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May 26, 1999 - MAY 1999 Profile Update Lexon, Inc. OTC - 'LXXN' May 26, 1999 Here are a couple quick updates for our members going into Memorial Day Weekend. Lexon, Inc. (OTC BB: LXXN) We released our profile on Lexon last Friday. For those who may have missed the profile, Click Here, and you will be taken directly...
April 03, 1999 - July 1998 Profile Update Uniprime Capital Acceptance Corporation OTC BB: UPCA April 3, 1999 Volume II, Issue 19 We hope you are all enjoying a nice holiday weekend. On Thursday, prior to the market closing, there was news on Uniprime Capital Acceptance (OTC BB: UPCA), the company we featured as a turn...
March 18, 1999 - July 1998 Profile Update Uniprime Capital Acceptance Corporation OTC BB: UPCA March 18, 1999 Volume II, Issue 15 Well, we finally got our members a true Small Cap Digest this year. For those of you who haven't been watching, our parent company, 1st Net Technologies (OTC BB: FNTT) hit a high of $10.50...
December 23, 1998 - July 1998 Profile Update - Year End Update Uniprime Capital Acceptance Corporation OTC BB: UPCA Uniprime Capital Acceptance Corporation December 23rd Update Rating: Likely to Make Progress in 1999 Uniprime Acceptance Corp (OTC BB: UPCA) was our July Profile. The stock has traded between $.25 and $1.25...
August 28, 1998 - July 1998 Profile Update Uniprime Capital Acceptance Corporation OTC BB: UPCA Uniprime Capital Acceptance Corporation August 28th Update Owning stock in Uniprime Capital Management is a bet on the ability of management. Uniprime was formed to acquire car dealerships. The Management team has 30 years...
July 01, 1998 - July 1998 Profile UNIPRIME CAPITAL ACCEPTANCE, INC. OTC BB: UPCA The growth of Wall Street over the past decade has opened the door for many industry groups that, 10 or 20 years ago, might not have been considered suitable candidates as public companies. An industry group that has recently become a...
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Stock Hucksters Thrive on the Web
By TIMOTHY L. O'BRIEN
NEW YORK -- When Uniprime Capital Acceptance Inc., a small automobile dealer with an even smaller stock price, announced early last month that it had acquired a new dealership, its share price hardly budged. Less than two weeks later, Uniprime made a more startling announcement: It had a cure for AIDS. And with that news, transmitted at lightning speed over the Internet, Uniprime's shares more than doubled. Online message boards favored by individual investors were abuzz with happy chatter about the company's prospects, making Uniprime one of the Internet's most talked about stocks.
The AIDS cure turned out to be a stock fraud cooked up by a self-described doctor named Alfred Flores, according to a civil complaint filed by the Securities and Exchange Commission last week against Uniprime and Flores in U.S. District Court in Manhattan. Last Thursday, federal law enforcement officials raided Uniprime's headquarters in Las Vegas and arrested Flores in connection with his role in the scam, which regulators describe as unusually brazen. Flores' medical credentials now appear to be dubious, and his resume, posted online, omitted an important detail: a criminal conviction years ago for his role in a murder, according to the complaint.
Resource-strapped regulators face an uphill battle against Internet crime.
Like snake-oil salesmen who rode into frontier towns peddling cure-alls more than a century ago, modern hucksters have taken to the Internet with gusto. And as the Uniprime debacle shows, amid the worthwhile companies promoting themselves on the Internet are shadowy scam artists who pose a real threat to unwary or unsophisticated investors.
"What the Internet has done is make it possible for people to have a wide geographic reach promoting cures and products very cheaply," said Stephen Barrett, a doctor in Allentown, Pa., who specializes in unearthing health scams.
"So there are probably more people involved with scams than ever before even though there's no way of finding data to support that."
Uniprime came to regulators' attention last month when Cameron Funkhouser, head of market regulation for the National Association of Securities Dealers, was feeding his 4-month-old son early one morning as he perused Internet stock boards. A message, bearing Uniprime's stock symbol, flashed across his computer screen: "Buy UPCA!" A little digging on the Internet about Uniprime convinced Funkhouser that something was amiss. A few hours later, the NASD, the Securities and Exchange Commission and the U.S. Postal Inspection Service began an investigation of the company.
"Everyone wonders how these investigations get triggered," Funkhouser said. "Well, that's how it happened. The wrong guy read the message they spammed across the Internet."
The SEC and other securities regulators have been mounting an increasingly public offensive against Internet fraud over the last year. While regulators have brought dozens of fraud cases against Internet companies since 1995, a large portion of the suits were filed this year and last. But even with heightened enforcement activity, resource-poor regulators, who often have a difficult time keeping up with fraud in the off-line world, face even greater challenges trying to monitor cyberscams.
Uniprime, and its chief executive, Gary Tabb, did not respond to requests for an interview. Tabb, while named in the SEC suit, is not a defendant. A lawyer representing the company and Flores did not return phone calls seeking comment.
Federal investigators said the Uniprime scam was hatched this spring when Flores, 45, was passing through Las Vegas and ran into a friend of Tabb's at a local restaurant.
An introduction was arranged and Flores told Tabb that he had invented Plasma Plus, a miracle cure that had effectively conquered the virus that causes AIDS. Almost immediately, the two men decided to go into business together, according to the SEC's suit.
From at least September 1998 until the Flores-Tabb meeting, Uniprime had issued a stream of news releases about its intention to acquire car dealerships and become one of the largest dealer chains in the country. Uniprime currently claims to own only a handful of dealerships in New York and South Carolina. In May, Flores and Tabb formed a company, New Technologies, to promote Plasma Plus. Uniprime got a large stake in the company and Flores, who signed over Plasma Plus' patent rights to New Technologies, became New Technologies' president. Then the games began.
Uniprime never released any meaningful financial reports, and, because it trades in the loosely regulated online world of small-stock bulletin boards, was not required to file extensive disclosure reports with the SEC. Its glowing news releases about the promises of Plasma Plus, though, were enough to stir up a frenzy among investors.
On July 19, the day Funkhouser of the NASD saw "Buy UPCA!" flash across his computer screen, Uniprime announced a "major breakthrough in the field of HIV research." The release claimed that five AIDS patients in Spain had been successfully treated with Plasma Plus. The next day, Uniprime's shares jumped $3.25 to $5 as more than 5 million shares of the company were traded. Presto. Uniprime, with shares that were worth about 25 cents each in January, now had a market value of about $100 million.
"Hallah! Hallah! Hallah! Shout it from the rooftops of the banks. Praise the money. From the church of the immaculate buck. Praise the money," read the July 20 post of an apparent Uniprime investor, a "mr. r," on Raging Bull, an Internet stock board. Raging Bull is gossip central in the mania surrounding Uniprime. To date more than 10,000 messages have been posted about Uniprime on the site, making it one of the most talked about stocks on Raging Bull's message boards.
Some investors were skeptical of Uniprime's claims from the beginning. On July 21 an investor with the screen name "darking" took speculators to task in a message posted on Raging Bull. "Believing this is a cure for HIV is like believing (on my say so) that I have a cure for aging," darking wrote. "Not bloody likely."
Even so, enough investors bought the hype to give Uniprime a valuation far out of proportion to its real financial prospects. But Uniprime devotees should have been skeptical. According to the SEC's complaint, Flores had little in his background to suggest he had stumbled upon an AIDS cure. In 1983, the complaint says, Flores was convicted on a charge of conspiracy to commit murder "based upon his participation in the murder of a friend's parents in their Colorado house after they refused to hand over valuables to Flores and their son." Flores was sentenced to 25 years in prison, but was paroled in 1992.
Moreover, Flores, who claims to be a native of Spain with U.S. citizenship, went to great lengths to pad his resume. He claimed to have spent 15 years in a laboratory outside Lisbon, Portugal, doing immunology research, an impossibility given the prison time Flores was serving. He also claimed to be an honors graduate of the University of Colorado, but he never attended it. Claims of having successfully tested Plasma Plus on five patients were also dubious, and a supposed agreement to do further research with an AIDS foundation in the Bahamas was a fabrication.
Although the SEC suspended trading in Uniprime's shares on July 22, some investors, either because they could not be convinced otherwise or because they were actively participating in pumping up the shares, refused to lose faith in Uniprime.
"This investigation is not by the SEC!" posted "irvine" on Raging Bull on Aug. 16. "This is the gov. trying to suppress information to the public with pressure from THE MAJOR DRUG COMPANIES."
Small brokerages are often some of the most active participants in the trading that envelops the freewheeling world of stock bulletin boards. The bulk of the trading volume in Uniprime's shares passed through three small brokerage firms, Knight Securities Inc., Wien Securities Corp. and Hill Thompson Magid & Co.
Uniprime's shares, which resumed trading on Aug. 5, now trade at about 25 cents, beaten flat by last week's raids on the company by law enforcement officials. Perhaps one burned Uniprime investor, "consolimd," in a message posted on Raging Bull on Aug. 14, best captured the current mood of Uniprime investors: "Aaaarrrrgggghhhh!"
Meanwhile, the Postal Inspection Service has filed a criminal complaint against Flores and the SEC's investigation is continuing. While not new, the lesson of the Uniprime scandal is still valuable, regulators say.
"It shows the perils of investing in companies that do not file disclosure documents with the SEC. The only disclosure this company made was press releases," said Andrew Geist, the SEC's associate regional director in New York. "You wonder whether investors are looking at these companies with a critical eye." |
