Daryn Fleming, owner and operator of IBC Radio:
Web Stock-Promoter Floods Message Boards With Hype
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
Daryn Fleming is a regular participant in Silicon Investor on-line message boards, often urging others to buy stocks and hinting about news to come. "Acquisition in the works,"he wrote on one board. "Another big story due out Tuesday! I would buy more..." he wrote on another.
But what isn't always clear from Mr. Fleming's posts is that his firm is paid to promote the companies.
Mr. Fleming is president of Wall Street West, which describes itself as a "stock research firm and holding company." For a fee, Wall Street West promotes companies as its stock picks on its Web site, and in many cases writes research reports that include "buy" recommendations on the stocks. It also sends out mass mailings of electronic mail and press releases promoting the companies. Its Web site lists offices in Denver and Las Vegas. Mr. Fleming says 15,000 people have signed up to receive the site's "stock alerts" via e-mail.
Mr. Fleming says when he talks up companies on the Silicon Investor Web site (www.techstocks.com) he is acting as an "individual investor," and not on behalf of Wall Street West. "I post because I have opinions on these companies, and sometimes I get pretty excited about them. Often I'll put my own money into these companies," he says.
Mr. Fleming says that other Silicon Investor users know that he is president of Wall Street West and is paid to promote companies. "I say that in most of my postings because of the potential conflict of interest," he says. But in his last 75 messages posted on Silicon Investor, Mr. Fleming doesn't make any disclosures about receiving payments. He occasionally identifies himself or his affiliation with Wall Street West.
In a sales pitch to prospective clients on Wall Street West's Web site (www.wallstreetwest.com), the firm says it can disseminate information on companies through a variety of outlets, including message boards. "There are more than 30,000 electronic bulletin boards on the Internet. We have the ability to post messages on these boards, targeting prospective investors," according to the site.
Of the 15 companies listed as "selected stocks" on the Wall Street West site, 11 have message boards on Silicon Investor. Mr. Fleming has been an active participant in all of them.
In an interview Thursday, Mr. Fleming said that he has slowed down in posting to Silicon Investor. "I think you're going to see a lot less posting from me, and it will probably stop entirely, because I think some people could see it as a conflict of interest and we don't want that," he said.
Still, early Friday, Mr. Fleming created a new message board on Silicon Investor dedicated to MobileVest, a company in a Sebring, Fla., that manages manufactured housing communities. Wall Street West issued a research report and "buy" recommendation on MobileVest late last week.
Wall Street West's first client, Mr. Fleming says, was U.S. Basketball League, a group that franchises minor league basketball teams. Mr. Fleming began posting on a message board devoted to the company shortly after being retained by the company. "Rumors abound about ... oh I won't say what. I will say BUY BUY BUY. GO USBL!" he wrote in one of the first messages on the forum. "Looks like this thing could explode!" he wrote in another. He repeatedly suggested that others buy the stock, and predicted the stock, which is quoted on the OTC bulletin Board for around $2.20 a share, would reach $5 a share.
Mr. Fleming never revealed on the U.S. Basketball message board that he was president of Wall Street West, or that his company had received compensation in exchange for promoting U.S. Basketball.
A spokesman for U.S. Basketball, which is based in Milford, Conn., couldn't be reached for comment.
Mr. Fleming declines to say how much U.S. Basketball paid Wall Street West in exchange for promotion. He says he believes a disclaimer at the bottom of the Web site's front page is enough. It alerts users that the company "has received or will receive compensation for the dissemination of this information." Mr. Fleming says U.S. Basketball supplied a research report that is posted on the Wall Street West site. He says Wall Street West is responsible for all of the other research reports on the Web site.
"I don't think we have to say the amount [of compensation]," he says. "We've told the SEC what we're doing and they seem fine with it."
John Stark, special counsel for Internet projects for the U.S. Securities and Exchange Commission, declines to comment specifically on Wall Street West. But he says the law is clear: Companies that promote stocks have to disclose whether or not they were compensated, and the specific amount. "It's not enough to give a vague blanket disclaimer. You have to say exactly what you received," he says.
Mr. Fleming says Wall Street West has been compensated by all 15 companies featured on it's home page. Only two of the profiles disclose the terms of the compensation.
Silver Star International gave Wall Street West $15,000 worth of stock in exchange for promoting the company, which sells a variety of products through stores on military bases. The company's stock price more than doubled to $3 on the OTC Bulletin Board Thursday after Wall Street West issued a press release announcing it had completed a research report on Silver Star. Wall Street West recommends Silver Star as an "aggressive buy" in the report. The press release doesn't disclose that the firm received compensation from Silver Star in exchange for producing the report.
"The phone is ringing off the hook based on the report they issued," Michael Faessler, president of Silver Star, said. "I've got two bottles of champagne being iced down right now in the front office. This is an incredible day of history for this company. For trading volume that is 20 times a previous best day, that's incredible." More than 491,000 shares of Silver Star changed hands Thursday. Silver Star is based in Dunedin, Fla.
Mr. Fleming also created a message board on Silicon Investor to discuss Silver Star. Roy Samuels of Hawke Group, which handles public relations for Silver Star, says it was understood that message board exposure would be part of Wall Street West's promotion of Silver Star.
Mr. Faessler acknowledges there could be a conflict of interest in issuing a research report in exchange for compensation. "Obviously there is bias. From what I have learned, bias is quite normal." Mr. Faessler says he believes brokers often hold positions in stocks they recommend.
Mr. Fleming says Wall Street West is not "pumping and dumping" -- driving a stock price higher through hype and then selling off shares. He says his company is always compensated in stock, or in cash that is then used to buy stock in the featured company. "We like to be paid in stock, because we believe in what we do and we believe we can help these companies. Our success is tied to their success," he says. From time to time, he says, Wall Street West will take a "very small" profit on stock it holds.
"We sell only for basic living expenses. We're well-financed," he says. He says all of Wall Street West's income comes from the compensation it receives for promoting companies.
Mr. Fleming also identifies himself as the president of Diversified Marketing Concepts, the parent company of Wall Street West. He says Magna Advisors is a "strategic partner" of the Wall Street West site, but says it doesn't contribute to the site's content. He declines to name anyone who works for Magna, or to describe what the company does. The Wall Street West site says Magna is based in San Diego. Mr. Fleming says Wall Street West has three employees, including himself and that Magna has three or four employees.
Mr. Fleming says Wall Street West is trying to move away from promoting OTC Bulletin Board stocks and toward "larger, more stable" companies. "We want to get a good reputation and have some solid companies. We'd like to have more like nternetJet, one that went from $3.50 to the $9 to $10 range."
Jon Marple, president of InterjetNet, a Newport Beach, Calif., wireless telecommunications company first featured on Wall Street West in April, says Mr. Fleming approached him about promoting the stock. "They wanted to feature us in exchange for stock. We were looking for an introduction to the public, and it sounded like a good deal," says Mr. Marple.
But he says he felt "uneasy" after seeing the research report Wall Street West issued on InterjetNet, where it gave the company a "buy" recommendation. "I felt uncomfortable about giving stock in exchange for the recommendation," he says. InterjetNet gave Wall Street West 2,400 shares of stock in exchange for the promotion.
Mr. Marple says InterjetNet hasn't paid anyone to recommend its stock since, and never will again. "You've got a young guy out there, this Daryn Fleming, who is trying something a little unusual with a tricky name," says Mr. Marple, who believed the company was involved in financial research based on its name. "Just starting out, we were vulnerable to an appeal like that."
Gary Schulteis, president of International Industries, says he hired Wall Street West to get some exposure for his company, particularly on-line.
"[Mr. Fleming] said that he is very active in the Internet, and that he had lots of places to get us good corporate exposure," Mr. Schulteis says. He says he never specifically asked Mr. Fleming to post on message boards.
Mr. Fleming created a Silicon Investor message board to discuss International Industries, a Boca Raton, Fla., company that manufactures cigars and cigar vending machines. Mr. Fleming has posted 11 of the board's 27 messages. When some participants complained that the stock's price appeared to be slipping, he responded, "We think mostly big time investors bought [International], which is why we want to do a Wall Street West style SQUEEZE. This is where none of us will sell. In light of increasing demand, the stock could soar!!!!"
Mr. Fleming says Wall Street West handles investor relations for Leah Industries, a Canadian manufacturer of windows and doors that was profiled on the Web site and received a research recommendation.
But Leah's president, Alex Nafanailov, says the company no longer has a business relationship with Wall Street West.
"We're not happy with them and we want nothing to do with them," says Mr. Nafanailov. He says Leah gave Wall Street West 10,000 shares last month in exchange for promotion, but stopped working with the company a short time later.
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=19926510&s=Jason%20Anders
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