Art2Gecko
20 years ago
CNDD - Anatomy of a stock fraud
http://www.junkfax.org/fax/profiles/wsp/wsp.htm
From their website:
Tom Heysek, the Editor of the WSP newsletter and our financial guru, has extensive experience in stock investment analysis and financial forecasts. His stock tips and financial expertise help WSP members to make informed investments!
That's bullshit. So is their criteria to be "selected" by them for profiling. The whole thing is a scam.
This page explains who they are, how they do it, and how they can get away with it without getting arrested or stopped.
IMPORTANT: If you are a victim of these folks and have actually lost money in your purchase of any shares promoted by these gentlemen, please join this Yahoo group and wait for an announcement. This is a moderator-post only group so you will only receive a small number of critical emails a month (if any):
Yahoo! Groups cnddStockFraud
Here's an image of the USPennyStocks.com website bio of Tom:
USPennyStocksHeysekBio.pdf
These guys made one big mistake: they sent me a unsolicited fax. I'm the last person on the planet you want to send a junk fax to.
Here are 8 faxes I got from Winningstock picks: Kirsch WSP faxes.PDF. Some of these were sent by Protus IP Solutions. But we have other examples of similar faxes sent on behalf of the WSP people that were sent by fax.com, e.g., see VerifiedSamplesJul04 which promoted TWTN, another WSP stock.
I've never lost a junk fax case because I'm always super careful to only sue people I can prove are liable.
This case was really intriguing because of the sheer volume of spam they've sent out as well as the incredible lengths they've gone to in order to make themselves "invisible." They tried to hide behind a company manufactured in the Bahamas to make it so there is no company to sue.
I took this as a personal challenge. I have never found any spammer I couldn't uncover and these guys are no exception to the rule.
I've spent several hundred hours over the past two months (since receiving my first fax from them) trying to figure out who these guys are and how they do it. I have most of the pieces solved. There are only a few loose ends I don't yet understand, but these are on the periphery.
This page is published to help aid those people who are investigating this matter. It is also posted as an aid to people who are thinking about suing those people who are truly responsible for sending the faxes and/or the stock fraud.
So in what follows, I will explain what the evidence indicates. I am not accusing anyone of a crime here, I am just reporting what appear to be consistent facts based on personal contact with the people involved (including personal conversations with Heysek, Kline, Ross, Rutkowski, Katz, Martin, Lord, the Woltz family, the Paulson brothers, Frappier, and Cuadra) and with evidence which I have been able to uncover. This information has been shared with my contacts in the Attorney General's office (State of Virginia, State of California), the SEC, and the FCC.
IMPORTANT: There is more information posted on a secret website if you are a government agency investigating this case. Use the contact link.
DEFINITIONS
"WSP" when used below means www.winningstockpicks.net aka Worldwide Picks LTD (the company behind the websites) aka www.USPennystocks.com aka www.hotstockpicks.net aka Fire Your Broker Stock Picks. They are all the same people, just different identities.
YOUR GUIDE TO THE PLAYERS
We introduce the cast of characters in this real-life drama first. The following people are covered here:
Jeremy Jaynes aka Gaven Stubberfield (Cary, North Carolina)
Top 10 ROKSO e-mail spammer (see ROKSO page on Jaynes and Rutkowski). Locations vary around the Raleigh and Cary, North Carolina area. Profit margins are down so turned to stock scam pump and dumps for greater returns. Gets personally involved in the execution of promotions.
Bryan Kos (eastern Canada)
Another top ROKSO spammer (see ROKSO page on Kos). Born and lived in the US (Sunnyvale, CA Scottsdale, AZ, and Chicago, IL), but now appears to be located somewhere in eastern Canada probably because he thinks he'd be harder to get there. Kos and Jaynes appear to be the top people which is consistent with their psych profile as well. According to a former associate, Kos, like Kevin Katz, is very charming and charismatic in person. People want to like him and help him. Just like Katz, his charisma creates a huge sense of loyalty to him that transcends their better judgment.
Don Oehmke aka Donald E Oehmke (Kalamazoo, MI)
Chairman of SGNJ (a WSP promoted stock) and Ventana Consultants LTD, Kalamazoo, MI. Oehmke arranges the stock transactions since he's "experienced" in this area (see Rel. No. 41755 - August 18, 1999). Oehmke and Kos incorporated SGNJ, for example. Heysek conveniently neglects to mention how Kos fits into the company in his writeup on SGNJ. In fact, he doesn't mention Kos's involvement at all. Gee, I wonder why? Heysek is normally so thorough in his research. How could he have missed that one? Could it be that if he did, that his readers would realize they were being set up...a company founded by two people of "questionable" reputations with a track record of breaking the law, none of whom appear to have any experience in the line of business they are in?
Hartley Lord (Boca Raton, FL)
The 75 year old head of CNDD. Unlike all the other suspects here, Hartley actually wanted to talk when I called him! Based on what I heard, I'm convinced he's innocent of any wrong doing, but I didn't spend a lot of time on this and probing into his background. He was completely cooperative and all his answers made sense. My guess is he's just being played by these guys. See his story below.
Jere Ross aka Jeremy Ross (Tampa, FL)
Co-founder and partner at Bush Ross Bush Ross Gardner Warren & Rudy PA in Tampa Florida (see Bush Ross Gardner Warren & Rudy, P.A. - Jeremy P. Ross Bio). Ross just provides legal counsel for both Oehmke and Lord. Both are heads of companies featured in WSP, but that is because Lord didn't have a current lawyer when Oehmke contacted him.
Thomas M. Heysek aka Tom Heysek (San Francisco, CA)
The "editor" of winningstockpicks.net aka USPennystocks.com. He's the "candyman" here, or should I say the CNDD man? He can take a company with no revenue and package it with his writeups (with the appropriate advertising on the web support) to a billion dollar market cap (like he did with CNDD). He uses his real name because otherwise it doesn't look credible. His resume is based on the truth, but "inflated" just like his stock writeups are. He's very tight with Kos.
Andrew M. Kline (San Rafael, CA)
Heysek's "partner" in creating fraudulent stock writeups. The two of them constitute the editorial staff for WSP. After I pointed out to Kline that Heysek's report on CNDD can't possibly be reasonable and was so outrageously false, Kline hung up on me. I must have really gotten to Andrew because five minutes later Heysek makes a threatening phone call to me to back off my cases against him (which confirms he was served). Tom didn't say "please" so I ignored his "request." Apparently Tom never saw any of the Barney tapes about "please and thank you are the magic words" when he was a kid. The only possible explanation for Kline's reaction I can think of for this is that Kline knows exactly what he is doing. That fits the facts since anyone honest would immediately figure out what Heysek is doing; they wouldn't need me to point this out. The CNDD profile is just a mind blower...full of impossible assertions. Anyone with basic skills could see the fraud. The fact that Kline had no interest in the facts suggests he's like a mini-Heysek, a "Heysek wannabe," learning the tricks of the trade from the master. I'll bet he is paid pretty well...maybe he even gets a cut of the action. Kline worked at Noe Valley Cyclery just a few years ago (in 2000). It's a bicycle shop. Impressive credentials. That seems like the perfect background for evaluating complex speculative investments.
Richard Rutkowski (Cary, NC)
The technical computer guru for Jaynes. Located in Raleigh and Cary, NC (see ROKSO page on Jaynes and Rutkowski). Sets up technical infrastructure. Was involved in WSP technical infrastructure. I've talked to him on his cell phone and wanted to ask him some questions. He said he'd have to talk to his lawyer first. He never called me back. Guess he forgot. So I had no choice. I was forced to do a lot of digging to find out who sent me the faxes. So you can thank Richard for providing me the incentive to dig out all this stuff since he wouldn't tell me who hired him on this job. These guys do have a great sense of humor... they set up a bunch of front companies, e.g., Vinnie's of the Carolinas and register it with the state as a full service restaurant. Ha ha! I had a good laugh on that one. Richard was quite pleasant to talk to on the phone...quite unlike Heysek who comes across as really arrogant and impolite.
Jessica DeGroot (Cary, NC)
A bit player. Works for Jaynes. Does Internet related stuff for them. The nice folks in the Virginia AG's office know her well.
Chad DeGroot (Cary, NC)
Works for Jaynes too. He does some graphic design work. He's Jessica's husband. Some of the WSP website is Chad's work, we can prove that so it ties Jaynes directly in with Heysek.
Tom Martin (Ottawa, Ontario, Canada)
CFO of Protus IP Solutions. They send out junk faxes for WSP, most likely in return for stock or cash. Martin refused to tell me who hired them (it was either Kos or Jaynes), but they claim they will respond to a subpoena that is "properly served." Seems to enjoy making my life difficult. If he wanted to help me, he could still be legal, but he refused to do that. More interested in seeing if I'll jump through the hoops.
Kevin Katz (Laguna Beach, CA, Aliso Viejo, CA)
CEO of fax.com (which is now called Access Sales Inc). They send out junk faxes for WSP, most likely in return for stock but could be a cash deal. Katz' lawyer that he uses for his SEC cases, Jackie Meyer, flatly refused to comply with any subpoena. That suggests to me that they know this is criminal to be doing this. Why admit you knowingly are sending out fraudulent faxes? So they are remaining silent. That of course means that it's perfectly reasonable to haul them into court to explain since they had the option to do it "the easy way" and instead want to provide the information "the hard way." My fax.com insider says that they ABSOLUTELY know this stuff is fraudulent. Frank Frappier (top sales person for fax.com) specializes in this area...he does almost a million dollars a month on these accounts! So fax.com alone is sending out over 20M of these promos a month. Fax.com NEVER complies with discovery. That should make conviction rather easy I would think if federal charges are brought... obstruction of justice I think is the term that is used.
Paul Spreadbury (Pensacola, Florida)
A freelance marketing consultant. His name (or phone numbers associated with him) were on the phony press releases. Appears to be currently located in Pensacola, Florida but might also be in New York. Uses a florida call-in number, but it could just be an answering machine. Left lots of messages, but doesn't return my calls or my emails. No criminal history. Could be just an innocent pawn in this chess game. Not enough info yet for an opinion on him until I make direct contact.
Doug Paulson (Toronto, Ontario, Canada)
They do audio and video work featured on the WSP site through their company Vault Studios www.vaultstudios.com in Ontario, Canada. At first I thought they were just innocent pawns in this, but they sure don't act like it. They act like they are hiding something big. They refuse to comply with my subpoenas. They send "send me the subpoena" but then never even bothered to call to discuss any issues that they might have had with it. It was basically a trick so they could find out what I was fishing for. Most honest people don't act that way. The Paulson's treated me like I'm the criminal and Kos is a whitehat. Gotta be a reason for this...I haven't figured this out yet, but it makes me very suspicious that they are still obstructing justice even after I've pointed out to them exactly who Kos is. I gave them a final chance to pick sides. They just ignored the email. Guess the Paulson's are rooting for the blackhats to win.
Jon Paulson (Toronto, Ontario, Canada)
Works for Doug. He's either Doug's son or his brother. Also is refusing to talk. I wonder what they are trying to hide?
Howell Woltz (Advance, NC)
This guy is incredibly evasive when you ask him simple yes-no questions (like "have you ever heard of Worldwide Picks LTD?" and "did you incorporate them?") and he's made statements and given answers that are deliberately misleading. That is a huge red flag. I spent several days trying to ask him a simple question: "Did you set up Worldwide Picks LTD, yes or no?" Woltz completely danced around the question for days and a week later still never answered it. It's a matter of public record that Woltz set up the offshore account (Worldwide Picks LTD). He did it for Jaynes and crew so they can hide their identity from being discovered. Like Jaynes, Woltz is also in North Carolina but he makes it appear he's based offshore by bouncing his email off a Bahamas based mail server and using a 714 area code cell phone when he is really in North Carolina. He told me "I'm done with my vacation in North Carolina." I knew he was lying about that because I already had his coordinates so I called his home in North Carolina and talked to his son. I asked "is howell there?" The son passed me to Vernice, his wife, who asked me why I was interrogating her son!!! Talk about extreme paranoia. Anyway, they were nice enough to confirm to me that my info was correct; that he really lives there. Howell is associated with the website registration info for WSP (the address is his Sterling Trust in Bahamas) and other things they used. Also, you are supposed to send your WSP membership fee to Howell's other company (Sterling Trust (Anguilla), Ltd) in Anguilla. When you call down there and ask what they do, they can't answer the question. No surprise...I asked Howell the same question and he was completely flustered trying to explain what he does for a living. If Howell doesn't know what they do, it's natural that his "employees" can't figure it out either! Howell stopped talking to me when I started cc: government agencies on my emails to him, specifically when I asked him: "who did you recall talking to on the day you incorporated Worldwide Picks LTD?" I guess that was too tough to answer. We should be able to pull the phone records on that one to help Howell's memory which seems to be conveniently bad.
John R. Rooney (Jupiter, Florida)
Rooney was quoted in a press release from WSP (see Abe Goes Tommy in New Campaign for USPennyStocks.com). Rooney, with his wife Natalie, moved from New York to Jupiter, Florida recently. Has a history of pumping up stocks well beyond their value. He's the son of Patrick J. Rooney who also has a history of stock manipulation. I guess it runs in the family. Might be genetic or something. John was head of HORNBLOWER & WEEKS INC INVESTMENT BANKING 110 WALL ST FL 24, NEW YORK NY 10005-3806 before moving to Florida. John is quite a guy. Here are a few choice articles about John:
Stock Patrol In Trouble Again (jul 11, 2002)
StockPatrol Through The Looking Glass (aug 10, 2002)
Stock Patrol The Terminator
Hornblower & Weeks, Inc. Order Revoking Broker-dealer Registration
FindLaw Class Action and Mass Tort Center Securities SEC Resources
NASD Regulation News Release - 05-07-02
LITIGATION Release No. 16733 - September 27, 2000 (it's the family business I guess)
John Richey
Haven't had time to research him (yet). Nothing came up on a quick search I did. His name was in one of the press releases, but is otherwise unknown. If I get to Spreadbury, I'm sure he'd know.
Javier A Cuadra (Key Biscayne, FL)
Javier is a contractor for these guys. He is also based in Florida. Javier is a busy guy and runs several companies such as Oncall Telecom, LLC, Camelot Promotions LLC, and a whole bunch more out of his home in Key Biscayne FL. Cuadra has experience with junk faxes since he also works at VeloFAX LLC (formerly Visionlab Miami). Javier probably does the actual dealing with the fax vendors, but I haven't been able to confirm this yet. He's clearly involved in this, I can prove that. He even confirmed it when I called him, but then started denying just about everything (including stuff I knew were facts) so he was clearly hiding a bunch of things. I'm sure he has an interesting story to tell any federal agents and I'm sure he'll be fully cooperative with them since I don't think he wants to go prison. The reason he'll cooperate is because if he doesn't give them the same answers as the hard evidence I've given the feds, they get to bust him for obstruction, just like Martha. He obviously would like to be contacted by the feds because I gave him a choice...talk to me or to them. And he opted not to talk to me. So there you go. His choice.
Here's the story as best as I can piece together. If there are any errors, please use the contact link to let me know about them.
What follows is MY BEST GUESS as to what really happened based on the evidence.
The setup
Jeremy Jaynes and Bryan Kos are well known e-mail spammers (on the ROKSO list). But the profit margins have eroded in their chosen profession due to a combination of factors:
Effective spam filters cut their margins and their response rates making it harder to make money
Increased competition from other spammers has driven down the prices they can charge advertisers
Increased volume from other spammers makes it harder for their spams to get above the "noise level" and thus affects the "click thru" rate which in turn means they have to charge lower prices than in the past
Fewer advertisers are willing to engage in sending out spam due to the laws
They now risk criminal prosecution and 20 or more years in prison if spams end up in Virginia. That risk is not hypothetical. It is very real. In fact, Jaynes and Rutkowski have been indicted and both are now facing 20 year prison terms in Virginia. That's a good incentive to change your business plan.
For all these reasons, they do a little "career development" training and end up getting into the much more profitable business of "pump and dump" of securities (buy low, promote, and sell high) or just "dump" (create or print the shares yourself, sometimes illegally, and sell them since it is so unregulated nobody notices).
The focus is on the DOLLAR-VOLUME of the stock (i.e., the volume of stock multiplied by the price), not the price itself. This is because they get their shares for either "free" or nearly free so that the only thing that matters is how many shares they can move (dollar volume). For example, in CNDD they moved 5M shares at $8 in a single day. They paid 10 cents for those shares from CNDD. So they made $40M in a single day. Profit. Tax free (they aren't worried about the IRS going after them...the IRS is too short staffed).
Jaynes and Kos (the e-mail experts) connect up with Oehmke (the stock expert) who has "experience" in the stock tout area, having been cited by the SEC for his company Ventana Consultants for similar work (See Rel. No. 41755 - August 18, 1999). Oehmke, who lives in Kalamazoo, MI, is a client of Jere Ross, a prominent attorney in Tampa, Florida. Oemke's job is to find the shell corporations that they can pump.
Interestingly, people in this line of work are known as "IR promoters," i.e., Investor Relations Promoters. That makes it sound legit. Cool eh?
Jaynes employs Rutkowski (who does technical work like websites and servers) and Jessica DeGroot and Chad DeGroot. There are a whole bunch more people who work for Jaynes. I have their complete employee roster (and list of company names they hide behind) if you are in law enforcement.
Jaynes and Kos also connect up with Heysek. Heysek employs Kline. Heysek is a specialist in providing convincing looking company writeups and Kline appears to be a Heysek "wannabe." Both Kline and Heysek know fully well that they are wildly distorting the truth in their company writeups.
Jaynes also works out a deal with Howell Woltz to set up Worldwide Picks LTD in the Bahamas where it is against the law to reveal who the officers of a corporation are. Howell's company in the Bahamas is called Sterling ACS, Ltd. So I asked Howell, "on the day you set up Worldwide Picks LTD do you recall who you spoke to?" That is not illegal for him to answer. At that point, he stopped talking to me completely. He lives on Woltz Lane in Advance, NC so when you have a street named after you, you are probably a bigwig. He certainly acts consistent with someone who has a lot to hide. Also, WSP says to send your membership fee to Howell Woltz's company in Anguilla, B.W.I. which has a slightly different name, Sterling Trust (Anguilla), Ltd (it's their other "branch office"). And there are other connections with Woltz's company and Jeremy Jaynes I can tell you about if you are in law enforcement. Woltz is definitely tied in with Jaynes. No doubt about that.
The promotional activities (website, etc.) are directed by Heysek and Kos. They utilize people like Spreadbury, the Paulsons, DeGroot, etc. to create their websites (winningstockpicks.net and it's successor, uspennystocks.com) and they contract with fax broadcasters fax.com and Protus IP solutions to send out faxes (perhaps using Javier A Cuadra in Florida who has experience in junk faxes).
The memberships on the web is just a come-on to get your email address. They make all their money on the stock trades. The membership fee income stream is peanuts, and are just there to make them look like they are a legit newsletters. The goal is to get your email address and get you to sign up for the free membership so that they can push the latest "hot tip" to you via email since you're not going to remember to come back to the website. If you are stupid enough to sign up for one of the premium packages that you have to pay for, that's just fine with them...they'll take your money, but the real value is getting you to enter your email address so they can market to you on a regular basis with their latest tips.
So now they have the core team to execute their new profession of IR promotion.
That's the setup. Now here's how it operates.
The Concorde America Story (CNDD)
Hartley Lord, an honest guy, 75 years old, does a reverse merger in June 2004 with MBC Foods. He needs money to finance his new company that has zero revenues. So he authorizes 209M shares (an interesting number to say the least) and registers 10M shares to sell to the public. Oehmke contacts Lord looking for an available shell. Oehmke does some research and finds Lord attended a shareholder meeting a few years ago. So Oehmke tells Lord that they met years ago at a shareholder meeting of a company Lord invested in. Lord doesn't remember so believes the story. Oehmke is a promoter and offers to buy the entire Rule 504 offering of 10M shares for 10 cents a share on or about June 30, 2004. Oehmke's attorney, Jere Ross, impresses Harley, so Hartley hires him to represent CNDD (in April 2004). So Lord is happy he got his financing done and he goes about his business.
Meanwhile, Oehmke tells Kos he just landed 10M shares of CNDD at 10 cents. Kos and Heysek arrange for a profile of CNDD to be written. Heysek talks with Lord to get the basic facts, then blows the whole story completely out of proportion. So a company with zero revenue as of June, 2004 is expected to do $630M in revenue in 2004 (and over $400M in Net Income!!!!!) according to Heysek and Kline. Here's the report they published preserved as a PDF so they can't change it: CNDDProfile on USPennyStocks.pdf. And this company is going to supply hundreds of thousands of workers under a contract with the Spanish government (later changed to an unnamed firm in Spain that employs less than 10 times that number now)!?! I don't think so!!! Even the CNDD officers listed in the writeup are wrong (one is a shareholder and doesn't even work for the company).
But it looks credible since Heysek is so skillful, so investors buy the story and the stock. They promote the shit out of CNDD using various means (varies with each stock but a combo of google ads, spam, junk fax, tv, etc). Just do a google search of "Concorde America." 15,000 pages of results; each one telling you how much you'll make on CNDD and to buy it now. This is an extensive web promotion campaign.
Kos and Heysek direct Spreadbury to send out a phony press release talking about this monster deal with the spanish government that was in the Heysek writeup. Spreadbury does as they request and he pays the invoice from the wire services so there is no money trail to them.
Result: on a good day, 5M shares of CNDD trade at $8. In short, the bad guy net close to $40M in profit in ONE DAY. Now that's where the REAL money to be made in penny stocks is!!! But Heysek never writes about that aspect.
Put it this way, CNDD with zero revenue and no "monster contract" that anyone has independently verified that I'm aware of, has a market capitalization that is more than Delta Airlines!
It first traded as a stock on July 28 with a $660M market cap and issued it's "Monster" press release later that same day. Remeber, there are no revenues.
Here are the press releases:
Company News and Press Releases From Other Sources:
Concorde America, Inc. Disclaims Prior Information Releases
Aug 11 2004 5:09PM ET PRNewswire-FirstCall via COMTEX/
Concorde America Revises Press Release
Aug 9 2004 6:32PM ET PRNewswire-FirstCall via COMTEX/
/C O R R E C T I O N -- Concorde America/
Aug 9 2004 3:34PM ET PRNewswire-FirstCall via COMTEX/
First Global 'Monster' Employment Placement Service Launched
Jul 28 2004 2:30PM ET PRNewswire-FirstCall via COMTEX/
Lord gets wind of what is going on, so Kos and Heysek get Spreadbury to issue a correction. But they just change the name of who the contract is with: from the government of Spain to an unnamed company in Spain. At no time, is there a mention of the name of the company or a quote from the mystery company! Pure fabrication.
So now Hartley is really pissed because none of these press releases was from him so has Ross draft a real press release that is really from CNDD and explains what is going on. He has trouble getting the wire services to take it initially because of all that has just happened (this is true; I verified it myself). He is finally able to get it run and the stock immediately tanks to $2.50 a share.
But even at that price, Jaynes, Kos, Oehmke, Heysek et al. stake is still worth $25M!!! But they've already sold close to $40M.
Interestingly, the most active brokers in Concorde stock on Friday included Newbridge, Sunstate and Intercoastal, all Florida-based. Newbridge has a history with authorities of "high pressure sales tactics"--i.e., it is a "boiler room." Either Newbridge or Sunstate is located approximately 3 miles from Lord's home/headquarters.
In the meantime, they are still hyping CNDD. In Heysek's letter to his subscribers, he completely forgets to mention the devastating press release that the real company issued that the previous press releases were bogus. Instead, the newsletter claims they are being attacked by shorts (which was true) and that this is a GREAT buying opportunity.
From: newsletter@USPennyStocks.com
To: [snip]
Sent: Thursday, August 12, 2004 3:18 PM
Subject: USPennyStocks.com Update
CNDD: Attack of the Short-Sellers Today, the common stock of Concorde America, Inc. was attacked by a group of short-sellers. For those of you who are not familiar with short selling, it occurs when individuals or groups get together to FORCE the price of a stock down in the hope that they can pick up those same shares at a cheaper price. In other words, they want to buy your shares cheap! We view this as a tremendous buying opportunity. Our recommendations are still in place, and we feel that CNDD will see a price of $38.00 per share over the next 6 months. If you are already invested in the stock, we see this as an opportunity to add to your positions. If you are new to CNDD, this is a great chance to accumulate shares at a price we won't see again. We will update you more on CNDD this weekend in our "Weekly Update" section. News Release Disclaimer - None of the views expressed in this email are of the Company, and NO company officials have been contacted regarding this information. Click here to read our full Disclaimer
You gotta admire their tenacity. And, by the way, in general, it is very difficult to short sell any volume of a pink sheet stock as far as I know. On 8/13/04, I asked my broker if he could short 1 share of CNDD. He talked to his pink sheets desk and they couldn't because they couldn't find even a single share to borrow to do this (they had 30 calls today wanting to do the same thing). So I couldn't short a single share!!!
Prior to 8/13/04, "locates" for short sales were available in larger quantities. I know one person who shorted 25,000 shares on 8/11/04. I received the following e-mail on 8/15/04:
After the press release disavowal, everyone wanted to borrow and it became impossible to get a "locate." When I called Goldman Sachs' stock loan desk on Thursday, I was told "everyone wants that one today," which may be the first time in the history of Goldman Sachs that so many people cared about a pink sheet stock. I am not sure what statistics regarding short sellers are required to be kept for pink sheet stocks, but I can tell you with certainty that by now every share that is available to be shorted is shorted. Insiders take special precautions (like taking physical delivery of their stock certificates or prohibiting their broker from lending) so that their shares can not be loaned. As a result, inventory for short sellers is limited to the public float less any public shareholders who take anti-short seller precautions.
Fool me twice? I guess you can do it. The net result of the "attack by shorts/great buying opportunity" e-mailing is the stock price on 8/13/04 is up over $4 and has traded over 2.3M shares today. So that's another $9M in "tax free" income for our spammer friends today alone even after being exposed by the company.
If you are wondering why CNDD just doesn't register more shares and make a fortune, here's why: under reg 504, the company is limited to raising $1,000, 000 or less, by the sale of common stock, in a 12 month period. That was done by the current 504 exclusion on or about June 25, 2004.
Final note: In Heysek's newsletter to his subscribers, he noted this amazing fact:
In the final two trading days of last week, CNDD exhibited a swing in Market Value for both days of $1.4 Billion. Remember, the OTC Bulletin Board has a total Market Value of only about $2 Billion --- a statistic we present to ensure the average individual investor has a perspective on how visible CNDD has now become among the Penny Stocks, and in a relatively brief period of time.
For more info, see the excellent article on CNDD on StockPatrol.
Scam#2: Storage Innovation Technologies, Inc (SGNJ)
Let's start with the management team on this WSP promoted stock.
Don Oehmke is the Chairman (and co-founder) of Storage Innovations Technologies. Previously, Mr. Oehmke was the Chairman & CEO of Ventana Consultants (1991-2004), a business consulting and venture capital firm. As its CEO, Mr. Oehmke operated at the highest organizational levels, for both domestic and international companies.
Does that name sound familiar. You bet!! He bought Lord's shares on the CNDD deal! Our friend Don keeps popping up.
And you gotta love Tom's writeup on Don. On August 16, 2004,I did a Google web search for Ventana Consultants LTD. I got two hits: this page and a link to Ventana Consultants, Ltd. Zero hits in Google Groups. So for a firm around for 13 years Don sure has kept a low-profile for someone who "operated at the highest organizational levels, for both domestic and international companies."
On to the deal. On this deal it's even better. Don can buy the shares for nothin' because it's his company (along with Kos)! So unlike the CNDD deal where they "risked" $1M (they bought 10M shares at 10cents), on this deal there is no downside since they paid $0 for the stock. ZERO.
However, the "story" they put together isn't as sexy as the big contract with the Spanish government billion dollar story of CNDD. So they can't get the volume up. They make only $100K a day on a good day. That's peanuts compared to CNDD.
So that's two examples of a real pump and dump (CNDD), and an example of a "dump" (SGNJ). Those are the principal methods. It's all about the volume, not the price.
Who sent me the fax?
So who do you sue for your junk faxes? Well, it looks like Rutkowski and Jaynes and a few more will be living in state housing for a long time so suing them may not be very productive. If you sue in small claims, you can get a quick judgment, but then you have to collect. So it's really risky suing these guys because they may not be around to enable you to collect.
I've personally decided to sue Heysek because he and Kos control the promotion of the site. Also, he's not going to comply with my subpoena (see Heysek suggested discovery questions), so he'll probably lose.
I have subpoenaed Heysek's financial records. I should have these by August 31 (the timeframes are regulated by statute to allow him time to object). I believe it is extremely unlikely that Heysek would be able to quash the subpoena; since Heysek says he isn't Worldwide Picks but just a writer, this is central to my case and it won't be quashed. After September 20, I should be able to share this information with anyone filing a case against Heysek where this information is relevant.
Heysek's receptionist has been specially trained in "process server avoidance techniques" by the "Heysek Legal Academy" aka Tom Heysek. Therefore, I used a process server who has been doing this for 30 years: Jeff Cunningham at 408-395-6778. He knows the proper drill to obtain legal service in these situations. I highly recommend him. He was highly successful in this difficult situation and he's fees are very reasonable.
It's extremely unlikely that Heysek will comply with discovery since it would expose his business associates, so it's an easy case to win.
See Heysek suggested discovery questions for some ideas for your subpoena/document requests.
In the unlikely event he does comply, please contact me and I'll be able to discredit any phony information he might supply the court.
Also, if he does comply with any of the requests, kindly have the judge hold it in the court file so that you can make a copy of anything he produces and send it to me using the contact link so that it can be analyzed.
Junk faxes promoting TWTN, CNDD, BDYS, AHFI, SGNJ are likely suspects for including in a lawsuit naming Heysek.
The address I used for service of Heysek is the following:
Thomas Milton Heysek
Asian American Capital Management
50 California street suite 1500
San Francisco CA 94111
(415) 277-5453
Fax 415 439 5299
I'll identify additional people that I might consider suing here as soon as I am confident they are liable.
For collection work, I highly recommend Bryan Sampson at (619) 557-9420. He is by far the best collection attorney I'm aware of. He's one of the few collection attorneys who knows how to break off-shore trusts (and has done it).
Why they can get away with doing this
Why do they do this stuff which appears that it might be pretty illegal? well, they make a shitload of money, that's why. It's the money, stupid, as they say. Like $40M in profit (tax free probably) in one day! Get it. It's a lot more profitable than spam!!!
They aren't worried about law enforcement either. Here's why... because of the Disclaimer that they emphasize, it's hard to get even a civil conviction on them. So individuals are not going to risk the $500,000 in litigation costs to recover their loss (even if they won). And class action attorneys aren't going to take the case either because there are no legitimate businesses or people involved to collect from at the end of the day so the attorneys can't recover their fee. So they can't afford to take this. An SEC case would take a year to investigate, take 2 years to try, and, if the SEC wins, the worst that can happen to these guys is they have to return the money (if they can find it after 3 years) and get them to promise not to do it again. But the SEC is so busy with other things, this may not even get assigned to a prosecutor. For example, the SEC didn't even stop trading on CNDD after the fraud was revealed. If the SEC didn't do that, the chance of this getting on the SEC radar is small. So they don't worry about the SEC either. The company CNDD still has an absurdly high market cap for a company with ZERO revenue (this is written 8-13-04). The SEC is doing nothing about it.
Criminal cases are even harder to get anyone to pursue; the threshold for proof is much higher, the $ amount must be in the billions to get someone at the FBI assigned to investigate. Therefore, the US Attorney won't take the case unless the evidence is a slam dunk. The FBI is too busy chasing terrorists and crooked CEOs to bother with these guys even if there was a case. And that's really unlikely since if you can't easily win a civil case, winning a criminal case against these guys is virtually impossible.
The SEC is short of manpower so doesn't have the resources to go after them. Nobody contacts the DOJ so they won't do anything. So these guys basically rip off a lot of people and get away scott free. And if you try to sue them, they have PLENTY of MONEY to outlast you in court (and counter sue on trumped up charges) and even if you win, the most you get to recover is the $ you lost on the stock making a case against them uneconomical. So they walk away free. It's a great scam.
Think I'm kidding about the SEC? Check this out from someone who used to work there: Gary Goodenow Presents Reality At The SEC. His whole website is worth reading if you have time. Here's an excerpt:
The bad news is that it seems to me that it is more likely the fraudster in Florida will be killed by lightening then be hauled into court on a contempt hearing and sent to jail. In the six years I was at the SEC in Miami, it happened once. I did the case, and the fraudster did a week or so in the can for failing to account for the proceeds of the fraud. Investors got no money back anyway, so the whole effort ended up being an exercise in futility. But at least the guy had to assume the position in jail. And the reality was, that the whole time I was going to court hearing after court hearing in an effort to get this guy held in contempt, management at the Commission thought I was wasting time. They wanted me to move another case, so the Commission could report to Congress another statistic for the year (called: “a stat”) to make it look like we’d brought another successful anti-fraud civil action.
...
With civil remedies being as they are, the punishment and deterrence that comes from collecting the fraudster’s ill-gotten money just is not there. The money is usually hidden or gone, or so the fraudster claims, and as far as money being returned to defrauded investors, the present system is not getting the job done.
So as long as they stay away from e-mail spam (violation of Virginia law) and unsolicited faxes, they can avoid civil litigation and get away with this. The dumb ones take the bait of the cheap advertising costs of spam and/or junk faxes and then they can get clobbered in lawsuits. Smart spammers avoid the spam and the junk faxes and get a free ride. Our friends have now graduated from dumb to smart; it's unlikely we'll see future junk faxes and email spam from them.
So great money, no downside (worst that can happen is that they only have to return the money that the government can prove they got), no risk of jail time. That's why they do it.
Why they won't go after me
Conversely, while our system "protects" them from any downside, it also protects anyone who knows how our legal system works (like me), so we have sort of a Mexican standoff here. If they have more brains than arrogance (which is true of Kos and Jaynes), they aren't likely to sue me for this writeup to try to scare me off. First, I'd re-open my investigation on them, but this time with a passion and a full-time staff of investigators. Secondly, they would be subject to the most massive document requests and most intensive depositions that they (or their attorneys) have ever been through. I am more thorough in prepping the attorneys as I am in the write-ups here. I am legally entitled to do this.
So suing me is not something that they are going want to do, no matter how badly they want to get back at me. That has not prevented Tom Heysek (who certainly appears to have more arrogance than brains) from threatening me with a lawsuit for extortion. That clearly was done before he talked with competent legal counsel. If they are arrogant enough to sue me, that would suggest I was wrong about them and that they have more arrogance than brains and they are really going to be surprised at what happens to them. They've already seen what happens to them after 8 junk faxes sent to me. That was just a cake-walk compared to what will happen to them if any of them try to file a frivolous lawsuit against me.
Right now, I'm like a little beehive in their backyard. I'm done building my beehive and I sit there waiting for them to make a mistake. If they are foolish to attack the beehive, they face a steep decline in their revenue stream and some very unpredictable consequences all with no upside for them. Only an idiot would do it, and they aren't idiots.
Here's a TINY sample of what would happen if they sued me:
My new "placeholder" website (which is currently a parody), www.LosingStockPicks.com, will become live, with a real staff, a professional look, and real promotion. It will do for stock frauds what junkfax.org does for junkfaxes.
"WinningStockPicks.net sues LosingStockPicks.com" makes a GREAT hook for PR. We'll get extensive press coverage which will totally blow their "business." And it will have all been instigated by them!
I'll be prompted to spend $120,000 to promote LosingStockPicks.com. Right now, it gets a few page views a day. With the promotion, my hits will skyrocket. And guess how I'll promote? Yup, using the same fax broadcasters and fax list they did so I'll hit directly to their subscribers. Unlike their faxes, my faxes are not illegal since they are public service faxes (not commercial advertisements). The faxes will be formatted to look like the traditional "pump and dump" faxes, but the content will be refreshingly honest about who is promoting the stock and what the real story is. It will be so funny (because it is being honest) that people will show it to their friends which will increase my reach (see www.LosingStockPicks.com for an example). For example, it will have copy like "this stock is heading rapidly toward $0... Our 3 month price target: 5 cents.... Don't buy this stock ever... only a moron would touch this stock at this price...you are virtually guaranteed to lose every dime you invest in this..." with a Disclaimer like: "LosingStockPicks.com ("LSP") hasn't been paid shit by anybody but we thought it was time that somebody told you the truth how a bunch of former e-mail spammers put a team together to wildly inflate a few basic facts to make a company with zero revenue worth over a billion dollars."
For every new stock they try to promote, we'll issue a press release from LosingStockPicks.com exposing the fraud. The press release will have the company ticker symbol on it so it will show up whenever anyone researches the stock in Yahoo, pinksheets.com, etc. It will have a link to the website. The website will document what really happened with earlier "picks" from Tom and Andrew.
So it all boils down to this: it's simply an incredibly bad business decision for them to raise their profile; they will have gained nothing from the suit even if they won since the reality is that this site isn't causing them any grief. But if they attack me, I'll launch the activities above and their business will be impacted and they risk other unforeseen consequences. So no upside and unpredictable downside...simply a really bad business decision. While Heysek would be arrogant and stupid enough to try such a stunt, Jaynes and Kos are smarter than that.
So that's why we have a detente.
IMPORTANT: If you are a victim of these folks, please join this Yahoo group and wait for an announcement
Yahoo! Groups cnddStockFraud
Also, there is more information posted on a secret website if you are a government agency. Use the contact link.
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