Anthony, Here it is.
Regards,
Tom
December 7, 1998
Ivana Get Rich
The Donald's ex gets mixed up with some questionable
characters
By Bill Alpert
Ivana Trump has found a deeper pocket than her ex-hubby Donald: the
stock market. But her latest enterprise involves her with some highly
questionable characters, and it's unclear whether or not she knows about their
past history of stock-market shenanigans. Just a couple of weeks ago, Ivana
told viewers of The Rosie O'Donnell Show that she was working with a
company called Tel-Com Wireless Cable TV, which was going to help her
get into Internet retailing. No sooner had she uttered these words than shares
of Tel-Com began to move from $6 to $25, briefly giving the firm a market
value of $220 million. Since then, the shares have settled back to $10. But
still, Ivana's televised plug seems to have inflated Tel-Com's shares by more
than $30 million.
Based in North Miami Beach, TelCom is but the latest company to excite
investors with talk of online retailing. In this holiday season, publications from
Newsweek to Business Week are predicting that shoppers will spend heavily
with the 'Net's "e-tailers." In this giddy atmosphere, stocks of relatively
well-known Internet companies like Amazon.com and America Online are
trading at crazy levels. Yet these outfits look like positively blue-chip
businesses compared to some other stocks in the e-tailing field. Among the
players are some once-floundering companies whose executives insist they
will now make good on the Internet. Among them are K-tel International,
Egghead.com and Bluefly.
But Tel-Com, the company Ivana Trump is involved with, looks even worse
than this lot. In exchange for 10% of a Tel-Com subsidiary, Ivana Trump has
agreed to put her name on Tel-Com's Internet site and host its home shopping
conduit, called the Fifth Avenue Channel. A peek into Tel-Com's back room,
however, reveals that the company's boosters and big shareholders include
convicted stock manipulators, shameless promoters and brokers who've been
banned from the securities business.
Before Ivana's arrival, Tel-Com ran a
broadcasting outfit in Costa Rica and wireless
cable TV franchises in Wisconsin. For the nine
months ended September, the company's
losses were $1.7 million, or 27 cents a share,
on revenues of $1.1 million. The company's
working capital and tangible net worth were
deeply negative.
Tel-Com bought the Costa Rican business from
Melvin Rosen in 1996, and he ended up taking
over as Tel-Com's chief executive in May 1997
when the company couldn't make its payments
to him. Very influential in Rosen's arrival was
Charles S. Arnold, a private investor who
operates in Florida and North Carolina and has
been a consultant to TelCom. "Chuck said, 'Don't foreclose on your debt,' "
Rosen recalls. " 'A lot of people are going to get hurt.' "
In the 1980s, Arnold sold franchises for renting videocassette recorders and
running coin-operated pizza ovens. Then he discovered penny-stock
promotion. His company, Sound Money Investors, describes itself as
"dedicated to helping investors make decisions" through investment
magazines, Internet sites and seminars. Arnold's publications, Sound Money
Investor and Personal Investing News, offer readers advice on "how to invest
safely and avoid risky investment traps," but they also run stories about
"low-profile companies with high profit potential."
Unfortunately, these stories are bought and paid for. According to contracts
on file with the Securities and Exchange Commission, Arnold and his
associates have taken millions of shares of cheap stock in exchange for
publishing glowing stories about fledgling companies. When the positive
stories spur investors to drive these stocks skyward, Arnold and his coterie
are in a position to cash in.
Arnold typically takes his shares through a welter of shell companies with
bland names like Universal Holdings and Affiliated Services. Last week
Arnold was staging a seminar in Costa Rica, and he refused to talk to
Barron's. The program for his seminar included discussions on currencies and
instruction on moving assets offshore. Headliners were stock guru Louis
Ehrenkrantz and talk-show veteran Morton Downey Jr., who offered to blow
the whistle on "Schemes and Scams."
Arnold's lawyer, Jerome Selvers, said, "Mr. Arnold maintains confidentiality
and privacy with respect to his business."
Various companies affiliated with Arnold came into 29% of Tel-Com shares
after Tel-Com in December 1996 signed a contract with a team of
"consultants" that included Arnold plus Carl Caserta, a broker who was sued
in 1990 by the SEC, which alleged that he refused to abide by an earlier
agreement to stay out of the securities business. Tel-Com filings with the SEC
say "the Consultants have disclaimed any affiliation with one another," but the
slightest research shows that one of them, Richard Fixaris, has worked as a
subordinate at one of Arnold's publications.
In late 1996, Arnold and Fixaris each took 100,000 shares of Tel-Com in
exchange for a flattering article in Arnold's Personal Investing News and a
telemarketing campaign to interest brokers in the stock.
If Arnold and his crew still hold the 29% of Tel-Com that they did earlier this
year, it would be worth $12 million at a recent share price of $10.
Investors in New York say Arnold visited them before Ivana's appearance on
Rosie O'Donnell, offering to sell them Tel-Com shares at a steep discount to
the market price. With Arnold, say those investors, was Howard Edrich, a
stockbroker who was banned from the securities business and pleaded guilty
in '92 to possession of stolen property. The plea came as part of the
Manhattan District Attorney's prosecution of a stock-manipulation ring.
It was Edrich who answered the phone when Barron's first called Tel-Com
about a week ago. A few minutes later, when we asked Tel-Com Chief
Executive Rosen about Edrich's past, Rosen said Edrich wasn't available.
Sounding disconcerted, Rosen professed ignorance of Edrich's rap sheet and
described Edrich as a part-time employee who handled calls from
stockbrokers.
Rosen claims that Arnold hasn't worked as a consultant for Tel-Com since
Rosen arrived in May of last year. Maybe so. But Tel-Com, complete with
information about the deal with Ivana, is one of the three featured investment
ideas on an Internet site called StockMaker, which is controlled by Arnold.
Rosen says he's mystified by a StockMaker disclaimer that says:
"StockMaker has been compensated with 50,000 shares for its profile on
TelCom Wireless Cable TV Corporation."
Rosen himself hired the brokerage firm Meyers Pollock Robbins as financial
consultants to Tel-Com on July 24 of last year. That was two months after the
attorneys general of four states had held a news conference to announce a
crackdown on Meyers Pollock for fraudulent sales practices. In at least one
state, Utah, Meyers Pollock pled guilty to the fraud charges. In November
1997, federal prosecutors in Manhattan charged that two of the firm's
branches were controlled, through a combination of bribes and muscle, by
stock consultants and thugs from the Genovese and Bonanno crime families.
The defendants are fighting the charges.
In December of last year, Tel-Com filed a stock registration to allow nearly
six million shares to be sold by Rosen, three shell companies affiliated with
Chuck Arnold and seven Meyers Pollock brokers, including ex-president
Michael Ploshnick, who is under continuing federal investigation. The filing
says the brokers got their stock from Tel-Com "consultants." Several of the
Meyers Pollock brokers have since moved to the Long Island firm Glenn
Michael Financial, another ardent proponent of Tel-Com stock.
As for Ivana, she never responded to our requests for an interview, so we
don't know if she realizes just whom she's mixed up with.
|
