Hey Willstocks, I mean Ed Williamson;
Is Susan Antilla a paid hack for the shorts too?
Is Bloomberg a paid hack for the shorts too?
Who is lying Eddie?
Ed, pay particular attention to the section entitled "Dubious
Distinction"
FBI Sting Provides a Lesson in Stocks to Avoid: Susan Antilla
10/23/96 10:1
New York, October 23 (Bloomberg) All right, so how could
you have known that a convicted felon barred from working as a
broker might be involved in a payoff scheme to get brokers to
push Spaceplex Amusement Centers.
After all, it did take the collective brains of three
government agencies and the National Association of Securities
Dealers to get Joseph Pignatiello on tape saying Spaceplex needed
''market support'' from cooperating brokers, according to the
U.S. Attorney's criminal complaint.
But you needn't be privy to inside information -- or have
access to FBI files -- to be leery about putting money in
Spaceplex.
In May, it underwent a rite of passage among penny stocks,
changing its name to Air Energy Inc. Also that month, it raised a
classic red flag among penny issues, engineering a 1-for-2 1/2
reverse share split. Hilariously, the accompanying press release
hailed the move to boost a sagging stock price as reflecting
''the aggressive acquisition track the company has entered.'' In
December, a 1-for-30 reverse split was announced with equal
fanfare.
There's a lot more, including a bankruptcy filing by a
Spaceplex unit in April, but you get the idea.
Name changes, reverse splits, and the other assorted antics
of risky penny issuers don't necessarily mean a stock is rigged
or that management is crooked. Indeed, the Feds have charged only
the promoters of Spaceplex -- not the company itself.
Aside from Pignatiello, 50, of Coral Gables, Florida, the
complaint cites two Long Islanders, John Fasano, 37, and James
Manas, 44, for securities fraud.
Unless you're looking for trouble, however, these earmarks
of cheapo stocks at the very least should arouse heightened
vigilance by investors. With their changing identities and
sometimes dubious businesses of having no business at all, the
penny stock field is frequently a portfolio accident waiting to
happen.
Name Droppers
When the FBI, the U.S. Attorney, the Securities and Exchange
Commission and NASD Regulation Inc. announced a sting operation
on October 10 exposing illegal payoffs to stock brokers, the
agencies released a list of small companies being rigged that
belong in a primer on dangerous investing.
Aside from Spaceplex, two companies named in the complaint
-- Alpha Solarco and Continental Orinoco -- had announced reverse
stock splits over the years.
Command Credit, Churchill Technology Inc. and Grayhound
Electric all were kicked off the Nasdaq or the Nasdaq Small-Cap
Market, banished to less liquid trading arenas. Such downgradings
occur frequently as penny issuers lose market capitalization or
break the rules that govern public companies.
And then, of course, there are the name changes, ubiquitous
among penny stocks and a great smoke screen for preventing unwary
investors from recognizing the names of problem companies.
Ten of the 24 stocks named in the government's recent
criminal complaint had undergone a nominal facelift in the past
two years, including Crystal Broadcasting (formerly Roan
American), Golf Ventures (formerly Sierra Technologies), Omap
Holdings (formerly Logos International) and Debbie Reynolds Hotel
& Casino (formerly Halter Venture).
Pontus Industries, which changed its name to Continental
Orinoco in May 1996, switched names yet again a month later to
Conorco in an effort at ''improving its name recognition,'' a
press release said at the time. Of course, who'd disagree that
Conorco simply rolls right off the tongue?
Dubious Distinction
Penny stocks highest on the risk scale frequently have the
distinction of being in the business of looking to become a
business, and the FBI list doesn't want for examples. Omap
Holdings, which in a September press release was crowing over
''the first of many future profitable acquisitions,'' has been
anything but profitable -- at least for investors, who've watched
the stock drop from $4.50 to 11 cents since early January.
The government said that Edward Bland Williamson, 49, whose
public relations and investment banking firm is listed as the
contact on some of Omap's press releases, paid a brokerage firm
for buying shares of Omap stock. Misha Mohr, who took a message
for Williamson at his office at Williamson & Co. in Wichita,
Kansas, on October 17, said ''he's not in this week.''
It was, no doubt, a bad week for Williamson, but he stands
to be tougher than others accused of securities fraud. In 1969,
he was sentenced to 15 years in prison for murder and robbery,
though paroled two years later, according to records kept at the
National Association of Securities Dealers.
Investors don't always have the tools to know that a penny
stock is being rigged, but companies frequently reveal the risk
by the company they keep, and the desperation with which they
promote their stocks.
Princeton-American, whose chairman was charged in the sting,
used the junk-mail circuit to tout its stock. As recently as mid-
September, it mailed a flier to investors calling itself a
''major player'' in the $23 billion personal care marketplace.
Despite the bullish promotion, the company has never shown a
profit. A lawyer for Dale Eyman, 56, chairman, says ''I think
ultimately my client will be found not culpable.''
Golf, Anyone?
Golf Ventures, whose chairman was charged in the sting,
sought out publicity through an investor ''magazine'' that
cleverly promotes its corporate clients in what looks like
journalism. (The same magazine, published by a Florida company
called Corporate Relations Group, provided the mailing list for
the Princeton-American promotion).
Money World magazine touted the stock in ''Rumor Mill,'' its
hot stocks column, a month after it signed the company on as a
client. Jim Spratt, ''reporter'' on the column -- who also was
listed as the public relations contact on Golf Venture press
releases -- is a former stock broker who was fired by both his
previous Wall Street employers and has 11 investor complaints on
his record.
Money World dropped Golf Ventures as a client in February
after ''we smelled a rat,'' says Roberto Veitia, publisher of
Money World. By that time, a column by Spratt in the April 1996
issue was already in the mail, calling for a move from $7.75 ''to
$14-$16 in the next 60 days. In fact, the stock moved straight
down to a low of 2 3/8 by April 19. In the next issue, Spratt
said the stock should be sold.
George Badger, 66, chairman of Leasing Technology Inc, which
has a controlling interest in Golf Ventures, did not return a
telephone call.
Though investors can learn lots about the lowest priced
stocks around without the benefit of hidden cameras and
microphones, the FBI tapes can't hurt in understanding the way
the penny stock world works. Consider, if you can stand it, a
little conversation between an undercover ''broker'' who was
being offered a bribe and the promoter who would be meeting with
the broker's clients to tell the company story.
''Obviously don't tell 'em anything about what we have going
on,'' the FBI ''broker'' told the promoter, according to the
complaint.
Replied the broker, according to the complaint, plainly
offended at being taken for a novice at the game: ''I was a
retail broker for nine years, Nick.'' When you're an old pro at
taking the public to the cleaners, the rules are understood.
-- Susan Antilla in the New York newsroom (212) 318-2359/fk |
