time that USATalks was
agreeing to shell out shares for TrendMark, the multi-level marketer was
reaching a consent decree with the Federal Trade Commission (FTC) over
alleged misleading marketing practices.
Also, the principals of TrendMark have been involved with other
operations that ran afoul of the law.
Yesterday, USATalks was saying that it ended the relationship with
TrendMark because of inadequate sales performance.
Meanwhile, many more questions are surfacing about USATalks. Investors
are asking about the cheap shares that have been doled out to so-called
"consultants" to the company.
SEC records show that in late October of last year, Robert M. Beaton of
Golden, Colo., got a warrant to purchase 750,000 shares of the stock for
6 cents a share. In return, Beaton would "develop relationships with the
securities analysts and brokerage firms," among other things, according
to the agreement.
Yesterday, Beaton refused to comment.
Last year, USATalks went public by "back-dooring" into a shell
corporation. Using such a route, companies often do not have to make as
many disclosures as they might if they go public through an initial
public offering (IPO).
In May 1998, Allen Gelbard of Beverly Hills got a warrant to purchase
941,000 shares at 6 cents a share. In November, he was granted warrants
on another 200,000 for the same price. Gelbard was to provide
"consulting services," according to the agreement.
Gelbard could not be reached for comment.
The USATalks spokeswoman did not get back with answers about the
services provided by the consultants.
Gelbard had helped the company find a corporate shell named SBB Inc., a
company with almost no business that was controlled out of Las Vegas. It
was merged with Alfine, with which Portnoy and his team had been
associated, to produce USATalks.
There is a large group of irate Alfine investors. They had been told
their restricted stock would be converted into USATalks stock that could
be traded, but this has been put off month after month. "I have been
hoodwinked," says one Alfine investor.
"I've been hornswoggled," says another. The spokeswoman did not get back
with answers on that question.
TrendMark distributors, who have been selling the USATalks service, also
feel let down. "I am blindsided, caught flat-footed -- a lot of my
credibility is on the line," says Rik Foxx of San Diego.
He had used the USATalks phone service. "Some calls were a little fuzzy;
they obviously need to do more tweaking," he says.
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Don Bauder's e-mail address is |
