Securities and Exchange Commission - Street Wire
SEC shuts down Howe Street's anthrax promotion, 2DoTrade
Securities and Exchange Commission *SEC
Shares issued 0 Jan 1 1900 close $.000
Tuesday Nov 6 2001 Street Wire
by Brent Mudry
While Trevor Koenig has been the star penny stock target of U.S. authorities in the border town of White Rock, B.C., the jailed Union Securities broker is now being overshadowed, if only briefly, by 2DoTrade Inc., a tiny OTC Bulletin Board company shamelessly trying to exploit the recent terrorist anthrax attacks. The United States Securities and Exchange Commission imposed a 10-day trading halt Tuesday morning, after it touted its purported anthrax disinfectant in press releases last Wednesday and Friday.
Shares of 2DoTrade quadrupled to a peak of 58 cents in the wake of the anthrax promotion on heavy volume, up from 14 cents a week ago, before the first release. The stock's daily volume rose tenfold to 884,000 on Oct. 31, the day of the first release, and reached 1.51 million shares on Monday, the last day of trading before the halt.
Such SEC trading halts are rare, with the last one imposed in March, on Ives Health Co. Inc., a bulletin board promotion featuring a bogus AIDS treatment. Even rarer, the SEC, which had its New York enforcement offices destroyed in the Sept. 11 terrorist attacks, issued a public statement denouncing the Vancouver-area company.
"Investment scams that attempt to prey on fears of terrorism are abhorrent," stated Stephen Cutler, the director of the SEC's enforcement division. "We will be vigilant about rooting out and prosecuting those who seek to exploit recent events to defraud investors."
Mr. Cutler declined further comment to Stockwatch, referring the matter to Harold Degenhardt, the district administrator of the SEC's Fort Worth, Tex., district office, which is the lead office on the 2DoTrade investigation. (2DoTrade's Houston-based publicist, Jennifer Mazzini of Stock Communications Group, could not be reached for immediate comment.)
"We are alerting investors out there that there is a need to be vigilant when investing in companies promoting products involved in the war on terrorism or bioterrorism. Anyone who is attempting to exploit the fears of the nation will find there is no safe haven, and we will vigorously pursue them," Mr. Degenhardt told Stockwatch.
In general terms, the SEC official noted, regarding Canada's latest export, "the despicable thing is that with these promoters, there is no depth they will not sink to."
While an anthrax disinfectant may seem a bizarre and flaky flagship product for any company, dubious promotions of flavour-of-the-week disinfectants were popular a decade or so ago on Howe Street, Street, the centre of dealings for the former Vancouver Stock Exchange, dubbed the Scam Capital of the World 11 years ago in Forbes magazine by satirist Joe Queenan.
The VSE's past disinfectant plays included Medical Polymers Technologies Inc. in 1992 and 1993, which claimed big Saudi Arabian sales and proudly rode the AIDS infection hysteria by reminding investors of the case of Kimberly Bergalis, who got the deadly disease in the dentist's chair in Florida, and Health Care Products Inc. in 1993, which touted its licensing deals in the hot markets of Libya, Tunisia, Algeria and Morocco.
More recently, an Edmonton company, Medical Services International Inc., has been flogging an AIDS test kit to the gullible, and its Canadian-produced shares to the equally gullible. Assisting in this Robert Talbot promotion is an Edmonton police detective named John Warkentin, a bullish and bullying supporter who has emerged as a clumsy Internet discussion enforcer.
Perhaps the most notable Howe Street disinfectant play, until now, was Rafi Khan's Tarn Pure Technology Corp. in 1988, which rode the wave of Legionnaires' disease hysteria. "Tarn Pure now has the safest, most effective residual disinfectant product available today," stated the company.
Mr. Khan, a notable American penny stock promoter now living in the Middle East, is now a prime turncoat informant in the long-running SEC and FBI probes of notorious boiler room kingpin Irving Kott, who allegedly secretly took control of Los Angeles-area broker Reynolds Kendrick Stratton through several Howe Street stock manipulations.
The SEC's Mr. Degenhardt declined to comment directly on whether the British Columbia Securities Commission has yet assisted the U.S. regulator's probe of 2DoTrade, which claims to have offices in the Vancouver border suburb of White Rock and in London. "The SEC and the B.C. securities people are not strangers and have oftentimes worked very closely together," the SEC official told Stockwatch.
BCSC regulators are well aware of the 2DoTrade case, but BCSC enforcement director Sasha Angus declines to comment or confirm whether the Canadian agency has yet been requested by the SEC to join the investigation.
The SEC's probe extends far beyond 2DoTrade's anthrax disinfectant touting. "There are also questions about the existence and viability of the company's contracts, the status of its business operations and prospects, and the identity and backgrounds of the persons in control of the company's operations and management," states the regulator.
The SEC's concerns about the accuracy of 2DoTrade's statements is understandable, given the company cannot even get its White Rock address right. In regulatory filings, 2DoTrade uses the address "207 - 1548 Johnson Road," White Rock, although the proper street name is Johnston Road, which is one of the main drags in White Rock's small business district.
Anyone calling this address at the stated White Rock phone number gets referred by phone man John K. Coleridge to a number for company chairman Russell Taylor in Scotland, which is where Mr. Coleridge claims 2DoTrade is based.
"I have no involvement with the company I am a shareholder of the company, however. I have 144 paper," Mr. Coleridge told Stockwatch. The phone man declined to identify other such holders of cheap Regulation 144 paper. Mr. Coleridge does not appear in readily available public filings, presumably as the 144 holders have kept below the 5-per-cent reporting threshold.
Mr. Coleridge is no stranger to Howe Street. The 2DoTrade White Rock phone man was involved in several Howe Street penny stock promotions between 1994 and 1999, according to Canadian regulatory filings.
In mid-1994, Mr. Coleridge was a vendor to, and a private placement shareholder of, Vidatron Entertainment Group, through a private company called Regional Pacific Operations. Regional Pacific also bought similar early bird shares a year later, in mid-1995, in promoter Milton Zink's Stellar Gold.
In early 1996, Mr. Coleridge served a stint as a "consultant" to Stellar. Mr. Coleridge was also the main stated shareholder of another private company, SG Financial Services Group, which served as a consultant in 1998 and 1999 to two more Howe Street penny stock promotions, Kismet Ventures Inc. and Mighty Beaut Minerals Inc.
It is not yet clear whether 2DoTrade is a step up or a step down for Mr. Coleridge.
In any event, the tiny company has come a long way in a short time. 2DoTrade claims that when it was incorporated in Nevada in November, 2000, it took over the non-mining assets of Diamonds S.L. Inc., including trading contracts valued in excess of $250-million.
In the past three months alone, 2DoTrade claims it has made big deals selling train locomotives from Brazil to Pakistan, selling specialty hardwood flooring from Sierra Leone to the United Kingdom, selling 2,000 metric tonnes of charcoal to customers in Europe and Southeast Asia, even before the anthrax exploitation opportunity popped up.
"2DoTrade currently holds firm contracts in excess of US $300-million over the next 12 months, and is in negotiation for additional business conservatively valued at US $100-million," stated the company in a press release on Aug. 16. The market took a yawn, and the stock fell 6.5 cents to 31.5 cents the next day. (All figures are in U.S. dollars.)
On its Web site, 2DoTrade claims an eclectic mix of deals, with "typical contracts" exceeding $110-million, including two $49-million contracts for rice, a $7.5-million deal for sugar and a $2.5-million deal for cement. In the "contracts pending" section, the company claims it has firm deals in the works for the sales of $56-million worth of hardwood timber, $20-million for a railway system, $15-million for an oil pipeline surveillance system, $10-million for wheat, $9.4-million for electric locomotives, $9-million for mining equipment, $8.5-million for sugar and $7-million for petroleum.
The tiny company also claims negotiations pending for the sales of $25-million more of pipeline surveillance systems, $10-million more of hardwood and an $8-million sale of 400 four-wheel-drive vehicles.
In its latest incarnation, 2DoTrade has been around for just a few months. The company went public through a June 15 reverse takeover of Moranzo Inc., a Nevada shell, in return for 16 million shares. The identities of the new shareholders are not known. A June 29 regulatory filing, the one using the White Rock address as the stated head office, notes that Mr. Taylor, 61, is the company's chief executive officer and president, while the only other director identified is Barrington Ellis, 39.
Neither have high profiles or pop up by name in many penny stock deals. 2DoTrade's Web site claims that a Kenneth Cunningham is chairman and CEO, while Mr. Ellis is president. Mr. Russell, claimed by Howe Street phone man Mr. Coleridge to be the company's chairman, is not noted on the Web site.
(c) Copyright 2001 Canjex Publishing Ltd. canada-stockwatch.com
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