YET ANOTHER FRAUDULENT PROMOTER TIED TO XYBERNAUT
Xybernaut Corporation
XYBERNAUT CEO TO ADDRESS INVESTORS DURING CEOCAST INTERVIEW. FAIRFAX,
VA - May 10, 2002-- Xybernaut Corporation (NASDAQ: XYBR) today ...
www.xybernaut.com/company/public/press/ 2002/press_release.asp?PRESSID=48 - 13k - Cached - Similar pages
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Michael S. Wachs (Registered Principal, New York, New York) submitted a
Letter of Acceptance, Waiver and Consent pursuant to which he was censured,
fined $250,000, barred from association with any NASD member in any capacity
and required to make full restitution to his member firm. Without admitting or
denying the allegations, Wachs consented to the described sanctions and to the
entry of findings that he misappropriated $20,800,000 in proceeds by means of
false and fraudulent pretenses, representations, and promises for the sale of certain
of his member firm’s assets and then diverted the proceeds to himself and others.
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Monday, July 28, 2003 TECHNOLOGY TRADER
By BILL ALPERT
On the Internet, a Second Act
MICHAEL S. WACHS HAS BECOME a bit of a celebrity in the online investing world. Since he started the investor relations firm CEOcast three years ago, he's supplied over 700 financial Websites with his audio interviews of chief executives, whose firms pay cash or stock to CEOcast. As smaller tech stocks have rallied, shares of some CEOcast clients have more than doubled -- including eResearchTechnology, a consultant to drug developers, and LendingTree, an online mortgage firm.
Wachs greets each CEO with a peppy "G'Day!," serves up a few flattering questions, then closes like a newscaster: "This has been Michael Wachs for CEOcast...where Wall Street listens." As some on Wall Street listen, however, they've begun wondering if the 40-year-old CEOcast personality is the same Michael Wachs who defrauded Chase Manhattan Bank of $20.8 million in 1996.
He is.
Wachs was a high-ranking officer at Chase before pleading guilty to bank fraud in 1997, for a scheme in which he sold off the bank's assets to his own front company and then flipped them to real buyers at an instant profit. At his sentencing in Manhattan's federal court, Wachs said that gambling made him do it. In four years, Wachs had bet $30 million at six casinos. He made full restitution, served 11 months in federal prison in Allenwood, Pa., and agreed to be barred from the banking and brokerage industries.
"The government never claimed I was greedy," Wachs told me. "I gambled away every penny I had." Gamblers Anonymous helped him conquer his gambling addiction and teach him responsibility for his actions.
One CEOcast client sounded shocked after learning the background of Wachs, last week. Barry Schechter, chairman of the computer consulting firm Island Pacific, said that Wachs had been pleasant, intelligent and effective at introducing the firm to investment funds. "It blows my mind completely," said Schechter. However, he added, "I would give him the benefit of the doubt and wouldn't hold it against him." He expects his firm to continue using CEOcast.
Wachs says he's doing nothing that violates the terms of his consent decrees. Nonetheless, knowledge of his past could add to investor questions about the credibility of online stock promotion. Such efforts flourished during the boom of the late '90s and appear to be regaining clout.
Tech Upgrade: Signs of higher chip prices led a couple of analysts to upgrade stocks like Texas Instruments and Micron. The Nasdaq Composite Index ended Friday at 1731, for a gain of 1.3% on the week.
Wachs insists that his responsibilities at CEOcast don't amount to much. To persuade me that Wachs plays only a bit part at CEOcast, the Manhattan-based company faxed pages from its 2002 federal tax returns. They showed 70% of CEOcast as owned by one Joseph Trachtman, with the remaining 30% owned by Kenneth D. Sgro -- a gentleman who called me three times one day to assert that he was the boss, not Wachs. "I'm the president of the company and I decide what goes on here," Sgro said. "I have Michael doing routine stuff. He answers investors' questions. He does interviews."
Other documents suggest that Wachs has played a larger role at CEOcast. A December 2000 consulting agreement, filed with the Securities & Exchange Commission by CEOcast client Kaire Holdings identifies Wachs as CEOcast's president. In May 2000, when Wachs incorporated CEOcast in the state of New York, he listed himself as "chairman or chief executive."
Most impressive, however, is a sworn affidavit from February 2001 in which Wachs said he was CEOcast president. Wachs filed the affidavit in New York state court in Manhattan, where he was suing a rival online stock promoter for telling CEOcast clients about his criminal record.
That rival firm had previously employed Wachs while he'd awaited sentencing for bank fraud, according to his affidavit, and welcomed him back after he got out of jail. Wachs alleged that his former employers started threatening him, however, after he told them that "I intended to, and subsequently did, leave their employ to form my own company." That company was CEOcast, said the Wachs affidavit. Wachs withdrew his suit in April 2001, after the rivals agreed in a settlement never to mention his criminal case.
Wachs and Sgro told me that all those documents were true at the time they were filed.
For its part, eResearchTechnology also tells me that it hadn't known of Wachs's criminal record. The Philadelphia-based firm provides heart monitoring of patients enrolled in medical studies, and just reported a 137% jump in June quarter earnings to $2.8 million, or 12 cents a share, on sales of $15 million.
eResearchTechnology dropped Wachs as its investor contact back in May, after a Raymond James analyst criticized CEOcast for hyping eResearchTechnology while CEOcast was holding a hefty 366,000 shares in the company. CEOcast says there is no conflict and continued to boost eResearchTechnology in an investor email last Sunday, while disclosing in a footnote that eResearchTechnology continued to pay CEOcast $17,500 a month, to fulfill an earlier contract. Said CEOcast: "All growth-oriented investors should own this stock."
After I began working on this story, a number of newly-created screen names appeared on the Yahoo message board that's devoted to eResearchTechnology. Whoever's behind these screen names claimed I was writing a negative story on eResearchTechnology, in exchange for bribes. One writer went so far as to threaten me -- vowing to knock me down for good, without warning.
I hope some of you readers will remember me fondly, when I'm gone.
Wachs, meanwhile, says investors can trust CEOcast. His fraud, he points out, was restricted to banking. "There were no securities involved," he told me. "We don't give investment advice," he added, before correcting himself. "I mean, I don't give investment advice."
Biovail Reconsiders
The drugmaker Biovail plans to halt a program that paid doctors $1,000 for writing prescriptions for a new Biovail blood pressure drug if they reported back some information about patients.
Biovail said it decided to stop adding doctors or patients to the program after receiving responses from more doctors than the 6,000 to 6,500 targeted, according to a published report.
Not all doctors approved of Biovail's program. Some questioned the program's research component and called it a subterfuge to dodge U.S. laws against paying doctors kickbacks for prescribing a drug, as Barron's reported last week ("Pill Pusher1," July 21).
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E-mail: william.alpert@barrons.com2
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