XDSL A MUST READ!!! Truthseekers final report!!!
mPhase Technologies (XDSL):
In investigating mPhase Technologies several irregularities have
appeared which may merit further attention.
mPhase Technologies is being run out of the offices of Microphase
Corporation, a privately owned defense contractor. Most of the mPhase
"employees" are actually Microphase employees.
While Bloomberg does not show any data for shares outstanding, looking
over the filings indicates that there are at least 17 million shares
out.
History of CEO:
mPhase itself is run by a former stockbroker, Ron Durando, who has
worked for some questionable firms. Durando has issued to Nutley
Securities, a firm in which he is the principal, 600,000 shares for
"services."
In XDSL's most recent filings, it is stated that Mr. Durando worked for
"several Security Brokerage Firms." However, in their previous filings,
it is noted that Mr. Durando has worked for the following firms:
Nutley Securities (As President and CEO)
Gladstone Securities
Graystone Nash
Donald & Co.
JW Weller & Co.
Greystone Nash is the most interesting of these, as it had been expelled
from the NASD, for cheating customers out of over $60 million. Little
wonder Mr. Durando does not want this information in XDSL's filings.
MEMBER FIRM: GRAYSTONE NASH, INC. (Expelled on 7/31/96)
BD NUMBER: 10635
NASD Member Firm: GRAYSTONE NASH, INC.
(Expelled on 7/31/96)
BD Number: 10635
2/09/99: 5/15/92 SEC PERMANENT INJUNCTION ORDER
THE FIRM WAS PERMANENTLY ENJOINED IN THE U.S. DISTRICT
COURT FOR THE DISTRICT OF NEW JERSEY, AS THE RESULT OF A
CIVIL COMPLAINT FILED BY THE SECURITIES AND EXCHANGE
COMMISSION. THE COMMISSION ENJOINED THE FIRM FROM
VIOLATING ANTIFRAUD, REGISTRATION AND OTHER
PROVISIONS OF THE FEDERAL SECURITIES LAWS.
THE FIRM WAS ORDERED TO DISGORGE $60.6 MILLION, IN
TRADING PROFITS AND CONCESSIONS FROM ITS ILLEGAL
ACTIVITIES. THE COMMISSION, ALLEGED THE FIRM, DIRECTLY
OR INDIRECTLY OFFERED AND SOLD SECURITIES IN INITIAL
PUBLIC OFFERINGS BY MEANS OF MISSTATEMENTS,
OMISSIONS, AND OTHER MANIPULATIVE AND DECEPTIVE
PRACTICES, ORCHESTRATED AFTERMARKETS FOR SUCH
SECURITIES AT ARTIFICIAL PRICES AND HEREAFTER
MAINTAINED, DOMINATED, CONTROLLED AND MANIPULATED
THE MARKETS FOR SUCH SECURITIES. [USDC FOR THE DISTRICT
OF NEW JERSEY, 91 CIVIL 4327, (LR-13241)]
2/09/99: 6/17/91 NASD EXPULSION
GRAYSTONE NASH WAS CENSURED, FINED $1,325,000 AND
EXPELLED FROM NASD MEMBERSHIP FOR VIOLATING ARTICLE
III, SECTIONS 1, 4 AND 19(a) OF THE RULES OF FAIR PRACTICE.
NASD ALLEGED THAT THE FIRM, ACTING THROUGH A CERTAIN
INDIVIDUAL, ENGAGED IN THE DISTRIBUTION AS SOLE
UNDERWRITER OF UNITS ON A BEST
EFFORTS CONTINGENCY BASIS AND ACCEPTED THROUGH ITS
CLEARING AGENT PURCHASERS' MONIES INSTEAD OF
REQUIRING THAT THEY BE PROMPTLY DEPOSITED IN A
SEPARATE BANK TRUST OR ESCROW ACCOUNT; MANIPULATED
THE MARKET PRICE OF SUCH COMMON STOCK IN THAT THE
FIRM BID FOR AND PURCHASED FOR ITS ACCOUNT AND
ATTEMPTED TO INDUCE AND INDUCED OTHERS TO PURCHASE
SUCH STOCK AT ARBITRARY PRICES; AND EFFECTED AS
PRINCIPAL, OVER THE COUNTER SALES OF SUCH COMMON
STOCK TO PUBLIC CUSTOMERS AT PRICES WHICH WERE NOT
FAIR. DECISION IS FINAL 6/17/91. [NASD COMPLAINT
ATL-1049]
History of Company:
XDSL has had several incarnations. The company was previously known as
Lightpaths TP Technologies, and before that as Tecma Labs. In all of its
forms it has been associated with Mr. Durando. Mr. Durando did the
initial underwriting work for the company, did all of the reverse
mergers and the private placements.
Relationship with Hart Telephone Company:
mPhase press releases often mention their only customer, Hart Telephone
Company, a small ILEC (Independent Local Exchange Carrier) in Georgia.
What these press releases fail to mention is that Hart Telephone is
owned by Lintel Inc., whose CEO is J. Lee Barton. Mr. Barton is a
director of XDSL and its largest shareholder, owning 14.8% of the shares
outstanding. Nowhere in XDSL press releases is it mentioned that Hart
(their only customer) could be considered a related party. Nowhere in
the press releases is it mentioned that Hart's owner sits on XDSL's
board of directors.
Relationship with Investec Ernst:
Recent press releases from XDSL (Dated 6/15/99) state that an analyst at
Investec Ernst, a broker-dealer owned by Investec, a South African
banking firm, has initiated coverage on XDSL.
This is not the case, as can be verified by speaking with the analyst in
question, John Garritty, at 800-724-0761. The actual situation is that
XDSL paid Investec Ernst to write a general overview of the company. The
stock is not being "covered" by an analyst there, as Investec was paid
specifically to write this report. Investec Ernst does not make a market
in the stock.
Relationship with Kaufman Brothers:
An analyst at Kaufman Brothers, Vik Grover 212-292-8100, does cover
XDSL. In XDSL's 10SB filing it is revealed that XDSL granted to Kaufman
400,000 warrants that strike at $1.00 per share, with a five year life.
The XDSL Technology:
mPhase's box, the Traverser, is a DSL (Digital Subscriber Line) unit
used for point-to-point communications between a customers premises
(CPE) and the telephone company central office (CO). In that respect it
is no different from CPE equipment made by other telco equipment firms
such as Alcatel, Westell, Aware, Lucent, Nortel, Cabletron, Tut Systems,
Brooktrout Tech. etc.
In fact, the DSL technology used by XDSL, provided by Globespan
Semiconductor, is non-standard CAP technology. The telecom industry
standards body, the ITU, has decided to adopt a competing technology,
DMT, as the industry standard.
mPhase's claims about its own "technology" are no different from the
claims made for all "flavors" of DSL technology. Considering that XDSL
does not use its own DSL chipset, functionality cannot be much different
from products offered by other Globespan Semiconductor customers.
XDSL's claims to send voice video and data simultaneously down the same
phone line is not unique. The amount of bandwidth that DSL connections
provide can be divided, or "framed" any way the engineers would like.
For example, if you have a 10mbs connection, you could divide the
bandwidth in multiple combinations, including 64kbps for one voice
channel, 8.436mbps for video and 1mbps for downstream data and 500kbps.
Relationship with Infospace:
The company has also issued press releases detailing its relationship
with Infospace (INSP). However, the truth to the relationship is that
XDSL is required to pay INSP for the content that INSP will provide.
This content includes yellow pages, white pages, classifieds, investing,
city guides, and other information services. In return for the content
XDSL will pay INSP $5000 per month, 50% of all advertising revenue will
go to INSP, and 50% of all revenue sharing fees will go to INSP.Clearly,
this "relationship" is little more than XDSL buying INSP services.
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