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Biotech / Medical : GMXX - GENEMAX CORP
ISON 0.00May 23 4:00 PM EDT

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From: StockDung12/12/2007 1:09:43 PM
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The rise and impending fall of yet another OTC stock

A nondescript B.C. exploration company buys a Washington-based biotech that makes a 'miracle' pill

David Baines
Vancouver Sun
Wednesday, December 12, 2007
canada.com

CellCyte Genetics Corp. is like watching a car collision in slow motion. We are just moments from impact. The traffic cops are nowhere in sight. Casualties will soon litter the street. We can only watch.

As noted in my Nov. 24 column, CellCyte began as a nondescript Vancouver exploration company called Shepard Inc. The two senior officers were Michael Eyre, owner of a Richmond car dealership, and Glen Macdonald, a Vancouver geologist who is actively involved in creating shell companies.

The company, with the help of Vancouver chartered accounting firm Morgan & Co. and Vancouver geologist Bill Timmins, filed a registration statement with the U.S. Securities and Exchange Commission in 2005 as a prelude to trading on the OTC Bulletin Board.

It was difficult to believe this was an earnest business endeavour. Shepard had only one mineral claim in the Northwest Territories, costing just $2,500. By all appearances, it was being created for some ulterior purpose.

Sure enough, in January this year the company announced it would acquire CellCyte, a Kirkland, Wash.-based company "engaged in the discovery and development of breakthrough stem cell enabling therapeutics."

In June, CellCyte -- with the help of filing solicitor Thomas Deutsch of Vancouver law firm Lang Michener -- filed a disclosure statement showing, among other things, that one of its major shareholders was Newport Capital Corp., a Zurich company controlled by Brent Pierce, who is currently serving a 15-year stock market ban in B.C. for fraud.

For years, Pierce has been able to tip-toe around his ban by promoting U.S. over-the-counter companies like CellCyte -- which are not B.C. reporting issuers and therefore outside the jurisdiction of B.C. securities regulators.

His other promotions have included Lexington Resources (high $7.46, now one cent); Uranium Energy (high $9.25, now $3.30); Morgan Creek Energy (high $5.40, now 30 cents); GeneMax (high $47, now 21 cents); and Geneva Gold (high $3.50, now $1.50).

Now Pierce is focussing on CellCyte. In October, he hired U.S. pen-for-hire James Rapholz to tout the stock:

"Now, a practical 'pill-in-a-bottle' application puts the miracle of regenerative medicine within immediate reach!" Rapholz gushed in a 12-page report.

At the time, the stock had levitated to $5.70, but he clearly expected much more: "Invest just $5,000 now . . . and you could have $7 million."

To produce and distribute this piece of hysteria, Pierce (through his private company, Stockgroup AG) paid Rapholz a stunning $445,000.

By last week, the stock had climbed to $7.35, giving the company a total stock market value of $440 million. The action caught the eye of Seattle Times biotech reporter Angel Gonzalez, who published a story on the front of the newspaper's business section this past Sunday.

Entitled "CellCyte shares ride a wave of hype," the article noted the company "is still a year away from its first early-stage clinical trials" yet its market capitalization exceeds many Seattle-area biotechs "far more advanced in developing therapies."

The article also quoted CellCyte co-founder, president and CEO Gary Reys as saying, quite incredibly, that "his lawyers investigated Pierce and found nothing wrong."

The article -- as damning as it was -- didn't even put a dent in the share price. For the moment, at least, the stock seems to be operating in its own universe, well beyond the laws of supply and demand. And not a regulator in sight. A slow-motion nightmare.

- - -

A former certified general accountant who allegedly embezzled just under $1 million from his employer has been charged with fraud.

On Nov. 26, Burnaby RCMP charged Wade Chernoff, former controller of Taiga Building Products Ltd., with one count of defrauding Taiga of more than $5,000.

Mark Schneidereit, Taiga's manager of corporate planning, said Chernoff worked at the firm from January 1997 to October 2005, when he voluntarily resigned.

He said that, after Chernoff left, the company discovered he had embezzled large amounts of money over more than three years.

In May 2006, the company filed a lawsuit in B.C. Supreme Court alleging Chernoff had "abused his position at Taiga through a fictitious invoice scheme under the guise of Chernoff's personal company, SPF Lumber Ltd., totalling approximately $982,000."

Schneidereit said Chernoff has fully cooperated in the recovery efforts: "We have already recovered a substantial amount, and we expect to recover the full amount," he said.

He declined to say why Chernoff took the money. Chernoff could not be reached for comment Tuesday.

Meanwhile, Burnaby RCMP commenced a criminal investigation. Last week, the Certified General Accountants Association of B.C. issued a release advising that Chernoff had been charged.

The association also noted that Chernoff was deemed to have resigned as a CGA on Aug. 1, 2006 for failing to pay annual dues.

Schneidereit said the company did not issue a release about the embezzlement because the amount was not deemed material to the company's affairs.

He also noted that the embezzlement occurred under former management. "Current management has put into place an internal auditor to prevent future occurrences," he said.

Taiga, based in Burnaby, distributes building products through 14 distribution centres across Canada and one in northern California. It also produces treated wood at three facilities in Canada.

The company's shares are publicly traded on the Toronto Stock Exchange. During the year ending March 31, the company generated $1.1 billion in revenues and $4.1 million in net profits. Total assets were $304 million.

dbaines@png.canwest.com

canada.com
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