"The shares were sold through San Diego brokerage World Trade Financial, according to the suit. The broker was longtime penny stock tout Marshall Klein, who was accused earlier this month of stock manipulation as part of the Federal Bureau of Investigation's "Bermuda Short" crackdown on securities fraud. According to National Association of Securities Dealers records, Klein in 1987 pleaded guilty to possession with intent to distribute cocaine."
August 25, 2002
It's one thing for a stock to be pumped and dumped. It's another thing for the company to be drained, too – particularly by an alleged repeat offender.
That's what happened to San Diego's former Advanced Bodymetrics, according to a civil suit filed by Rancho Santa Fe resident Brenda Lynn Ortega.
The company was best known as the maker of a wristwatch that could monitor the heart, called PulsePro. The company was headed by John E. Riddle of Rancho Santa Fe, Ortega's former spouse. He could not be reached for comment.
According to the suit, filed last month in Superior Court, Ortega had loaned the company $172,401, and also owned 3.74 million shares.
Those shares used to flutter like – well, like an arrhythmic heart of a coronary patient who might have used PulsePro. During one stretch in 2000, the stock soared or plummeted by double-digit percentages on 34 of 53 trading sessions, including one-day leaps of more than 40 percent and declines of more than 25 percent.
The suit, filed by Ortega's lawyer, Carlsbad's Eileen McGeever, says that in early August of 2001, Ortega and Riddle met with Michael Paloma, an entertainment and penny stock promoter from Mesa, Ariz.
He proposed to take over the company with his Canyon Mountain Entertainment Group, invest $1.5 million in the combined company, and "promote the (blank) out of this watch," according to The Phoenix Business Journal.
But Paloma and his group – also named in the suit – promoted the stock more than the watch. And prematurely. Cranking out news releases about the coming watch promotion, Paloma and pals "illegally sold millions of shares of stock, plus 10 million shares of Advanced Bodymetrics treasury stock, which they did not control in the absence of a definitive agreement, for a gross profit exceeding $8 million," according to the suit. (The deal later went through.)
The shares were sold through San Diego brokerage World Trade Financial, according to the suit. The broker was longtime penny stock tout Marshall Klein, who was accused earlier this month of stock manipulation as part of the Federal Bureau of Investigation's "Bermuda Short" crackdown on securities fraud. According to National Association of Securities Dealers records, Klein in 1987 pleaded guilty to possession with intent to distribute cocaine.
Klein and World Trade are accused in the suit of fraud and manipulation. After making several futile calls, I was told by World Trade that its lawyer would call. He didn't.
After the stock plunged to zero, Paloma announced that the combined company would acquire another Mesa company, ICM Telecommunications, which was said to be a long-established firm. It was only half a year old, says the suit.
There was a reverse 1-for-20 split of the stock. I called ICM and was told Paloma didn't work there. Then, the phone was hung up.
As the merger activity was going forward, Paloma and his associates were being investigated by the Securities and Exchange Commission, according to the suit. On April 8 of this year, the SEC settled with Paloma and one of his associates: The SEC alleged that Desert Winds, another Paloma company, had issued numerous press releases falsely claiming that the company had signed a $25 million contract with Warner Bros.
Paloma dumped 2 million shares during the hype period, said the SEC. He paid more than half a million dollars in disgorgement and penalties.
The Advanced Bodymetrics adventure was just a rerun of Desert Winds, says McGeever. And San Diego attorney Jordan M. Cohen, who handled the sale to CMEG, says the same. Both say, and the suit alleges, that Ortega and Riddle were never informed about the SEC's probe of Paloma.
After CMEG went into Chapter 7 bankruptcy, Ortega and Riddle learned that the company had lost more than $1 million in the years 2000 and 2001, according to the suit.
A lawyer who wrongfully concealed such negative information was San Diegan Sarkis "Sam" Kaloustian, according to the suit, in which he is a defendant. I tried multiple times to reach his office, but there was no answer. I reached a cousin who said he would try to locate him, but have heard nothing.
According to the suit, the inventory of watches was sold because the defendants didn't pay storage fees.
I could not reach Paloma, or other defendants. I wasn't surprised.
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Union-Tribune library researcher Dwight Donatto assisted with this column. |
