Crystallex Internet nonsense ever topical
Crystallex International Corporation KRY
Shares issued 34,000,000 1998-12-22 close $0.76
Wednesday Dec 23 1998
THE INTERNET'S WEIRDEST DISCUSSION GROUP
by Stockwatch Business Reporter
If it can be said that there are two poles within the strange group of Internet Crystallex supporters, they might be represented by Rand Bard and Patrick Souami. Mr. Bard has been among the most enthusiastic of the "Crystallites," as followers of the company are known. Mr. Souami, while a long-time contributor to the odd-ball Crystallex Internet discussion, has been more cautious; raising concerns, questioning many of the more optimistic claims, and often placing the company squarely in its peer group of undistinguished juniors. Indeed, so conservative was Mr. Souami during the halcyon months before the devastating June 11 Venezuelan Supreme Court decision that disallowed Crystallex's challenge to the awarding of mining rights for the prized Las Cristinas concessions, that he was ostracized by many of the chat site participants. Even now his posts to the Raging Bull discussion site invite sharp rebukes about negativity and pessimism from some of the remaining tattered yet hopeful band, including Mr. Bard. On one issue, however, the poles have come together; both Mr. Bard and Mr. Souami have had enough of the Internet hype anonymously posted by 'Au', whose messages are signed 'TheListener'.
As it happens, 'TheListener' is not completely unknown. Many of the so-called "forum elders", including Clive DeSouza and Robert Van Santen, met 'TheListener' at Crystallex's post-AGM invitation-only gathering last summer; others have communicated with him by telephone and e-mail.
Anonymity is something that quickly collapses once it has been breached. A forum poster has identified 'TheListener' as one of a number of brokers participating in the Internet Crystallex promotion. 'TheListener', he says, is Edward Fracasso, and he should be held accountable for his hype. During much of 'TheListener's' Crystallex posting career, Mr. Fracasso was a broker with Morgan Stanly Dean Witter in Wayne, New Jersey. Rich Less, manager of the Morgan Stanly Dean Witter branch where Mr. Fracasso was employed, chuckled when he heard which company Mr. Fracasso had allegedly been touting on the Internet, acknowledging that he knew about Crystallex. "Ed sold a lot of that when he was in the office," Mr. Less said. Evidently Mr. Fracasso didn't sell enough of Crystallex or anything else to maintain his job. Mr. Less was at first reluctant to discuss the circumstances of Mr. Fracasso's departure, finally stating, "Well, you know...Ed...he didn't meet his production numbers and came in and resigned."
'TheListener' encouraged the notion that he was well-acquainted with the securities industry, even advancing the notion that he was a well-connected major player representing some powerful financial interests and privy to a great deal of "inside information". That Internet persona is difficult to reconcile with the reality of a resignation brought on by a failure to meet production targets unless, of course, one is incapable of distinguishing between fact and fiction or deliberately engaged in deception. Whether it was deception or delusion, 'TheListener' had a long run of contrary-to-fact claims. In the early months of 1998, he predicted time and again that a favourable Supreme Court ruling would be forthcoming the following Tuesday or Wednesday or Thursday. When the predictions failed to materialize he simply authoritatively offered up another date. By early May, however, the pattern of failed predictions had worn thin and he claimed that Crystallex's de facto ownership of Las Cristinas was soon to be acknowledged without the need of a Supreme Court ruling. His varied and fanciful stories were inconsistent and all turned out to be entirely wrong but he seemed impervious to criticism and undeterred by reality. In early January 1998, he claimed that a deal between Placer Dome and Crystallex was in the works: "an outstanding offer of 2 PDG for 1 KRY would seem to be the price". Placer Dome denies any such negotiations and they have never been acknowledged by Crystallex. At one point, he claimed that Barrick Gold had entered the dispute in support of Crystallex, buying shares on the open market, following this with a claim on February 21 that Barrick had "acquired 3mm shs of KRY through a note." No such transaction has ever been acknowledged by either company.
Other of 'TheListener's' fantasies were less specific and far more convoluted. Playing on his alleged knowledge of the securities industry and imagined role as a key player, he developed a story of mystery buyers accumulating Crystallex shares under various names and through a number of brokerage firms, staying below the percentage limit in each account which would have necessitated statutory disclosure until such time as the shareholdings were consolidated. On March 12, he announced, "stock transferred to its rightful owner." No such disclosure followed his announcement. On another occasion he suggested that two companies had control of more than 90 per cent of Crystallex shares, inviting forum participants to check out Cede & Co. and CDS & Co. Cede and CDS are simply US and Canadian clearing agencies and there has never been any indication that any person beneficially owns or exercises control over shares carrying more than 10 per cent of Crystallex voting rights.
Outrageous price predictions ranging as high as US$100 per share have frequently been made by 'TheListener'. In early April, he stated that "$100 is a minimum", going on to claim that this target "will become a reality within a couple of weeks." He subsequently noted that he was being "too conservative at this time" and that, in fact, "KRY is a minimum price of $102 US." Some Internet chat site participants dismissed such claims as the nonsense that they were; others discounted the wild price predictions, settling for a lower, 'more reasonable' target; and yet others, unfortunately, lent some credence to 'TheListener', clamouring for more information and encouraging him to keep posting. Following the June 11 Supreme Court decision and resulting collapse of Crystallex's share price, the number of people prepared to entertain of his claims dropped off sharply but 'TheListener' wasted no time constructing another story. On June 12, he posted: "MEM (Venezuelan Ministry of Energy and Mines) will reverse on Wednesday after all the weaklings are shook out." Wednesday came and went with no "reversal", as have all subsequent Wednesdays. For a time, 'TheListener' stuck to his story, citing various delays but maintaining that the reversal of the decision would come. He finally abandoned that tale and, for a time, his regular Internet posting.
The hiatus in 'TheListener's' Internet hype was short-lived and he was soon back with another plot, though not so bullish on Crystallex for a time. In fact, it seemed for a while that 'TheListener' and his "investment group" were extremely disappointed with Crystallex management and there was talk of replacing the board of directors and taking control of the company. This was followed by yet another flip-flop and twist. According to 'TheListener's' December installment of the saga, Placer Dome was now actively purchasing Crystallex shares in the market in advance of a buyout of Crystallex. In a December 9 post to Raging Bull, he announced: "Dec. 31st PDG will hold 4.9%. January will be the period of accumulation as KRY unveils its news." He concluded the post by stating, "In any event, PDG are buying and so are we." 'TheListener' claims the touted Placer purchase of Crystallex shares is part of a complex strategy: "Anyone who believes that PDG will not make an offer for KRY is terribly mistaken...Year end tax selling, an opportune time for the PDG camp to implement its three prong approach to protecting itself from losing out on Las Cristinas. First there is an effort to build up gold reserves to offset the possibility that KRY pulls a rabbit out of the hat and takes it all. Second, there is an insurance policy to protect themselves. Third, and most importantly, they are buying shares in the open market to protect themselves from ANY eventuality at a modest cost. If a PDG offer is not accepted, they will still have a large enough amount to still own a majority of L.C. 4&6. But they want it all for themselves." According to him, the deal, unacknowledged by either company, will involve a 1 for 1 share exchange.
Internet poster, Mr. Souami, has been a persistent but usually courteous critic of many of the more off-the-wall claims posted to the chat site. However, it seems his patience has been severely tested by the latest round of unsubstantiated claims by 'TheListener'. "What did YOU ever contribute to the thread besides your lies?" he recently demanded. "How you can live with yourself after reading your past posts amazes me." Mr. Bard's censure is equally harsh, challenging 'TheListener' to provide some evidence in support of his "BS". In an unusual move among the generally tight-knit and protective Crystallex supporters, Mr. Bard has even taken to addressing 'TheListener' on occasion by his first name, "Edward", and threatening the ultimate ignominy for Raging Bull posters, using the "ignore button" on him.
In spite of his outrageous claims and numerous failed predictions, 'TheListener' is not without some modest support from at least two of the most highly regarded Crystallex Internet posters. Clive DeSouza, who has lunched with 'TheListener', has acknowledged that he knows his "KRY stuff". Moreover, Mr. DeSouza, appealing to his training in interpreting body language and voice tone and inflection, indicated many months ago that he detected nothing "suspicious" about a number of chat site participants, including 'TheListener'. On December 17, Robert Van Santen offered his own broker-ese assessment of 'TheListener's' recent posts: "While I wouldn't be posting what Au ('TheListener's posting handle) and some others are, I can tell you that their statements are extrapolations and logical conclusions of events anticipated, and directions chosen. You either believe in management or not. I choose to believe."
Having already paid for his past indiscretions, including unauthorized trading in clients' accounts, with a hefty fine and other sanctions, and no longer employed as a broker, Mr. Van Santen has not been bashful about his identity. Someone presently employed as a broker in the US, however, may have good reason to conceal questionable Internet posting activity. As Nancy Condon of the National Association of Securities Dealers (NASD) points out, there are rules of conduct governing Internet communications and a variety sanctions available to deal with contraventions of those rules by registered representatives. Briefly, NASD rules stipulate that communications with the public, which include Internet chat site postings, must be based on principles of fair dealing and not omit material information, including risk disclosure; not make exaggerated, unwarranted, or misleading claims; give the investor a sound basis for making an investment decision; and not contain predictions or projections of investment results.
Mr. Fracasso's NASD file is relatively unblemished, the only disclosure event being a bankruptcy in July 1997. However, there are some peculiarities with respect to Mr. Fracasso's file. For example, the file indicates that he has been employed by Durian Securities from April 1, 1988 to the present. According to Ms. Condon, Durian Securities is not a NASD member firm. Moreover, Mr. Fracasso has held a variety of jobs since 1988, many unrelated to the securities industry. After leaving college in 1991, Mr. Fracasso had a brief stint with Goldman Sachs from October of 1991 to June of 1992. Following that, he was employed in a number of positions and locations by CVS Pharmacy from June 1993 to June 1997. He was then employed by Dean Witter Reynolds in Wayne, New Jersey, which subsequently became Morgan Stanly Dean Witter, from July 1997 to October 1998. A further oddity is that Mr. Fracasso's file does not show any registrations; that is, jurisdictions in which he is registered to do business, the category of any such registrations, and the date of approval. Ms. Condon was unable to explain these peculiarities and was puzzled that the system had not picked up the apparent discrepancy regarding Durian Securities. She is looking into the matter.
Mr. Fracasso's former supervisor at Morgan Stanly Dean Witter was also stumped by the Durian Securities oddity. According to Mr. Less, Edward Fracasso had taken a job with First Union National Bank in Bogota, New Jersey after leaving Morgan Stanly Dean Witter. Attempts to contact Mr. Fracasso at his new place of employment were unsuccessful. According to a First Union Bank customer service representative, they have two directory listings for Mr. Fracasso at the Bogota branch but the numbers are all zeroes. "Oh my, this man must not want to get any phone calls," he joked.
While it appears that any relationship between Mr. Fracasso and 'TheListener' will remain a mystery for the moment, there is little mystery surrounding the reception that 'TheListener's' posts are receiving on the Raging Bull discussion site. For a year, he contributed the stuff that dreams of quick riches are made of; in the end that stuff resulted in financial nightmares for a number of investors. They are not pleased.
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
|
