Cybertouts often have a way of stretching the truth
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DON BAUDER
Union-Tribune library researcher Tom Stinson assisted with this column.
14-Feb-1999 Sunday
Late in December, the online tout service, www.superstockpick.com, boasted
that its best selection of the year was Virtual Gaming Technologies of San
Diego.
The online Internet tout had recommended Virtual's stock at $3.50 in March,
and it had soared to $11 in June. In late December, however,
superstockpick.com (from now on to be called SSP.com) did not point out
that at that very time, the stock was down to $3.75.
SSP.com had a juicy motive to make its original recommendation highly
bullish: Virtual Gaming, which operates online gambling, had forked over
36,000 shares of its own common stock to SSP.com in return for the plug.
"We have no relationship with them (SSP.com) now," says Bruce Merati, chief
financial officer of Virtual Gaming. "We are now hosting our own Web site."
Merati thinks it was somewhat misleading for SSP.com to boast of its March
pick in December without mentioning that the stock had come back down.
SSP.com is one of many similar operations in the world of cybertouts, or
Web sites that promote shares of companies in return for some of those
shares and other considerations.
SSP.com's parent, 1st Net Technologies, is based in Rancho Bernardo and has
three other online newsletters. Like many of the stocks it recommends, 1st
Net is on the Bulletin Board. The stock has climbed from $1.50 in late
December to the recent $4 level.
The Denver company that publishes SSP.com merged into 1st Net last year.
The chief executive of 1st Net, Gregory D. Writer Jr., who spent most of
his career in the Denver speculative stock snake pit, has quite a record.
It's available from the National Association of Securities Dealers, or
NASD, and the Colorado Division of Securities.
Among many things, Writer was barred from the securities business by the
NASD in 1990 for quarterbacking the upward manipulation of a stock, selling
stocks through unregistered accounts, failing to inform customers of
material facts and making "false, inaccurate and misleading statements to
the staff of the NASD," according to the NASD.
Writer was censured and fined $200,000 as well.
Three years later, despite that ban, Writer was prohibited from any further
solicitation or violation of Idaho securities laws.
Before the 1990 ban, Writer had been suspended by the NASD for distributing
a misleading fund solicitation letter and, earlier, for failing to keep
accurate books and records.
His license was also revoked in Kansas, and he was slapped by the NASD for
advertising a brokerage while the application was pending.
Before that, he had pleaded guilty to charges of possession of marijuana.
According to Colorado records, he was growing plants on his balcony in
1981.
Writer and his wife, Mary E. Writer, who is 1st Net's registered agent,
filed for Chapter 7 bankruptcy in Colorado Springs in 1987.
1st Net's attorney, R. Blair Krueger II, correctly points out that SSP.com
reveals its financial ties to companies it promotes and was not included in
the Securities and Exchange Commission's enforcement actions against
cybertouts last fall.
Gregory Writer denies that he made false statements to the NASD and
manipulated the stock in the incident that got him banned. He says the
Idaho misadventure actually happened before he forfeited his NASD license.
He also denies falsifying loan information and making excessive markups
that got him in trouble in Kansas. He blames the poor bookkeeping on an
employee.
And, he says he no longer smokes marijuana and regrets the incident, adding
that the bankruptcy was a result of medical bills.
How does 1st Net rake in all those shares of stocks it plugs? For enthusing
that Engineering Power Systems Group, a builder of barge-mounted power
plants, is working on "the most exciting and far-reaching business project
of any we have ever encountered," SSP.com received 150,000 options on the
stock, exercisable at $1 and $2.
For lauding the "unparalleled" management of AXYN, a Y2K fix-it company,
SSP.com got 16,000 shares. For plugging LDDI, a reseller of long distance
service, the cybertout got 200,000 shares.
Last month, SSP.com gave a rave review to San Diego-based Laforza
Automobiles, which assembles an Italian sports car here, and is selling
four cars a month for $45,000 to $60,000, says president David Hops.
SSP.com got 300,000 shares of Laforza at 50 cents a share and five Laforza
cars. It's also getting $5,000 a month. "They raised $700,000 for us, did
our Web page, handled our investor relations. We have a great
relationship," Hops says..
Gregory Writer "told me up-front about the bad times in Denver," Hops says.
In the bullish reports, SSP.com takes pains to sprinkle a few caveats among
the plaudits. "They package their featured stocks to make them look like
independent recommendations," says columnist Susan Antilla of Bloomberg
News.
She hoots at claims that followers of the reports can make 100 to 300
percent in 12 to 18 months.
Just recently, 1st Net put on what it billed as "the first live, Internet
video/audio multimedia presentation" using software provided by InterVu of
San Diego.
Also, 1st Net has a radio show on KCEO AM 1000, but it doesn't plug stocks.
"It's an educational show," says Jeffrey Chatfield, 1st Net's vice
president of investor relations and a former San Diego broker.
The new radio show is called the "Angel Network Radio Hour."
Don Bauder's e-mail address is don.bauder@uniontrib.com
Copyright Union-Tribune Publishing Co.
with permission
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