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To: StockDung who wrote (873)6/15/2004 8:03:31 PM
From: afrayem onigwecher
   of 977
eLinear Requests and Obtains Delisting from the Berlin Stock Exchange

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To: StockDung who wrote (872)6/15/2004 9:33:51 PM
From: afrayem onigwecher
   of 977

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To: afrayem onigwecher who started this subject6/16/2004 7:30:01 AM
From: StockDung
   of 977
StockGate: London Companies on Berlin Exchange Ask for Investigation, Reg SHO Hearing Reset

Jun 16, 2004 ( via COMTEX) -- (FinancialWire) It's not just U.S. companies such as Whistler Investments (WHIS), Sonoran Energy (SNRN), Celsion Corporation (CLN), and eLinear Inc. (ELU) or Israeli companies that have had serious concerns about their unannounced and unathrorized listings on the Berlin-Bremen Stock Exchange.

Apparently, some 150 British companies are protesting the same fate.

A number of UK-listed companies have demanded a London Stock Exchange investigation after they found that their shares are being traded.

Meanwhile, Whistler, Sonoran and eLinear have announced they have successfully secured their delistings, and the U.S. Securities and Exchange Commission has rescheduled its open hearing to consider the adoption of amendments to Regulation Sho to June 23 at 9:30 a.m. The announcement is at .

According to the London Money Telegraph, "several companies believe the market for their shares has been distorted and that they have fallen in value after trading started on the Berlin-Bremen exchange.

"Some smaller companies, whose shares are lightly traded in London, fear the Berlin market has been used by speculators to short-sell their shares."

The Telegraph said the number of companies are thought to be as high as 150, including even "larger companies" such as Matalan (OTC: MATNF) and Halfords.

Mladen Ninkov, the chairman of Aim-listed Griffin Mining (OTC: GFNMF), was quoted as saying: "We were put on the Berlin market without our knowledge by a German broker and now we've got about 8m shares out in a short sale. It is horrifying - that is about 4 per cent of the company and it is forcing the price down."

A spokesman for the London Stock Exchange said: "If there is evidence of market abuse we would refer that on to the appropriate authorities."

Whistler said that according to its transfer agent records, "we have 5,504,680 shares held by DTC, but the ADP broker search indicates of 6,217,458 shares being reported by broker/dealers as being held on behalf of their customers, indicating a short position of more than 700,000 shares. A summary report can be viewed at .

"We have therefore commenced work with DTC for a formal review of the reported excessive broker/dealer holdings of our stock so that we can conduct our corporate affairs properly in view of our planned stockholders meeting and other upcoming corporate matters. We again advise our stockholders make sure that they receive delivery of any shares that they purchase, and also that their stock is not being borrowed without authorization.

Holly Roseberry, President of Whistler Investments, states "We intend to get to the bottom of the excessive short position and bring stability back into the trading of our stock. We're happy to say that we have 5,133 stockholders and we expect all our stockholders to benefit from the shorters having to cover their short positions."

FinancialWire has reported on the disclosure that "Dateline," the investigatory TV program aired by General Electric's (GE) NBC unit, has purportedly been preparing a blockbuster expose of "Stockgate" (see separate story at

It is not known if "Dateline" has uncovered continuing underworld connections to the scandal, but FinancialWire reported that Dateline may be pointing a large finger of conflict at the U.S. Securities and Exchange Commission itself, which reportedly receives a slice of every transaction fee as part of its budget. According to court filings supported by the O'Quinn/Christian legal network, almost $1 billion annually is received by the Depository Trust and Clearing Corp. for its "Stock Borrow Program," which the lawsuits claim is just a fancy name for counterfeiting, as the DTCC purportedly lends out many multiples of the actual certificates in the float. Apparently the SEC receives a transaction fee for each transaction facilitated by these loans of non-existent certificates, which could knock a hole in its budget should the revenues from the practice be halted.

The North American Securities Administrators Association, comprised of state and Canadian regulators, has pointedly told the SEC that either it must rethink its cozy DTCC relationship, or it hints, some of its more aggressive state practitioners (think Eliot Spitzer) may do the rethinking for the SEC.

Naked short selling is worrisome for hundreds of small U.S. companies, including those recently asking to be delisted from the Berlin Stock Exchange, such as Golden Phoenix Minerals, Inc. (GPXM), Nannaco, Inc. (NNCO), 5G Wireless Communications, Inc. (FGWC), CyberAds, Inc. (CYAD), Provectus Pharmaceuticals, Inc. (PVCT), House of Brussels Chocolates (HBSL), InforMedix, Inc. (IFMX), Tissera, Inc. (TSSR), Americana Publishing, Inc. (APBH), Celsion Corporation (CLN), ChampionLyte Holdings, Inc. (CPLY), Pickups Plus, Inc. (PUPS), China Wireless Communications Inc. (CWLC), CareDecision Corp. (CDED), Titan General Holdings, Inc. (TTGH), IPVoice Communications, Inc. (IPVO), Whistler Investments (WHIS), WARP Technology Holdings, Inc. (WRPT), BGR Corp. (OTCBB: BGRR), ICOA, Inc., (ICOA), DICUT, INC. (OTCBB: DCUTE), NHC Communications Inc. (NHC), Stratus Services Group, Inc. (SERV), Golden Phoenix Minerals, Inc. (GPXM).

Berliner Freiverkehr (Aktien) AG has been singled out as the broker and market maker that has been "listing" the companies. It is suspected that one broker, RA Angsar Limprecht, is involved in all if not most of the listings.

Small public companies are squeezed not only by hedge funds, naked short sellers, overseas listers such as the Berlin Stock Exchange, and the out-of-control "Stock Borrow Program" run by the governance-conflict-laden Depository Trust and Clearing Corporation, but to the amazement of the industry, as often and not by their own regulators.

A new staff recommendation by Annette Nazareth, director of the division of market regulation at the U.S. Securities and Exchange Commission to "outlaw" ownership of paper certificates at the same time the Depository Trust and Clearing Corporation is under intense scrutiny for alleged electronic counterfeiting has begun hitting the small public company markets, company executives, shareholders and manipulative short-selling opponents like the proverbial ton of bricks.

A Dow Jones (DJ) article by Judith Burns sparked the uproar, as the inextricably intertwined web of connections between the SEC and the DTC, which is sagging from the weight of conflicted governance by representatives from a rollcall of industry heavyweights, including NASD, which owns NASDAQ (NDAQ), the New York Stock Exchange, Goldman Sachs (GS) and Lehman Brothers (LEH), to name only a few.

The rule proposal would bar stock transfer agents from handling shares that carry any limitations on transfer. Control over stock certificates is one of the ways that small companies have combated illegal naked short sellers. Burns quoted Nazareth as saying that these companies' "self-help" efforts "aren't helping U.S. markets overall." Nazareth was quoted as saying restrictions on stocks are "a significant step backwards" in the "move from paper stock certificates to automated computerized trading."

Nazareth said that abusive "naked" short selling has been a problem "in some cases," but that is "best dealt with by a pending SEC proposal," presumably Regulation SHO.

SEC Commissioner William Donaldson purportedly publicly refused to answer any questions from the NASD about the timing of the Commission's consideration of the Regulation at a conference where he was simultaneously proposing early reforms of the mutual fund scandals. The Dow Jones said, however, that Robert Colby, SEC deputy market regulation division director, predicted the SEC will take that to a vote in early June.

The Dow Jones report noted that "naked short-selling occurs when sellers don't buy shares to replace those they borrowed, a manipulative practice that can drive a company's stock price sharply lower.

The stock certiticate plan has been put to a 30-day comment periodl Then the SEC would have to vote to adopt it. If adopted, Colby was quoted as saying that regulators might "sue firms that seek to impose restrictions on stock transfers."

The recent lawsuit filed by Nanopierce Technologies (NPCT) alleges that the Depository Trust and Clearing Corp. has a lot of reasons, almost one billion of them a year, to keep illegal naked short selling in operation. It was the shot across the bow by the legendary Houston law firms of Christian, Smith, Wukoson and Jewell, and OQuinn, Laminack and Pirtle, whose notches already include environmental targets, the breast implant industry and the tobacco industry, all brought to their knees.

In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell, who is providing litigation support and research for the law firms, said that StockGate is more massive than anyone may have imagined. "Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors," and have resulted in over 7,000 public companies having been "shorted out of existence over the past six years." Burrell said some experts believe as much as $1 trillion to $3 trillion has been lost to this practice.

He stated that the restrictions on short selling were deliberately put into the Securities Acts of 1933 and 1934 because of the first-hand evidence then available that the "sheer scale of the crashes was a direct result of intentional manipulation of US markets through abusive short selling by a massive conspiracy."

Burrell noted that the 65-lawyer team presided over by lead lawyers Wes Christian and John O'Quinn has uncovered more than 1,200 hedge fund and offshore accounts working through more than 150 broker-dealers and market makers in a joint cooperative effort to strip small and medium size public companies of their value.

Recently the NASD and U.S. Securities and Exchange Commission approved an interim naked short-selling band-aid, requiring U.S. brokers to make an "affirmative determination" that short-sellers, even foreign short-sellers, mostly Canadian, can find certificates to cover before processing the order.

Last year, many besieged public companies sought refuge from the manipulation by seeking to exit the DTC, but on June 16, 2003, the SEC stated "the issues surrounding naked short selling are not germane to the manner in which DTC operates as a depository registered as a clearing agency. Decisions to engage in such transactions are made by parties other than DTC. DTC does not allow its participants to establish short positions resulting from their failure to deliver securities at settlement. While the Commission appreciates commenters' concerns about manipulative activity, those concerns must be addressed by other means."

The Nanopierce lawsuit, said to be the first of many out of the box, emphatically suggests otherwise. According to lawyer Christian,, the DTC is at the very heart of the problem, and has almost a billion dollars a year at stake in keeping the problem.

The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively "dematerializing" most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in "custody."

According to the suit, the DTCC has an enormous pecuniary and conflicted interest in the entire short selling scandal through the huge income stream they were realizing from it every day. They have made literally billions of dollars lending individual real shares, in most cases over and over, getting a fee each time they made a journal entry in the "Stock Borrow Program."

The Stock Borrow Program was purportedly set up to facilitate expedited clearance of stock trades. Somewhere along the line, the DTCC became aware that if it could lend a single share an unlimited number of times, it could collect a fee each time, according to Burrell. "There are numerous cases of a single share being lent ten or many more times," giving rise to the complaint that the DTCC has been electronically counterfeiting just as was done via printed certificates before the Crash.

"Such re-hypothecation has in effect made the potential 'float' in a single company's shares virtually unlimited and the term 'float' meaningless. Shares could be electronically created/counterfeited/kited without a registration statement being filed, and without the underlying company having any knowledge such shares are being sold or even in existence." Burrell said the Christian/O'Quinn lawsuits will seek to show that the "counterfeiting/creation of unregistered shares is a specific violation of the Securities Act of 1933, barring the 'Sale of Unregistered Securities'."

While the Nanopierce lawsuit has been filed at the state level, another companion lawsuit just heading to the courts on behalf of (EXII) will be argued at the Federal level.

Nanopierce's suit in the 2nd Judicial District Court in Nevada, is Case No. CV04-01079, alleges that the DTC's "stock borrow program" was "purportedly created to address SHORT TERM delivery failures," but that the "end result of the program has been to create tens of millions of unissued and unregistered shares to be traded in the public market," and in some instances resulting in "two or more shareholders who purchase shares in separate transactions to own the same shares."

The complaint alleges that the DTC has a colossal disincentive to stop the "stock borrow" program, booking revenues from services of $425,416,000 and similarly, the NSCC deriving revenues of $293,133,000.

Further, the suit alleges that "open positions" resulting from this activity at the close of business on December 31, 2003, "approximated $3,025,467,000" due to NSCC, and $2,303,717,000 due by NSCC, and unsettled positions of $721,750,000 for securities borrowed through the NSCC's "Stock Borrow Program."

Nanopierce claims that DTCC and NSCC have joined in a "scheme" to "manipulate downward the price of the affected securities, thereby reducing the market value of the open fail to deliver positions." The suit also claims that the defendants have permitted sellers to maintain open fail to deliver positions of tens of millions of shares for periods of a year and even longer.

It quotes the National Association of Security Dealers as admitting that "concerns have been raised by members, issuers, investors and other interested parties about potentially abusive short selling activities occurring in the marketplace. In particular, naked short selling, or selling short without borrowing securities to make delivery, can result in long term failures to deliver, including aggregate failures to deliver that exceed the total float of a security. NASD believes such extended failures to deliver can have a negative effect on the market. Among other things, by not having to deliver securities, naked short sellers can take on larger short positions than would otherwise be permissible, which can facilitate manipulative activity."

Nanopierce claims that it had "relied on material misrepresentations and omissions by DTC and NSCC in trading its shares in the stock market "without knowledge of Defendants' fraud-on-the market through statements they made about the clearing and settlement services they provided." Further, it claims that the Defendants acted with "scienter" since they had a major financial financial motivation to falsely represent their services, which Nanopierce claims are also anticompetitive.

The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined. And, as the SEC's June 16 ruling indicates, its monopoly over the electronic trading system appears even to be protected.

The Depository Trust and Clearing Corp.'s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (NDAQ) and the embattled American Stock Exchange! Regulators, regulate thyself?

In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:

They include Bradley Abelow, Managing Director, Goldman Sachs (GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney's Corporate Investment Bank (C); Michael C. Bodson, Managing Director, Morgan Stanley (MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);

Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (JPM).

In their comments to the SEC regarding Regulation SHO in January, the 50 state regulators, through their association, the North American Association of Securities Administrators (NASAA) issued what many consider to be a strong warning that if the DTC is not dealt with in the final regulations, state regulators such as New York State Attorney General Eliot Spitzer may step to the plate.

In what many considered to have been explosive comments, Ralph Lambiase, NASAA president and Director of the Connecticut Division of Securities, warned "NASAA urges the Commission to reconsider its stance regarding the role of the Depository Trust and Clearing Corporation (the DTC). As a threshold matter, NASAA believes that the Commission should explicitly prohibit the DTC from lending more shares of a security than it actually holds. The ability of the overall proposed rule would be severely impared unless the Commission undertakes to implement such a prohibition."

As the Nanopierce lawsuit reveals, those were indeed strong words, meddling as it did, in a substantial revenues base for the DTCC.

Recently, leading market makers and brokers named in various lawsuits and other actions, including FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (HRB), Charles Schwab (SCH), Toronto-Dominion's (TD), TD Waterhouse Group and vFinance, Inc. (VFIN). A.G. Edwards, Inc. (AGE), Ameritrade Holding Corp. (AMTD), Deutsche Bank AG (DB), and ETrade Group, Inc. (ET), were forced to comply with new short-selling market regulations imposed by the NASD after the SEC had "sat on" the NASD request to plug material loopholes for almost 2-1/2 years.

"The new rules expand the scope of the affirmative determination requirements to include orders received from broker/dealers that are not members of NASD ("non-member broker/dealers").

The new rule is on the web at

The rule itself, while welcomed by small companies and their shareholders in the U.S., nevertheless raised an outcry because the NASD's request to put it into effect had set on a shelf at the SEC since 2001.

The scandal has embroiled hundreds of companies and dozens of brokers and marketmakers, in a web of internaitional intrigue, manipulative short-selling and cross-border acctions and denials.

Comments on Regulation SHO ended January 5, and may be viewed at .

Some 122 companies, including 13 brokers, such as FleetBoston (NYSE: FBF), Goldman, Sachs & Co. (GS), H. Myerson & Co., Inc. (NASDAQ: MHMY), Olde / H&R Block (HRB), Charles Schwab (SCH), Toronto-Dominion's (TD), TD Waterhouse Group and vFinance, Inc. (VFIN). A.G. Edwards, Inc. (AGE), Ameritrade Holding Corp. (AMTD), Deutsche Bank AG (DB), and ETrade Group, Inc. (ET), have been embroiled for over a year in a raging controversy

The remaining 109 companies among the 122 named to date have issued press releases or been named in the media as having been victimized, or as taking various actions, either alone or in concert with other companies, to oppose manipulative trading in the form of illegal naked short selling. The actions have ranged from lawsuits to withdrawals and threatened withdrawals from the electronic trading system managed by the Depository Trust & Clearing Corp., to withdrawals from toxic financings, to the issuance of dividends or name changes designed to squeeze manipulators, to joining associations or networks or to contacting regulatory authorities to provide documentation of abuses or otherwise complain.

The complete list of those 108 companies include Advanced Viral Research Corp. (ADVR), AdZone Research, Inc. (ADZR), Amazon Natural Treasures (OTC: ANTD), America's Senior Financial Services (OTCBB: AMSE), American Ammunition, Inc. (AAMI), AngelCiti Entertainment (OTCBB: AGLC), ATSI Communications, Inc. (ATSC), Federal Agricultural Mortgage / Farmer Mac (AGM) Allied Capital (ALD), American Motorcycle (OTC: AMCYV), American International Industries (AMIN), Ameri-Dream (OTC: AMDR), Adirondack Pure Springs Mt. Water Co. (OTCBB: APSW), ATSI Communications,Inc. (ATSC) Bluebook International (BBIC), Blue Industries (OTCBB: BLIIV), Bentley Communications (OTCBB: BTLY), BIFS Technologies Corporation (BIFT), Biocurex (BOCX). Broadleaf Capital Partners, Inc. (BDLF), Chattem, Inc. (CHTT), Critical Home Care (OTCBB: CCLH), Composite Holdings (COHIA), CyberDigital, Inc. (CYBD). Diamond International Group (OTCBB: DMND), Dobson Communications Corp. (DCEL), Eagle Tech Communications (EATC), Edgetech Services (EDGH);

Also, Endovasc Ltd. (EVSC), Enviro-Energy Corporation (ENGY), Environmental Products & Technologies (OTC: EPTC), Environmental Solutions Worldwide, Inc. (ESWW), EPIXTAR Corp. (EPXR), eResearchTechnologies, Inc. (ERES), Flight Safety Technologies (OTCBB: FLST), Freddie Mac (FRE), FreeStar Technologies (FSRCE), Front Porch Digital,

Inc. (FPDI), Geotec Thermal Generators, Inc. (GETC), Genesis Intermedia (GENI), GeneMax Corp. (GMXX), Global Explorations Inc (GXXL), Global Path (OTCBB: GBPI), GloTech Industries, Inc. (OTCBB: GTHI), Green Dolphin Systems (OTCBB: GLDS), Group Management (OTCBB: GPMT), Hop-On (HPON), H-Quotient, Inc., (OTCBB: HQNT), Hyperdynamics Corp. (HYPD), International Biochem (IBCL), Intergold Corp. (OTCBB: IGCO), International Broadcasting Corporation (IBCS), InternetStudios, Inc. (ISTO), ITIS Holdings (ITHH), Investco Corp. (IVCO), Lair Holdings (LAIR), Lifeline BioTechnologies Inc. (LBTT), Life Energy & Technology (LETH), MBIA (MBI);

Also, MegaMania Interactive (MNIA), MetaSource Group, Inc. (MTSR), (MIDS), Make Your Move (OTCBB: MKMV), Medinah Minerals (MDMN), MSM Jewelry Corp. (OTC: MSMC), Nanopierce Technologies, Inc. (NPCT), Nutra Pharmaceutical (NPHC), Nutek (OTCBB: NUTK), Navigator Ventures (NVGV), Orbit E-Commerce, Inc. (OECI), Pitts & Spitts (PSPP), Sales OnLine Direct (OTCBB: PAID), Pacel Corp. (OTCBB: PACC), PayStar Corporation (PYST),Petrogen Corp. (PTGC), Pinnacle Business Management (OTC: PCBM), Premier Development & Investment, Inc. (PDVN),, Inc. (PRIM), Phlo Corporation (PHLC), Resourcing Solutions (RESG), Reed Holdings (OTC: RDHC), Rocky Mountain Energy Corp. (OTCBB: RMECE), RTIN Holdings (OTCBB: RTNHE), Saflink Corp. (SFLK), Safe Travel Care (OTCBB: SFTVV), Sedona Corp. (SDNA);

Also, Sionix Corp. (SINX), Sonoran Energy (SNRN), Starmax Technologies (SMXIF), Storage Suites America (SSUA), Suncomm Technologies (OTC: STEH), Sports Resorts International (SPRI), Technology Logistics (TLOS), Swiss Medica, Inc. (SWME), Ten Stix, Inc. (TNTI), Tidelands Oil (TIDE), Titan Construction (TTCS), Trezac Corp. (OTCBB: TRZAV), Universal Express, Inc. (USXP), Valesc Holdings, Inc. (OTCBB: VLSHV), Vega Atlantic (OTCBB: VGAC), Viragen (VRA), Viragen International (VGNI), Vista Continental Corporation, (VICC), Viva International (VIVI), Vtex Energy (OTCBB: VXENE) and Wizzard Software (WIZD), (WTSW) and Y3K Secure Enterprise Software, Inc. (YTHK).

Earlier in 2003, the SEC fined Rhino Advisors, Inc., $1 million for its representation of Amro International in the financing and manipulation of Sedona Corp. Amro, also known as AMRO, was registered in Panama, a secretive offshore haven, but was not named in the SEC settlement. Another 60 public companies may have been manipulated by the fined Rhino Advisors and its indicted principals, or its funding apparatus, Amro.

These include:

All American Food Group Inc (AAFGQ), Amanda Co Inc (AMNA), Antra Holdings (RECD), Aquis Communications Group Inc (OTCBB: AQUIS), Avanir Pharmaceuticals (AVN), Bionutrics Inc (BNRX), Brilliant Digital Entertainment Inc (AMEX: BDE), Bravo! Foods International Corp. (OTCBB: BRVOE), Butler National Corp (BUTL),Calypte Biomedical Corp (CYPT), Chemtrak Inc/DE (CMTR), Clicknsettle Com Inc (CLIK), Corporate Vision Inc (OTC: CVIA), Crown Laboratories Inc/DE (CLWB), Dental Medical Diagnostic Systems Inc (DMDS), Detour Media Group Inc (DTRM),

Also, Digital Privacy Inc/DE (OTC: DGPV), Senior Services Inc (DISS), International Inc (DYNX), Endovasc Ltd Inc (EVSC), Esynch Corp/CA (OTCBB: ESYN), Focus Enhancements Inc (NASDAQ: FSCE), Frederick Brewing Co (FRBW), Greystone Digital Technology Inc (GSTN), Havana Republic Inc/FL (HVNR), Henley Healthcare Inc (HENL), Hollywood Media Corp (HOLL), Ibiz Technology Corp (IBZT), Diagnostic Systems Inc/FL (IMDS), Imaging Technologies (OTCBB: IMTO), Integrated Surgical Systems Inc (RDOC),

Also, Interferon Sciences Inc (IFSC), Interiors Inc (OTC: ITRNA), Laminaire Corp (THMZ), Medisys Technologies Inc (SCEP), Milestone Scientific Inc/NJ (MS), Nevada Manhattan Group Inc (NVMH), Innovations Inc (OTCBB: NTGE),Systems Group (OSYM), Pacific Systems Control Technology Inc (PFSY), Professional Transportation Group Ltd Inc (TRUC), Rnethealth Inc (RNTT),

Also, Sand Technology Inc (SNDT), Sedona Corp (SDNA), Silverado Foods Inc (SVFO), Stockgroup Information Systems (SWEB) Surgilight Inc (OTC: SRGL), Tasty Fries Inc (TFRY), Tech Laboratories Inc (TCHL), Teltran International Group Ltd (TLTG), Titan Motorcycle Co of America Inc (TMOTQ), Trans Energy Inc (TSRG), Motorcycle Co (UMCC), Universal Communication Systems Inc (OTCBB: UCSY), Medical Systems Inc (UMSI), Vianet Technologies Inc (VNTK),Viragen Inc (VRA), Webcatalyst Inc (WBCL), Worldwide Wireless Networks Inc (WWWNQ), and ZAP (ZAPZ).

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To: StockDung who wrote (820)6/23/2004 10:33:25 AM
From: afrayem onigwecher
   of 977
SEC OKs Short-Sale Rule Reforms

June 23, 2004 10:15 a.m.

By Judith Burns
WASHINGTON -- The Securities and Exchange Commission voted unanimously Wednesday to approve a revised package of short-sale rule changes that will include a one-year experiment lifting short-sale restrictions for about 1,000 stocks.

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To: afrayem onigwecher who started this subject6/29/2004 8:19:28 AM
From: StockDung
   of 977
SEC wants info on two Vancouverites in LOM matter

2004-06-25 17:02 ET - Street Wire

Also Street Wire (C-*BCSC) B.C. Securities Commission
Also Street Wire (U-STLOF) SHEP Technologies Inc

by Stockwatch Business Reporter

Canada's most respected securities regulator, the U.S. Securities and Exchange Commission, wants information about the stock trading of two Vancouver-area businessmen, Todd Peever and James Curtis, both known locally as stock promoters. The SEC is attempting to loosen up trading information thought to be held by Bermuda-based Lines Overseas Management Ltd. (LOM) and its managing director Scott Lines. The regulator has filed an application to enforce a subpoena served upon LOM and Scott Lines. The SEC has also been working with the British Columbia Securities Commission, seeking information on the two Howe Streeters, who the SEC believes have been using nominees to hide their identities while trading shares of SHEP Technologies Ltd. through LOM. (All figures are in U.S. dollars unless otherwise noted.) News on the SEC court application was broken by David Marchant's Offshore Alert on June 11, 2004, one day after the SEC filed its application in court.

This is not Mr. Curtis's first appearance in the news. Something of a newsmaker on Howe Street, he was named in March, 1996, as a defendant against allegations brought in the Supreme Court of B.C. by a Polish bank for a total of $22.4-million (Canadian). Bank Gospodarki Zywnosciowj Spolka Ackcyjna sued Mr. Curtis and his associate Don Farrell. The dispute is unresolved. Mr. Curtis has been involved as a director of many Vancouver companies over the years.

Mr. Peever was the president of Achievers Training Group Inc., as well as a director for Doron Explorations Inc., Lodestar Explorations Inc., Precision International Resources Corp. and Rockwealth International Resource Corp. He was an investor for Datawave Systems Inc., Landmark Resources Ltd. and Pathfinder Resources Ltd.

The allegations in the SEC's application and in the BCSC's hearing notices remain unproven, and so far, the SEC is seeking only to talk with Scott Lines. It claims to not even have a negative opinion about any of the people or stocks mentioned in its application.


The SEC's application was filed in the District Court of the District of Columbia on June 9, 2004. Scott Lines was personally subpoenaed by an SEC process server on April 20, 2004, at the Miami International Airport with a request that LOM hand over documents in connection with an SEC investigation into SHEP Technologies, HiEnergy Technologies Inc. and Sedona Software Solutions Inc., all trading at one point on the OTC Bulletin Board. Sedona, the regulator says, is a shell company, registered in Nevada and run from Vancouver. (SHEP, another local production, has its office in the same building as Stockwatch in Vancouver. The office is also used by the MCSI Consulting Group, owned by Tracy A. Moore, a director of SHEP.) The SEC alleges that HiEnergy, unrelated to either Sedona or SHEP, is secretly controlled by Phil Gurian, a name that has appeared in many Stockwatch stories and has being linked with the Mafia.

LOM is based in Bermuda but has satellite offices in the Cayman Islands and in the Bahamas. Most of the office functions are conducted through the Bermuda office. The SEC claims that Brian Lines, the president of LOM, and his brother Scott Lines routinely handled U.S. market securities transactions for LOM clients, opening accounts in LOM's name at several U.S. securities firms, including Knight Securities LP, Paragon Capital Markets Inc., Wein Securities Corp. and Vfinance Investments Inc. in January, 2003. At the same time, LOM had agreements with Bear Sterns Companies Inc. and Spear, Leeds & Kellogg, two U.S. firms, to clear LOM's securities transactions. As part of LOM's agreements with the securities firms, the SEC claims that LOM agreed to submit itself to arbitration with regulatory agencies in the U.S. if a dispute arose.

The SEC initiated separate investigations on Sedona, SHEP and HiEnergy, looking for information about possible fraud, market manipulation and reporting violations. The Sedona investigation began on Jan. 29, 2003, when SEC staff started looking at if any person or entity involved with Sedona was violating anti-fraud provisions of U.S. federal securities laws. During the course of the Sedona investigation, the court application states, SEC staff identified allegedly fraudulent activities in the securities of SHEP, involving some of the same participants in the Sedona investigation, including LOM, the Lines brothers and several as-yet unnamed nominees. During the investigation into Sedona and HiEnergy, SEC has uncovered information that points to "significant trading" in the securities of the three investigatee companies through LOM for the benefit of LOM customers and the Lines brothers personally, the application states.

Scott Lines was personally subpoenaed by SEC staff on April 20, 2004, at the Miami International Airport with a request that LOM hand over documents relating to trading in the three companies since Jan. 1, 2002. The subpoena stated that the information needed to be on the desks of SEC staff in Washington, D.C., by April 28, 2004. Since then, neither LOM or Scott Lines have contested the subpoenas, but neither have they delivered the information or appeared to testify to the SEC. Scott Lines's lawyer has contacted the SEC and indicated that his client will not be testifying under the subpoena.

The subpoena delivered to Scott Lines stated clearly that the investigation is a non-public fact-finding inquiry, as the SEC is simply trying to determine if any securities laws have been broken. The disclaimer also states that the SEC had not concluded that the recipients have broken the law, nor that the SEC had a negative opinion of any person, entity or security. The subpoena then asks for information for each account that bought or sold HiEnergy stock since Jan. 1, 2002, any Sedona stock since Jan. 1, 2003, and any SHEP stock since Dec. 1, 2001; account opening documents; account statements; confirmation and order tickets for each transaction; all documentation relating to delivery of stock, credits or debits (including wire transfer instructions, memos and cancelled checks); and anything to identify the brokers assigned to the accounts. The Sedona subpoena also asks for any information on accounts in the name of Eric Collins or his apparent company Consensus Investment Ltd., Richard King or his apparent company Nottinghill Resources Ltd., Kevin Way or his apparent company SKN Holdings Ltd., Michael Heslop or his apparent company Aberdeen Holdings Ltd., or Mr. Peever and Mr. Curtis. (Consensus Investments has participated in several financings for Vancouver public companies, as have Nottinghill Resources, SKN Holdings and Aberdeen Holdings.)

The application to the court included an affidavit by Michael Ungar, an SEC attorney, much of which dealt with Sedona. The affidavit states that Sedona currently trades on the Pink Sheets under symbol SSSI. The SEC's Sedona investigation has led to suspicions that in early January, 2003, Brian and Scott Lines secretly acquired 99 per cent of Sedona's shares through nominees, the affidavit alleges. The affidavit goes on to state that Brian Lines told an LOM employee that at least 1.2 million Sedona shares were to be credited to two LOM accounts controlled by the Lines brothers.

LOM entered into an agreement on Jan. 15, 2002, with Renaissance Mining Corp., a private U.S. company, for it to assist Renaissance in raising between $3-million and $6-million from non-American investors. A condition of the agreement was a reverse merger between Renaissance and Sedona. Two days later, Renaissance issued a press release touting LOM as the investment banker for the financing. The press release neglected to mention that the Lines brothers controlled 99 per cent of Sedona's stock and stood to profit quite handsomely from the proposed merger.

On Jan. 21, 2003, Sedona opened at $9.00 per share, a 30,000-per-cent increase over the previous close price of three cents per share. Brian Lines allegedly took advantage of the skyrocketing price and sold 97,000 Sedona shares. Over the next week, Brian Lines allegedly sold another 51,000 Sedona shares through his accounts at Vfinance and Knight, as well as an unnamed Canadian firm. Mr. Ungar's affidavit claims that Brian Lines made over $1.4-million from his sales and through sales to LOM customers. The SEC also wants Scott Lines to tell all on his apparent beneficial ownership of Sedona shares sold by his brother Brian during January, 2003.

On Jan. 29, 2003, Sedona was suspended by the SEC. The affidavit alleges that after LOM learned of the SEC investigation into Sedona's trading, LOM made several changes to its internal records regarding the ownership of Sedona shares. The changes were to conceal the significant ownership and control of the Lines brothers over Sedona, the affidavit claims.

In the course of its investigation, SEC staff discovered that LOM and the Lines had previously engaged in similar conduct involved SHEP Technologies between January, 2002, and June, 2003. The affidavit claims that the unlawful scheme to manipulate the shares of SHEP was carried out between LOM, Brian Lines and two LOM customers, identified in a tiny-print footnote as being Vancouver's own Mr. Peever and Mr. Curtis. The footnote states that the accounts of Mr. Peever and Mr. Curtis in LOM Caymans and LOM Bahamas received virtually all of the SHEP shares that LOM and Brian Lines purchased in a private transaction. Nominees were used to hide the identity of true beneficial owners Mr. Peever and Mr. Curtis, the affidavit alleges. The affidavit goes on to state that Brian Lines used nominees to obtain secret control over 88 per cent of SHEP on behalf of Mr. Peever and Mr. Curtis. Brian Lines then instructed a U.S. lawyer to file ownership reports with the SEC that falsely stated that several of the nominees owned or sold the shares, when in fact the SEC claims that it was Mr. Peever and Mr. Curtis who were the SHEP owners. Over three million SHEP shares were sold into the U.S. markets after several tout press releases for SHEP. The SHEP share scheme raked in approximately $3-million in profit.


LOM initially provided documents to SEC staff, Mr. Ungar's affidavit claims, but redacted the identity of customers in all communications. The SEC told LOM that it needed the names, and LOM then declared that it was finished being helpful. If the SEC wanted any further co-operation, LOM stated, then staff would have to make a request to the Bermuda Monetary Authority (BMA), LOM's primary regulator. The BMA served LOM with the SEC's requests, and LOM handed over an additional 400 pages of documents to the SEC, continuing to redact the names of customers. In January, 2004, LOM filed an action in a Bermuda court to challenge the BMA's authority to share LOM customer information with foreign authorities, including the SEC. Mr. Ungar states in his affidavit that he believes that LOM and Scott Lines have not produced certain documents in their possession relating to the trading and ownership of Sedona and SHEP stock.

After the SEC subpoenaed Scott Lines and LOM, LOM customers Mr. Peever and Mr. Curtis, along with their nominees Golden Accumulator Ltd. and Coal House Ltd., sought an injunction in the Cayman Islands and in Bermuda. SEC staff believe that the injunction is a step to prevent the Cayman and Bermuda authorities from passing on information to the SEC. Mr. Ungar claims that the B.C. authorities have also served Mr. Peever and Mr. Curtis with documents on behalf of the SEC, but to date the two have not produced their LOM account information to the BCSC. Mr. Ungar also notes that the BCSC has filed a notice of hearing against LOM and many of its directors, with a hearing date set for Oct. 5 and 6, 2004, but this is in connection with yet another company.

Mr. Curtis has been a director of many Vancouver companies, including high-profile flops such as Cross Pacific Pearls Inc., Danco Industries Ltd., Lima Gold Corp., Medilase Industries Inc. and Turbodyne Technologies Inc. Mr. Curtis was an active associate of former Howe Street promoter Harry Moll. Turbodyne, from which Mr. Curtis resigned in October, 1993, after less than a year on the board, subsequently became involved in notoriety when director Nick Massee vanished with his wife in August, 1994, after having arranged a meeting with a potential investor, who according to one source said he was representing investors from Chicago.

Mr. Curtis was also involved as an investor in Paviland Financial, Langland Bay Financial, Jersey Investments, Skinny Technologies Inc., Unique Tire Recycling Inc. and International Tourigan Corp.


The BCSC's LOM notice of hearing, filed on May 20, 2004, states that between Sept. 1, 2002, and March 28, 2003, LOM made purchases in San Telmo Energy Ltd., a TSX Venture Exchange-listed company, accounting for 15.5 per cent of purchases and 35 per cent of sales of San Telmo on the TSX-V. LOM accounts were also allegedly responsible for 20 per cent of the upticks in San Telmo's trades during the period. On Nov. 6, 2003, the BCSC stated that commission staff requested that the BMA help it in obtaining the identity of the person or persons trading in San Telmo through LOM. LOM apparently declined to give the information over to the BMA, instead handing over an anonymous list of all trades for San Telmo. The report indicated that LOM accounts bought 1.65 million shares of San Telmo and sold 5.6 million shares over the TSX-V and two other stock exchanges. The BCSC served LOM with a demand for production on April 30, 2004.


LOM issued a press release on June 14, denying that it ever engaged in securities fraud as alleged by the SEC, and that the company is prevented from providing information on its clients trading by Bermuda confidentiality laws. LOM put out a plea that the American courts "must respect the duties imposed by the laws of other nations, even smaller nations, and not unilaterally seek to enforce American administrative supoenas against entities and persons in other countries."


Reader Comments - Comments are open and unmoderated, although abusive remarks may be deleted. Opinions expressed do not necessarily reflect the views of Stockwatch.


Everyone who has dealt with LOM in the last five years should be nervous.

Posted by sharted @ 2004-06-26 11:23


Alot of stock guys are freaking they don't know if their past will come back.The 30 something Vancouver guys are besides the trash can.All the money that came in (half is spent)is gone and now wave after wave of heat.Very shaky call me Shaky West Van guy with nervous problems.

Posted by Joshi Mendelcore @ 2004-06-26 17:54


"Canada's most respected securities regulator, the U.S. Securities and Exchange Commission,wants information about the stock trading of two Vancouver-area businessmen, Todd Peever and James Curtis, both known locally as stock promoters."


I wish the SEC did have jurisdiction in Canada - hopefully that would put the fear of God into some would be securities lawbreakers.

Posted by Lynn @ 2004-06-28 10:29


When the SEC comes knocking it's big trouble.Canada is no limit to their powers.Sleep well boys they are comming.

Posted by john Limba @ 2004-06-28 20:40


Here in Bermuda it's very tense this morning.

Posted by Larry Funkhouser @ 2004-06-29 05:16


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To: StockDung who wrote (878)6/29/2004 3:26:15 PM
From: peter michaelson
   of 977
What happened to LXRS stock today? Down 50%. Are these pumper guys having internal disputes?

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To: peter michaelson who wrote (879)6/29/2004 5:40:52 PM
From: StockDung
   of 977
Form: S-8 Filing Date: 6/8/2004

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Blaine, State of Washington, on June 4, 2004.


Grant Atkins
President and
Chief Executive Officer

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To: peter michaelson who wrote (879)6/30/2004 4:21:25 PM
From: StockDung
   of 977
=DJ IN THE MONEY:Bermuda To Ease Information Sharing With SEC

By Carol S. Remond
A Dow Jones Newswires Column

NEW YORK (Dow Jones)--Pending changes in Bermuda law could make it easier for
U.S. and other foreign securities regulators to seek information related to
ongoing investigations.

Reacting to a court challenge mounted by a Bermuda brokerage firm disputing
the right of U.S. regulators to obtain information about its clients, the
Bermuda Monetary Authority is hoping to usher through changes to clarify
existing legislation.

"Our intention is to have new amended legislation in place by the end of
July," said Monroe Sutherland, superintendant of banking, trusts and investments
at the BMA.

Lines Overseas Management, a Bermuda-based brokerage firm with branches in the
Bahamas and the Cayman Islands, filed a lawsuit against the BMA in January to
prevent the regulatory body from passing on information to the U.S. Securities
and Exchange Commission.

The SEC is seeking information from the firm, known as LOM, relating to
ongoing investigations into three U.S. publicly traded companies: Sedona
Software Solutions Inc. (SIII), Shep Technologies Inc. (SHEP) and HiEnergy
Technologies Inc. (HIET). Court documents filed by the SEC show that U.S.
regulators are investigating whether LOM, Scott Lines and Brian Lines, managing
director and president of LOM, respectively, manipulated the stocks of the three
companies. No charges have been brought by the SEC.

LOM said it's confident that the evidence will demonstrate that the firm and
its personnel have not violated securities laws in the U.S. or any other
jurisdiction. The firm claims that local laws prohibit it from sharing
information about its clients.

That led the SEC earlier this month to file documents in the U.S. District
Court for the District of Columbia to compel LOM to comply with several

Scott Hill, group compliance manager for LOM, said the firm is awaiting advice
from counsel on how to answer the SEC's latest move.

In order to avoid any delay while the court reviews LOM's challenge of the
BMA's authority, Sutherland said that the Bermudan government "decided to put
the matter beyond doubt and tweak the language of the (BMA) act" to make clear
that the BMA can share information with foreign regulators.

Sutherland said that a new principle will also be added to the BMA's general
function: "Cooperate with other regulatory bodies." Sutherland said he expects
the Bermudan parliament to approve the changes before its August recess.

The SEC alleges in court documents that the Lines and LOM used nominees to
obtain secret control over shell companies in an effort to hide its positions or
that of its customers.

Commenting on LOM's contention that local law prohibits it from sharing
information, the SEC said that while a counsel for LOM "has argued that foreign
secrecy laws prohibit it from disclosing responsive documents to the
commission", the firm has offered no evidence "to support these vague assertions
and has not identified any specific provisions purportedly precluding it from
producing the requested documents."

British Columbia securities regulators are also looking into LOM and some of
its Canadian clients.

(Carol S. Remond is one of four "In The Money" columnists who take a sophi
ticated look at the value of companies and their securities and explore unique t
ading strategies.)

-By Carol S. Remond; Dow Jones Newswires; 201 938 2074;

(END) Dow Jones Newswires

30-06-04 1915GMT

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To: peter michaelson who wrote (879)7/1/2004 12:33:45 PM
From: StockDung
   of 977
."BusinessWeek magazine last year reported that the company paid a promoter for ostensibly independent stock research while Donaldson was on the board"

Regulators Probe Firm Where SEC Chief Was Director

By Carrie Johnson
Washington Post Staff Writer
Thursday, July 1, 2004; Page E01

The Securities and Exchange Commission is probing the books of EasyLink Services Corp., a New Jersey firm where SEC Chairman William H. Donaldson served on the board until shortly before he became the agency's chairman, according to sources familiar with the investigation.

The status of the investigation, which involves how the company recorded its revenue, could not be determined yesterday.

Donaldson declined to comment yesterday, as did SEC spokesman Matthew C. Well.

Donaldson, 73, took the helm of the SEC last year after financial scandals and political missteps had damaged the agency's reputation. He has been trying in recent months to push through a slate of controversial proposals to clean up the mutual fund industry, regulate the risky investment pools known as hedge funds and give dissatisfied shareholders more power to nominate corporate board members.

The investigation into EasyLink, which was reported by Dow Jones yesterday, echoes a similar controversy in the SEC's recent history.

Donaldson's predecessor as SEC chairman, Harvey L. Pitt, resigned on election night in November 2002 in a firestorm over his choice of former CIA director William H. Webster to head the new accounting industry oversight board.

It was later disclosed that Webster had headed the audit committee at U.S. Technologies Inc., a D.C. company whose accounting practices were under SEC scrutiny and whose chief executive would later be convicted of fraud. Pitt allegedly failed to tell his fellow commissioners about Webster's role at U.S. Technologies before they voted to approve him to head the accounting oversight board.

Donaldson, who was on the EasyLink board from 1998 to late 2002 and served on the audit and compensation committees, has recused himself from voting on the EasyLink enforcement action, the sources said. One of the sources said board members, even those on audit committees, don't necessarily delve into methods of revenue recognition.

EasyLink converts paper documents into e-mail messages. The company, then known as, went public during the height of the dot-com boom in 1999 and its shares rose to a high, adjusted for splits, of $271 that year. Its shares now trade for $1.63.

Its founder and chairman, Gerald Gorman, worked for a dozen years at the Wall Street investment bank Donaldson, Lufkin & Jenrette, which Donaldson co-founded. Gorman did not return phone calls yesterday.

While on the board, Donaldson voted to forgive a $200,000 loan to the company's chief executive at a time the company was struggling financially, an issue that critics raised before his 2003 confirmation hearings for the role of SEC chairman. BusinessWeek magazine last year reported that the company paid a promoter for ostensibly independent stock research while Donaldson was on the board.

SEC enforcement chief Stephen M. Cutler did not return calls yesterday evening.

© 2004 The Washington Post Company

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To: peter michaelson who wrote (879)7/1/2004 12:36:47 PM
From: StockDung
   of 977
A Thorny Question for Donaldson
DECEMBER 31, 2002

Bush's SEC chief nominee was on EasyLink's board when the Internet outfit paid $25,000 for a report that called it a "speculative buy"

The brokerage firm that William H. Donaldson co-founded, Donaldson, Lufkin & Jenrette, was proud to call itself "The House That Research Built." But research may prove to be a thorny issue for Donaldson, who faces Senate confirmation hearings on whether he will succeed Harvey L. Pitt as chairman of the Securities & Exchange Commission. BusinessWeek has learned that an Internet company in which Donaldson was a director, EasyLink Services Corp. (EASY ), paid $25,000 to a California firm to produce ostensibly independent research that briefly boosted the high-tech company's share price.

And that poses a troubling question: Did Donaldson endorse the controversial practice, common among microcap companies, of paying for research? Donaldson's close ties to Wall Street and his controversial tenure as chairman of Aetna Inc. (AET ) have made him a subject of widespread criticism by investor advocates. Any connection between Donaldson and the decision by Edison (N.J.)-based EasyLink to commission the research -- which mimics Street research so closely that it appears to violate industry guidelines -- could fuel criticism that he is not sympathetic to investor concerns.

PROMOTION GIMMICK. Donaldson, who left the EasyLink board on Nov. 12, declined comment on whether he or the board had approved the hiring of J.M. Dutton & Associates to produce the reports. Through a staffer, he referred questions to Gerald Gorman, EasyLink's chairman and a former DLJ investment banker, who said he didn't recall discussing Dutton with Donaldson, or asking for board approval. He declined to say if the board ever discussed the general issue, saying, "Those are not matters we discuss publicly."

Paid research, though legal, is generally viewed by regulators and market pros as a stock promotion gimmick rather than genuine research. Says Joseph P. Borg, the Alabama Securities Commissioner and an authority on microcap issues: "When we look at these things, more than half are usually, you know, crap."

Louis M. Thompson Jr., president of the National Investor Relations Institute, says the group banned paid research entirely until January, 2002, because of the potential for abuse. NIRI then enacted stringent, though voluntary, guidelines requiring that reports not resemble ordinary analyst reports and mandating explicit payment disclosure.

"UNDERVALUED"? Market reaction to the first Internet-distributed Dutton report, on Sept. 3, was ecstatic. Share prices jumped 37%. Contrary to NIRI guidelines, the report gave EasyLink a "speculative buy rating." It noted Donaldson's presence on the "strong board of directors" and said the company "appears to be undervalued."

The report says "the cost of enrollment in the Dutton & Associates one-year continuing research program is US $25,000" -- but does not explicitly say that EasyLink paid Dutton. The firm's president, John M. Dutton, confirmed the payment and said there was no understanding that Dutton would provide favorable reports.

The SEC has set no rules specifically governing paid research and has announced no plans to look at the issue. But that could change if more distressed companies decide to resort to this controversial form of stock promotion. Gorman is right. What happened at EasyLink board meetings is a private issue. But the Senate may not take "no comment" for an answer.

By Gary Weiss in New York

Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story.

To subscribe online to BusinessWeek magazine, please click here.

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