dilly..drugs aren't good for ya anyway..

I'm sure that your comment makes sense to you, but it's just a rhetorical game. You and the lunatic penny king can sit in the back seat of his car all day and...well, I'm just saying no.

how does one know?

what is willing..

if what is being imposed..

is not understood..

Brainrot! Stop using drugs, gabe.

One can only 'impose' upon the willing...

Just say no.

Kant: "There is the knowable and the unknowable."
Hubbard: "How did Kant know?"

Follow this thread:http://www.investorshub.com/boards/read_msg.asp?message_id=3172233

Truth..The Fundamental Paradox..


The fundamental paradox..

of what Socrates did..

and the fundamental paradox of Plato's answer..


SOCRATES..What we think we know, we don't..

PLATO.....What we really know, we don't know that we know..

hey bonnie..political correctness..

is the natural continuum from the party line..

what we are seeing once again..

is a self~appointed group of vigilantes imposing their views on others..

~ Dorris Lessing ~

Source..Sunday Times, 10 May 1992

Billions of Dollars of Equity in Smaller Cap US Equities, and the Future of Hundreds of US Public Companies Is At Risk. Apparently, US based Depositary Trust and Clearing Corp. is Facilitating the Naked Shorting. Allegations Include Ties to Financing Terrorism.

In what is being called "StockGate" by Wall Street insiders, more than 200 U.S. publicly traded companies have been listed on the Berlin-Bremen Stock Exchange without the Companies' prior knowledge, consent or authorization. More than 650 additional US public companies have listings pending, virtually all without the companies requesting the listings.



The listings appear to be part of an effort by domestic and foreign brokers to circumvent the recent National Association of Securities Dealers (NASD), and Securities and Exchange Commission (SEC) restrictions against "naked short selling."



Short selling is a trading practice whereby investors borrow stock from a broker to sell with the hope that the stock price will decline before they have to "deliver" the shares to cover their "short position." Often, naked shorting involves groups of people working together to manipulate the market by selling non-existent shares of stock in an effort to force a company's share price to go down. By listing the US companies' shares on the Berlin-Bremen Stock Exchange, short-sellers sought the benefit of an "arbitrage," apparently utilizing clearing facilities of US based Depositary Trust Company that none of the current regulations are designed to close.



The StockGate story has resulted in complaints to the NASD and the SEC regarding "manipulative trading" that has coincided with the "listings" on the exchange for dozens of the several hundred companies that were listed en masse by what appears now to have been one European broker.



Norma Cohen reporting in the Financial Times stated, "The Berlin listings came just weeks before a new Securities and Exchange Commission rule on so-called naked short selling. Under the new rules, those seeking to sell shares short must be able to demonstrate that they are able to gain access to the securities within two days. However, the rules contain a loophole for what are deemed to be genuine arbitrage trades, defined as short sales in shares that are listed on another stock exchange."



The Financial Times also stated that "According to a spokeswoman for the Berlin-Bremen Stock Exchange, a single broker, Berliner Freiverkehr, asked that 850 US companies that are traded Over The Counter (OTC) be added to the official list during a six-week period beginning in mid-February."



Listings for more than 200 U.S. public companies sponsored by the German brokerage Berliner Freiverkehr, have now apparently been put on hold. The companies are now shown at the Berlin-Bremen Stock Exchange's website under "filing companies" but have the designation, "NA," under the column for the "expected day of listing.



Of the companies already listed by Berliner Freiverkehr without the companies knowledge or authorization, 100 were listed on April 22. Another 43 were listed on April 2nd, and another 80 were listed on April 28th.



Many of the companies who have become listed on the Berlin-Bermen Stock Exchange are demanding the delisting of their shares. These include FemOne, Inc., Advanced ID, and GK Intelligent Systems.



At the same time many of the US companies listed on the Berlin-Bremen Stock Exchange are evaluating their legal options against the US and foreign brokerage firms that they feel are responsible for the unauthorized listings, as well as against Depositary Trust Corporation who they believe is facilitating the naked short selling.



Ray Grimm, CEO of FemOne, recently stated: "We are completely dumbfounded to learn that a corporation's stock can be listed for trading on an international stock exchange without the prior knowledge or consent of the corporation itself. There are apparently hundreds of companies in the same situation as we are, and the only plausible explanation for this is that nefarious individuals are using the arbitrage loophole to engage in naked short selling, which has had significant negative repercussions on the market price of our stock."



In a recent news release FemOne also stated, "During the past several weeks the company's share price has traded significantly lower. Management believes that the downward trending of its share price in the market is related to the unauthorized listing on the Berlin-Bremen Stock Exchange, which the Company learned became effective on April 22, 2004."



"We intend to follow the lead of other companies listed on the Berlin-Bremen Stock Exchange, all without prior authorization, in demanding both delisting and evidence of who was ultimately behind the unauthorized listings," Grimm added.



Recently, columnist, Jack Anderson, who writes the “Washington Merry-Go-Round,” alleged that much of the naked short selling in small cap stocks drains small U.S. companies of their market caps and their small investors of their nest-eggs specifically to funnel money into terrorist hands, a sort of double-whammy against the American capitalist system. Rumors circulating around Wall Street are quoting conspiracy theorists in stating that the Berlin-Bremen Stock Exchange short selling is a strategy to "get even with the US" over the US' Iraqi involvement.


On April 29th officials of the Berlin Stock Exchange confirmed to FinancialWire that U.S. public companies had been listed for trading without their knowledge or authorization, but denied that the purpose was to circumvent the new NASD rules that require U.S. brokers to gain assurances of "affirmative determinations" from short sellers in both the U.S. and abroad.


Companies with listings still pending on the Berlin-Bremen Stock Exchange include: Anacomp Inc-A, Amer Intl. Industries, Aethlon Medical, Advant-E Corp, ACR Group Inc, and Acceris Communication. Systems Evolution, Startech Enviro, Specialized Health, Solutia Inc, Skyterra Communication, Siricomm Inc., Sinofresh Health, Simtek Corp., Silverleaf Resources, Serviceware Tech, Searchhelp Inc., Schick Tech Inc., Satellite Enterprise, Safety Component,Robotic Vision, Roaming Messenge, Poseidis Inc., Polymer Group-A, Platinum Superya, Phone 1Globalwide,Pharsight Corp, Pharm Formulation, PDC Innovative, Oxford Ventures, Yi Wan Group Inc, YDI Wireless Inc, XRG Inc, Weirton Steel, Usurf America, United Energy/NV, UCI Medical Affi, Touchstone Resources, Torvec Inc, Tissera Inc, Timco Aviation, Thermoenergy, and Temecula Valley. Otish Mountain, Optio Software, Northland Cran-A, Nothern American, Newtech Brake Corp, Network Installa, Net 1 Ueps Tech, Nannaco Inc, Mr3 Systems Inc., Millstream Acqui, Mile Marker Inc, Micromem Tech, Metalline Mining, Mems Inc, Medical Makeover, Manhattan Pharma, Majesco Holdings, M2003 PLC. Loral Space &Communication, Locateplus Holdings, Life Science Resources, Liberty Star Gold, Komodo Inc, Knot Inc., Jurak Corp, Jag Media Holding-, Invisa Inc, Intl. Paper-Pfd, Integrat Security Systems, Impsat Fiber Net, Houston American, Havana Group Inc, Guardian Tech, Graphco Holdings, GFY Food Inc, Gelstat Corp., Gaming &Entertainment, Fortune Divers, First Avenue Net, Findex.com Inc, Femone Inc., Female Health, Fact Corporation, Exten Industries, Exide Technologies, Epixtar Corp., Endeavor Intl, Eline Entertainment, Ecoloclean Industries, Duravest Inc, Dtomi Inc, Dreams Inc, Directview Inc, Cytomedix Inc, CPC of America, Conectisys Corp, Comdisco Holdings, Civitas Bankgroup, Cinemaelectric, China World Trade, China Granite Co, China Enterprise, Chaus (Bernard), Chaparral Resources, Cadence Resources, Buyers United Inc., Bio-Amer Capital, Axcess Inc, Autoinfo Inc, Austral Pcific, Asia Premium Tel, Asia Pac Wire, Ascendant Solution, Aptimus Inc., Applied DNA Science, American Oil &Gas, Amer Tech Group, Amcast Industrial, Ambase Corp, Alpine Group Inc, Allegiance Telecommunicaion, Air-Q Wi-Fi orp, Aerotelesis Inc, Aegis Assessment, Accupoll Holdings, Aames Financial Corp, and Armstrong Holdings Samaritan Pharm, Sagent Tech Inc, Spacedev Inc, IVP Technology, Tech Labs Inc, Synthetic Turf C, Swiss Medica Inc, Summus Inc., Stockgroup Info, Spectrum Organic, Spear&Jackson, Sonoran Energy I, ADV Viral Research, Allergy Research Group,Zone 4 Play Inc., Zap, WinWin Gaming, Whitney Info Net, Warrantech Corp, Viragen International, Veramark Tech, Urban Television, Towne Bank, Total First Aid, Time America Inc., Thomas Group Inc., Surequest System, Summit Financial, Spectre Gaming, Sealife Corp., Scanner Technology, Roo Group Inc., Refocus Group Inc., Provectus Pharma, Power2Ship Inc, Pipeline Data, Pan American Energy, Ortec Intl. Inc, Ophthalmic Image, Northern Empire, Noble Romans Inc., New Medium Enterprises, New Jersey Mining, Naturade Inc., Nathaniel Energy, Mymetics Corp, Michelex Corp, Medicor Ltd, Market Central, Man Sang Holdings, Kolorfusion Intl, J Net Enterprises, Intl Smart Sources, International Mo, International Ca, IJJ Corp, I2 Telecom Internationa, Heritage Worldwide, Find/SVP Inc, E-The Movie Network, Ergo Science, Eos International, Elbit Vision Israel, E Med Future Inc, Dogs International, Desert Mining, Corvu Corp, Coolsavings Inc, Claxson Inter-A, Cipher Holding, China Expert Technologies, Carroll Shelby, Burzynski Research, BP International, Bns Co-Cl A, Barneys NY Inc, Ballistic Recov, Axesstel Inc, Archon Corporation, AP Henderson Group, and TVI Corp.



Apparently the naked shorting is being facilitated by the US based Depositary Trust and Clearing Corporation (DTC).



The role of the Depository Trust and Clearing Corp. in facilitating this naked shorting is just coming to light. Dow Jones recently confirmed a lawsuit by Nanopierce Technologies (OTCBB: NCPT) against the Depository Trust and Clearing Corp. and the National Security Clearing Corp. However, Dow Jones also reported that the chief spokesperson for the DTC continues to deny that it has been sued even though the papers were served on the firm's attorneys more than two weeks ago.



Nanopierce’s suit in the 2nd Judicial District Court in Nevada 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.


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 DTC, 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 DTC 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.



The suit quotes the NASD 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.”


In what is being called a gigantic conflict of interest, the two preferred shareholders of Depository Trust and Clearing Corp. are the New York Stock Exchange and the NASD, the regulatory agency that also owns NASDAQ, the OTC Bulleting Board and the American Stock Exchange.

It will be interesting to see if the SEC and the NASD take action to end this activity by the Berlin-Bremen Stock Exchange, as well as the Depository Trust & Clearing Corp.'s role in facilitating this naked shorting before it destroys hundreds of smaller cap US companies, and destroys what could be billions of dollars in investor and shareholder equity.

The CFA Institute's joint efforts with the National Investor Relations Institute to forge new guidelines for the interaction of analysts and corporate issuers, and for the first time, guidelines for the growing practice of issuer-paid research, is a "commendable process," according to executives and practitioners at Investrend Research, the world's largest and oldest standards-based and fee-based independent research provider, but "needs substantial work before the investing public can be comfortable that inherent conflicts have been eliminated."

The effort by CFAI (formerly the Association for Investment Management and Research) and NIRI comes in the wake of the global research settlement involving ten investment banks, including Citigroup (NYSE: C) and Merrill Lynch & Co. (NYSE: MER), and a spate of lawsuits and threats, mostly in France, by firms such as Sodexho Alliance SA (NYSE: SDX), and LVMH Moet Hennessy Louis Vuitton against Morgan Stanley (NYSE: MWD), designed to squelch professional criticism.

Investrend Research, with some 70 analysts, and the Investrend Research Syndicate, which distributes independent research for ten standards-based research providers, is a division of Investrend Communications, Inc., whose Investrend Information division publishes FinancialWire.

In comments provided to CFAI and NIRI at those organizations’ invitation at http://www.aimr.org/standards/pdf/aimrniricommentfinal.pdf , Investrend CEO Gayle Essary suggested the organizations’ could enhance the proposed guidelines with the adoption of tenets of the “Standards for Independent Research Providers” at http://www.firstresearchconsortium.com .

The full comments are at http://www.investrendinformation.com .

First and foremost, said Essary, there is no discernable benefit to the public for analysts or their firms to own or trade stock in companies they cover. Essary called on the CFAI-NIRI task force to follow the lead of the standards-based independent research providers in eliminating what he termed an “inherent fatal conflict.” He noted that on the one hand the task force suggests it is a conflict for analysts to receive stock as a fee for coverage while at the same time “inexplicably” suggesting it is not a conflict for the same analysts to own such stock.

The two organizations propose that coverage must be paid for in cash, and “only in a manner that does not influence or seek to influence the content and conclusions of the research, not attempt explicitly or implicitly to influence the research, recommendations, or behavior of analysts or otherwise pressure analysts to produce research or recommendations favorable to the corporate issue, and ensure that the disclosures required of the analyst … are included in the research report, that are published or distributed, in whole or in part, by the corporate issuer.”

The document states that payment in “stock warrants or other equity instruments that could increase in value based on positive coverage in the report” means “analysts would have incentive to avoid negative information or conclusions that would diminish their compensation.”

“As research providers, we find no hardship in adhering to a higher standard,” said Essary, “so we urge the task force to reconcile the disparity in its proposed Guidelines by banning stock ownership altogether.”

Essary pointed out that stock ownership is at the root of many problems, noting that in January, a judge allowed a class action lawsuit against analysts at Robertson Stephens, formerly a Bank of America (NYSE: BAC) unit, over their opinions regarding Corvis Corporation (NASDAQ: CORV), over allegations that Robertson Stephens analysts recommended Corvis shares to inflate its price and then sold their own shares in the company.

Essary said that to adopt the tougher standard, because it would conflict with current CFAI practices, the six CFAI members on the task force may have to “recuse” themselves.

Several weeks ago, Essary told Nightly Business News that most of the organizations’ proposals “mirror” those originally established by Investrend Research (http://www.investrendresearch.com) some eight years ago, and more recently propogated as the “Standards for Independent Research Providers.”

The ten fee-based independent research providers that have subscribed to the “Standards” that now mirror those proposed by NIRI and CFAI are EquityNet Research, Los Angeles; eResearch, Toronto; Fundamental Research Corp., West Vancouver; Howlett Research Corp., Sechelt, British Columbia, Canada; Investrend Research, Forest Hills, NY; MarketPerform.com, White Plains, NY; SISM Research & Investment Services, Zurich; Sophia Orange Investment Advisors, LLC, Ladera Ranch, CA; ValueNotes, Pune, India; and VEReports, Miami.

Second, he said, the proposals “dance around” the idea that researchers “might” provide investor relations or other promotional services, and indicate that is “okay” if the activity is “disclosed.” Essary said it is “not okay, and NIRI’s own guidance at http://www.investrend.com/Admin/Topics/Articles/Resources/490_1073335258.doc specifically warned against such practices. We will urge CFAI and NIRI to adopt the NIRI position on this before the guidelines are finally promulgated.”

Third, the independent research provider takes issue with the practice of releasing ratings and targets without providing public access to the full research report, which its comments said could be described by some as “institutionalized pump and dump,” whereby a second class of investors receive truncated, often subsequently-released information “after the first class of investors have had an opportunity to position themselves to sell into the second wave of trading volume.”

Finally, noting that it is public corporate issuers or their investor relations practitioners who pressure analysts for “promotional” coverage, Essary said that independent research providers must be empowered to inform the public of circumstances that might result in impaired coverage. He said that because surveys show that three out of every four investors are “most influenced” by an analyst report, and that nearly nine out of ten believe that “legitimate fee-based research is objective and useful,” it is important for the two organizations, after final promulgation, to “undertake a pro-active campaign to educate investors that there is no longer any obstacle to credible, independent research on companies in which they are in invested.”

Essary said CFAI and NIRI should inform investors if companies do not have coverage it is a legitimate question for investors to ask, “Why not?”

FinancialWire, in an ongoing series, has identified a number of corporate issuers whose coverage announcements or whose provider announcements have failed to meet the proposed standards, and more often than not the Securities and Exchange Commission Regulation 17(b), including Horizon Medical (AMEX: HMP), Nymox (NASDAQ: NYMX), Genesis Technology Group (OTCBB: GTEC), Martek Biosciences (NASDAQ: MATK), Ecolab (NYSE: ECL), Clorox (NYSE: CLX), Dial Corp. (NYSE: DL), AdZone (OTCBB: ADZR), American Water Star (OTCBB: AMWS), Markland Technologies (OTCBB: MRKL), Transnational Financial Network (AMEX: TFN) and International Barrier Technology (OTCBB: IBTGF; TSX Venture: IBH), Telkonet (OTCBB: TLKO), Cytomedix (OTCBB: CYME), LocatePlus (OTCBB: LPLHA), Rockport Healthcare (OTCBB: RPHL), Universal Express Co. (OTCBB: USXP), Lifestream Technologies (OTCBB: LFTC), CareDecision Corp. (OTCBB: CDED), Life Energy and Technology Holdings, Inc. (OTCBB: LETH), and Flight Safety (OTCBB: FSFY);

Also, Playtex Products (NYSE: PYX), Ericware Technologies (OTC: ECWR), NuTech Digital, Inc. (OTCBB: NTDL), Terra Nostra Technology Ltd. (OTCBB: TNRL), and NanoSignal Corp. (OTCBB: NNOS)., DNAPrintGenomics (OTCBB: DNAP), Syndication Net.com (OTCBB: SYCI), Quintek Technologies (OTCBB: QTEK), GeneLink (OTCBB: GLNK), Quality of Life Health Corp. (OTC: QLHC), Environmental Remediation Holding Corp. (OTCBB: ERHC), Cornerstone Entertainment (OTC: CNRH), Medifast, Inc. (AMEX: MED), Workstream, Inc. (NASDAQ: WSTM), SIGA Technologies (NASDAQ: SIGA), Sub Surface Waste Management of Delaware (OTCBB: SSWM), Xfone, Inc. (OTCBB: XFNE), Offshore Systems International (OTCBB: OFSYF; TSX Venture: OSI), American Ammunition, Inc. (OTCBB: AAMI), Destiny Mediat Technologies (OTCBB: DSNY), Isonics Corp. (NASDAQ: ISON), a21, Inc. (OTCBB: ATWO); and

Also, OrderPro Logistics (OTCBB: OPLO), Military Resale Group, Inc. (OTCBB: MYRG), Timber Resources International, Inc. (OTC: TMBN), OptimumCare Corporation (OTCBB: OPMC), Command Security (OTCBB: CMMD), Molecular Imaging Corporation (OTCBB: MLRI), TechnoConcepts Inc. (OTCBB: TCPT), Sequiam Corporation (OTCBB: SQUM), Provectus Pharmaceuticals, Inc. (OTCBB: PVCT), eFoodSafety.com (OTCBB: EFSF), Intelligent Business Systems Group International, Inc (OTCBB: IGII), Chilmark Entertainment (OTC: CMKK), Tech Laboratories, Inc. (OTCBB: TCHL), BodyScan Corp. (OTC: BDYS), Wireless Frontier Internet, Inc. (OTCBB: WFRI), Ableauctions.com, Inc. (AMEX: AAC), UFP Technologies (NASDAQ: UFPT), Systems Evolution Inc. (OTCBB: SEVI), Touchstone Applied Sciences (OTCBB: TASA), JMAR Technologies (NASDAQ: JMAR), TravelZoo (NASDAQ: TZOO) Axonyx Inc. (NASDAQ: AXYX), and Epixtar Corp. (OTCBB: EPXR).

CFAI and NIRI developed the best-practice guidelines through a Joint Task Force on Corporate Issuer and Analyst Relations, with participants from Europe, Canada and the United States, that began work in June 2003. Task force members include analysts and investor relations professionals, with people from standard-setting and regulatory organizations sitting in as observers.

Samuel Jones, CFA, who served as co-chair of the AIMR-NIRI Joint Task Force, said, "Our guiding principles for developing these standards were based on the view of both AIMR and NIRI that information is the lifeblood of efficient, effective and fair capital markets. Investors need transparent information that is fairly and consistently disclosed if they are to make good investment decisions and allocate their capital appropriately."

Thomas A. Bowman, CFA, president and CEO of CFAI, commented, "Investors' interests must be front and center in all matters guiding the relationship between public company executives and research analysts. Both exist to serve the best interest of investors, although in different roles and from different perspectives. So it is important that corporate issuers respect an analyst's duty to ask hard questions, point out potential risks to investors, and make fair, unbiased assessments based on facts and their own forecasts.

"But at the same time," Bowman said, "analysts have a responsibility to be skilled and competent in conducting their research - to differentiate between fact and opinion, and to be fair and impartial in their analysis of companies. Analysts must not let outside pressures threaten their impartiality and influence their research conclusions or recommendations."

CFAI is the global, non-profit professional association that administers the Chartered Financial Analyst® curriculum and examination program worldwide and sets voluntary, ethics-based professional and performance-reporting standards for the investment industry. AIMR has almost 70,000 members in 116 countries. Its membership includes the world's more than 55,000 CFA charterholders, as well as 127 affiliated professional societies and chapters in 46 countries.

NIRI is the professional association of corporate officers and investor relations consultants responsible for communications among corporate management, shareholders, security analysts and other financial publics. NIRI's 4,700 members represent over 2,500 publicly held companies in the United States. As its mission states, "NIRI is dedicated to advancing the practice of investor relations and the professional competency and stature of its members."

Firms involved in the settlement include Bear Stearns Cos. Inc. (NYSE: BSC), Credit Suisse (NYSE CSR) Credit Suisse First Boston unit, Goldman Sachs Group Inc. (NYSE: GS), Lehman Bros. Holdings Inc. (NYSE: LEH), Citigroup's (NYSE: C) Citigroup Global Markets, J.P. Morgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MWD), Merrill Lynch Cos. Inc. (NYSE: MER), UBS (NYSE: UBS) unit UBS Warburg and the Piper Jaffray unit of U.S. Bancorp (NYSE: USB).

The deadline for comments is May 31.

This planet has more than 6 billion different perspectives with the US Government having only less than 1% accuracy ratings...

Of course. It is always a matter of perspective.

btw, just what is "truth" in the first place?

Actually if you put people in a circle and have one person for each degree of separation you would have 360 differing viewpoints on the same physical plane action, incident or history...sometimes the truth is stranger than what is commonly believed to be public facts or opinions...

Of course.
What about there always being more than one side to a story?

Boot Camp for Counter Intelligence Officers

Rule Number One:

Don't believe a thing you ever read published by the source, it will taint your opinion in the long run.

Ok, I'm here.

The Story gets bigger...big brother is watching from every tentacle of his massive reaching arms that span the globe in this day and age.

Why would the FBI, CIA, Homeland Security be investigating someone who has been buying pennies from homeless people on and off for the last decade?

the powers that be..

must protect the sheople..

against themselves..

Uncanny justice...Penny King barred from penny stocks!

Litigation Release No. 18720 / May 20, 2004...
Securities and Exchange Commission v. Gabor S. Acs and Penny King Holdings, Inc., Civil Action No. CV-N-03-0463-ECR-VPC

The Commission announced that on May 12, 2004, the United States District Court for the District of Nevada entered a Final Judgment against Gabor S. Acs and Penny King Holdings, Inc. Between January and May 2002, Acs wrote, edited and approved six false and misleading press releases concerning Quintek Technologies, Inc. ("Quintek") and Eknowledge Group, Inc. ("Eknowledge") and between at least March and August 2002 he created and maintained two Internet websites containing false statements. The releases and websites contained false and misleading statements concerning, among other things, the financial prospects of Quintek and Eknowledge, a business combination between these two companies, Penny King's assets and Acs' financial experience. Acs and Penny King also failed to disclose payments made by Quintek and Eknowledge in exchange for touting services.

At a hearing on May 6, 2004 on the SEC's Motion for Summary Judgment against Acs and a Default Judgment against Penny King, the court found that Acs and Penny King violated Section 17(b) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. By order of the court, Acs and Penny King were permanently enjoined and a penny stock bar was entered against Acs. In addition, Acs was ordered to pay disgorgement and prejudgment interest in the amount of $43,962.81 along with a civil penalty in the amount of $600,000. Penny King was ordered to pay a civil penalty of $600,000.

http://www.sec.gov/litigation/litreleases/lr18720.htm

The Science of Justice..

Natural Law..

by Lysander Spooner [18??]

Part First..
Chapter I..
The Science of Justice..

Section I..

The science of mine and thine ~ the science of justice ~ is the science of all human rights; of all a man's rights of person and property; of all his rights to life, liberty, and the pursuit of happiness..

It is the science which alone can tell any man what he can, and cannot, do; what he can, and cannot, have; what he can, and cannot, say, without infringing the rights of any other person..

It is the science of peace; and the only science of peace; since it is the science which alone can tell us on what conditions mankind can live in peace, or ought to live in peace, with each other..

These conditions are simply these: viz., first, that each man shall do, towards every other, all that justice requires him to do; as, for example, that he shall pay his debts, that he shall return borrowed or stolen property to its owner, and that he shall make reparation for any injury he may have done to the person or property of another..

The second condition is, that each man shall abstain from doing to another, anything which justice forbids him to do; as, for example, that he shall abstain from committing theft, robbery, arson, murder, or any other crime against the person or property of another..

So long as these conditions are fulfilled, men are at peace, and ought to remain at peace, with each other. But when either of these conditions is violated, men are at war. And they must necessarily remain at war until justice is re~established..

Through all time, so far as history informs us, wherever mankind have attempted to live in peace with each other, both the natural instincts, and the collective wisdom of the human race, have acknowledged and prescribed, as an indispensable condition, obedience to this one only universal obligation: viz., that each should live honestly towards every other..

The ancient maxim makes the sum of a man's legal duty to his fellow men to be simply this: "to live honestly, to hurt no one, to give to every one his due.."

This entire maxim is really expressed in the single words, to live honestly; since to live honestly is to hurt no one, and give to every one his due..


Section II..

Man, no doubt, owes many other moral duties to his fellow men; such as to feed the hungry, clothe the naked, shelter the homeless, care for the sick, protect the defenceless, assist the weak, and enlighten the ignorant..

But these are simply moral duties, of which each man must be his own judge, in each particular case, as to whether, and how, and how far, he can, or will, perform them..

But of his legal duty ~ that is, of his duty to live honestly towards his fellow men ~ his fellow men not only may judge, but, for their own protection, must judge..

And, if need be, they may rightfully compel him to perform it..

They may do this, acting singly, or in concert. They may do it on the instant, as the necessity arises, or deliberately and systematically, if they prefer to do so, and the exigency will admit of it..

Section III..

Although it is the right of anybody and everybody ~ of any one man, or set of men, no less than another ~ to repel injustice, and compel justice, for themselves, and for all who may be wronged, yet to avoid the errors that are liable to result from haste and passion, and that everybody, who desires it, may rest secure in the assurance of protection, without a resort to force, it is evidently desirable that men should associate, so far as they freely and voluntarily can do so, for the maintenance of justice among themselves, and for mutual protection against other wrong~doers..

It is also in the highest degree desirable that they should agree upon some plan or system of judicial proceedings, which, in the trial of causes, should secure caution, deliberation, thorough investigation, and, as far as possible, freedom from every influence but the simple desire to do justice..

Yet such associations can be rightful and desirable only in so far as they are purely voluntary..

No man can rightfully be coerced into joining one, or supporting one, against his will..

His own interest, his own judgement, and his own conscience alone must determine whether he will join this association, or that; or whether he will join any..

If he chooses to depend, for the protection of his own rights, solely upon himself, and upon such voluntary assistance as other persons may freely offer to him when the necessity for it arises, he has a perfect right to do so..

And this course would be a reasonably safe one for him to follow, so long as he himself should manifest the ordinary readiness of mankind, in like cases, to go to the assistance and defence of injured persons; and should also himself "live honestly, hurt no one, and give to every one his due.."

For such a man is reasonably sure of always giving friends and defenders enough in case of need, whether he shall have joined any association, or not..

Certainly no man can rightfully be required to join, or support, an association whose protection he does not desire. Nor can any man be reasonably or rightfully expected to join, or support, any association whose plans, or method of proceeding, he does not approve, as likely to accomplish its professed purpose of maintaining justice, and at the same time itself avoid doing injustice..

To join, or support, one that would, in his opinion, be inefficient, would be absurd. To join or support one that, in his opinion, would itself do injustice, would be criminal. He must, therefore, be left at the same liberty to join, or not to join, an association for this purpose, as for any other, according as his own interest, discretion, or conscience shall dictate..

An association for mutual protection against injustice is like an association for mutual protection against fire or shipwreck..

And there is no more right or reason in compelling any man to join or support one of these associations, against his will, his judgement, or his conscience, than there is in compelling him to join or support any other, whose benefits (if it offer any) he does not want, or whose purposes or methods he does not approve..


Section IV..

No objection can be made to these voluntary associations upon the ground that they would lack that knowledge of justice, as a science, which would be necessary to enable them to maintain justice, and themselves avoid doing injustice..

Honesty, justice, natural law, is usually a very plain and simple matter, easily understood by common minds. Those who desire to know what it is, in any particular case, seldom have to go far to find it. It is true, it must be learned, like any other science. But it is also true that it is very easily learned. Although as illimitable in its applications as the infinite relations and dealings of men with each other, it is, nevertheless, made up of a few simple elementary principles, of the truth and justice of which every ordinary mind has an almost intuitive perception..

And almost all men have the same perceptions of what constitutes justice, or of what justice requires, when they understand alike the facts from which their inferences are to be drawn..

Men living in contact with each other, and having intercourse together, cannot avoid learning natural law, to a very great extent, even if they would. The dealings of men with men, their separate possessions and their individual wants, and the disposition of every man to demand, and insist upon, whatever he believes to be his due, and to resent and resist all invasions of what he believes to be his rights, are continually forcing upon their minds the questions..

Is this act just?

or is it unjust?

Is this thing mine?

or is it his?

And these are questions of natural law; questions which, in regard to the great mass of cases, are answered alike by the human mind everywhere..(1)

Children learn the fundamental principles of natural law at a very early age..

Thus they very early understand that one child must not, without just cause, strike or otherwise hurt, another; that one child must not assume any arbitrary control or domination over another; that one child must not, either by force, deceit, or stealth, obtain possession of anything that belongs to another; that if one child commits any of these wrongs against another, it is not only the right of the injured child to resist, and, if need be, punish the wrongdoer, and compel him to make reparation, but that it is also the right, and the moral duty, of all other children, and all other persons, to assist the injured party in defending his rights, and redressing his wrongs..

These are fundamental principles of natural law, which govern the most important transactions of man with man..

Yet children learn them earlier than they learn that three and three are six, or five and five ten..

Their childish plays, even, could not be carried on without a constant regard to them; and it is equally impossible for persons of any age to live together in peace on any other conditions..

It would be no extravagance to say that, in most cases, if not in all, mankind at large, young and old, learn this natural law long before they have learned the meanings of the words by which we describe it..

In truth, it would be impossible to make them understand the real meanings of the words, if they did not understand the nature of the thing itself..

To make them understand the meanings of the words justice and injustice before knowing the nature of the things themselves, would be as impossible as it would be to make them understand the meanings of the words heat and cold, wet and dry, light and darkness, white and black, one and two, before knowing the nature of the things themselves..

Men necessarily must know sentiments and ideas, no less than material things, before they can know the meanings of the words by which we describe them..


Chapter II..
The Science of Justice (Continued)
Section I..

If justice be not a natural principle..

it is no principle at all..

If it be not a natural principle..

there is no such thing as justice..

If it be not a natural principle, all that men have ever said or written about it, from time immemorial, has been said and written about that which had no existence..

If it be not a natural principle, all the appeals for justice that have ever been heard, and all the struggles for justice that have ever been witnessed, have been appeals and struggles for a mere fantasy, a vagary of the imagination, and not for a reality..

If justice be not a natural principle, then there is no such thing as injustice; and all the crimes of which the world has been the scene, have been no crimes at all; but only simple events, like the falling of the rain, or the setting of the sun; events of which the victims had no more reason to complain than they had to complain of the running of the streams, or the growth of vegetation..

If justice be not a natural principle, governments (so~called) have no more right or reason to take cognizance of it, or to pretend or profess to take cognizance of it..

than they have to take cognizance, or to pretend or profess to take cognizance, of any other nonentity; and all their professions of establishing justice, or of maintaining justice, or of rewarding justice, are simply the mere gibberish of fools, or the frauds of impostors..

But if justice be a natural principle, then it is necessarily an immutable one; and can no more be changed ~ by any power inferior to that which established it ~ than can the law of gravitation, the laws of light, the principles of mathematics, or any other natural law or principle whatever..

and all attempts or assumptions, on the part of any man or body of men ~ whether calling themselves governments, or by any other name ~ to set up their own commands, wills, pleasure, or discretion, in the place of justice, as a rule of conduct for any human being, are as much an absurdity, an usurpation, and a tyranny, as would be their attempts to set up their own commands, wills, pleasure, or discretion in the place of any and all the physical, mental, and moral laws of the universe..


Section II..

If there be any such principle as justice, it is, of necessity, a natural principle; and, as such, it is a matter of science, to be learned and applied like any other science. And to talk of either adding to, or taking from, it, by legislation, is just as false, absurd, and ridiculous as it would be to talk of adding to, or taking from, mathematics, chemistry, or any other science, by legislation..

Section III..

If there be in nature such a principle as justice, nothing can be added to, or taken from, its supreme authority by all the legislation of which the entire human race united are capable. And all the attempts of the human race, or of any portion of it, to add to, or take from, the supreme authority of justice, in any case whatever, is of no more obligation upon any single human being than is the idle wind..

Section IV..

If there be such a principle as justice, or natural law, it is the principle, or law, that tells us what rights were given to every human being at his birth; what rights are, therefore, inherent in him as a human being, necessarily remain with him during life; and, however capable of being trampled upon, are incapable of being blotted out, extinguished, annihilated, or separated or eliminated from his nature as a human being, or deprived of their inherent authority or obligation..

On the other hand, if there be no such principle as justice, or natural law, then every human being came into the world utterly destitute of rights; and coming into the world destitute of rights, he must necessarily forever remain so..

For if no one brings any rights with him into the world, clearly no one can ever have any rights of his own, or give any to another..

And the consequence would be that mankind could never have any rights; and for them to talk of any such things as their rights, would be to talk of things that never had, never will have, and never can have any existence..


Section V..

If there be such a natural principle as justice, it is necessarily the highest, and consequently the only and universal, law for all those matters to which it is naturally applicable..

And, consequently, all human legislation is simply and always an assumption of authority and dominion, where no right of authority or dominion exists..

It is, therefore, simply and always an intrusion, an absurdity, an usurpation, and a crime..

On the other hand..

if there be no such natural principle as justice, there can be no such thing as dishonesty; and no possible act of either force or fraud, committed by one man against the person or property of another, can be said to be unjust or dishonest; or be complained of, or prohibited, or punished as such..

In short, if there be no such principle as justice, there can be no such acts as crimes; and all the professions of governments, so called, that they exist, either in whole or in part, for the punishment or prevention of crimes, are professions that they exist for the punishment or prevention of what never existed, nor ever can exist..

Such professions are therefore confessions that, so far as crimes are concerned, governments have no occasion to exist; that there is nothing for them to do, and that there is nothing that they can do..

They are confessions that the governments exist for the punishment and prevention of acts that are, in their nature, simple impossibilities..


Section VI..

If there be in nature such a principle as justice, such a principle as honesty, such principles as we describe by the words mine and thine, such principles as men's natural rights of person and property, then we have an immutable and universal law; a law that we can learn, as we learn any other science; a law that tells us what is just and what is unjust, what is honest and what is dishonest, what things are mine and what things are thine, what are my rights of person and property and what are your rights of person and property, and where is the boundary between each and all of my rights of person and property and each and all of your rights of person and property..

And this law is the paramount law, and the same law, over all the world, at all times, and for all peoples; and will be the same paramount and only law, at all times, and for all peoples, so long as man shall live upon the earth..

But if, on the other hand, there be in nature no such principle as justice, no such principle as honesty, no such principle as men's natural rights of person or property..

then all such words as justice and injustice, honesty and dishonesty, all such words as mine and thine, all words that signify that one thing is one man's property and that another thing is another man's property, all words that are used to describe men's natural rights of person or property, all such words as are used to describe injuries and crimes, should be struck out of all human languages as having no meaning..

and it should be declared, at once and forever, that the greatest force and the greatest frauds, for the time being, are the supreme and only laws for governing the relations of men with each other; and that, from henceforth..

all persons and combinations of persons ~ those that call themselves governments, as well as all others ~ are to be left free to practice upon each other all the force, and all the fraud, of which they are capable..


Section VII..

If there be no such science as justice, there can be no science of government; and all the rapacity and violence, by which, in all ages and nations, a few confederated villains have obtained the mastery over the rest of mankind, reduced them to poverty and slavery, and established what they called governments to keep them in subjection, have been as legitimate examples of government as any that the world is ever to see..

Section VIII..

If there be in nature such a principle as justice, it is necessarily the only political principle there ever was, or ever will be..

All the other so~called political principles, which men are in the habit of inventing, are not principles at all..

They are either the mere conceits of simpletons, who imagine they have discovered something better than truth, and justice, and universal law; or they are mere devices and pretences, to which selfish and knavish men resort as means to get fame, and power, and money..

Chapter III..

Natural Law Contrasted With Legislation..
Section I..

Natural law, natural justice, being a principle that is naturally applicable and adequate to the rightful settlement of every possible controversy that can arise among men..

being too, the only standard by which any controversy whatever, between man and man, can be rightfully settled; being a principle whose protection every man demands for himself, whether he is willing to accord it to others, or not; being also an immutable principle, one that is always and everywhere the same, in all ages and nations; being self~evidently necessary in all times and places; being so entirely impartial and equitable towards all; so indispensable to the peace of mankind everywhere..

so vital to the safety and welfare of every human being..

being, too, so easily learned, so generally known, and so easily maintained by such voluntary associations as all honest men can readily and rightully form for that purpose ~ being such a principle as this, these questions arise, viz..

Why is it that it does not universally, or well nigh universally, prevail?

Why is it that it has not, ages ago, been established throughout the world as the one only law that any man, or all men, could rightfully be compelled to obey?

Why is it that any human being ever conceived that anything so self~evidently superfluous, false, absurd, and atrocious as all legislation necessarily must be, could be of any use to mankind, or have any place in human affairs?

Section II..

The answer is, that through all historic times, wherever any people have advanced beyond the savage state, and have learned to increase their means of sub~sistence by the cultivation of soil, a greater or less number of them have associated and organized themselves as robbers, to plunder and enslave all others, who had either accumulated any property that could be seized, or had shown, by their labor, that they could be made to contribute to the support or pleasure of those who should enslave them..

These bands of robbers, small in number at first, have increased their power by uniting with each other, inventing warlike weapons, disciplining themselves, and perfecting their organizations as military forces, and dividing their plunder (including their captives) among themselves, either in such proportions as have been previously agreed on, or in such as their leaders (always desirous to increase the number of their followers) should prescribe..

The success of these bands of robbers was an easy thing, for the reason that those whom they plundered and ensalved were comparatively defenceless; being scattered thinly over the country; engaged wholly in trying, by rude implements and heavy labor, to extort a subsistence from the soil; having no weapons of war, other than sticks and stones; having no military discipline or organization, and no means of concentrating their forces, or acting in concert, when suddenly attacked..

Under these circumstances, the only alternative left them for saving even their lives, or the lives of their families, was to yield up not only the crops they had gathered, and the lands they had cultivated, but themselves and their families also as slaves..

Thenceforth their fate was, as slaves, to cultivate for others the lands they had before cultivated for themselves. Being driven constantly to their labor, wealth slowly increased; but all went into the hands of their tyrants..

These tyrants, living solely on plunder, and on the labor of their slaves, and applying all their energies to the seizure of still more plunder, and the enslavement of still other defenceless persons..

increasing, too, their numbers, perfecting their organizations, and multiplying their weapons of war, they extend their conquests until, in order to hold what they have already got, it becomes necessary for them to act systematically, and cooperate with each other in holding their slaves in subjection..

But all this they can do only by establishing what they call a government, and making what they call laws..

All the great governments of the world ~ those now existing, as well as those that have passed away ~ have been of this character..

They have been mere bands of robbers, who have associated for purposes of plunder, conquest, and the enslavement of their fellow men..

And their laws, as they have called them, have been only such agreements as they have found it necessary to enter into, in order to maintain their organizations, and act together in plundering and enslaving others, and in securing to each his agreed share of the spoils..

All these laws have had no more real obligation than have the agreements which brigands, bandits, and pirates find it necessary to enter into with each other, for the more successful accomplishment of their crimes, and the more peaceable division of their spoils.

Thus substantially all the legislation of the world has had its origin in the desires of one class ~ of persons to plunder and enslave others, and hold them as property..


Section III..

In process of time, the robber, or slaveholding, class ~ who had seized all the lands, and held all the means of creating wealth ~ began to discover that the easiest mode of managing their slaves, and making them profitable, was not for each slaveholder to hold his specified number of slaves, as he had done before, and as he would hold so many cattle, but to give them so much liberty as would throw upon themselves (the slaves) the responsibility of their own subsistence, and yet compel them to sell their labor to the land-hodling class ~ their former owners ~ for just what the latter might choose to give them..

Of course, these liberated slaves, as some have erroneously called them, having no lands, or other property, and no means of obtaining an independent subsistence, had no alternative ~ to save themselves from starvation - but to sell their labor to the landholders, in exchange only for the coarsest necessaries of life; not always for so much even as that.

These liberated slaves, as they were called, were now scarcely less slaves than they were before..

Their means of subsistence were perhaps even more precarious than when each had his own owner, who had an interest to preserve his life..

They were liable, at the caprice or interest of the landholders, to be thrown out of home, employment, and the opportunity of even earning a subsistence by their labor..

They were, therefore, in large numbers, driven to the necessity of begging, stealing, or starving; and became, of course, dangerous to the property and quiet of their late masters..

The consequence was, that these late owners found it necessary, for their own safety and the safety of their property, to organize themselves more perfectly as a government and make laws for keeping these dangerous people in subjection; that is, laws fixing the prices at which they should be compelled to labor, and also prescribing fearful punishments, even death itself, for such thefts and tresspasses as they were driven to commit, as their only means of saving themselves from starvation..

These laws have continued in force for hundreds, and, in some countries, for thousands of years; and are in force to~day, in greater or less severity, in nearly all the countries on the globe..

The purpose and effect of these laws have been to maintain, in the hands of the robber, or slave holding class, a monopoly of all lands, and, as far as possible, of all other means of creating wealth; and thus to keep the great body of laborers in such a state of poverty and dependence, as would compel them to sell their labor to their tyrants for the lowest prices at which life could be sustained..

The result of all this is, that the little wealth there is in the world is all in the hands of a few ~ that is, in the hands of the law~making, slave~holding class; who are now as much slaveholders in spirit as they ever were, but who accomplish their purposes by means of the laws they make for keeping the laborers in subjection and dependence, instead of each one's owning his individual slaves as so many chattels..

Thus the whole business of legislation, which has now grown to such gigantic proportions, had its origin in the conspiracies, which have always existed among the few, for the purpose of holding the many in subjection, and extorting from them their labor, and all the profits of their labor..

And the real motives and spirit which lie at the foundation of all legislation ~ notwithstanding all the pretences and disguises by which they attempt to hide themselves ~ are the same to~day as they always have been..

The whole purpose of this legislation is simply to keep one class of men in subordination and servitude to another..


Section IV..

What, then, is legislation?

It is an assumption by one man, or body of men, of absolute, irresponsible dominion over all other men whom they call subject to their power..

It is the assumption by one man, or body of men, of a right to subject all other men to their will and their service..

It is the assumption by one man, or body of men, of a right to abolish outright all the natural rights, all the natural liberty of all other men; to make all other men their slaves..

to arbitrarily dictate to all other men what they may, and may not, do; what they may, and may not, have; what they may, and may not, be..

It is, in short, the assumption of a right to banish the principle of human rights, the principle of justice itself, from off the earth, and set up their own personal will, pleasure, and interest in its place..

All this, and nothing less, is involved in the very idea that there can be any such thing as human legislation that is obligatory upon those upon whom it is imposed..

Notes
1. Sir William Jones, an English judge in India, and one of the most learned judges that ever lived, learned in Asiatic as well as European law, says..

It is pleasing to remark the similarity, or, rather, the idenity, of those conclusions which pure, unbiased reason, to all ages and nations, seldom fails to draw, in such juridical inquiries as are not fettered and manacled by positive institutions.. ~ jones on bailments, 133..

He means here to say that, when no law has been made in violation of justice, judicial tribunals, in all ages and nations, have seldom failed to agree as to what justice is..



Ordo Ab Chao?

The SEC has the last laugh on the Penny King. $1.2MM fine and $40K disgorgement. And in the irony of ironies, the Penny King has been barred for life from penny stocks.

Gotta do it...

BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!!!

What's the story, g!? You hate Hartley, but you post his prose without attribution.

The actual proposed rule is better anyway.

http://www.sec.gov/rules/proposed/33-8407.htm

the powers that be..

must protect the sheople..

against themselves..

The Securities and Exchange Commission is taking a major step to assure that investors in tiny over-the-counter companies have access to material information about those businesses and the people who run them.


The SEC is also halting a practice that has allowed many obscure, insubstantial public companies to flood the marketplace with shares.


These developments reflect the SEC’s latest effort to increase transparency in a microcap market that has been a fertile ground for deceptive practices and stock fraud. A series of new rules are directed at public shell companies, which have used existing federal regulations and procedures to avoid disclosure and keep investors in the dark.


On the surface, shell companies can offer an appealing alternative for small private companies that want to become public but are unable to find an underwriter who is willing to handle their Initial Public Offering (IPO). See The Shell Game. They enter into a reverse-merger with the shell that leaves them in control of the surviving public entity.


There are, however, companies that choose a reverse-merger over an IPO for other reasons. These companies are seeking to avoid the exhaustive disclosure that comes with a public offering. In an IPO they would be required to file a registration statement detailing the history of their business, the background of their management team, and the identity of each controlling shareholder. That registration statement also would include extensive audited financial information. In effect, the company and its insiders would be laid naked to the world.


Not every business is eager to make those disclosures, since in some cases the information could motivate the SEC to delay or stop the offering.


Until now, the reverse-merger has enabled private companies to circumvent the disclosure process. The private company gains control of a public entity, but investors are generally flying blind. Historically, companies that merge into shells have not been required to make detailed material disclosures about their business history, management or controlling shareholders. And while public companies that file regular reports with the SEC (which would include every company listed on the OTC Bulletin Board) have been required to file a Form 8-K including audited financial information on the newly acquired private business, all too often that information is delayed, incomplete, or non-existent.


That practice is about to end, thanks to new rules proposed by the SEC on April 13, 2004. Now, after a reverse-merger, the former shell will be required to file a Form 8-K that includes all of the disclosures that would be required if it were registering a class of securities under the Securities and Exchange Act of 1934. In other words, a reverse-merger will no longer be a method for evading disclosure. The curtain will be lifted and investors will have access to material information that is likely to affect their investment decision.


It is about time.


There is yet another reason for investors to rejoice. The SEC has struck a decisive blow against an insidious tool that has been utilized by stock schemers to obtain registered shares that can easily be dumped on an unsuspecting marketplace.


Over the past several years, Form S-8 Registration Statements have been overused, misused, and often abused. The Form S-8 differs from most other registration statements in one fundamental respect – it becomes effective immediately after it is filed with the SEC. Traditional registration statements – such as those used in connection with IPOs – are subject to rigorous review by the SEC, and must be revised, sometimes several times, in response to SEC comments and concerns before they are declared effective. Until that time, the stock being registered may not be sold.


Not so with the Form S-8 – which becomes effective without any advance SEC review.


The absence of a review is even more startling in light of the abbreviated nature of a Form S-8, and the broad – vaguely defined – category of potential stock recipients. In short, a Form S-8 can be used to register shares that are issued to an “employee” under an employee benefit plan.


The real rub, however, lies in the definition of “employee,” which includes officers, directors, consultants, advisors – and yes – attorneys. The definition of “employee benefit plan” is equally broad. Rule 405 of the Securities Act of 1933 defines an “employee benefit plan” as:


any written purchase, savings, option, bonus, appreciation, profit sharing, thrift, incentive, pension or similar plan or written compensation contract solely for employees, directors, general partners, trustees (where the registrant is a business trust), officers, or consultants or advisors. However, consultants or advisors may participate in an employee benefit plan only if:

They are natural persons;

They provide bona fide services to the registrant; and

The services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the registrant's securities.


In other words, virtually anyone can fall within the definition of an “employee,” and there are few obstacles to constructing an “employee benefit plan.”


As StockPatrol.com has repeatedly noted, tiny companies with virtually no assets, no operations and no revenues utilize Forms S-8 to hand millions of shares to employees and consultants – many of whom are not even identified. Remarkably, Form S-8 does not even require the recipients of shares to be named. The company may simply register as many shares as it wishes for an employee benefit plan, and later hand them out to unnamed individuals whose identity, background, and services are never described. And while companies are supposed to amend the Form S-8, and name those new shareholders once the shares have been distributed, few ever do.


As a result, shares can be issued to company insiders, their friends and associates and so-called consultants who render no discernible services. Investors, and regulators, do not know who is receiving the stock, or if it is going into the hands of individuals who merit further scrutiny.


Some of the potential for these abuses is about to stop. Under the SEC’s newly proposed rules, shell companies will be prohibited from using Form S-8 to register shares for employee benefit plans. Consequently, those anonymous employees and consultants will no longer have a free flowing pipeline of registered stock.


These important rule changes should prove critical to investors. Former shell companies will be required to provide material information about their new operations, on a timely basis, and will be unable to use Form S-8 to register shares that can be dumped immediately after the reverse-merger. In addition, in the absence of a reverse-merger, shell companies will now be prevented from saturating the market with shares of worthless stock in an insignificant enterprise.


The new rules represent an important, even historic step for the SEC, but regulatory efforts should not stop here. The SEC must commit itself to the process of reviewing each Form 8-K and S-8 in order to assure full compliance – and companies that fail to meet these standards should have registration of their shares revoked.


In any case, the architects of stock schemes should be losing plenty of sleep over these developments.

great reference site..

http://www.justice-denied.net/Links001.htm

Hilarious! I heard Acs got served with 21 NEW charges. This is getting to be very entertaining.

Denver, Colorado Gabor S. Acs, in a teleconference with the SEC on April 15th, 2004 agreed to all the claims made by the SEC in a Complaint dated August 26th, 2003. A final determination by the Nevada District Court in Reno as to the final judgement amount is anticipated before the end of April.

In a separate complaint filed electronically by Gabor on the same day with the United States Securities and Exchange Commission against several present and former Officers and Directors of Telynx, Inc., a publicly traded company listed on the Pink Sheets under the symbol TLXX, Mr. Acs alleges that several false and misleading statements were made in the most recent 8K filing made by certain persons who are now representing that they control the company.

The electronic response confirmed that the Division of Enforcement of the United States Securities and Exchange Commission has received the complaint.

Some of the text of the electronic response is quoted below:

"We are always interested in hearing from members of the public, and you may be assured that the matter you have raised is being given careful consideration in view of the Commission's overall enforcement responsibilities under the federal securities laws. It is, however, the Commission's policy to conduct its inquiries on a confidential basis.

The Commission conducts its investigations in this manner to preserve the integrity of its investigative process as well as to protect persons against whom unfounded charges may be made or where the Commission determines that enforcement action is not necessary or appropriate. Subject to the provisions of the Freedom of Information Act, the existence or non-existence of an investigation as well as information which may be gathered thereunder is not disclosed unless made a matter of public record in proceedings brought before the Commission or in the courts.

Should you have any additional information or questions pertaining to this matter, please feel free to communicate directly with the undersigned at 450 Fifth Street, N.W., Washington, D.C. 20549-0908 or via e-mail at enforcement@sec.gov. We appreciate your interest in the work of the Commission and its Division of Enforcement.


Mr. Acs was not available for further comment.

Possible loss of US citizenship..

http://travel.state.gov/loss.html

US Citizenship & Nationality..

http://travel.state.gov/acs.html#cit

Renunciation of US Citizenship..

http://travel.state.gov/renunciation.html

Can U.S. Citizenship Be Ended?

If a US person intends to live offshore or engage in extensive offshore finance, it's worth considering the acts by which legal standing as a US citizen might be called into question..

The basic rule..

US government policy presumes that an American citizen
does not wish to surrender citizenship..

Clear proof of that intention is required before "expatriation" will be recognized officially..

Expatriation comes about because of an individual's deliberate act..

One officially must renounce native or acquired legal citizenship. This means visiting a US embassy or consulate abroad, answering a standard questionnaire, then signing a formal document requesting an end to US citizenship..

Subsequent US State Dept. approval usually is granted as a
routine matter. In such case the person already must have acquired a new citizenship, lest they become a man without a country..

What specific acts could cause a loss of US citizenship?

In addition to a formal 'paper work' renunciation, the US has a developed body of statutory and judicial case law describing various specific acts that can cause involuntary expatriation by citizens..

Under US law these acts might include voluntary military service in the armed forces of a foreign nation, voting in foreign elections, and swearing allegiance to, or accepting an official office in a foreign government..

This automatic loss of citizenship can occur despite the United Nation's 1948 Universal Declaration of Human Rights which states that no one shall be arbitrarily deprived of his nationality nor denied the right to change his nationality..

In Nishikawa v. Dulles, 356 US 129 (1958), the US Supreme Court held that the government must prove by clear and convincing proof that a potentially expatriating act was done voluntarily before citizenship can be lost..

In Afroyim v. Rusk, 387 US 253 (1967), the Court said an
American has a constitutional right to remain a citizen until
voluntary relinquishment and that intent to relinquish must be proven by the government..

In Vance v. Terrazas, 444 U.S. 252 (1980), the Court said such intention to relinquish citizenship may be proven by conduct
or reasonable inferences. Mere long~term residence abroad does not cause loss of US citizenship, Schneider v. Rusk, 377 US 163 (1964), not even leaving the US to evade the draft in time of war.. Kennedy v. Mendoza-Martinez, 372 US 144 (1963)..

It's worth noting that US law clearly confirms the right of a US citizen to dual citizenship.. That is, US persons have the right to acquire a second citizenship and passport..

That dual status can be very useful for those who engage in offshore business or live abroad, as we at the Sovereign Society can explain..

That's the way that it looks from here..
BOB BAUMAN

SEC Subpoenas Four MarketWatch Executives
By Lisa Baertlein, Reuters

SAN FRANCISCO (April 7) - Federal regulators have subpoenaed the stock-trading records of four top officials of MarketWatch.com Inc., including its chairman and chief editor, as part of a probe into the trades of co-founder Thom Calandra, the financial news service said on Tuesday.

The Securities and Exchange Commission sent subpoenas to Larry Kramer, MarketWatch's chairman and chief executive, Editor-in-Chief David Callaway, Chief Technology Officer Jamie Thingelstad, and Bill Bishop, general manager of consumer Internet properties, MarketWatch General Counsel Doug Appleton told Reuters.

Callaway declined comment. The other executives, as well as a spokesman for the SEC, could not be immediately reached for comment.

The subpoenas called for the executives' personal trading records from March through December 2003, a period that roughly coincided with the publication of ''The Calandra Report,'' a subscription newsletter with stock research and recommendations written by Calandra, Appleton said.

''We don't know why the SEC selected these individuals. We can only surmise it's because they had supervision over Calandra or 'The Calandra Report,' or potentially had access to the report prior to publication,'' Appleton said.

Calandra resigned in January amid company and regulatory probes into his trading activities. Calandra refused to turn trading records over to the company and no longer has ties to MarketWatch, Appleton said.

MarketWatch has been turning over e-mail and documents from Calandra's computer to regulators under a previously issued subpoena, he said.

''We do not have any information that these individuals traded on nonpublic information communicated by Calandra,'' Appleton said.

MarketWatch.com operates two Web sites, CBSMarketwatch.com and BigCharts.com, and is 33 percent owned by Viacom Inc.'s CBS Enterprises unit and 33 percent owned by British publishers Pearson Plc.

Electronic publisher Thomson Corp. last week said its financial arm would partner with MarketWatch.com to develop a customized new service, to compete with real-time information services offered by Reuters Group Plc. and Bloomberg LP.

(Additional reporting by Duncan Martell and Michael Kahn in San Francisco)


Reut20:30 04-06-04

ACLU to Sue Government Over 'No-Fly' List

By LESLIE MILLER, Associated Press Writer

WASHINGTON - American Civil Liberties Union (news - web sites)'s officials declined to comment in advance of their planned announcement Tuesday that they would file a class-action lawsuit challenging the list of travelers that the government has barred from flying because they're considered a threat. The civil rights group is representing seven plaintiffs.

Airlines are instructed to stop anyone on the "no fly" list that is compiled by the Transportation Security Administration. The ACLU contends, though, that some people are wrongfully put on the list.


David Nelson is a law-abiding 34-year-old lawyer from Belleville, Ill. But he says the government treats him as if he's a threat to commercial aviation who shouldn't be allowed on a plane.


Nelson says he believes his name appears on the government's "no-fly list," which names people deemed too dangerous to board commercial flights. For Nelson, it's a case of mistaken identity: he's not the David Nelson the government believes is a threat.


Still, he says he's been delayed at airports dozens of times as government officials questioned him.


Nelson is among seven people whom the ACLU brought together in a class-action lawsuit filed Tuesday against the TSA, which administers the list.


"Few would line up in sympathy for a trial lawyer delayed for a few minutes at the airport every time he wants to hop on the plane," Nelson said in an interview. "But surely it affects individuals of color disproportionately, individuals of Arab descent or who practice the Muslim religion, and it's very much those people on my mind when I volunteered to be a named plaintiff."


His colleagues in the lawsuit include a retired minister, a college student, an Air Force master sergeant, a human rights activist and two ACLU employees.


The lawsuit, filed in U.S. District Court in Seattle, claims the "no-fly list" violates airline passengers' constitutional protection against unreasonable searches and seizures and their right to due process. The civil rights group says the government has not put enough safeguards in place to ensure people with similar names aren't treated with suspicion.


"You can't force the same innocent people over and over and over again to shoulder the burden of our lack of decent intelligence," said Reginald Shuford, the ACLU's lead attorney on the case.


TSA spokesman Mark Hatfield said he couldn't comment on the case but is confident the "no-fly" list is legal.


"Our standard procedures and our systems in place, those we've created and those we've inherited, have all stood the legal tests they've been subjected to so far," he said.


The TSA administers two lists: "no-fly" and "selectee." Those on the "no-fly list" are not allowed to board a commercial aircraft. Those on the "selectee list" must go through more extensive screening before boarding.


Federal law enforcement and intelligence agencies recommend to the TSA who gets put on the lists, but little else is known about them. The government does not disclose how many people are on the lists or how people qualify to get on or off, nor does it confirm any names on the lists.


Hatfield said the problem of confusing innocent people with those on the lists points to the need for a broader TSA program that can conduct computerized background checks of all airline passengers and to rank them according to their risk of being terrorists.


"If we can create a system, and we believe we've architected one, that has a very accurate identification component, we're going to eliminate the vast majority of misidentification," Hatfield said.


The ACLU and other privacy advocates oppose the program, called the Computer Assisted Passenger Prescreening System, or CAPPS II.





"It doesn't make sense to replace this deeply flawed program with a larger program that will capture innocent people in larger numbers," ACLU spokesman Jay Stanley said.

The other plaintiffs in the lawsuit are:

_Michelle D. Green, 36, an Air Force master sergeant.

_Alexandra Hay, 22, a Middlebury College student.

_John Shaw, 74, a retired Presbyterian minister from Sammamish, Wash.

_Mohamed Ibrahim, 41, coordinator with the American Friends Service Committee.

_David C. Fathi, 41, senior staff attorney with the ACLU National Prison Project in Washington.

_Sarosh Syed, 26, special projects coordinator at the ACLU in Seattle.

___

On the Net:

Transportation Security Administration: http://www.tsa.gov

American Civil Liberties Union: http://www.aclu.org

To see the ACLU's complaint: http://www.aclu.org/SafeandFree.cfm?ID15419&c272

LIST OF LITIGATIONS WITH ORDERS OR DECISIONS AVAILABLE ON THE DATABASE

Sorted by company's name

http://securities.stanford.edu/decisions.html

LIST OF LITIGATIONS WITH COMPLAINTS AVAILABLE ON THE DATABASE
Sorted by company's name

http://securities.stanford.edu/filings.html


HEADLINES

http://securities.stanford.edu/news.html#settles

$250 Billion Lost Due to Stock Market Scams








http://securities.stanford.edu/

http://securities.stanford.edu/Settlements/REVIEW_1995-2002/settlementspr.pdf

http://securities.cornerstone.com/pdfs/3_03PR.pdf

http://securities.stanford.edu/research/studies/20020219_JAG.pdf

SkyWay Communications Holding Corp. Reports Financial Results For The Third Quarter of 2004.
Clearwater, Florida, March 26, 2004 – SkyWay Communications Holding Corp. (OTCBB: SWYC — News) Reports Financial Results For The Third Quarter of 2004. Third Quarter, 2004 For the third quarter of 2004, SkyWay reported a net loss of $6.258 million (7 cents per share), compared with net loss of $.140 million (1 cent per share) in the third quarter of 2003. The increases in expenses were the result of our merger with Sky Way Aircraft, Inc. and the fact that Sky Way Aircraft had minimal operations during the nine months ended January 31, 2003. The company reported quarterly sales of $0.015 million versus $ 0.0 during the quarter ended 2003. The revenue represents company sales from their wireless division as it begins to focus on sales to multi development units. As of the quarter end we had a cash position of approximately $1,535,000.

In addition, during the current quarter, the company procured a DC-9 for $2.112 million, including improvements. Of this amount, $1.5 million is funded with a promissory note. The company is currently having the plane retrofitted with the equipment necessary to demonstrate the company’s technology and provide the information necessary to obtain FCC certifications which are necessary for installations in commercial aircraft. It is expected that the aircraft will be available for testing in early May 2004.

2004 Year-to-Date Results, Since Inception and Subsequent Events
The company’s net loss for the first nine months of 2004 was $13.3 million ($.19 per share). For the first nine months of 2003, the company recorded a net loss of $.3 million ($.04 cents per share).

From our inception on April 24, 2002 to January 31, 2004, we incurred operating losses of approximately $14,600,000 (approximately $10,000,000 of this loss was from non-cash stock based compensation expense) and at January 31, 2004 we had a net working capital deficit of approximately $904,000. Net cash used in operating activities for the period from April 24, 2002 to January 31, 2004 was approximately $4,278,000. Net cash used from investing activities for equipment and an aircraft, after borrowings of $1,500,000 secured by the aircraft, was approximately $1,756,000. We funded these needs through the sale of common stock and advances from related parties that were converted to common stock which have provided us approximately $7,900,000.

Between February 1, 2004 and March 9, 2004, we raised an additional approximate $4,500,000 from the sale of common stock and as of March 9, 2004, we had approximately $3,700,000 of cash on hand.

We believe our cash resources are sufficient to satisfy our cash requirements over the next 5 months based upon our current run rate. We will need to secure a minimum of $3,000,000 more to satisfy requirements for our full 12 months of operations, but we also will need an additional minimum of $5,000,000 to finance our planned expansion, which funds will be used for product development, capital procurement and personnel. In order to become profitable we may still need to secure additional debt or equity funding.

We may experience problems; delays, expenses, and difficulties sometimes encountered by an enterprise in Sky Way Aircraft’s stage of development, many of which are beyond our control. These include, but are not limited to, unanticipated problems relating to the development of the system, production and marketing problems, additional costs and expenses that may exceed current estimates, and competition. “The quarterly and year to date results are in line with our expectations” according to Brent Kovar, President of SkyWay Communications Holding Corp. “From a cash position, the company is in its best position since its inception which will allow us to continue to build out our network, move forward with the approval process for the equipment to be installed in aircraft, and obtain capital equipment needed in support of the operations”. “With the recent approval from the FCC, which has granted us licenses for 114 towers we qualify as the largest Air To Ground network in the world. This will allow us to broadcast seamlessly to airborne aircraft providing in-flight entertainment and Homeland Security solutions anywhere in the United States territory. Finally, with the procurement of the DC-9 and other aircraft we have available, we are in the process of testing our technology in the transmission of data between the ground and air. We have demonstrated that video and internet connection data can be transmitted between the ground and airplanes using our technology and we are in the process of additional testing to refine these communication links. All of the tests are functioning as planned at this time”.

Certain information contained in this press release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various economic, financial and industry factors including without limitation the company’s ability to implement its technology, obtain additional funds and achieve its targets. Additional factors that may cause actual results to differ materially from those indicated by such forward looking statements are discussed in the company’s Form 10-KSB for the year ended April. 31, 2003 and Form 10-QSB for the quarters ended July 31, 2003, Oct. 31, 2003, and Jan. 31, 2004 which are on file with the Securities and Exchange Commission. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

For more information about SkyWay Communications Holding Corp. please visit our website at www.skywayaircraftsecurity.com or our Investor Relations Department at stevek@positivereturns.usa

Contact:

Contact:
SkyWay Communications Holding Corp.
Brent Kovar
President
(727) 535-8211
http://www.skywayaircraftsecurity.com



http://www.sec.gov/Archives/edgar/data/1128723/000110801704000111/e991.htm

Skyway Communications Holdings, Inc Part II
OTC- BULLETIN BOARD SYMBOL SWYC

Corporate Headquarters:

6021 — 142nd Avenue North
Clearwater, FL 33760

727.535.8211


bkovar@SkyWaynet.us




It doesn't take a rocket scientist to see that this logo has been added to this picture to give the false impression this is a Skyway Aircraft facility. This is both outrageous and insulting and we believe this is the kind of dishonest practice that deserves swift and harsh SEC action.


NAME THAT ROOM -

Now you too can be a Junior Detective and help Our-Street.com find out exactly what kind of room this is. We notice to the right of the logo is a map of Florida and some weather data so it looks like a Doppler radar screen but we just don't know. Can you find this room somewhere else on the net? Do you recognize exactly what this room is actually used for? If so, please let us know. Write us at info@our-street.com and help us "name that room". Help us solve this and, if we had a secret decoder ring we would send one to you.. but we don't. You will have to settle for our gratitude and that of others who want to know as well and you will know you helped us take back our street, plus, if you want, we will post your name right here as a champion internet detective.



TO STC OR NOT TO STC. THAT IS THE QUESTION!



The March 2004 issue of Avionics Magazine it is reported that



"The aircraft itself will serve as a technology demonstrator and test bed. The systems on the DC-9-15, as of early February, were in the supplemental type certificate (STC) approval process."



We have been further informed by the company's IR person that the DC9 is in Chicago at DuPage Airport and that the system is being installed by Scott Aviation. So we checked with the Aircraft Certification Office at the Chicago office of the FAA since that is the normal place where an STC for the plane would be handled. As of March 29, 2004, the FAA representative called us back after checking all the records and informed Our-Street.com that

"there is not any current Sky Way Aircraft STC projects in this office"



In fact the man we talked to at the FAA hadn't even heard of Sky Way Aircraft or Skyway Communications. We figured that if anyone in the FAA knew about Sky Way Aircraft or Skyway Communications or the Kovars, it would be the Tampa FSDO office of the FAA so we called them as well. They informed us that they had never heard of Sky Way either and further, that neither Sky Way Aircraft nor Skyway Communications had applied for or been granted any FAA licenses either.



We also asked about an STC under the other Registered owner of the plane Royal Sons Motor Yacht Sales, Inc.



Now maybe there is an STC application somewhere in some other name but frankly, we doubt it very much. We invite the Kovar's to provide the proof of an ongoing application and we will gladly publish it here.



For those of you who aren't familiar with the STC process, the first step is to file a Certification Plan. This informs the FAA of what you intend to do. You can't even start work without that plan being filed and approved.



We also spoke with the FSDO office of the FAA in Tampa, Skyway's nearest office and the gentleman there, who handles the certification of companies hadn't even heard of Skyway or the Kovars either.



BUGGY WHIPS ANYONE?



In 2002 Claircom Communications, a division of AT&T shut down their InFlight phone service. It wasn't profitable, it wasn't going to be profitable and previous attempts to sell the system had failed. This left Verizon as the only other Air to Ground company providing in flight phone service the old fashioned way, with land based towers instead of satellites.



In steps a white knight, Skyway Communications and they get the deal of the century, or so it might seem. They bought the entire 10+ year old system, including the broadcasting hardware for a cool million. Was this because no one else knew about it? Hardly, the fact Claircom was trying to dump this property was common knowledge in the airline and communications industry.



We are being led to believe that the reason the system didn't make sense to anyone else in the industry is that Brent Kovar and Skyway Communications Holdings has been sitting on a technology so advanced that it will allow the Clarion tower/communication system to transmit data in both directions ten times faster than land based broadband internet systems and what's more, he has been sitting on this unique software technology since 2000 without finding a single profitable commercial outlet for it to date.



Further, Brent is asking us to accept his claim that this technology will not only support high speed internet access on commercial aircraft, he also is asking us to accept his claim that their web cams and other aircraft monitoring technology will prove valuable to both airlines and governments in the quest for homeland security.



Of course to accomplish this task we have to suspend our concern for the fact that this technology, (assuming it even works at all in the first place), will be limited to the US and some limited parts of the Caribbean and Canada so it would have no practical value to any airlines that have need for technology which is international in scope. Without the use of the latest ground-to-air satellite based technologies, Skyway's system will be useless as soon as the plane leaves US airspace and the range of the coastal towers. This automatically eliminates all the international carriers.



Of course, this also calls into question the logic behind ramping up the towers in Alaska and Hawaii since the system would go dark en-route. We could also get into discussions about compatible systems and how Skyway intends to integrate their airlines and systems with the major airlines who will all be forced to use competing systems that feature the latest in leading-edge, state-of-the-art equipment and global satellite communications technology instead of surplus towers and equipment purchased from a now defunct company.



In case you didn't know it, Transdigital Communications Corporation, the company SWYC just announced buying some equipment from, is out of business. Phones at their listed phone number are disconnected and their website is down and has been for some time. We aren't quite yet sure what happened but if you look at their former website you will see that they never really got beyond the "we're putting our website together" stage.



Also, since international flights are the ones that are the primary focus of terrorist watches, having facial recognition software installed only on airlines and planes that will be limited to domestic flights would seem a little irrelevant.



We are doing our best here not to get really sarcastic but come on now. Are you getting a clue here?



Competition Anyone?



Just so no one thinks that the Kovar's have a lock on the high speed air to ground communication/internet business out there, there are a few other players on the scene. Granted, none make the claim of 15Mbps of two way data transmission like Skyway does and none of the serious players have the advantage of a once mothballed network of ground based antennae that Skyway does either. Lacking the distinct qualities of a "US and limited areas of Canada and the Caribbean only" ground based antenna system these companies are forced to resort to other methods of air to ground data transmission like leading-edge, state-of-the-art, global satellite systems.



Of course, being well funded companies, they have managed to get a jump on Skyway. One example is the Boeing Connexion who, although they don't have the Southeast Airlines letter of intent contingent on just about everything including the apparent "if it works and we decide we like it and haven't found something better in the interim" clause, they do have Boeing behind them.



It is our understanding that Boeing does have some involvement in the manufacture and sales of commercial airplanes and, even though they don't operate their own airline, we suspect they can perhaps influence the kind of systems which are installed in some fleets anyway. Perhaps that is why the Boeing Connexion has already concluded in flight trans atlantic testing and is launching their system using Lufthansa Airlines as their initial launch airline.



NOTE: The chart displayed by Skyway showing their connection speeds is misrepresented. The initial trans-Atlantic test run, according to articles had a downloaded speed of 3 Mbps and an upload speed of 128kps. This initial test download speed surpasses what Skyway indicates on their comparison chart and according to Boeing Connexion, their download speed now is at 20 Mbps, surpassing Skyway's claimed download speed by 33%. Boeing Connexion's upload speed is currently at about 1 Mbps.



IF YOU ARE GOING TO MAKE COMPARISON CHARTS, AT LEAST GET THE INFORMATION RIGHT. DON'T MISREPRESENT THE COMPETITION TO MAKE YOURSELF LOOK BETTER THAN YOU REALLY ARE!



Another player in the field is a Bothell, Washington company called Matsushita Avionics Systems. Matsushita is a bit of a newcomer to the Avionics business having only entered this field in 1979. Fortunately they did have some previous experience in electronics having originated in Japan about a century ago and establishing a name for themselves in electronics. Among other ventures they established and still control the Panasonic product line. They already supply systems to airlines and are offering upgrades to their latest systems that include internet access in addition to other features. Of course, Matsushita is also stuck with that leading-edge state-of-the-art, global satellite based communication system instead of Skyway's 10+ year old revived, ground based, geographically limited system so there is no telling how they are going to compete against Skyway once (and if) Skyway ever gets their system installed, working as represented, and certified by the FAA.



Of course Skyway will have the edge, they claim, because they will be offering the systems for free to the airline and the internet free to the customer and making their money on forced advertising. Despite the fact this model has yet to be successful over the long haul, as far as we know except in the area of mass media, Skyway has offered to prove the critics wrong and backs it up with presales of high value advertising contracts to the likes of Dew Cadillac, Dimmitt Bentley and others commercial establishments in Florida.... or do those contracts really exist after all and are they for cash in the amounts represented??? Looks like a bunch of smoke and mirrors to us based upon what we have been told.



DID YOU KNOW THAT BRENT FAILED AT AN IPO ATTEMPT BEFORE SWITCHING TO A SHELL MERGER?



We find it interesting too that the Kovar's initially attempted to take Sky Way Aircraft, Inc public before finally giving up and taking the easy way to the market with the reverse merger into a shell. Now, in our opinion, there is nothing wrong with a shell merger but we get concerned when a company, or more appropriately, the people involved with a company, can't get an IPO through the SEC then quit trying and resort to merging into a shell where the SEC has less to say and less opportunity to ask questions. Remember, the key to getting an IPO through the SEC is thorough and accurate disclosure. They don't conduct a merit review to determine if they like the business. They simply want you to explain the business and the corporate structure completely and accurately.



If you can't get your IPO cleared, there is definitely something wrong. Aside from not answering the SEC's questions fully and accurately, there aren't too many reasons why you might not get cleared. We have heard that another source of difficulty can sometimes come (unofficially) from being someone the SEC would prefer wasn't running a public company. In the past the SEC has been accused of "bed-bugging" registrations (not responding in a timely fashion) or of simply issuing comment letter after comment letter no matter how well you responded to the previous ones. Given that registrations are reviewed in a subjective fashion by people with more files on their desk than they should have, both are certainly possible and we don't even fault them for employing such tactics if it protects the market. In the case of Sky Way Aircraft, we have no idea whatsoever why they quit trying but what we do know for certain is that they filed their initial SB-2 in July 2002 and subsequently filed 4 amended registration statements over the next 8 months then quit trying and filed a formal notice to abandon the registration in May 2003 just before sliding into the shell and starting trading.







*Preferred shares



The Series A and Series B Preferred, which represent 300,000,000 common shares currently are convertible into common. Although both Series initially had milestones that had to be reached prior to conversion, the most recent 10Q has eliminated any discussion of their conversion into common which suggests they can be converted at any time with no additional payment. The Series B is still convertible upon certain events that may never occur. Those events are 1. The completion of a successful IPO in the amount of $25 Million. 2. A minimum closing price of $4 per share for 30 days (adjusted for splits, acquisitions etc) or 3. the successful launch of their product (definitive agreements with three (3) nationally recognized airlines to provide its Products and Services; (ii) to have an operational network capable of providing its Products and Services throughout the United States; and (iii) an operational ground base data center.



Based upon available information, we do not consider the agreement with Southeast Airlines a "definitive agreement" however, management may disagree. Further, it is important to keep in mind that conversion terms of convertible preferred shares can be changed and since the Kovars have voting power equal to the converted shares, they control this company with absolute power.



We believe, their disclosure in SEC filings is woefully inadequate considering the level of potential dilution and the voting control they hold. We also find no evidence that the Kovars, with their overwhelming control of the voting power of the corporation, are prohibited from modifying the conversion terms to suit themselves.



Although the Kovars do disclose the terms of the convertible preferred in their SEC filings, we feel they do not disclose this adequately and that this failure also represents a violations of Section 13 of the Exchange Act as a material omission.



ALMOST TOO STUPID TO EVEN MENTION.



We sometimes marvel at the hubris and gall of people sometimes and this time is no exception. Brent published this amazing sounding announcement in August of last year.



SkyWay Communications Holding Corp Announces Congressman and Republican Majority Leader Tom Delay's Appointment of Brent C. Kovar, President of SkyWay, to the National Republican Congressional Committee Business Advisory Council



HONESTLY, HOW STUPID DOES THIS GUY THINK YOU ARE? First he doctors the picture to make you think that is his monitoring room or something then this!! This is nothing more than a simply fund raising tactic on behalf of the Republican party. They cold call people and get them to contribute a few hundred dollars then name you to this Business Advisory Council. Nothing wrong with doing it but any company that uses is to promote their stock is, in our opinion, up to no good!

A little more on the subject

Even a little more


ENOUGH SAID!



SUMMARY



Give us a break here!! We have here a family with proven lack of credibility running this company and paying themselves generous salaries ($175,000 annually to Brent). We have here a family that either currently is or almost certainly was under SEC examination with the Net Command Tech/SAS matter and yet, in our opinion, continues to act so as to deceive the investing public to get where they want to go.



We have here a software technology that has not been proven or confirmed by any reputable independent source that we can find.



We have a company that is issuing shares at a rate even Our-Street.com finds hard to comprehend. In the past 3 quarters, we have seen the issued and outstanding go from 57,200,000 on July 7, 2003 to 70,200,000 on October 31, 2003 and 124,701,669 on March 9, 2004 and all this dilution was without benefit of an acquisition. That means that the Kovar's are issuing stock at an average rate of 204,893 per day. Of course, all this stock has nothing to do with the 351,998,000 shares represented by existing convertible preferred shares.



Finally, we have here a company that has mislead the markets about the value and nature of existing contracts of clients on both sides of this business equation.



In our opinion, if the Kovars aren't stopped here, they will continue to use the public markets and trusting investors as their personal ATM machine without consideration or concern for shareholder value, honesty, disclosure, or ethics.




As always, we will gladly provide a forum for any documented and verifiable comments by the company and will promptly and sincerely apologize for any errors in our facts. Our commitment is to bring forth the truth and the facts in the matter and we encourage Skyway Communications Holdings to produce whatever documents they can to clear up our concerns and the concerns of what we assume are many SWYC shareholders.

http://our-street.com/featured.htm

Skyway Communications Holdings, Inc

OTC- BULLETIN BOARD SYMBOL SWYC

Corporate Headquarters:

6021 — 142nd Avenue North
Clearwater, FL 33760

727.535.8211


bkovar@SkyWaynet.us



The Ones Responsible

Officers and Directors and Significant Players

Brent Kovar

Glenn Kovar

Joy Kovar

James Kent





SEC FILINGS

Some Basic Facts - as of January 31, 2004

Common Shares outstanding (March 9, 2004) - 124,701,669

FULLY DILUTED AFTER CONVERSION OF PREFERRED SHARES INTO

351,998,000 shares of common - 476,699,669*

Total Assets December 31, 2003- $4,881,565 (unaudited)



Total Liabilities - $2,554,308


Revenues for year ending 1/31/2004 $15,398 (also revenues since inception)



Total Net Loss from continuing operations for 9 months ended 1/31/04 -

$13,326,597


Accumulated Deficit from April 2002 - $14,608,290



Stock price when report was published $.80

Market capitalization $99,761,335

Market Capitalization fully diluted $381,359,735

Date Complaint filed: March 25, 2004

Filed with: Enforcement Division of the SEC, Washington and Florida

Known actions to date - None

2 APRIL 2004 - Our-Street.com been contacted by a former high level employee of Satellite Access Systems (Kovar's former company) who, after reading our report, concluded that the Kovars were up to the same misdeeds as they witnessed with Satellite Access Systems. Those misdeeds included some of the following more disturbing events.

1. The Kovars took millions of investor dollars without generating any meaningful income and enjoyed extravagant lifestyles while failing to pay employees in a timely fashion. This included throwing a $20,000 New Years party at Brent's expensive executive home while continuing to fail to pay employees. (Brent lives in a luxury executive home most of us can only dream about and it is funded entirely by investor dollars).

2. Demonstrations of SAS technology were faked by Brent. On one occasion, while moving a computer, a "critical" hardwired component was ripped from the computer and Brent simply instructed the employee to reinsert the broken connection and proceeded to conduct a demonstration that would have been impossible under the circumstances.

3. When conducting a demonstration of the satellite link between the demo room and his receptionist who was on camera, Brent secretly instructed his receptionist to pause three seconds after hearing the speaker to give the impression there was a time delay due to satellite distances.

4. Contracts were specifically drawn to enable SAS to take huge "stand still" deposits from customers yet not require delivery of services and still allow retention of deposits. (this supports statements by Net Command Tech regarding all customers of SAS and the Kovars demanding their money back for failure to perform).

5. Our contact also stated clearly that Brent Kovar is the brains behind the outfit and that he is the most capable con man our whistleblower personally has ever witnessed. "He could sell ice to Eskimo's".

6. Brent not only took money from investors, he also talked his relatives out of money as well and they too ended up losing investments they could hardly afford to lose.

Generally speaking this highly placed whistleblower spoke of Brent, Glenn and Joy's conning everyone from family and friends to investors to companies out of millions of dollars and spending that money in helping support the con with impressive offices and demo rooms while enjoying extravagant lifestyles at the expense of the investors. All this was pulled off while NEVER delivering a single product. Our whistleblower compared Brent to a skilled magician as he staged mock demonstrations and took non-refundable deposits then failed at every instance to deliver the promised technology.

OUR COMPLAINT

Sometimes a story almost too strange to the point where you wonder how people believe it to begin with. Such is the case with the Kovar family's latest venture, Skyway Communications Holdings, Inc.



Here is a family that has been working different versions of the same type story with the public since at least 1996 and still seems to be able to find willing believers. The premise is simple. "Invent" a product with remarkable capabilities. Also invent a great story to go along with the "product" and be really good at telling the press and others about it so you can convince others to invest in you and the product. (Keep in mind, when we say "invent" we mean that in the broadest terms possible). Keep this up as long as you can and make sure you pay yourself and your family well along the way. When the story falls apart, invent a new product or recycle the old one in a different package and repeat the process.



The head of this family, Papa Glenn Kovar's history as a man who makes materially false and/or misleading statements to get what he wants goes back even further beginning with his lies on a job application to get a position with a Redevelopment Agency from which he was subsequently fired when the lies were exposed.



Actually, our story starts in the late 1980's. Around that time Glen was getting fired for his "creative resume" work. Also around the same time another apparent turning point for the Kovar family occurred. Glenn tells you of a poignant father/son moment aboard a sail boat in 1987 in the Virgin Islands, where Glenn and Brent began wondering about the opportunities in the satellite and related businesses. We don't know if this moment came before or after Glen was fired from the Redevelopment Agency but with Glenn being out of work and fresh from this magical moment, Glen and Brent experienced the genesis, the inspiration for their first recorded commercial father and son project, Satellite Access Systems (SAS).



This is the first evidence we have of Brent and his dad teaming up on a project. Now, when it comes to getting caught in a lie as Glenn did, some people learn their lessons and change or even commit themselves to atoning for their past mistakes while others just keep on keeping on. That appears to be the case with Glenn because his misstatements didn't stop after the resume lie/firing incident. There are so many misstatements in the article about his formation of SAS that we are reluctant to list them all on this page. Instead, we have listed some as additions to the article itself.

Tampa Bay Business Journal article



Although Glenn credits Brent with being the "genius", it is obvious where Brent got his education when it comes to outrageous promotional claims. We can see this in their first venture together, Satellite Access Systems. Although Glenn is the one taking the lead in the news story and bragging about their mysterious "black box", Brent, at age 29 does "yeoman's duty" in helping carry the promotional load by making his own grandiose claims. For example, when Glenn tossed up the claim that they just were signing a contract with an AOL subsidiary, Brent hit it over the fence by adding that the contract could "blossom into well over $500 million."



It was only after realizing how badly he had been scammed, that the reporter who wrote the initial SAS story came back and filed a follow up story not only on Glenn's resume problems but on several of the other lies told to him as well.



It isn't often you see a follow up story by a reporter where the reporter actually goes back and attempts to correct a snow job he had gotten previously. We commend the reporter on his vigilance and note this must have been a better than average snow job to cause this kind of reaction.



From here we don't find much on the Kovar's and their so called "black box" technology and inch wide satellite dishes until two and a half years later in April 1999, when Corsaire Snowboard Inc announced the acquisition of SAS and the changing of their name to Net Command Tech, Inc. (OTCBB: NCDT now pink sheets). Here is what they thought they were acquiring.



According to NCDT, the Kovars were involved in the "development of ultra high speed satellite and Internet communications for the transmission of voice, date and video signals; technology"



Somehow the Kovar's managed to talk the folks controlling NCDT out of about $3 million in cash in addition to debt assumption and a bunch of stock without ever confirming the existence or effectiveness of their alleged technology.



Were not quite sure how these things happen but we got this information from NCDT SEC filings (see link below). We find additional credibility in these particular disclosures due to the fact that about 60 days after the announcement of the SAS acquisition and right about the same time as the acquisition of SAS was closing, the SEC stepped in and suspended trading in NCDT stock while requesting information on, among other things, their recent acquisitions and claims surrounding the acquired company's technology and claimed income.



There are some pretty troubling claims in these filings and we suggest anyone with an interest in Skyway Communications, read this information thoroughly.

NCDT FILING



Here is just a sample of what you are going to find.



"However, SAS had not successfully delivered contracted services or technologies under these contracts. In addition, as discussed in Note 9, substantially all counterparties to SAS's contracts have made claims for return of the customers' advance deposits and other damages."



Bottom line here is simple; amazing claims about technologies were made but not delivered by Glenn Kovar and Brent Kovar while sucking money out of the investor's pockets.



Fast forward again to today and the latest venture of the Kovar family, Skyway Communications Holdings. Through this company and its subsidiaries, they are once again promoting some amazing technology with outrageous claims both in their press releases and on their website and people are buying the story. Here are some of the claims:



"While all commercial airlines currently provide some limited In-Flight Entertainment (IFE) and communication services, these systems currently rely on data transfer systems that are inferior in reliability and speed when compared to Sky Way Aircraft’s system. Sky Way Aircraft has the ability to provide data link technology that will dramatically increase IFE connection speed and capability."



BUT WAIT!



In their most recent 10Q filed on March 16, 2004 they clearly state, All of our products and services are in the development stage and will require additional testing.



The obvious question here is

How can these two statements exist when referring to one technology?

It appears to us that Skyway simply hopes to someday have the ability to provide these services.



And



How in the world can they claim superior reliability when they haven't even finished installing the first working model which will decide if the technology even works? This it a total fabrication.. a lie... a deception.. a con... "masculine bovine exhaust" at its best.



Section 10b-5 of the Exchange Act prohibits a person from making materially false and/or misleading statements in relation to the sale of stock and we believe that SWYC's claims on their website as stated above are clearly false and/or misleading.



We have another problem with Kovar's claims about his technology. This has to do with how he describes it in his SEC filings. In his most recent 10Q, Kovar refers to his technology this way.



"Sky Way Aircraft, a division of Sky Way Communications Holding Corp. was formed to utilize now-patented wireless data transmission software technology developed by Mr. Brent Kovar, our President. This technology is a software program for data indexing, which is similar to data compression but which mitigates data loss problems associated with compression. This technology permits faster and less expensive transmission of data, video, voice and audio between the ground and an airplane or other homeland security related ground locations than using traditional, non-indexed data transmission mechanisms"



However, when we look at the patent itself, the first sentence of the abstract clearly says,



"A system for increasing the transmission bandwidth of a terrestrial digital network". Additionally, the patent says nothing at all about cost effectiveness. More masculine bovine exhaust!



Again we find contradictions between representation and fact. And for those who might want to say, "but the technology can be used for wireless", we say SO WHAT? Disclosure is about accuracy and truth and the truth is that Brent Kovar's patent, IF IT EVEN WORKS, was designed for terrestrial digital networks. In his patent, Kovar even goes futher to make the distinction between satellite and wireless transmissions and the more traditional "terrestrial networks" such as phone lines.



Given this fact, how can Kovar then file a disclosure document with the SEC and call his technology a "wireless data transmission software technology"?



It is a violation of Securities Law to knowingly file false information with the SEC and, in our opinion, the claim that Brent's patent is for wireless data transmission software, is materially false and/or misleading.



Basically, this is what we see going on with the "technology". The Kovars, through SWYC, have acquired the old AT&T in-flight tower phone system for the US. This is the system that AT&T essentially abandoned when it got out of the in-flight phone business. Now, they are attempting to upgrade this system to support their claim of being able to transmit data at a rate of 15,000,000 bits per second". According to their own charts, the system they acquired from AT&T, an "in flight phone system" was only equipped to transmit data at a rate of 2,400 bits per second. Skyway does not disclose exactly what is required to upgrade their system from 2,400 bps to 15,000,000 bps but we think this is the kind of information that should be clearly and fully disclosed both in terms of cost and time.



This use of bits per second alone is quite misleading, in our opinion. The industry simply doesn't measure data transmission in bits per second anymore. A bit is the smallest form of data one can transmit. Data transmission today is measured in terms of kilobits, megabits per second (Mbps) and not bits per second.



Accordingly, the data transmission rate being claimed by Skyway is 15 Mbps or 15 Megabits per second. By comparison a typical T1 internet connection transfers data at a rate of around 1.5 Mbps. So, according to Skyway, they have developed their own technology for transmitting data back and forth between an airplane and a ground tower about 10 times faster than a T1 connection by using their software designed for terrestrial network systems and not by using other state of the art compression technologies or hardware thus allowing them that speed on both the up and down link.



Given the historical facts of the Satellite Access Systems promotion and eventual demise added to the apparent inconsistencies already in evidence, we find Mr. Kovar's latest claims about this technology to be highly questionable at best. We have written the company and asked for some documentation of their claims and have not received a reply. We will advise you if we get any additional information.



Adding to our concerns regarding the technology and the credibility of the Kovars and Skyway Communications, is evidence we are receiving regarding the relationship between Southeast Airlines and Skyway. According to Skyway, Southeast Airlines initially entered into a Letter of Intent in July and then

"signed a SkyWay in-flight system contract for a wide variety of in-flight services. Under the contract, Southeast Airlines shall receive, on a reoccurring basis, a percentage of the revenue generated by advertising and in-flight service usage of the system. Terms of the contract call for the installation of the Upgraded SkyWay in-flight system on the fleet of Southeast Airlines eight (8) MD-80 and DC-9 aircraft."

This understanding is not shared by Scott Bacon, a VP for Southeast Airlines. According to reliable sources who have spoken with Mr. Bacon, there is no formal contract with Skyway Communications or any of its subsidiaries. According to Mr. Bacon,

1. There is no "formal contract" with Skyway Communications or any subsidiary.

2. They do have what amounts to an agreement that is more like a letter of intent based upon numerous conditions gs, among them

a. Proof that the technology works

b. All required FAA certifications

c. Inspection and working demonstration of a fully installed and complete working model



3. Once Southeast has had an opportunity to see the product in action and can confirm its functionality and that both the airplane and Skyway have the proper certifications from the FAA, then they will "look at it" to determine if they want it.



4. It is way too early in the process to determine if anything will come from the relationship.



5. In the interim Southeast continues to investigate other options including but not limited to the Verizon technology which uses existing installed hardware. They also have been in discussion with other airlines. This is an active subject of investigation for Southeast out of a commitment to be competitive while Skyway continues to fail to deliver requested documentation.



Recent developments also concern us. We called Southeast Airlines to personally speak further with Mr. Bacon about this subject and were told by the operator at Southeast that Skyway had called and instructed her to refer any further calls regarding their relationship with Southeast Airlines to Steve Kline, the IR representative for Skyway. We find this action both troubling and inappropriate. We have written Mr. Bacon and asked him to comment and will let you know if he replies.



ADVERTISING CONTRACTS?



We also have serious concerns about the accuracy of certain press releases referring to advertising contracts between Skyway and commercial organizations in the Florida area.



On October 2, 2003, Skyway issued a press release announcing that

"SkyWay Communications Holding Corp. its wholly owned subsidiary, Sky Way Aircraft Inc., and Mavilo Jewelry Company of Tampa, Fl. announces their new Southeast Airlines 12 week In-Flight advertising contract valued at $75,000. The contract is scheduled to commence Spring 2004.

As previously announced in the original press release of August 29, 2003, SkyWay and Southeast Airlines signed an in-flight services contract whereby SkyWay would provide a wide variety of in-flight services to Southeast Airlines. A significant part of these services were the advertising of local Tampa Bay and other businesses and info-commercials that would be tailored to specific destinations of the Southeast Airlines flight schedule. The contract with Mavilo Jewelry Company, an import diamond and fine jewelry company located in Tampa, provides for a 12 week ad coverage on Southeast Airlines scheduled flights, between St. Petersburg., Ft. Lauderdale, and Orlando, Fl. Allentown, Pa, Newburg, NY, and Newark, NJ.

We contacted Mavilo Wholesalers in Tampa Florida, a respected jewelry company and asked them to confirm the contract with Sky Way Aircraft. When we informed the receptionist we needed to talk to someone who would know about advertising contracts, we were put in touch with Maria in their business office. We introduced ourselves and told her we were researching Skyway Aircraft and Skyway Communications and wanted to confirm the existence of an advertising contract between Mavilo and Skyway and she replied

"I’ve never heard of them."

Question; You’ve never heard of them?

Answer; "If we had, I would know about it."

Question: You would think if it was for $75,000…..

Answer: "[Laughs] – Yeah, I think I would know about it."

We also looked at the two press releases regarding contracts with automobile dealerships. One claims that Dew Cadillac entered into an advertising contract valued at over $200,000 and the other claimed to have made a deal with a West/Central Florida Bentley dealership. Surprisingly enough Dew Cadillac is a part of the Dimmitt Luxury Automobile Group as is Dimmitt Cadillac, the only Bentley dealer in West/Central Florida.

We have spoken with both the marketing department for Dimmit Luxury Automobile Group and with the General Manager of Dew Cadillac. Originally, Tracy Peterson, in the marketing department, indicated "I can't confirm this..... We're not doing anything like that". We offered to send her a link to the press release and she confirmed her willingness to follow up her statements with an email. We subsequently received an email from her referring us instead to Scott Larguier, the General Manager of Dew Cadillac.

We then spoke with Scott at Dew Cadillac and he refused to comment any further indicating that they were not in the habit of discussing their advertising relationships and weren't familiar with Our-Street.com. When we explained to them that Skyway stock was being publicly promoted using the Dew name already as well as the $200,000 figure, he didn't feel this was sufficient to change his mind. We then invited him to visit our website and to review the work we do and then decide further if he wanted to provide more information. To date, we have not heard further from him. We can only hope that, should the SEC inquire of them, that they will have more success with Dew Cadillac than we did.

We think it is important to note here that these press releases announce contracts "valued at" various figures. This should indicate the value to Skyway but understanding deceptive promotional tactics, we are fully aware of the fact that this can also be used to describe the value to the advertising customer as in "we can let you have this advertising package valued at over $200,000 today for the incredibly low price of only $xxx". Who of us haven't had the opportunity to purchase something from a TV pitchman that represents an $820 value for only $69.95?

Time alone will tell us what the actual truth is with deal with Dew Cadillac and the Dimmitt Luxury Automobile Group but as far as we are concerned, we are terribly disappointed in the Dimmitt group because, in the world of stock promotions, if you are involved as Dew Cadillac is, and you aren't part of the solution, you are part of the problem. We would expect this from an old style bait and switch Motor's Holding type store from the 70's but not a Cadillac and Bentley dealership. Oh, well.. no accounting for ethics.

Now for something really stupid!

(And really, really wrong too!)

In our opinion, Brent Kovar holds the investing public in very low regard. In fact, we get the feeling he thinks most of you are total idiots. We have reached this conclusion based upon a picture Brent has added to the monitoring page of his technology overview page. Here he has added a picture of a high-tech room full of monitors and work stations. On the wall of this obviously state of the art looking room, in the center of all the monitors, is the Skyway Aircraft Logo.

http://our-street.com/featured.htm

Our-Street.com has made a lot of noise as a self-appointed securities cop, even recently winning accolades from no less than the Dow Jones (NYSE: DJ) Newswire. The site's purported proprietor, "Nick Tracy," screams for more "transparency," but like most would-be anonymous vigilantes, there is a dark side. A very, very dark side. And not a lot of "transparency" for Our-Street and Tracy.

The site's current target is Skyway Communications Holdings, Inc. (OTCBB: SWYC), and its recent targets have included H-Quotient (OTCBB: HQNT) and Circle Group Holdings (AMEX: CXN) when it was on the over-the-counter bulletin board. Short sellers love the site, and until recently Tracy had disclosed that he was among the short sellers trading the companies he posted.

Targeting H-Quotient turns out to have been Our-Street's Achilles heel. H-Quotient has sued Our-Street and Nick Tracy, who claims to live and operate out of the countryside near London, Chancery Number 86916, Fairfax Circuit Court, Virginia.

Except the company didn't sue Tracy, and it certainly didn't sue him "just outside London," where he has claimed residence. It sued Timothy J. Miles, of 918 Pacific Terrace, Klamath Falls, Oregon 97601, phone 541-273-0225, fax 541-273-0206, a character whose background is definitely interesting and eclectic. Miles, purportedly a.k.a. Nick Tracy, sent his attorneys, Charles Hildebrandt and Michael York of the law firm of Wehner & York (www.lawyers.com/w&ylaw/) to answer the suit. The next hearing is scheduled May 27.

The website operator's claim to be "outside London" appears to be true. Klamath Falls, Oregon, is definitely outside London.

Other companies that Our-Street has gone after include Silverado Gold Mines, Ltd. (OTCBB: SLGLF), Epixtar Corp. (OTCBB: EPXR), Aqua Vie Beverage Corporation (OTC: AQVB), ChampionLyte Holdings, Inc (OTCBB: CPLY), BEVsystems Interenational, Inc. (OTC: BEVI), DataMeg, Inc. (OTCBB: DTMG), Kingdom Ventures, Inc. (OTCBB: KDMV), Imaging Diagnostics, Inc. (OTCBB: IMDS), SHEP Technologies, Inc. (OTCBB: STLOF), EdgeTech Services, Inc (OTCBB: EDGH), Nutra Pharma Corp. (OTCBB: NPHC), Verdisys Inc. (OTC: VDYS), Calypte Biomedical Corporation (OTCBB: CYPT), Galaxy Energy Corp. (OTCBB: GAXI), PowerChannel, Inc. (OTCBB: PWRC), US Global Nanospace (OTCBB: USGA), and Universal Guardian Holdings (OTCBB: UGHO).

A handful have indeed become targets of the SEC, not always though for the "crimes" that Our-Street has accused them of. Many others, however, have actually prospered, and some, such as H-Quotient, reported strong earnings and revenues hard on the heels of Our-Street's representations that its finances were a sham.

At first it was hard not to admire Our-Street's premise, and even FinancialWire reported the site's activities and Investrend Information even listed the site as a partner, for about a week, until certain representations became suspicious and requests for documentation as to Tracy's existence and true whereabouts were brick-walled. The circumstances were outlined in a comment letter posted on the SEC web site at www.sec.gov/rules/proposed/s72303/investrend010404.htm, which claimed among other things that "Tracy's" own comment letter supporting short selling may have been a violation if, as suspected, Tracy had not truly identified himself in an official letter to a government agency.

In response, "Nick Tracy" wrote to FinancialWire and claimed that the SEC "knows who I am."

For Timothy J. Miles, nothing could be closer to the absolute truth.

"Securities and Exchange Commission v. C. Jones & Company, Carter Allen Jones, Timothy J. Miles, Gaylen P. Johnson, and Jonathan Curshen, Civil Action No. 03-WM-0636(PAC) (District of Colorado, filed April 11, 2003)" is proof of that. On March 1, 2004, the SEC was awarded a summary judgment against Miles in their case against him after Miles' dismissal motion was denied.

The SEC charged Miles and his co-defendants, most of whom are believed to have dropped out of sight or left the country, with securities fraud for their participation in an alleged "pump and dump" scheme involving Freedom Golf Corporation's common stock, where Miles was a "principal shareholder."

The complaint alleges that in the fall of 1999, Miles provided a broker-dealer with false information to be filed with the National Association of Securities Dealers in order to initiate public trading of securities issued by Freedom Golf's predecessor company. The complaint also alleges that from late January through early March 2000, Miles paid two stock promoters, Jones and Curshen, to hype Freedom Golf via the Internet, telephone, and mail. Specifically, the complaint alleges that Jones arranged for the dissemination of between 25 and 35 million unsolicited "spam" e-mails touting Freedom Golf in February 2000. During the same period, the complaint continues, Johnson created baseless profit, revenue, and expense projections for Freedom Golf that Jones published on his company's Internet website, and that Curshen publicized on an Internet message board. In addition, the complaint alleges that Jones and Curshen failed to disclose the full amount that Miles was paying them to tout Freedom Golf, in violation of the federal securities laws.

The complaint further alleges that Freedom Golf's stock price and trading volume was pumped up to artificially inflated levels as a result of the false and misleading e-mails and baseless price projections.

According to the complaint, during the course of this manipulation, Jones, Miles, and Curshen all sold shares of Freedom Golf stock and reaped profits of more than $500,000.

And yes, indeed, the SEC does know Miles. The case is used as "class materials" in presentations on stock fraud by John Reed Stark, Chief of the Office of Internet Enforcement in the Division of Enforcement of the U.S. Securities and Exchange Commission, at www.johnreedstark.com/ClassMaterials/LitigationReleases/freedomgolf.htm.

As it turns out, the SEC's recognition of Miles' activities were nothing new for him. From 1997 to 2001, operating from Hilton Head, SC, an EDGAR search reveals that Timothy Miles would indeed make a Nick Tracy a very knowledgeable resource for pumps, dumps and sham public companies.

Miles is listed in registration statements during that period for a wide range of public companies that were soon pumped and dumped out of business, including Ballyhoo Capital Ventures, Casinovations, Inc., Global Foods Online, Inc., ICV, Inc., Pratt Wylce & Lords Ltd., Sea Shell Galleries, and Wahoo Capital Ventures. Only one company in which he was involved, Bionet Technologies, Inc. (OTC: BNTK), survived as a public entity, and it is nothing more than a shell, with zero trades at $0.0001.

Before leaving Hilton Head for Klamath Falls, however, Miles appears to have had an epiphany. As "Reverend" Timothy Miles, our self-described fighter against "corporate evil-doers" apparently discovered "the meaning of life," and began sharing his revelations with the world at www.themeaningoflife.net. Recently, FinancialWire wrote to the email address on the website, addressing "Nick Tracy." Miles/Tracy did not respond but the website was promptly taken down, perhaps to save the author from embarrassment. However, the website was downloaded and stored, and portions of it may be accessed at www.investrendinformation.com at www.investrend.com/Admin/Topics/Articles/Resources/925_1081035055.htm .

"In February 1991, a unique and mysterious crystal was discovered near what some authorities believe to be the site of the Garden of Eden. This crystal possessed remarkable powers. Anyone who held this magical crystal was healed emotionally, restored spiritually and enlightened. Everyone who held the crystal was changed in a positive and profound way," stated Rev. Timothy Miles as part of a pitch to have individuals register at his website.

"In 1999 the crystal was discovered to also contain data. This data turned out to be a text file that revealed new insight into the meaning of life. Religious leaders and scientists gathered together and examined the crystal and the newly found text. What followed was a scientific evaluation of the crystal and the gathering of all available empirical evidence. The result; the only possible explanation for the powers of the crystal and the unusual and unexplainable characteristics of the file containing the message was that this was indeed a message from God.

"For reasons too numerous and complex to detail here, these religious leaders decided that the best thing to do with this message was to put it on the internet, accompanied by a complete story about the crystal's discovery and the events leading up to its being placed on the net to let God's will determine if and how it would be disseminated.

Rev. Miles goes on to say that "the insight I have gained from the story and the message has changed my life in many ways, all for the better. I am a 54-year old ordained minister (30 years) and I can say without reservation, this story has strengthened my faith," noting that "there is something remarkable about the actual file containing the message, something beyond scientific explanation that has convinced me beyond a shadow of a doubt that this is indeed a message from God. It blew me away."

Blown away to Klamath Falls to become London's "Hellboy" saving the world from corporate evildoers?

One would think that one public website besides Our-Street.com would have been enough for the versatile Rev. Miles, but drum roll, please, straight from Klamath Falls, Oregon, ladies and gentlemen, we bring you, wonder of wonders, OTCart.com, at www.otcart.com.

Here, he is a little bit more upfront about his interests, although "fine art" would not be among those most observers would have guessed. Mighty fine art, perhaps, but fine art?

Here is how the Reverend Stock Corruption Expert Pumper Dumper Corruption Fighter Art Connoisseur describes yet another enterprise: "OTCart.com was conceived and developed by Timothy J. Miles. Over 2 years in development, OTCart.com represents the logical and essential meeting of two of Mr. Miles' great passions, the stock market and the world of fine art.

"Mr. Miles has been an avid collector of original and limited edition fine art for over 20 years. As a collector, Mr. Miles recognized the lack of a cohesive secondary market for limited edition art. He also recognized that this lack of a structured market, kept limited edition art from reaching its potential as an investment medium. After all, cars, commodities and even companies, through the public stock markets, had an organized and cohesive trading platform for their products.

"Having spent the past 14 years working as a stockbroker, consultant to and president of publicly traded companies, Mr. Miles has an intimate knowledge of the workings of the Over the Counter Stock Market and recognized the similarities between stock and limited edition art. He also realized that what the art world needed was a market similar to the Over the Counter Market as a venue to establish not only the value of a particular work of limited edition art, but the strength and depth of that market as well. In that way, the collector could make a more informed decision regarding a particular artist or work of limited edition art and a gallery owner could expand his market by participating in a global trading platform both as both a buyer and as a seller.

"OTCart.com is the perfect marriage between the stock market and the art world. Establishing a simple, effective and relevant real-time market for registered works of art, this platform creates the essential distinction between decorative and investment-grade limited edition art and facilitates the execution of that market," concludes the quirky site.

Miles' OTCart, Inc., in Klamath Falls, lists a phone and fax which executives at one public company say are the same where messages were left and documents were faxed from and to Nick Tracy. Our-Street publicly acknowledged receiving phone messages that were left exclusively at the phone number, 541-273-0225, and discussed documents faxed to 541-273-0206.

The site states that "effective May 1, 2003, employees and/or owners of Our-Street.com do not trade any stocks featured on this site. In fact employees and/or owners don't even short stocks period!" That policy was adopted as part of the set of principles that FinancialWire required after its initial article about Our-Street on March 17, 2003, and just prior to FinancialWire's demand for more documentation as to the site's agenda and ownership in May, 2003, when FinancialWire ceased coverage of the site's complaints.

In late April, Our-Street, squeezed out of press release distribution by the major press wire services, frantically asked FinancialWire to publish findings that Aqua Vie Beverage (OTC: AQVB) had apparently produced its own "tout sheet," without disclosing it was the publisher. Our-Street had posted a complaint against the company on April 55, but it wasn't getting the notice that "Nick Tracy" wanted.

As part of its requirements for publishing the story, FinancialWire asked Tracy to fax copies of the offense for purposes of documentation, and to assert that neither he nor others associated with Our-Street was trading in stocks of companies covered. Thus, Our-Street set its policy, but in doing so, inadvertently revealed that up until May 1, the site's proprietors were in fact trading the stocks.

Satisfied going forward, in the wee hours of May 2, FinancialWire broke the story, and the SEC halted trading in Aqua Vie's stock before the market opened.

The site then turned to other means to try to make money from its venture. It began accepting gratuities and selling "alerts" and "pre-alerts" about stocks it was about to publish, in essence, offering a paid front-runner service.

FinancialWire has received an email collected by Asiavest Investigative Services (www.agents911.com) that indicates Our-Street "does release information privately and before posting to their web site."

The agent goes on to state "we believe that the person that sent this to us was one of the principals of Our-Street or closely related to the principals. The person that sent it to us is a known shorter, he is tied to organized crime people, and he was involved with a shorting criminal enterprise."

The July 14, 2003 email message about Imaging Diagnotic Systems, Inc. (OTCBB: IMDS) sent to the individual from Tracy/Miles stated "that isn't due to hit till wedns so keep a lid on it .. thanks."

One observer notes that many of the so-called "scams" targeted by Our-Street had "significant price moves" prior to his "coverage." It isn't a leap to recognize that if there were short sellers in those companies, a scathing attack on the company wouldn't do a short seller looking to bail out of a losing position any harm if the result, a short-term stock price deflation, occurs.

The observer notes that just because the messenger is tainted doesn't mean that all of those targeted by short sellers are on the "up and up." But for those that were, the executives are left after the experience wondering "who was that masked man, and what was that all about?"

That masked man, it turns out, is no relation to Dick Tracy, and he doesn't have Sam Ketchum as a sidekick. Unmasked, is he Timothy Miles the SEC-charged fraud, the Reverend who found the meaning of life, the art connoisseur, the former stock broker and public company executive, the pumper and dumper, former Hilton Head resident now in Klamath Falls, or is he a true, abused, well-meaning, honest-to-goodness fraud-fighter just outside London? You decide.

Meanwhile, if you happen to be someone who agrees with Tracy/Miles that "Wall Street has been taken over by gangsters and terrorists in three piece suits and the cops (the SEC with its staff of 3,100) can't handle it themselves," you can do your part.

At www.voy.com/22812/, another dubious website apparently frequented by "Tracy," mostly devoted to get-rich pyramid schemes and European lassies looking for a good time in London, you can answer this ad: "Looking for a research assistant -- Nick Tracy, 18:06:47 11/04/03 Tue [1] Nick Tracy Enterprises, Ltd is looking to hire another research assistant. We are a public company watchdog and we investigate all kinds of stock fraud and manipulation. If you like research, you will absolutely love this job. London area. Contact Nick Tracy at 207-900-2080."

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http://host.wallstreetcity.com/wsc2/Autoflag.html?Button=Get+Story&DB=SQL&SID=096r9509&S...

IF YOU ARE THINKING OF SUING US PLEASE READ THIS FIRST

If you are an attorney representing a client who wants to sue us, please click here for the most important part.

Litigation is a continuing topic when it comes to watchdog sites.

Most people love hearing good news, even when it isn't true. Likewise, they hate hearing bad news, even when it IS true and often misdirect their anger at the source of the bad news instead of its cause. As a result, when confronted with exposure in an Our-Street.com report, the direction companies and their supporters seem to gravitate is toward attacking the messenger rather than addressing the issues raised. These attacks are usually in the form of discrediting and often libelous remarks on the internet attacking our motives, our strategy and our character.

They claim we are part of a large short selling conspiracy or that we are controlled by short sellers or that, despite our disclaimer, we are short selling stocks ourselves. Of course, none of this is true but that doesn't stop them from making the accusations. We accept this as part of the cost of doing business and simply ignore it. What has been consistently and notably missing from the responses since we began our work is a detailed and substantive response from the company which refutes the facts we bring forth.

Attacks can also come in the form of litigation against us for what the companies want to claim are false and manipulative statements. They want to do this despite our sincere attempt to get all our facts straight.

On each feature page, we make a very simple and honest offer.

As always, we will gladly provide a forum for any documented and verifiable comments by the company and will promptly and sincerely apologize for any errors in our facts. Our commitment is to bring forth the truth and the facts in the matter and we encourage Xxxxx to produce whatever documents they can to clear up our concerns and the concerns of what we assume are many Xxxxx shareholders.

These are not hollow promises, as indicated by the fact that we have made every correction promptly and apologized even when we didn't feel it was entirely our mistake. Still, despite this offer, precious few have taken advantage of the opportunity to refute or correct our complaints and our reports. Still, when we discover an error, we quickly correct it and apologize without any delay.

Still, as troublesome and costly as litigation is, it also presents an interesting opportunity for Our-Street.com in that the only defense we can offer is to prove our allegations are true. Litigation gives us that opportunity through a process called "discovery". In order to prove we were accurate, we have the right to ask for and receive every company document and communication that relates to each of our allegations. If we are going to be sued for publishing false or misleading information, by God, we are going to go all out to prove that we were accurate so the requests for document production will be quite extensive.

We also are convinced that these litigations will be of great interest to the markets so, at our attorney's suggestion, we intend to keep you informed of the progress made in the case through our website.

Additionally, since we really do submit all our complaints to the SEC, exactly as we say we do, we will also be forwarding any documents obtained in the discovery process, which support our allegations, to the SEC as well. We are confident they will appreciate this added bounty as it will make their jobs just that much easier.

Of course, discovery is a two way street and they also get to ask us for information to try to prove their case. What will they discover? They will discover that we really don't short stocks. They will discover that we are the only ones who pick the stocks to research and that no one tells us which one to do next. They will discover that we really stick to the procedure as outlined in the disclaimer and that we never involve ourselves in discussions of stock prices or trading strategies. They will also discover that our subscribers never know which stocks we are reporting on next until the information has been posted to the internet on an unrestricted web page.

Finally and sadly, they also will discover that this website generates so little money, simply because we don't sell out, that there really isn't anything to gain by suing us anyway. Sorry folks, no deep pockets here. You wouldn't believe how lucrative the promotional side of this market is compared to the watchdog side. Based upon the compensation we see in these deals many of these promoters make more in a month or off one deal than we will gross this entire year.

Of course, we believe that, since we openly offer to correct any inaccuracies and to publicly apologize to the market and to the SEC when presented with the proper information, anyone who sues us without taking advantage of this is doing so out of retribution and is most likely attempting to simply harass us and will have trouble even proving merit to the litigation. Accordingly, in each instance, we intend to ask our attorneys to investigate the merits of each case with an eye toward counter suits and malicious prosecution actions.

There are better solutions than litigation for both Our-Street.com and the companies we feature. The best way to make us go away is to either show us how our allegations are false or change your ways and quit violating SEC regulations. Honest and full disclosure in your filings combined with ethical promotions makes us a thing of the past.

So, before you consider filing suit, email us and tell us what you want. If you want a retraction, we will gladly give you one and you don't have to sue us to get it. We have said that all along. Simply write us and tell us which facts we got wrong, document it and you won't believe how quickly we publish the correction. If you simply want to provide us with a statement contradicting our report, then send that to us. Chances are good we will publish that as written. Just don't expect us to retract an allegation and apologize based simply upon a cry of "DID NOT" or because you don't like people reading contradictory information about your representations. Our complaints are based upon facts in evidence. If you have additional facts, provide them and we will gladly correct our report and even our opinion when appropriate. Crow doesn't taste very good but we are certainly willing to eat it along with a nice slice of humble pie if that is called for.

On the other hand, if you just can't stand it and want to sue, go ahead. Just be ready for an extensive and probing discovery process, be ready for much of what we receive to become part of the public record as exhibits made a part of the court record and accept the fact that any relevant evidence supporting our allegations will be promptly forwarded to the SEC. Also be ready for the court of public opinion because we intend to try the case in public as much as we can. And finally know when all is said and done, should you win (which you won't), it will be a hollow victory because there isn't any water in the well and finally, if you lose, you might just find that to be the beginning and not the end of your litigation with us.

http://our-street.com/litigation2.htm#atty

Our-Street.com files complaint with SEC against Skyway Communications Holdings, Inc

Clearwater, Florida, Mar 29, 2004 (M2 PRESSWIRE via COMTEX) -- Our-Street.com, an Internet-based, public company watchdog, announced today that it filed a complaint with the Enforcement Division of the Securities and Exchange Commission against Skyway Communications Holdings, Inc. (OTC BB: SWYC). The complaint alleges possible violations of Sections 10b-5 of the Exchange Act. The report/complaint can be read in its entirety at http://www.our-street.com/feature.htm .
Our-Street.com is an internet based public company watchdog that researches companies and publishes reports and files complaints with various regulatory agencies. Previously, Our-Street.com`s complaint against Aqua Vie Beverage Corporation (OTC: AQVB) was followed by a suspension in trading and litigation by the SEC, their report on Verdisys, Inc (OTC: VDYS) was also followed by a trading suspension by the SEC and their complaint against Kingdom Ventures, Inc (OTC BB: KDMV was followed by the disclosure by the company of a formal investigation into their activities by the SEC. Additionally, two other Our-Street.com featured companies, Calypte Biomedical (OTC BB: CYPT) and US Global Nanospace, Inc (OTC BB USGA) also disclosed, subsequent to the Our-Street.com complaint, that they were informed by the SEC that inquiries had been initiated regarding their activities as well.

Note: Our-street.com is not a financial or investment advisor and is not offering stock for sale or giving investment advice. For investment advice contact a non-conflicted registered investment advisor or non-conflicted broker. The best place to get information about a company is from the SEC.

Specific information about Skyway Communications Holdings, Inc can be gotten by using this link http://www.sec.gov/cgi-bin/browse-edgar?company=skyway+communications&CI K=&filen um=&State=&SIC=&owner=include&action=getcompany

Our-Street.com and/or their associates do not have a position in SWYC.

Our-Street.com has not been paid or compensated in any way to conduct the research and file this complaint. Our-Street.com is member supported by subscriptions but members do not choose which companies Our-Street.com selects to profile. For more information refer to our disclaimer at www.our-street.com/disclaimer.htm . Our-Street.com strives to be accurate and will promptly correct any errors in posted information. Simply email us with any corrections along with documentation.

CONTACT: Nick Tracy Enterprises, Ltd. Tel: +44 (0)20 7900 2080 Fax: +1 425 740 0645 e-mail: info@our-street.com WWW: http://www.our-street.com

M2 Communications Ltd disclaims all liability for information provided within M2 PressWIRE. Data supplied by named party/parties. Further information on M2 PressWIRE can be obtained at http://www.presswire.net on the world wide web. Inquiries to info@m2.com.

http://www.pinksheets.com/quote/news.jsp?url=fis_story.asp%3Ftextpath%3DCOMTEX%5Cmt%5C2004%5C03%5C29...

SEC SUES FREEDOM GOLF CORPORATION'S PRESIDENT, CONTROL PERSON, AND PROMOTERS IN INTERNET PUMP-AND-DUMP SCHEME

Securities and Exchange Commission v. C. Jones & Company, Carter Allen Jones, Timothy J. Miles, Gaylen P. Johnson, and Jonathan Curshen, Civil Action No. 03-WM-0636(PAC) (District of Colorado, filed April 11, 2003)

The Securities and Exchange Commission ("Commission") announced that it filed an action for injunctive relief in United States District Court in Denver, Colorado on April 11, 2003, charging four individuals with securities fraud for their participation in an alleged "pump and dump" scheme involving Freedom Golf Corporation's ("Freedom Golf") common stock. The defendants are Freedom Golf president Gaylen P. "John" Johnson; Timothy J. Miles, a principal shareholder; and two promoters, Carter Allen Jones and Jonathan Curshen. Jones' company, C. Jones & Company, also was charged.

The complaint alleges that in the fall of 1999, Miles provided a broker-dealer with false information to be filed with the National Association of Securities Dealers in order to initiate public trading of securities issued by Freedom Golf's predecessor company. The complaint also alleges that from late January through early March 2000, Miles paid two stock promoters, Jones and Curshen, to hype Freedom Golf via the Internet, telephone, and mail. Specifically, the complaint alleges that Jones arranged for the dissemination of between 25 and 35 million unsolicited "spam" e-mails touting Freedom Golf in February 2000. During the same period, the complaint continues, Johnson created baseless profit, revenue, and expense projections for Freedom Golf that Jones published on his company's Internet website, and that Curshen publicized on an Internet message board. In addition, the complaint alleges that Jones and Curshen failed to disclose the full amount that Miles was paying them to tout Freedom Golf, in violation of the federal securities laws.

The complaint further alleges that Freedom Golf's stock price and trading volume was pumped up to artificially inflated levels as a result of the false and misleading e-mails and baseless price projections. According to the complaint, during the course of this manipulation, Jones, Miles, and Curshen all sold shares of Freedom Golf stock and reaped profits of more than $500,000.

The Commission's complaint alleges that as a result of the conduct described above, C. Jones, Jones, Miles, Johnson, and Curshen violated the antifraud provisions of the federal securities laws, and C. Jones, Jones, and Curshen also violated the anti-touting provisions of the federal securities laws. The Commission seeks permanent injunctions, civil money penalties, and penny stock bars against each of the defendants, and the disgorgement of ill-gotten gains plus prejudgment interest against C. Jones, Jones, Miles, and Curshen.

In a related proceeding, the Commission instituted administrative proceedings against Freedom Golf on April 7, 2003. The proceedings will consider whether to suspend or revoke the registration of Freedom Golf's stock. For more information, see Exchange Act Release No. 47636 (April 7, 2003).

http://www.johnreedstark.com/ClassMaterials/LitigationReleases/freedomgolf.htm

The FinancialWire expose uncovering the mystery and misdeeds behind the Our-Street.com small company protagonist “Nick Tracy” on Monday, but posted Saturday at parent Investrend Information (http://www.investrendinformation.com) , was barely on the wires when the “real” website operator, Timothy J.Miles, posted a confession

April 6, 2004. (FinancialWire) The FinancialWire expose uncovering the mystery and misdeeds behind the Our-Street.com small company protagonist “Nick Tracy” on Monday, but posted Saturday at parent Investrend Information (http://www.investrendinformation.com) , was barely on the wires when the “real” website operator, Timothy J.Miles, posted a confession and acknowledgement at http://www.our-street.com/about.htm .
Among the companies targeted by Miles, who has himself been accused by the U.S. Securities and Exchange Commission as a fraudulent pumper-and-dumper while winning accolades from the Dow Jones (NYSE: DJ) newswire and other media, are H-Quotient (OTCBB: HQNT) and Circle Group Holdings (AMEX: CXN). As it turns out, Miles’ repertoire involved even more companies than FinancialWire described, now including, by his own admission, Applied Digital Solutions (NADSAQ ADSX) and others.
H-Quotient “blew his cover” by suing him under his real name and in Klamath Falls, Oregon, rather than London, where he had misled his short-selling “followers” and others to believe he lived.
Other companies he has now listed as having been involved with, in addition to Ballyhoo Capital Ventures, Casinovations, Inc., Global Foods Online, Inc., ICV, Inc., Pratt Wylce & Lords Ltd., Sea Shell Galleries, and Wahoo Capital Ventures, and Bionet Technologies, Inc. (OTC: BNTK), all failed, are Casino Journal Publishing (OTCBB CJPG), Redneck Foods (OTC: RDNK), Level Best Golf (OTC: LBGF), and Global Diversified (OTCBB: GDVI).
Miles also acknowledged he has operated under the guise of an ordained minister for the purposes of writing a book, and as Rev. Timothy Miles, has represented in a site at http://www.themeaningoflife.net that he has been gifted through a crystal with a text that he believes is a true “message from God,” and that he is proprietor of another quirky website at http://www.otcart.com where he combines his “knowledge” of the over the counter stock market with his special knowledge of “fine art.”
The ex-stockbroker and campaigner against “corporate evil-doers” is anything if not versatile.
After acknowledging his “mistakes” that resulted in SEC charges of fraud and corruption, and his failed efforts at running public companies and trading stocks, Miles/Tracy inexplicably stated that this background led him to believe he has the “skills necessary to conduct superior due diligence.”
In his confession and acknowledgement, Tracy/Miles stated “there is more and more speculation on the message boards about the person or people behind Our-Street.com and a lot of speculation about who controls or influences it as well.
“My name is Timothy Miles. I am in my mid 50's so I have a lot of experience to draw on as I conduct my research.
“Since the early 70's I have been involved in business management in a wide variety of industries, and almost always with companies grossing less than $100 million per year. I have been involved in turn-around situations as well as start ups and been both a consultant, a hired gun and an entrepreneur. As a result of my experiences, I have developed the ability to analyze a company, its personnel and its activities with a certain degree of accuracy.
“I have been an investor since the late 70's and in 1988 I entered the securities industry on a full time basis as a stock broker. I had a pre-existing idea of what the brokerage business was like and was shocked to discover it was nothing like I imagined it to be. I innocently walked into the offices of Power Securities, one of the more notorious penny stock brokers and was both shocked and horrified to discover what this end of the business was really like. I left there within about a month and found a more suitable firm where I could actually work for my clients and not against them.
“I discovered over time that the best way to make my clients and myself money was working with companies as they were going public and in 1993, I left the brokerage business and started Pratt, Wylce & Lords, a public company that focused on helping small companies enter the public market. Through this company we helped several companies enter the public market, among them Applied Cellular Technologies (now Applied Digital Solutions NADSAQ ADSX) and Gaming Venture Corp (now Casino Journal Publishing OTC BB CJPG). I also worked with a not so successful company, Level Best Golf LBGF.
“In 1996, I shut down the company's operations as a result of my personal failures due in large part to my inability to comply with the SEC's stringent 40 Act requirements. Organizationally wise, I had bitten off far more than I could chew and I knew it.
“Throughout this entire period, I never had a blemish on my record as a stock broker or as a consultant but it was in 1999 that I made a mistake I am not at all proud of. I was working with a company called Auric Enterprises, Inc. and had structured a 504 offering for the stock. A number of my friends wanted to invest but lived in California and Ohio, states that had not been approved for the offering. I was told that if they drove to a neighboring state like Nevada where the offering was approved, they could invest. Rather than having them do this, I made the mistake of telling them instead to put down addresses in approved states and filed these inaccurate documents with the NASD. I also was not accurate as to the relationships of some investors as well. This was wrong to do and I deeply regret having done it. I have admitted this to the SEC in testimony and stand fully accountable for my actions.
“Subsequent to these actions, Auric executed a reverse acquisition with Freedom Golf Corporation and when they became dissatisfied with their investor relations people they called me and asked me for referrals. I didn't have any but asked around and was given the names of two people who were supposed to be honest who I then referred to Freedom Golf. What followed was a significant promotion based upon false and/or misleading information and an SEC investigation,” he noted.
The SEC’s charges disagree, saying that Miles/Tracy actually paid for the scam hype, and failed at the time, as apparently he fails yet today, to divulge that fact. The SEC also said Miles/Tracy and his co-conspirators “reaped profits of more than $500,000” out of the fraud.
The case is used as "class materials" in presentations on stock fraud by John Reed Stark, Chief of the Office of Internet Enforcement in the Division of Enforcement of the SEC, at http://www.johnreedstark.com/ClassMaterials/LitigationReleases/freedomgolf.htm.
As to his other activities, he admits to having “built a website which deals with another love of mine. It is OTCart.com. I have developed a real time quotation system for limited edition art. It is very slow catching on but I remain optimistic,” and to “have built another website which is connected to a novel I am writing. I have been an ordained Christian minister since 1970 and the book is spiritual in nature. It is about the meaning of life and the website is appropriately titled www.themeaningoflife.net .
Miles / Tracy says he is “disillusioned about the corruption that continues to infect the market and those who involve themselves in it and I certainly am not proud that I found myself swept up in it to the point where I personally did things I knew were wrong.”
Other companies that Our-Street has gone after include Silverado Gold Mines, Ltd. (OTCBB: SLGLF), Epixtar Corp. (OTCBB: EPXR), Aqua Vie Beverage Corporation (OTC: AQVB), ChampionLyte Holdings, Inc (OTCBB: CPLY), BEVsystems Interenational, Inc. (OTC: BEVI), DataMeg, Inc. (OTCBB: DTMG), Kingdom Ventures, Inc. (OTCBB: KDMV), Imaging Diagnostics, Inc. (OTCBB: IMDS), SHEP Technologies, Inc. (OTCBB: STLOF), EdgeTech Services, Inc (OTCBB: EDGH), Nutra Pharma Corp. (OTCBB: NPHC), Verdisys Inc. (OTC: VDYS), Calypte Biomedical Corporation (OTCBB: CYPT), Galaxy Energy Corp. (OTCBB: GAXI), PowerChannel, Inc. (OTCBB: PWRC), US Global Nanospace (OTCBB: USGA), and Universal Guardian Holdings (OTCBB: UGHO).
Of course, for those who know the history of vigilantism, the expose of the site and its proprietor, and the subsequent acknowledgement of misdeeds that are greater if not equal to those the defender against “corporate evil-doers” has alleged, is not surprising.
Neither is the fact that many of the site’s allegations have turned out to baseless, leaving Miles/Tracy with one more failed enterprise to add to his eclectic resume.

There is more and more speculation on the message boards about the person or people behind Our-Street.com and a lot of speculation about who controls or influences it as well.

As has become apparent over the past year that the supporters and, at times, the principals of the companies or transactions I have been featuring here on Our-Street.com would like to divert your attention from the allegations and substantial documentation we put forth and have you focus instead on the author and contributors and their motives instead. I have resisted discussing personnel simply because I wanted to keep the focus where it belongs, on the due diligence information we provide.

In May 2003, I stopped trading stocks entirely for that very reason. I didn't want the fact that I traded stocks to interfere with the substance of my reports. Now that my name and my past are being thrown around on the internet message boards and in emails by corporate executives and people claiming to represent ethical and independent analysis in an apparent attempt to once again divert your attention from the substance of our reports, I felt it was time to introduce myself to you and share my background with you.

My name is Timothy Miles. I am in my mid 50's so I have a lot of relevant experience to draw on as I conduct my research.

Since the early 70's I have been involved in business management in a wide variety of industries, and almost always with companies grossing less than $100 million per year. I have been involved in turn-around situations as well as start ups and been both a consultant, a hired gun and an entrepreneur. As a result of my experiences, I have developed the ability to analyze a company, its personnel and its activities with a certain degree of accuracy.

I have been an investor since the late 70's and in 1988 I entered the securities industry on a full time basis as a stock broker. I had a pre-existing idea of what the brokerage business was like and was shocked to discover it was nothing like I imagined it to be. I innocently walked into the offices of Power Securities, one of the more notorious penny stock brokers and was both shocked and horrified to discover what this end of the business was really like. I left there within about a month and found a more suitable firm where I could actually work for my clients and not against them.

I discovered over time that the best way to make my clients and myself money was working with companies as they were going public and in 1993, I left the brokerage business and started Pratt, Wylce & Lords, a public company that focused on helping small companies enter the public market. Through this company we helped several companies enter the public market, among them Applied Cellular Technologies (now Applied Digital Solutions NADSAQ ADSX) and Gaming Venture Corp (now Casino Journal Publishing OTC BB CJPG). I also worked with a not so successful company, Level Best Golf LBGF.

In 1996, I shut down the company's operations as a result of my personal failures due in large part to my inability to comply with the SEC's stringent 40 Act requirements. Organizationally wise, I had bitten off far more than I could chew and I knew it.

From 1996 through 1999 I continued working with companies wanting to enter the public market. I worked with Redneck Foods RDNK and with Global Foods (now Global Diversified GDVI).

Throughout this entire period, I never had a blemish on my record as a stock broker or as a consultant but it was in 1999 that I made a mistake I am not at all proud of. I was working with a company called Auric Enterprises, Inc. and had structured a 504 offering for the stock. A number of my friends wanted to invest but lived in California and Ohio, states that had not been approved for the offering. I was told that if they drove to a neighboring state like Nevada where the offering was approved, they could invest. Rather than having them do this, I made the mistake of telling them instead to put down addresses in approved states and filed these inaccurate documents with the NASD. I also was not accurate as to the relationships of some investors as well. This was wrong to do and I deeply regret having done it. I have admitted this to the SEC in testimony and stand fully accountable for my actions.

Subsequent to these actions, Auric executed a reverse acquisition with Freedom Golf Corporation and when they became dissatisfied with their investor relations people they called me and asked me for referrals. I didn't have any but asked around and was given the names of two people who were supposed to be honest who I then referred to Freedom Golf. What followed was a significant promotion based upon false and/or misleading information and an SEC investigation.

I was so dismayed and disillusioned at what had happened, not only at my own actions but the actions of others, that I quit the consulting business and set about rebuilding my life. I traded stocks for a while but soon discovered first that I wasn't very skilled at trading stocks and yet my knowledge of business and the markets based upon years of experience in working with emerging growth companies, in reading and preparing both financial statements and disclosure documents and in researching investments for myself, my company and my clients had given me the skills necessary to conduct superior due diligence. I also discovered that, as a result of seeing literally hundreds of pump and dump schemes over the course of my investment career, that I could ferret out these activities and document them.

My decision to start Our-Street.com was based in part on my desire to make amends for my mistake and part in the hopes that I could make an honest living doing what I do well and discovered I like to do, exposing corruption in the public market. I have come to find out that this end of the business is not nearly so profitable as pumping stocks and I could make 10 times as much as I do if I put together a site that effectively pumps a company's stock. Still, I am convinced that the work I do is important and I am committed to continuing it as long as I can.

In addition to Our-Street.com, I have built a website which deals with another love of mine. It is OTCart.com. I have developed a real time quotation system for limited edition art. It is very slow catching on but I remain optimistic.

I also have built another website which is connected to a novel I am writing. I have been an ordained Christian minister since 1970 and the book is spiritual in nature. It is about the meaning of life and the website is appropriately titled www.themeaningoflife.net. The website is not a commercial site but rather an integral part of the book and is supported entirely by me.

I will gladly go into other worthwhile and charitable projects I have been actively involved as an adult if you care to ask but feel no need to list them here. Our-Street.com's reports are self contained and stand on their merit and what I did for this cause or that one will hardly change a single fact.

Now you know who the person behind Our-Street.com is. You know my history and my qualifications. I have aired my dirty laundry in public for all to see. I am accountable for my actions and am remorseful for my failings. I have always believed the bulletin board and NASDAQ small cap markets were the breeding ground of the American Dream and the entrepreneurial spirit. I am disillusioned about the corruption that continues to infect the market and those who involve themselves in it and I certainly am not proud that I found myself swept up in it to the point where I personally did things I knew were wrong.

My agenda is exactly as I state on this website. My disclosure here hasn't changed it one bit. There never was and there isn't now a hidden one. Now that you know me, one thing is still true, the issue is not now nor was it ever who was writing these reports. The truth does not change with the person telling it. The relevant issue for discussion is the information provided in my reports and my complaints. Discuss me if you must but discussions about me will not change relevant information I have posted here nor will it effect your stock's price. And, finally if you want to discuss me, at least get the facts straight. I will respond honestly to any reasonable inquiry.

http://www.our-street.com/about.htm

NASD Restates The Obvious

By Bill Singer - Contributing Columnist

The NASDs recent announcement of heightened broker supervision is based on a critical study whose own statistics speak for themselves.

September 8, 2003 - The National Association of Securities Dealers, Inc. ("NASD"), a self-regulatory organization ("SRO") charged with monitoring Wall Street, recently issued a press release announcing that "NASD Proposes Heightened Supervision for Brokers with a History of Customer Complaints, Investigations or Regulatory Actions." Essentially, the NASD's seeks to require

Securities firms to adopt heightened supervision plans for registered brokers who, within the last five years, have had

three or more customer complaints and arbitrations,
three or more regulatory actions or investigations, or
two or more terminations or internal firm reviews involving wrongdoing. Supervisors to approve the plan in writing and acknowledge responsibility for the execution of the plan. (August 28, 2003).

Okay, so call me a cynic. But isn't it amazing how these critical studies and rule proposals always seem to get announced on some quiet news day before a holiday . . . like the Thursday before Labor Day, for example. Apparently, the driving force behind the NASD's proposal is a study of the 663,000 brokers registered with SRO that disclosed the following data for the last five years (I've noted the percentages in parentheses):

2,751 (.41 %) have three or more customer complaints and arbitrations,
216 (.03 %) have been subject to three or more investigations or regulatory actions, and
1,198 (.18 %) have been subject to two or more terminations or internal reviews based on allegations of wrongdoing.
The statistics speak for themselves --- a range of potential miscreants who account of between three-hundredths of one percent to four-tenths of one percent of all stockbrokers registered with NASD. Consequently, the overwhelming majority of registered persons have not garnered the attention of claimants' attorneys or industry regulators. Good news, but, notwithstanding, the raw numbers still indicate that as many as 2,751 individuals have had at least three customer complaints/arbitrations within the past five years.

Okay, so what does one of Wall Street's cops make of the data? Well, NASD Chairman/CEO Robert Glauber says that

Investors face higher risk dealing with a broker who has a long regulatory record. Securities firms must respond to that risk with enhanced controls. Putting heightened supervision plans in writing and holding supervisors accountable will ensure that these plans are a part of the compliance and management process that is critical to investor protection.

Let's carefully analyze the above three sentences by Mr. Glauber.

Investors face higher risk dealing with a broker who has a long regulatory record.

Great sound bite, but I wonder if it doesn't cause more harm than good. Here's my point. The public faces a high risk when dealing with a broker with a long regulatory record. Would be foolish not to admit the obvious. However, on what basis does Mr. Glauber extrapolate that a "high" risk becomes a "high-er" one? Higher than what? The following supposed upright citizens of Wall Street paid a collective $1.4 billion settlement for conflicts of interest: Bear Stearns, CSFB, Goldman, J.P. Morgan, Lehman, Merrill Lynch, Morgan Stanley, Piper Jaffray, SSB, and UBS. If a public investor dealt with any individual from those ten NASD member firms during the past five years, how much less risk did you incur than if you had merely invested with some stockbroker (from any other broker-dealer) with at least two terminations during the same period? Would Jack Grubman or Henry Blodgett have satisfied any of the NASD's five-year warning criteria --- I don't think so. And what about all those high-flying NASDAQ stocks (that's right, the NASDAQ that the NASD itself used to own it? Was it less risky to invest in some of those $100 plus stocks that are now trading for pennies and whose CEOs face criminal charges?

The danger of the Glauber quote is that it perpetuates a now discredited myth that it's only the stereotypical boiler-room with its fast talking kids and its Rolex-wearing, custom-suited, Porsche-driving owners who defraud the public. It also fails to address one of Wall Street's dirty, little secrets: For years the regulatory community has meted out two forms of justice --- one for the smaller firms and one for the larger firms. The big broker-dealers rarely found themselves subjected to the same intense investigations as their smaller competitors. And when it came time to handing out punishment, well, you go read the headlines; historically, they often got slaps on the wrist.

No, Mr. Glauber, it wasn't your cited recidivists who besmirched Wall Street's reputation this last round. Fact is, it was the best and the brightest, the biggest and the richest. Fact is, it was the star performers and favored sons of Wall Street --- or at least that's the type of billing you regulators gave them for years.

Securities firms must respond to that risk with enhanced controls.

Now there is an exercise is profundity. What the hell is self regulation about anyway? We need a 2003 press release to remind broker-dealers that they need to respond to warning signs of misconduct? Is this the sorry state to which industry regulation has finally fallen --- we issue SRO press releases restating the obvious? And if we really, really need to remind broker-dealers of this basic obligation of self-regulation, then we need to overhaul the entire system of Wall Street's regulation. Frankly, my mother stopped telling me years ago to look both ways before I crossed the street.

Putting heightened supervision plans in writing and holding supervisors accountable will ensure that these plans are a part of the compliance and management process that is critical to investor protection.

Folks, Wall Street already requires that every broker-dealer prepare and maintain extensive written supervisory procedures --- or WSPs as we industry pros call them. Further, haven't we all finally learned that more written documents, written procedures, written rules, and written regulations never solve any serious problems? In my opinion, the NASD Press Release and the Chairman's remarks underscore the real problem with Wall Street --- ineffective regulation. Regulation that lacks vision. Regulation that seems to be conducted in the press on quiet news days. Regulation by autopsy--- after the crimes are committed. And now, regulation by the obvious. Gee, what a profound proposal coming out of the NASD: Let's carefully supervise those individuals with problems and make sure that we have written procedures to accomplish the same.

Folks, wake up and don't be mislead. You need to be suspicious and wary of any individual and any firm that's trying to get your hard earned money to invest on Wall Street. The Harvard-educated stockbroker with an unblemished record who works at one of the household-name broker-dealers could defraud you of every penny in your account. There is no security to be found in an unblemished record or with a popular broker-dealer that runs expensive television ads. You shouldn't let your vigilance relax because the company whose stock you own was just featured in the newspapers.

The NASD asks you to buy into some fantasy that if the brokerage firms would only watch the bad guys more carefully, then you could sleep better at night. In the final analysis, I fear that Mr. Glauber and his colleagues simply fail to understand the lessons of these past few years. A fish stinks from the head down. It wasn't that the brokerage industry failed to implement better supervisory policies. It wasn't that supervisors weren't trying to do their jobs. It wasn't that every stockbroker has stepped out of an audition line from central casting and is looking to rip off the public. No, it's actually more basic. The regulators failed. They coddled the major, national firms and sent the wrong message to those organizations and to the public investor. And the regulators are back at it again.


http://www.axcessnews.com/commentary_0908.shtml

The Borg Attacks Wall Street! Humans on the run!

By Bill Singer - Contributing Columnist

I don't get it and probably never will. You know, the little guy gets hammered and the big guy gets treated with kit gloves, the same old double standard that always seems to apply.



November 19, 2003 - Okay, let me put it bluntly. I don't get it. Never did. Still don't. Likely never will. And I've hated the practice for as long as I understood it --- and will continue to. What am I talking about? Simply, the double standard that always seems to apply for smaller businesses regulated by government or so-called quasi-governmental regulators. You know what I mean --- all things being the same, the little guy gets hammered and the big guy gets the kid gloves.

Consider this November 17, 2003, headline on the United States Securities and Exchange Commission's (SEC's) website: "SEC Charges Morgan Stanley With Inadequate Disclosure in Mutual Fund Sales Morgan Stanley Pays $50 Million To Settle SEC Action."

In commenting on the settlement, the release criticizes

Morgan Stanley's firm-wide failure to adequately disclose to customers at the point of sale the greater costs associated with large purchases of certain B shares and the potential greater returns associated with A shares made the brokers better off and their customers worse off . . .

Equally impressive is the November 17th headline on the NASD's website that trumpets: "NASD Charges Morgan Stanley with Giving Preferential Treatment to Certain Mutual Funds in Exchange for Brokerage Commission Payments." Virtually, parroting the SEC, the NASD announces that it sanctioned Morgan Stanley DW Inc. for

giving preferential treatment to certain mutual fund companies in return for millions of dollars in brokerage commissions. This is the second action brought by NASD against the firm for mutual fund violations in the last two months and is part of NASD's broader effort to crack down on sales practice abuses in this area. In conjunction with a related action filed by the Securities and Exchange Commission (SEC), Morgan Stanley agreed to resolve the NASD and SEC actions by paying $50 million in civil penalties and surrendered profits.

Now $50 million in fines is admittedly no chicken feed. However, for a global financial services firm of Morgan Stanley DW's stature, it's not going to bankrupt the company either.

Consider this October 16, 2003, Press Release from NASD proclaiming that "NASD Charges Long Island Firm, its President, and Two Former Managers as a Result of Fraudulent "Boiler Room" Sales Practices: Eleven Others Barred in Related Conduct". The salient facts in this matter were that a small firm, --- described by NASD as an unsavory "boiler room" --- its President, and a former branch manager were charged with engaging in high-pressure sales practices that defrauded investors of $8 million. NASD also permanently barred 11 other individuals involved in the misconduct.

Interesting. The small firm engages in Fraudulent "Boiler Room" Sales Practices but the giant Morgan Stanley DW was only involved in Inadequate Disclosure or Preferential Treatment. My, oh my, ain't words wonderful --- and particularly in such skilled hands! Just imagine. A small firm engages in $8 million worth of fraud and over a dozen human beings are barred. You know --- flesh and blood, breathing, earthlings. And then this other humongous firm pays a $50 million fine for inadequate or preferential practices but nary a homo sapien was suspended as a result. You see, it's sort of like the Matrix movie or the Terminator --- there are we humans and there are the monolithic machines (the latter apparently run larger firms because the regulators don't seem to name any individuals). Oh sure, maybe in a few more weeks or months the SEC or NASD will suspend a bunch of folks at Morgan. But it will probably be in a less highly-publicized press release. And that release will likely take pains to play down the affiliation of the bad boy with his former august firm. And that release may get issued on a quiet Friday news day or an equally dull holiday eve. Regardless, it just didn't make it into today's much ballyhooed press conferences.

So, what's the point? Simple. Wall Street's regulators don't realize how dangerous and unfair their large-firm preference is. The watchdogs diminish the import of misconduct at major firms by euphemizing whatever was done. You can almost see them sitting around a table --- much like my wife and I do on Sundays with the crossword puzzle . . . honey, what's a twelve-letter word for fraud? Worse, the regulators lessen the public's concern for improper conduct at larger firms by giving the impression that it happened solely on a computer or as the result of some non-human action. Meanwhile, the SEC and the SROs make life miserable for smaller firms by giving the equally false impression to the investing public that fraud only occurs at modest sized broker-dealers --- or that you can't trust the salesforce or management of your local stockbroker. Frankly, it's unfair and it stinks. But, like what else is new about regulating Wall Street?


http://www.axcessnews.com/commentary_1119.shtml

Reading Toe Tags on Wall Street

By Bill Singer - Contributing Columnist

I don't think the SEC and the NYSE are entitled to kudos for the specialists settlements announced today. They're supposed to try to prevent crime. They're doing a lousy job of it.

March 30, 2003 - Once again, Wall Street's ever-vigilant regulators have polished their trumpets and herald a "Settlement Reached With Five Specialist Firms for Violating Federal Securities Laws and NYSE Regulations Firms Will Pay More Than $240 Million in Penalties and Disgorgement." Yes, that's what the U.S. Securities and Exchange Commission and the New York Stock Exchange announced on March 30, 2004. The five settling specialist firms (Bear Wagner Specialists LLC; Fleet Specialist, Inc.; LaBranche & Co., LLC; Spear, Leeds & Kellogg Specialists LLC; and Van der Moolen Specialists USA, LLC.) will pay a total of $241,823,257 in penalties and disgorgement, consisting of $87,735,635 in civil money penalties and $154,087,622 in disgorgement, and implement steps to improve their compliance procedures and systems. You apparently have to be doing a lot of mischief in order to be making enough moolah to pay a quarter of a billion in fines - crime certainly seems to pay.

And to whom do we taken-advantage-of investors owe our gratitude? Well, our caped crusader and super-hero were the New York Stock Exchange and the SEC. And what did those hard-working regulators find? Well, between 1999 and 2003, the five specialist firms violated federal securities laws and NYSE rules by executing orders for their dealer accounts ahead of executable public customer or "agency" orders. Through these transactions, the firms violated their basic obligation to match executable public customer buy and sell orders and not to fill customer orders through trades from the firm's own account when those customer orders could be matched with other customer orders. Through this conduct, the firms improperly profited from trading opportunities; disadvantaged customer orders, which either received inferior prices or went unexecuted altogether; and breached their duty to serve as agents to public customer orders.

Barry W. Rashkover, Associate Director of the SEC's Northeast Regional Office, said, "This landmark settlement underscores the obligation of exchange specialists to serve public customer orders over the specialist's own proprietary interests. The settlement is excellent news for injured customers. Because of the Distribution Fund, they will be the ultimate beneficiaries of the firms' sizeable payments." We are also promised that the investigation is continuing. And, gee, there's even the possibility that some human beings might be named and more charges brought. Oh, and did I tell you that there's even a rumor that the SEC might even bring charges against the NYSE itself?

With all due respect to the Mr. Rashkovers of the world, this ain't no landmark settlement, it's not underscoring anything, there's no excellent news, and I doubt most of us investors will truly realize any meaningful monetary compensation. I mean can we stop with all the bureaucratic doublespeak already? What's landmark is that the charged misconduct has been going on for years under the noses of Wall Street's regulators. What today's press release underscores is that the securities cops are a dollar short and a day late, again. The excellent news is what . . . I keep missing that one. We're supposed to be happy that there's yet more misconduct and malfeasance uncovered on Wall Street?

Here's my point. The misconduct charged in the recent SEC action dates back to 1999 . . . that's five years ago! And it's not like the august joint task force of the SEC and the NEW YORK STOCK EXCHANGE (did I make the name of the latter clear enough?) was absolutely unfamiliar with the comings and goings of the specialists on the NYSE (again, please note the name of the second member of the joint task force). You've all read about the NYSE lately, you know, that's the employer that paid former Chariman Grasso the big bucks to efficiently run the Exchange. Oh, and by the way, you all do recall that the current SEC Chairman Donaldson is one and the same as the former NYSE Chairman Donaldson? Plus the NYSE was helping to investigate something it was very familiar with - itself. Not exactly a set of facts calculated to stump the SEC and NYSE. Or so you'd think.

I could go on and on, but I've done so in the past. I don't think the SEC and the NYSE are entitled to kudos for reading the toe tags on corpses and telling us who the body is. That's not their job - or, at least, that's not what they should be bragging about. They're supposed to try to prevent crime. They're doing a lousy job of it. Frankly, the size of the fines is a mere smokescreen. I guarantee you that the specialist firms survive. I promise you that the NYSE will be open for business tomorrow.

Discordant Notes Copyright 2004 by Bill Singer. Reprinted by permission, Bill Singer. All rights reserved.

http://www.axcessnews.com/commentary_033004.shtml

Sovereign Immunity: Individual Liability of Public Officials

The doctrine of sovereign immunity protects the State from suit unless it consents to be sued. Although the State of North Carolina has adopted a limited waiver of sovereign immunity, public officials may not be held personally liable for mere negligence in the performance of governmental duties involving the exercise of judgment and discretion. A public official may be held personally liable, however, it the official's "act, or failure to act, was corrupt or malicious." Smith v. State, 289 N.C. 303, 222 S.E.2d 412, 430 (1976) (quoting Smith v. Hefner, 235 N.C. 1, 68 S.E.2d 783, 787 (1952).

http://www.nlrg.com/lawlet/civ2_may.htm

I. WHAT IS SOVEREIGN IMMUNITY?

The topic of sovereign immunity is too varied and too large to be fully covered here. This broad topic has become even more volatile because of the efforts of Senator Slade Gorton (R-WA) to alter or abrogate tribes' sovereign immunity in various legislative proposals, as well as the efforts of other members of Congress to counteract those proposals. Accordingly, this paper endeavors to set out major principles on the sovereign immunity of the United States and of Indian tribes and to apply those principles to current federal legislation concerning Indian tribes.

A. Historical Roots.

Sovereign immunity is an expression of the lawmaking power of government and reflects judgments concerning how public resources should be distributed. As Alexander Hamilton famously observed: "t is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent. This is the general sense, and the general practice of mankind; and the exemption, as one of the attributes of sovereignty, is now enjoyed by the government of every State in the Union."(1)

The inability of courts to enforce a judgment was a basis for the doctrine of sovereign immunity noted in Chisholm v. Georgia.(2) That case held a state liable to suit by a citizen of another state or foreign country and created such a shock that the Eleventh Amendment was at once proposed and adopted. Sovereign immunity is also justified on the "logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends."(3) A further basis for the doctrine is avoidance of interference with governmental functions and with the government's control of its instrumentalities, funds and property.(4)

B. The Public Treasury or Domain.

The doctrine of sovereign immunity is critically important where it truly applies--to suits against the sovereign. But how does one determine if a suit is against the sovereign? The simple answer is that a suit is against the sovereign if "the judgment sought would expend itself on the public treasury or domain."(5)

In many cases the rule can be difficult to apply because the sovereign acts through human individuals, and these agents are often the named defendants. Sovereign immunity does not prevent suits challenging the acts of individuals who violate federal or other applicable law. For this reason, a careful distinction must be drawn between suits against officers of a government and suits against the government itself. Although sovereign immunity provides limited protection of the public treasury or domain, it does not generally protect the officers of the sovereign.

http://www.msaj.com/papers/doc0831.htm

SOVEREIGN IMMUNITY - A doctrine precluding the institution of a suit against the sovereign [government] without its consent. Though commonly believed to be rooted in English law, it is actually rooted in the inherent nature of power and the ability of those who hold power to shield themselves.

In England it was predicated on the concept that "the sovereign can do no wrong", a concept developed and enforced by - guess who? However, since the American revolution explictedly rejected this interesting idea, the American rulers had to come up with another rationale to protect their power. One they came up with is that the "sovereign is exempt from suit [on the] practical ground that there can be no legal right against the authority that makes the law on which the right depends." 205 U.S. 349, 353.

"[S]tatutes waiving the sovereign immunity of the United States must be`construed strictly in favor of the sovereign." McMahon v. United States, 342 U.S. 25, 27 (1951).

11 U.S.C. S 106, "Waiver of Sovereign Immunity," provides:

(a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose.

The interest served by federal sovereign immunity (the United States' freedom from paying damages without Congressional consent)

Federal sovereign immunity is readily distinguishable from the states' immunity under the Eleventh Amendment and foreign governments' immunity under the Foreign Sovereign Immunities Act. The latter two doctrines allow one sovereign entity the right to avoid, altogether, being subjected to litigation in another sovereign's courts. Pullman Constr., 23 F.3d at 1169. Similar sovereignty concerns are not implicated by the maintenance of suit against the United States in federal court. Federal sovereign immunity has had such broad exceptions carved out of it that, as Pullman Construction concluded, "Congress, on behalf of the United States, has surrendered any comparable right not to be a litigant in its own courts." Id. In the present day, federal sovereign immunity serves merely to channel litigation into the appropriate avenue for redress, ensuring that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." Pullman Constr. at 1168 (quoting Art. I, section 9, cl. 7).

Federal sovereign immunity is a defense to liability rather than a right to be free from trial.

The Supreme Court has ruled that in a case involving the government's sovereign immunity the statute in question must be strictly construed in favor of the sovereign and may not be enlarged beyond the waiver its language expressly requires. See United States v. Nordic Village, Inc., 503 U.S. 30, 33-35 (1992).

Of quasi-horses, quasi-donkeys, quasi-governmental
entities, and self-regulatory organizations

By Bill Singer

In Part I of this series, I set forth the proposition that the courts have promulgated a heads-I-win-tails-you-lose standard for the self-regulatory organizations (SROs). When registered persons sue the SROs, the courts effectively shield the regulators with quasi-governmental absolute immunity. However, when those same registered persons assert their Fifth Amendment right against self-incrimination before those same SROs, the courts sustain the regulators’ refusals to recognize that right by finding that the regulators are private entities not capable of government action. Forgetting for the moment the issue of whether an SRO can “incriminate” anyone, the simple fact remains that at any given point in time, the courts are capable of deeming SROs both private entities and governmental (or quasi-governmental) entities.

The proposition is simple: can an entity at any given point in time be both governmental and private? I believe that the commonsense answer is “no.” You’re either an official organ of the government or you are a private enterprise. The United States Senate is not a private sector equivalent of Macy’s. Microsoft is not the governmental equivalent of the United States Department of Justice. We intuit the differences even in the absence of an ability to succinctly explain them. However, in the world of finance, at the fringes of local government and its constituents, we often find hybrids of governmental/private sector cloning. Bonds are issued by government-sanctioned organizations, which, in turn, function competitively in the private sector. Municipalities and counties license private businesses to operate on government property. These almost private, almost public manifestations are frequently referred to as “quasi-governmental” --- they’re almost like a government entity but not quite. Nonetheless, the fact is clear: such entities are not private, are not governmental, but, rather, a third, quite different mutation.

Quasi-Private --- a term not used
Interestingly, we never seem to use the term “quasi-private.” The reason for the disparity is obvious. There are few legal concerns when a hybrid entity takes on the characteristics of the private sector, provided that such a business does not use its government ties to engage in anticompetitive practices. However, when a hybrid entity has some government-like powers, when it operates within the prerogatives of a sovereign, we must be careful. Thus, quasi governmental isn’t merely a description it is a warning.

Quasi-governmental rights
Given that the courts have recognized the existence of quasi-governmental entities, one should ask why there have not been similar judicial efforts to recognize that individuals subject to regulation by those hybrid actors must have quasi-governmental rights. If I am called as a witness before a government agency conducting a civil investigation, I am entitled to constitutional and statutory civil due process protections. If I am a target/subject in a criminal investigation, I am entitled to similar criminal due process protections. But when the arena is one of a mixed metaphor, there is a danger.

SRO investigations and subsequent disciplinary proceedings all too often occur within some distant shadows, outside the pale of federal, state, or administrative practice. The SROs arrogate to themselves the right to do what they want, when they want --- even to the extent that they proclaim that as private entities they are not subject to constitutional due process obligations. In diluting the impact of such extraordinary powers, the defenders of the SRO system routinely assure its critics that the SROs are subject to governmental oversight by the SEC, which must approve their rules and regulations. I’ve never found that explanation comforting. If the SROs are “subject” to governmental oversight, then why aren’t they obligated to afford witnesses and respondents federally guaranteed due process rights?

A criminal justice process by any other name
When a lawyer represents an individual before an SRO, that individual is technically involved in a “civil” proceeding. There is not supposed to be a government agency on the other side of the table. Your adversary is not supposed to be a state or federal prosecutor. Your client does stand accused of a “crime.” But, in reality, everything about the process smacks of a government investigation, a criminal prosecution, and a verdict that may deprive the respondent of his career and imposes a substantial fine.

Consider the following. Your client is ordered to appear before an SRO to give on-the-record (OTR) testimony; at the same time, he or she is the subject of a state or federal grand jury investigation. As to the ongoing, parallel criminal investigation, you are concerned that the self-incriminating testimony that cannot be forced from your client by prosecutors will be compelled by the SROs under threat of fine and suspension --- and any material so obtained will likely be provided to the prosecutors by the SROs. That which prosecutors cannot legally obtain directly, they can obtain indirectly from the SROs --- and, as demonstrated in the previous article, the path between those two actors is well worn and well tended. No one needs a road map or directions.

This problem also surfaces in the absence of ongoing parallel criminal investigations or proceedings. Among the more common examples of this issue would be the client who received some cash compensation over the years but didn’t declare the payments for tax purposes. The mere admission of receiving such payment could result in an Internal Revenue Service inquiry, with an attendant criminal prosecution. The false denial of such payments could expose the witness to a subsequent criminal prosecution for perjury. Under the circumstances, an experienced practitioner might counsel the client to assert the Fifth Amendment right against self-incrimination.

Fifth Amendment RIGHT against self-incrimination
It is important to remember that the assertion of the Fifth Amendment is a constitutional right deemed so basic to the fabric of our society that the framers of the Constitution included it within the Bill of Rights. Historically, we have viewed efforts to coerce criminal convictions as repugnant to our national sense of fairplay and decency. Those who defend the present system of Fifth Amendment non-recognition by SROs frequently argue that such regulators are not government entities capable of pursuing criminal justice agendas and they do not have the power to convict anyone of a crime. But that of course begs the question: Since the courts deem SROs to be quasi-governmental, are they actually quasi-criminal justice organizations conducting quasi-criminal investigations and adjudicating quasi-criminal indictments?

A legitimate argument against recognizing the Fifth Amendment in SRO proceedings would be to note that in any typical civil proceeding the assertion of the right against self-incrimination still permits the judge or jury to draw a negative inference. Note, however, that the proper application is that the trier of fact “may” draw a negative inference. The negative inference is not mandatory. Further, it is not the act of refusing to answer that is deemed criminal or tortious, but, rather, one may infer from the invocation that the underlying misconduct occurred. A legal nicety, yes --- but an important one within our system of justice. Similarly, the assertion of the Fifth within the context of a criminal trial is sacrosanct and deemed a constitutional right not properly permitting a negative inference nor probative of guilt. Simply put, in the United States you cannot be convicted of a crime if the only evidence against you is your refusal to incriminate yourself.

Is the assertion of a constitutional right “unethical”?

What comes as a surprise to lawyers unfamiliar with practice before the SROs is that those organizations do not recognize the Fifth Amendment assertion and routinely initiate disciplinary proceedings solely based upon the mere refusal to testify. Again, let me underscore that point. You can be charged with a violation of an SRO rule merely for declining to incriminate yourself. And the result of such a violation will likely be the loss of your right to pursue a career in the securities industry, with many additional ramifications arising from the loss of your industry registrations. The SROs not only deem the refusal to incriminate oneself as a proper basis for imposing a fine and suspension, but also deem the invocation of your constitutional right to be an unethical practice.

In Department of Enforcement v. Mario J. Coniglione, registered representative Coniglione asserted his Fifth Amendment right against self-incrimination during an NASD Regulation (NASDR) on-the-record interview (OTR). Prior to that invocation, his counsel asserted his belief that the NASD is a governmental agency and that his client was entitled to assert the Fifth Amendment. The NASDR staff informed him that:

[Y]our testimony has been requested in this matter pursuant to Procedural Rule 8210. Rule 8210 requires any person associated with an NASD member to provide all information requested by the staff. Therefore please be advised that failure to answer any of our questions, ... [or] to provide any information requested by the staff during this meeting ... could be inconsistent with Rule 8210 and could be the basis for the initiation of sanctions, including a bar, censure, suspension and/or fine.

The NASDR staff then asked Coniglione questions relating to his prior employment with a member firm. He refused to answer each and every question asked of him, replying only, "I respectfully rely on my Fifth Amendment right and decline to answer this question." Counsel for NASDR informed him that:

NASD and NASD Regulation is not a government entity, so ... you have an obligation to answer all of the Staff's questions .... I remind you if you continue to refuse to answer the questions for whatever reason, whatever grounds, we will seek disciplinary action for your failure to answer.

Based on Respondent's continued refusal to respond to any of the NASDR staff's questions, the NASDR staff concluded the interview. As a result he was charged with violations of NASD Procedural Rule 8210 and NASD Conduct Rule 2110. Conduct Rule 2110 imposes ethical standards upon the members and their associated persons to observe “high standards of commercial honor and just and equitable principles of trade.” Consequently, Coniglione was charged with engaging in unethical behavior by invoking his constitutional right against self-incrimination.. His unwillingness to incriminate himself constituted the sole basis for the disciplinary proceeding and subsequent disbarment.

In analyzing the bases for granting NASDR’s motion for summary disposition, the Hearing Officer concluded that a violation of Rule 8210 is also a violation of Rule 2110. He further commented that the Securities and Exchange Commission ("SEC") has stated that

[w]e have repeatedly stressed the importance of cooperation in NASD investigations. We have also emphasized that the failure to provide information undermines the NASD's ability to carry out its self-regulatory functions.... Failures to comply are serious violations because they subvert the NASD's ability to carry out its regulatory responsibilities." In re Joseph Patrick Hannan, Exchange Act Rel. No. 40438 (September 14, 1998) (omitting citations noted therein).

Hearing Officer Carleton reiterated that the Fifth Amendment prohibits only governmental action, and that the NASD is a private entity He then cited the NASD Sanction Guidelines ("Guidelines"), which provide that in the case of a failure to respond, "a bar should be standard." Consequently, Coniglione was barred for asserting his Fifth Amendment rights and refusing to answer the Staff’s questions.

If, in fact, the NASD is a quasi-governmental entity, how is it that Coniglione was barred for invoking his Fifth Amendment right? If he invoked that right in a criminal proceeding in any court in the United States, no negative inference could be drawn and any finding of guilt would be predicated upon the evidence introduced against him. If he invoked that right in a civil proceeding in any court in the United States, a negative inference could be drawn, but any finding of liability would still be predicated upon the evidence introduced against him. Should the fact that the NASD is a quasi-governmental entity serve to deprive Coniglione of those rights he would have had before a government entity? Furthermore, assuming that the NASD now argues it is a private entity, why does that fact render the assertion of one’s constitutional rights as being “unethical?”

Brady in a non-criminal environment . . . does it make sense?

In a recent NASDR enforcement proceeding, OHO Order 01-13,[ii] Hearing Officer Andrew H. Perkins ruled on the Department of Enforcement’s (DOE’s) obligations to produce various documents, which Respondents claimed contained exculpatory evidence and were discoverable under NASD Code of Procedure Rule 9251, and specifically under the doctrine enunciated by the Supreme Court in Brady v. Maryland, 373 U.S. 83 (1963), as incorporated under Rule 9251(b)(2). NASD Code of Procedure Rule 9251. Inspection and Copying of Documents in Possession of Staff, sets forth requirements as to documents that must be made available for inspection and copying by the Departments of Enforcement and Market Regulation, and similarly sets forth those standards under which such production may be withheld. As Hearing Officer Perkins notes:

The Department’s right to withhold documents under Rule 9251(b)(1) is itself limited by Rule 9251(b)(2), which states: “Nothing in subparagraph (b)(1) authorizes the Department of Enforcement . . . to withhold a document, or a part thereof, that contains material exculpatory evidence.” “This provision is intended to be consistent with the doctrine enunciated in Brady.” Notice of Filing of Proposed Rule Change, Exchange Act Release No. 38,455, 1997 SEC LEXIS 959, at *14 n. 99 (Apr. 24, 1997) However, the NASD has not provided guidance on how Brady, a criminal law doctrine, is to [be] applied in NASD disciplinary proceedings. Hence, to set a standard for its application, it is necessary to review the origins of Brady and the manner in which it has been applied in other proceedings.

In explaining the origin of the Brady Doctrine, Hearing Officer Perkins observes that

Ultimately, Brady and its progeny are concerned with the “special role played by the American prosecutor in the search for truth in criminal trials.” Strickler v. Greene, 527 U.S. 263, 281 (1999). As the Supreme Court explained in Strickler,

The United States Attorney is “the representative not of an ordinary party to controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in criminal prosecution is not that it shall win a case, but that justice shall be done.”

(Id.) quoting Berger v. United States, 295 U.S. 78l, 88 (1935).

However, Brady arises out of consideration of the special role that American prosecutors play within the criminal justice system. The Supreme Court further acknowledged that such prosecutors are not mere parties in litigation but representatives of a sovereign. Which of course brings us back to a series of interesting questions. Is the NASD a quasi-prosecutor? Are NASD enforcement proceedings enmeshed in a quasi-criminal justice system? Is the NASD a quasi-sovereign, i.e., a government-like power?

Even Hearing Officer Perkins seems somewhat uneasy in applying Brady to the NASD’s proceedings. He candidly notes:

Given the Supreme Court’s concern with the special role prosecutors play in the American criminal justice system, it is not surprising to find that Brady has not been applied to administrative proceedings. Because administrative proceedings are civil in nature, the same constitutional concerns are not present. Indeed as the SEC has recognized, there is no constitutional requirement that administrative agencies apply Brady . . . Nevertheless, some agencies have incorporated the principles set forth in Brady into their procedural rules, See, e.g., SEC Rule 230(b)(2). ..

Where does all this leave us? The Brady Ruleis invoked in criminal proceedings to constrain government prosecutors --- but we find this rule referenced within the procedural rules of an SRO, a quasi-governmental or private entity. Even within the context of the example Hearing Officer Perkins cites of an agency that incorporates Brady into its procedural rules, the referenced agency (the SEC) is an arm of a sovereign, i.e., a commission of the United States Government.

I submit that the incorporation of Brady into the NASD’s procedural rules underscores the reality of the SROs’ true nature. SROs are more governmental than private. Their disciplinary proceedings are more criminal prosecutions than civil suits. The results of SRO hearings are not the rendering of a civil award imposing civil damages to be paid to the prevailing civil litigant. To the contrary, SROs impose “sanctions,” which are generally suspensions from association and fines; and such sums of money that are routinely collected do not go to benefit the alleged victims of securities fraud (other than disgorgement) but normally wind up in the coffers of the SRO itself --- again, more in keeping with criminal fines than civil damages.

The protections afforded to the respondents trapped within this quasi system are inadequate and unfair. Individuals enmeshed in a quasi-governmental prosecution by the SROs are routinely barred from their livelihoods because they assert a constitutional right. That they may ultimately be guilty of underlying misconduct is besides the point --- due process is not intended to be viewed as an inconvenience but as a protection. Concededly, the SROs are not criminal prosecutors acting pursuant to indictments, putting citizens in jail. The NASD is not a sovereign government. The NYSE is not empowered to issue grand jury indictments. But that distinction may well be lost upon any citizen who happens to be employed in the securities industry when ordered to appear at an SRO, subjected to interrogation, forced to answer every question or be fined and/or barred for failing to do so.

In closing, I offer the following definition from Encyclopedia.com:

mule
hybrid offspring of a male donkey (see ass) and a female horse, bred as a work animal. The name is also sometimes applied to the hinny, the offspring of a male horse and female donkey; hinnies are considered inferior to mules. . . They lack the speed of horses, but are more surefooted and have great powers of endurance. Like donkeys, they are of a cautious and temperamental disposition and require expert handling to perform well. Both sexes are sterile. . .

Engaging in a tremendous amount of professional restraint, I will avoid the quick and easy jokes as to the parents of the SROs (and I will particularly avoid any reference to any parenthetical references). But isn’t it interesting that the world of science doesn’t resort to the inartful classification of these animals by calling them quasi-horses or quasi-donkeys? Mules are neither donkeys nor horses, they are mules. Now if only we could so classify SROs and instill within them the better virtues of their parents.

Bill Singeris the regulatory partner of the securities industry law firm of Singer Frumento LLP in New York. This article represents the personal views of Mr. Singer. He may be reached at bsinger@singerfru.com. © 2001 Bill Singer.


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Department of Enforcement v. Mario J. Coniglione, Disciplinary Proceeding No. C10000140 (May 14, 2001, Hearing Officer Gary A. Carleton) http://www.nasdr.com/pdf-text/oho_dec01_18.txt ; also see, Department of Enforcement v. Vincent P. Coniglione, Disciplinary Proceeding No. C10000116 (May 2, 2001, Hearing Officer Andrew H. Perkins) http://www.nasdr.com/pdf-text/oho_dec01_11.txt

[ii] ORDER DENYING RESPONDENTS’ MOTION TO COMPEL THE PRODUCTION OF DOCUMENTS AND FOR A LIST OF WITHHELD DOCUMENTS, OHO Order 01-13 (CAF000045) (May 17, 2001, Hearing Officer Andrew J. Perkins), http://www.nasdr.com/pdf-text/01_13oho.txt

Stock fraud spurs regulators to look online
Last modified: June 21, 2000, 6:35 PM PDT
By Gwendolyn Mariano
Staff Writer, CNET News.com


Just when it seemed stock manipulation suits were out of fashion, the Internet put the problem in the spotlight for securities regulators.

The California Department of Corporations this week settled a lawsuit against an investor for violation of the California investment laws concerning "false and misleading" information posted on the Internet--one of the first such cases to be resolved, but likely not the last.

"You don't see cases like these very often anymore," said Bruce Vanyo, a securities litigator at the law firm Wilson Sonsini Goodrich & Rosati who was not involved in the case. "They're a relic of 70 years ago. You typically don't catch anyone doing it. But this settlement shows that the Internet can be used and abused in affecting stock prices."

The lawsuit is the latest effort by the department to police stock fraud on the Internet. Since last year, it has set up an Internet Compliance and Enforcement Team, which has been cracking down on online scams.

Victor Idrovo of Manhattan Beach, Calif., allegedly posted "false or misleading" messages on Yahoo's Finance message board and "intended to affect the offer, purchase, and sale" of the stock of Metro-Goldwyn-Mayer by using the name of Frank Mancuso, the former chairman and CEO of MGM.

In settling the suit, which was filed last week in Los Angeles County Superior Court, state securities regulators obtained an injunction, a retraction, a fine and costs.

"This case sends a message that people should be more prudent about what they post online regardless of their anonymity," said Marc Crandall, the department's lead counsel of Internet compliance and enforcement.

On April 19 and Oct. 19, Idrovo allegedly claimed to be the former MGM head and wrote messages indicating stock price predications. He also relayed a message from Kirk Kerkorian, the majority shareholder for MGM.

With a headline reading, "Kirk say a minimum of $24 a share," the first message read: "This bad boy is heading north. See you at 22 by the end of the month, if not sooner."

The actual stock was much lower at that time, and the message was an attempt to "talk the stock up," according to Crandall.

But the message that caused uproar, Crandall said, came Oct. 19--when the stock was on its way down.

With a headline reading, "Let the selling begin," the message read: "Down over 2 today and the rites (sic) have not even been issued. If you wait much longer you will lose any amount you might have made with the rites (sic)."

Crandall said the message implied that the former MGM head was suggesting that investors sell all the stock because it was falling.

Although Idrovo's lawyer declined to comment on the lawsuit, Idrovo had stipulated to the injunction and penalties without admitting or denying the allegations.

Idrovo was a frequent trader with a pattern of both long- and short-selling MGM stock through several online brokerage accounts.

"A case against someone who spoofs an identity without authenticity and says something in the name of someone else, I think that's no great reach to find him guilty of something," said Charles Merrill, an Internet lawyer for McCarter & English in Newark, N.J.

Although lawyers are seeing a crackdown on Internet fraud by government regulators, legal cases such as these are sending wake-up calls to Internet users and providers as well as potential online con artists.

"People are really starting to get the picture that these actions are going to be taken seriously and made a high priority," said William D. Briendel, an attorney specializing in securities litigation for Greenberg Traurig. "I think when you have extensive, high-profile prosecutions by the regulators that seems to act as a deterrent."

Briendel said government regulators are not only developing new technology to identify fraudulent schemes on the Internet, but they are also enlisting providers as allies to help track down con artists through the use of subpoenas.

In December, the first Internet stock-fraud case was filed by the Securities and Exchange Commission against three men who were charged with manipulating a stock through Internet chat rooms.

Guernsey: "Offshore" Has Lost Much of its Meaning

12 January 2004

Article by Gerry Williams

I firmly believe that Guernsey has lost its "offshore" name. The simple fact is that the tags "offshore" and "onshore" were lost many years ago.

The recent implementation of laws enforcing the licensing of trust companies in Guernsey has helped raise standards across the board, creating common standards, such as the four-eyes process, to which all trust providers have to comply. Even though this has meant we have had to restructure some of our operations, this raising of the bar is definitely good for us, the business and the clients.

The Guernsey Financial Services Commission has clearly listened to the outside world and I am more than comfortable with the levels of regulation that have been introduced. The island and other financial centres in a similar position should use this to their advantage in terms of business development, as it offers significant comfort to both existing and potential clients within our industry.

Admittedly, there are inevitable additional costs to this sector as a direct result of increased regulatory demands. However, the plus side of the re-enforced positive message which the island can give the world is of far greater importance.

I accept that the regulations have and will continue to have direct effects on the profile within the local industry. We have had to carefully restructure our operational delivery platform, as I am sure many others have, to enhance our risk management and audit function. Also there has been a degree of rationalisation and consolidation within the industry – again I am sure that we have not yet seen the end of this trend. It is inevitable that some of the smaller companies will find it more difficult to put in place the appropriate level of resource to ensure they are fully compliant with the new regulations, so some mergers and take-overs will happen as a matter of course.

In this very competitive environment, it will be the smaller trust companies that may struggle to justify and support the costs required by the new levels of due diligence. As a result, the period of consolidation is expected to continue in the trust industry.

The finance world has been subject to a series of investigations over the last few years, and I feel that well-regulated jurisdictions like Guernsey have come through this process virtually unscathed. Nonetheless these winds of change impelled us to open offices in Switzerland and the UK. Though the world is now a much smaller place, by having a wider presence, one can better meet the needs of the client.

Nonetheless, it is in Guernsey that I believe one can find the optimum environment to conduct trust business. I have worked in many other jurisdictions, such as The Bahamas, Jersey, the Isle of Man and Cayman, however my preference is Guernsey. It is a relatively small place and you can talk to the practitioners and have your views heard by the Guernsey Financial Services Commission with ease – not always possible in other places I have worked. There is a comprehensive financial and legal infrastructure, and basically both clients and practitioners alike consider the jurisdiction to be a pleasant, simple and efficient place from which to conduct business.

With a similar amount of time spent in the trust business, I am well placed to assert that the key to successful trust management is understanding what they are – a structure that takes advantage of the distinction between legal ownership and beneficial ownership - and what that allows clients to achieve. This can include estate planning, avoiding disruption on death, tax minimisation, structures that protect the mentally or physically weak, the protection and continuation of family businesses, pension schemes and much more.

This reality has not changed for the hundreds of years that trusts have been employed. What has changed, I would point out, is the way in which the trust is structured, as it can be a very flexible entity, depending on the needs and requirements of the client.

However, making sure that whatever is created is still fully compliant with regulations is the modern challenge for international trust companies. Guernsey’s removal from the various blacklists that were created undeniably helps in this. The trust arena remains a fascinating business, and one that will continue to flourish. The goal of trust businesses should be to make oneself adaptable enough to be able to react to whatever the market changes may be, which at present are quite difficult to foresee. Nonetheless, it is necessary to remain flexible and fleet of foot, and to take advantage of those changes, as and when they emerge.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Close Minded


To Don's dismay, the mutual fund establishment continues to run scared from more fund disclosure.


On August 31, 1999, Dave Nadig and I, and the team at MetaMarkets.com, started managing the world's first "interactive mutual fund." It was the first fund ever to display all its portfolio holdings updated in real time -- to show and explain all trades as soon as they are completed -- to publish ongoing commentary and research about stocks and the market by the fund's managers -- and to invite fund shareholders and the public to interact with the fund's managers online.

We did it because we wanted to demonstrate that there's a new and better way for mutual funds to talk to their shareholders, their shareholders' advisers, and the public. We were fed up with the fact the the mutual fund industry constantly warns you that "past performance is no guarantee of future returns" -- but then reveals virtually nothing useful or timely about funds except their past performance. Yes, our intention has always been to make money with this innovation, by recognizing an unmet need in the marketplace. But at the same time, it's a crusade for us. We think that showing people how their money is invested is the right thing to do.

So it's with more than a little bit of frustration that we read yesterday that the Investment Company Institute, the lobbying organization of the mutual fund industry, announced that it had provided the Securities and Exchange Commission "...with information demonstrating that average investors are much more likely to be harmed than helped if all mutual funds are required to reveal their portfolio holdings more than the current, twice-a-year requirement."

The ICI's submission is the latest shot fired in a war that we started in May, 2000, when we sent an open letter to the ICI's president, Matthew Fink, calling for greater mutual fund disclosure. The letter was cosigned by several others, including Mark Rekenthaler of Morningstar. When Dave Nadig went to Washington to discuss it with the ICI's SEC Rules Committee, he was given the bum's rush. But the issue wouldn't go away. And now, a little more than a year later, it's under SEC review and the ICI is scared enough to go public with the Commission to try to head it off at the pass.

The centerpiece of the ICI's submission to the SEC is a study conducted by University of Maryland finance professor Russ Wermers. The ICI summarizes the study as concluding that "...more frequent disclosure could potentially raise fund-trading costs by increasing the risk that outsiders would anticipate fund trades and trade ahead of funds. Such 'front running' can increase the price that funds pay to purchase securities and lower the price funds receive when they sell. ...abusive trading activities would become more widespread and would adversely affect fund performance."

What, are you surprised? You shouldn't be: this is neither the first nor the last time that a study performed by an academic, financed by a lobbying organization, has arrived at precisely the conclusions that the lobbying organization has already espoused.

The ICI cites a survey of the ICI's member mutual fund companies, showing that "...some mutual funds have determined that more frequent disclosure creates an unacceptable risk of facilitating abusive practices that would harm their shareholders. In addition, members responding to the survey reported virtually no demand for more portfolio holdings disclosure from their shareholders."

Yet at the same time, the same survey shows that "...many funds already disclose portfolio holdings information more than twice a year" -- twice a year being the current regulatory minimum for disclosure.

How is that possible? How can "many funds" do something that "creates an unacceptable risk" and for which there is "virtually no demand"? It can only be that -- among the thousands of mutual funds in America -- there is room for difference of opinion as to whether more frequent disclosure is risky, and as to whether there is demand for it.

Obviously, we at MetaMarkets.com believe there is demand for it -- and for more of it. We believe that based on the very positive public and media response we've gotten to our own modest initiatives in this area over the last two years. And we believe it based on two overwhelmingly conclusive Harris Polls conducted for us -- one, in 2000, of individual investors, and another, in 2001, of investment advisors. But let it never be said that the ICI let itself be confused by the facts: our polls are simply waved away by the ICI in their letter to Paul Roye, director of the SEC’s Division of Investment Management, as being "of dubious value."

On the one hand I utterly disapprove of the ICI's scorched earth approach to an idea that has great merit, and an issue that deserves nuanced consideration. But on the other hand, I respect that the ICI is doing its most important job for its members -- protecting them from new regulations, in an industry that is perhaps more regulated than any industry other than nuclear power generation.

Throughout our crusade for more mutual fund disclosure, we have never advocated that it be mandated by regulation. Quite the contrary -- we see our own efforts as a shining example of a free market response to a legitimate consumer need, a classic attempt to "do well by doing good." And ours is just one of an infinite number of ways to meet that need. There are thousands of mutual funds out there, and there should be just as many different approaches to serving the needs of shareholders, with many different levels of disclosure, and with many different forms of disclosure. As far as I'm concerned, the regulations should be relaxed to permit mutual funds to make no disclosure. Why not? Let's see if there's a market for it.

So here's hoping that the ICI's efforts will succeed in squelching new regulations -- but not in squelching new innovations!

-=-=-=-=-
Don Luskin
MetaMarkets.com