DD Support Board and Research Team

[scion]

One client who has been hyped by paid stock touts is Pepper Rock Resources Inc., which is officially based in the Chicago area but is run by Kelowna promoter Philip Kueber.

As I noted in my column last Wednesday, for more than two decades Kueber has stumbled from one bad promotion to another, most listed on the Pink Sheets, another U.S. over-the-counter market where almost anything goes.

In May 2009, Kueber acquired control of 1st Texas Natural Gas Company Inc., which was listed on the Pink Sheets, from a Texas promoter named Jim Dial.

The company had acquired a series of natural-gas leases on the Adams-Baggett Ranch near Ozona, Tex. Dial predicted that, by the end of 2007, the wells would generate $500,000 in gross revenues per month, rising to $1.3 million per month by the end of 2008.

Alas, financial statements show the company failed to generate any revenues.

When Kueber acquired control of 1st Texas, he renamed it Riverdale Capital Ltd. and took it into the software business, but that, too, has been a flop. As of September, the company had generated negligible revenues and its total assets were only $3,100.

[...]
On Feb. 5 this year, Kueber acquired control of Pepper Rock, an obvious sham company that, by all appearances, was created simply as a vehicle for some future promotion.

Five days later -- on Feb. 10 -- Kueber announced that Pepper Rock had acquired an interest in the Adams-Baggett Ranch.

Although this was the same tired property that had washed through Dial's company (and several other over-the-counter issuers), the acquisition seemed to excite Clay Mahaffey, a chartered financial analyst who resides in New Orleans.

The next day -- on Feb. 11 -- he recommended Pepper Rock as a speculative buy. At the time, the stock was trading at 22 cents. Mahaffey set a target price of $3.75.

Although it looked like a real research report, it wasn't. According to the disclaimer, it was nothing but a paid commercial, but it had the desired effect. Pepper Rock's share price jumped to 37 cents on massive trading volume, affording insiders ample opportunity to dump stock. (Kueber denies he has sold any stock.)

By April this year, Pepper Rock had several large offshore shareholders, including Naomi Johnston and Jonathan Marshall, both of London. They are the common-law wife and son, respectively, of Scott Marshall, a bulletin-board promoter who lived in a fancy house in Shaughnessy until 2007, when somebody fired four bullets into it and he quickly left the country.

Despite these very sketchy circumstances, Macdonald filed a registration statement on Pepper Rock's behalf on March 8, seeking to register these shares with the SEC so they could be sold to public investors. For reasons that are not clear, the SEC has not yet approved that registration statement.

Meanwhile, the B.C. Securities Commission learned that Kueber was resident in B.C. That was enough, under new securities rules, to require Pepper Rock to become a reporting issuer in B.C. But since it hadn't filed any disclosure documents here, the commission slapped it with a cease-trade order.

Pepper Rock is still trading in the United States, where it has sunk to less than two cents -- a tiny fraction of Mahaffey's target price.

I asked Macdonald whether this is the sort of business that he should be lending his name to.

He declined to respond on the grounds that he cannot discuss his clients' business.

NEXT: Although Macdonald can't discuss his clients' business, we can. In the second part of our series, we take a closer look at some of the other companies he has helped usher onto the public markets.

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Vancouver lawyer facilitates questionable OTC filings
Bill Macdonald's clients include some of the most untrustworthy people involved in Vancouver's junior securities market
David Baines, Vancouver Sun
Published: Wednesday, October 20, 2010
http://www2.canada.com/vancouversun/columnists/story.html?id=0fd303b0-1977-4bd1-bf80-7a3804bfbe46&p=2