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Non-Tech : Versatech (VITC) -- Ignore unavailable to you. Want to Upgrade?

To: jperry who wrote (303)	4/13/1998 11:21:00 PM
From: Sid Turtlman	Read Replies (1) \| Respond to of 435

JPerry: I first started exposing internet frauds before I ever heard of the internet, back when I was just hanging out at Prodigy's "Money Talks" Bulletin Board. The story is always the same: I, or someone else, show that a company has been defrauding investors with false statements, absurd profit projections, deliberate lies, etc. Many of the company's investors, rather than admit to themselves that they have been duped by con artists, work themselves into a tizzy about the supposed motivations of those trying to help them and stop the fraud. It doesn't make sense to many people that someone would fight crime just because he or she is against crime. They must be paid off--they couldn't be doing this out of a desire to do what is morally right--that is too old fashioned, no one could possibly do that anymore, could they? I don't want to place an angel halo on my head. I love the challenge of reading a company's financial statements and finding the inconsistencies, and figuring out the truth. That is the hobby part. It is like reading a good mystery, except it is real time, and I don't have an omniscient author telling me what happens next. For example, after I saw DHMG's September quarter, I knew the company had a problem to solve. It had been doing rigged transactions all year long to generate its so called profits. It was regularly "selling" things to insiders and private entities controlled by insiders, creating what appeared to be profits. Except that almost none of the "buyers" were real buyers willing to pay good old American dollars for the garbage (Oooops! Excuse me, I mean "valuable collectibles") that they supposedly bought from DHMG. Instead, they paid DHMG with its own stock, or the stock of private companies, all of which have negligible real value, but all of which DHMG valued at high prices per share, thus creating huge "profits" So far so good. DHMG reports great profits and touts future growth, investors think this is real, the stock goes up, and Hagen and his buddies unload their stock on the suckers. But all one has to do is look at the September 10-Q and the flaw in the scam becomes transparent. The problem is that when you claim big profits, you have to pay the IRS big taxes. Since, in real life, DHMG has no real profits and negligible cash, the figure in the Current Liabilities section entitled Accrued Taxes Payable had soared well beyond DHMG's ability to pay. So I knew that DHMG had to do something. The right thing to do was to admit that the profits were all phony, but I knew that that was a low probability solution. What else could they do to avoid paying taxes on the imaginary earnings? Suddenly it became clear--they would acquire Universal Network, the private outfit on the other side of most of the rigged transactions. Universal had big losses in 1997; inevitable, since it was paying high prices on the stuff it bought from DHMG to help rig the latter's income statement, and it couldn't possibly unload that garbage (Ooops! Excuse me, I mean valuable....oh, forget it) at a profit. By acquiring Universal DHMG could wipe out the year's imaginary profits and no longer have to pay any taxes. I figured management would count on the fact that many unsophisticated investors would think this was a good thing--look how the company is growing!--and think that the now non-existent profits were because of some kind of one-shot writedown. Then DHMG would start the game up again in the first quarter of the new year, rigging transactions with Fama, Inc., or some other private company that never pays cash for what it "buys". I knew DHMG was going to do this. It HAD to do this. I posted it here, and sure enough, that is exactly what it did. That was so delightful! I was ecstatic when I saw the announcement. What a pathetic, predictable bunch of turkeys. I am not saying that everyone would or should get off on a hobby like this, but you don't think I enjoy it? If you want to believe I have some hidden agenda, feel free. I think it is all pretty straightforward--I am doing what is right, and I am having fun doing it. What else is life about?