AI
Monday, April 14, 2008 12:29:49 PM
Now, TOGI consists of several entities.
Its Due Diligence entity is building ActivReport, an online search engine that performs linear searches of individuals and allows people to find out about other people before they invest their money. Such information most often does not exist in the small cap arena, Martin said.
"It searches for involvement with other companies and other people, and it brings everything together in one easily read report," he said. "If a person is bad and he has hurt shareholders before - 10 years ago or five years ago - and nobody knows about it and now he shows up here, then shareholders need to know this guy has done it before. What's going to stop him from doing it again?"
----------------------------------------------
American Security Resources Corporation
(ARSC is a fully reporting OTCBB stock)
has passed our initial due diligence Check!
http://www.theownersgroupinc.com/arsc.php?PHPSESSID=97e898e6669abd56be4930b3a91ef13a
======================================================================
http://www.sec.gov/Archives/edgar/data/1085069/000137219806000087/form10ksba.htm
On September 8 and 27, 2005 the Company issued 60,000 shares and 40,000 shares to B&B Marketing Communications, pursuant to a consulting services agreement. Also on September 27, the Company issued 1,000,000 shares to the Owners Group, Inc. pursuant to a Consulting Services Agreement.
On December 8 and 12, 2005, pursuant to a consulting services agreement with OTC Services, Inc., the Company issued 1,400,000 shares to OTC Services, Inc. and 1,400,000 shares to Darrel T. Uselton.
AMERICAN SECURITY RESOURCES CORPORATION 10KSB/A 1 form10ksba.htm FORM 10K SBA
-----------------------------------------------------------------------------
Texans Charged With Using Botnet In Pump-And-Dump Scheme
An investigation was launched after the two Texans allegedly sent one of their spammed e-mail messages to an SEC lawyer, who became interested in the case.
By Sharon Gaudin
InformationWeek
July 10, 2007 12:44 PM
The Texas attorney general charged two men with running a pump-and-dump spam scam that defrauded investors out of more than $4.6 million.
On Monday, Darrel Uselton, 40, of Katy, Texas, and his uncle, Jack Uselton, 69, of Houston, face organized criminal activity and money laundering charges, along with securities fraud charges. Both men, who were indicted on July 3 by a Harris County grand jury, still are the subject of an ongoing investigation being conducted by several states and the Securities and Exchange Commission.
Both men are accused of using a nationwide botnet of hijacked computers to distribute the spam. The investigation reportedly began after an SEC lawyer received one of the fraudulent e-mails at work.
Darrel Uselton was arrested and is being held in Harris County Jail in lieu of $8 million bond. An arrest warrant has been issued for Jack Uselton.
"Investors will not tolerate scam artists who use the Internet to illegally manipulate stock prices," Attorney General Greg Abbott said in a written statement. "Together with several states and the SEC, we have uncovered an elaborate scheme to defraud unwitting investors. The Office of the Attorney General will aggressively prosecute market manipulators, spammers and con artists whose illegal schemes defraud unsuspecting citizens."
For the past several months, security professionals have been warning about the burgeoning number of pump-and-dump e-mail schemes that are buffeting the Internet. Pump-and-dump refers to potentially fraudulent spam that hypes small-company stocks with phrases like "Ready to Explode," "Ride the Bull," and "Fast Money." The spammers invest in these generally low-cost stocks before the spam campaign begins. Once people are duped into buying the stocks, the share prices go up and the spammers sell off and cash in. The sell-offs, though, usually drive the stock prices down, and the other investors lose their shirts.
The Useltons reaped millions in illegal profits by promoting shares from at least 13 penny stock companies, according to information released by the Attorney General's Office. The suspects then allegedly secretly sold those stocks into an artificially active market they created with manipulative trading schemes, spam campaigns, direct mailers, and Internet-based promotional activities.
The Attorney General's Office reported that its investigators seized more than $4.2 million from the Useltons' bank accounts.
"Unfortunately for the SEC, pump-and-dump spam campaigns don't seem likely to go away any time soon," said Graham Cluley, senior technology consultant at Sophos, in a written statement. "The use of compromised networks of computers to spread these illegal spam messages can result in quick fortunes for the scammers, and can have serious detrimental effects on the stock involved. But it seems that these criminals were in such a rush to make their millions that they forget to pay any attention to which e-mail addresses were being spammed and in the end, this looks likely to be their downfall."
In March, the SEC suspended trading on 35 companies that had been touted in recent spam campaigns. The trading suspensions -- the most ever aimed at spammed companies -- were ordered because of questions regarding the adequacy and accuracy of information about the companies, according to an advisory put out by the SEC.
=============================================================
GROUP PROMOTES FRAUD FREE INVESTMENTS
http://www.zwire.com/site/printerFriendly.cfm?brd=1994&dept_id=226362&newsid=17425071
11/04/2006
GROUP PROMOTES FRAUD FREE INVESTMENTS
By GREG JUNEK, Business Editor
BUILDING ‘OASIS’: John Martin, left, and Bill Frizzell stand outside the offices of The Owners Group, 602 S. Broadway Ave.(Staff Photo By Amy Peterson)
John Martin and Bill Frizzell just wanted assurance that they and others could invest money without fear of fraud or scam.
So Martin and Frizzell established The Owners Group Inc., 602 S. Broadway Ave., after they, along with tens of thousands of other shareholders, saw their money disappear in a penny stock company that could not provide investors proof of stock ownership.
Martin said TOGI was begun based on the principles of honesty and transparency.
"We had these feelings for these shareholders and we wanted to do something for them," Martin said. "So we formed a company, The Owners Group, which is almost like an oasis out there for people to be involved in without worry and fear of scam."
In early 2004, Martin, a former wholesale business owner, and Frizzell, a Tyler attorney, purchased shares of CMKM Diamonds, which traded under the symbol "CMKX," had mining leases in Saskatchewan and traded on Pink Sheets. The allure of finding diamonds caused a buying frenzy, and more than 70,000 people purchased about 700 billion shares of stock in the company.
"You could buy a million shares for a hundred bucks," Martin said. "It was alluring to be able to own a million shares of anything in the stock market. And if they hit, that .0001 stock could possibly run to a quarter or a dime, and you'd make a lot of money. So the allure was rather large, and the people involved in the company itself were promoting it in such a way where they had their own top fuel race cars, they were advertising on the raceways out in Las Vegas, and before they knew it, it spun out of control."
SUSPICIONS
But CMKM was not filing its scheduled reports with the Security and Exchange Commission. Martin became suspicious and he asked Frizzell, who had a 28-year law practice, to look for a way to get information from the company.
Frizzell and Martin suspected the market was "naked shorting" the company, or selling stock without backing it with actual stock certificates.
"A broker will sell you electronically a stock - you give them the money and they put a marker in your account - but they don't have the actual certificate to back that stock up," Martin said. "A large number of penny stock companies that have sold billions and billions and billions of shares out there eventually get delisted. When they're delisted, they go away, and the brokers don't ever have to find the stock to match the money that they got. It's a very complicated process and a lot of people don't believe it happens. They think it's a conspiracy type thing, but it's very prevalent, not just in the small markets but also in the larger markets."
In May 2004, Frizzell intervened as a third-party representative for the CMKM shareholders in an SEC administrative hearing on whether to revoke the company's license that allowed it to trade on the stock market. The company's license was revoked in October 2005.
"I don't really have a securities law background," Frizzell said. "My background is in litigation, and early in my practice I tried a lot of criminal cases, federal and state cases. But when I got to looking into things that were happening to this stock and to these shareholders, it was my thought that this was the most obvious and blatant crime that you could ever see and the regulators were not doing anything about it."
Frizzell's representation of third-party interests in the SEC hearing was the beginning of he and Martin building "the largest shareholder advocacy base in the history of the stock market," Martin said.
"(Frizzell) intervened in the administrative hearing and we started getting information from the SEC, which is very unusual," Martin said. "The SEC doesn't share information with anybody, but the judge ordered that they turn over their investigative work on CMKM to Bill because Bill had gotten into this administrative hearing."
TOGI's effort is ongoing to get at least some return to the shareholders on their investment. Frizzell said CMKM sold "a very significant asset" to another publicly traded company, and the shareholders received 45 million shares for the asset. But the company said stock certificates would be required to assure the shareholders' identity and the group has been working since November 2005 to identify the shareholders.
The company wanted proof of ownership, which required a shareholder to have a certificate for his or her shares. Shareholders called their brokers to request the certificates and faxed them to the group's office.
Martin said 40,000 people have faxed in their certificates, and one year later thousands of people cannot get their brokers to send them their certificates.
"According to our records, there are still some 50 billion shares unaccounted for in the legitimate share count," he said. "My question is, why can't the shareholders get their certificates when they own them? It's their property. The answer to that is once the brokers pass out all of the shares, then they can't claim that there is no naked short. As long as they have some certificates, they can always claim that there is no naked short."
Martin said that CMKM has announced it would file an interpleader action with the federal court in Las Vegas.
If the action is approved, a federal judge would decide who the shareholders are and the mode of payment of the company's shares, he said. The judge could also give attorneys for the company subpoena power to open the brokers' books to determine the identities of the legitimate shareholders.
SHAREHOLDER PLIGHT
A small number of CMKM shareholders and Martin met one Saturday morning and called Frizzell, and The Owners Group grew out of those discussions.
Martin said he, along with many other shareholders, had become addicted to tracking the stock, and would stay on the computer for hours. After the SEC administrative hearing started, he and Frizzell were the shareholders' point of contact.
"They looked to me and Bill, because we were the only voice for the shareholders," he said. "We were the only people they knew to contact."
Martin said there were times he left his office in tears after reading correspondence from some of the shareholders. Some were addicted to watching the charts and reading the chat boards, and they wrote Martin about how they lost their families because the money the just knew they would make with CMKM never materialized.
Some wrote suicide notes. Some, in frustration over losing their money, lashed out at Martin and Frizzell.
"The people have no idea how many lives are ruined in the penny stock market because of scams on a daily basis," Martin said.
The CMKM debacle was not one-sided, he said. Both the brokers and some insiders at the company scammed the shareholders.
"If we had known this about this stock before we invested, we never would have invested in it," Frizzell said, referring to shareholders' comments. "Wouldn't it have been nice if we had a company that could check these things out before we invest? So they said, 'You guys know how to do a lot of good due diligence. ... Let's start a company that does that.'"
Word spread about the group's work in investigating the CMKM issue, and people "with some really good technology and some really good projects" began inquiring if the group could help them get their companies on the public and private markets.
Now, TOGI consists of several entities.
Its Due Diligence entity is building ActivReport, an online search engine that performs linear searches of individuals and allows people to find out about other people before they invest their money. Such information most often does not exist in the small cap arena, Martin said.
"It searches for involvement with other companies and other people, and it brings everything together in one easily read report," he said. "If a person is bad and he has hurt shareholders before - 10 years ago or five years ago - and nobody knows about it and now he shows up here, then shareholders need to know this guy has done it before. What's going to stop him from doing it again?"
Another entity, The Owners Group Entertainment Co. will publish three books, Martin said.
Author Mark Faulk is writing the CMKM story, "The Naked Truth." Martin said the book is about 95 percent complete.
Also, Peggy Sue Gerron of Lubbock, the person about whom Buddy Holly wrote the song "Peggy Sue," approached the group about publishing a book about her life surrounding Buddy Holly and The Crickets in the 1950s. Martin said Ms. Gerron for years has wanted to clear up inaccuracies contained in the movie "The Buddy Holly Story," and the book seeks to do that.
Another book project is an autobiography of Bryan Abrams of the group Color Me Badd.
Faulk is assisting Ms. Gerron and Adams in writing their stories.
TOGI Strategic Alliances entity is working with Data Flow Technologies, which is promising a new way to send data at a much higher speed. Martin said scientists who built the technology have called it "evolutionary."
Its Public Company Promotions entity has a contract with American Security Resource Corp., which is developing high efficiency hydrogen fuel cells that can be mass produced. It is also involved with Diamond I Inc., which develops wireless gaming products.
TOGI also has a Prospective Strategic Alliances entity, which includes Petrosonics, a company that is developing technology for low-cost reduction of sulfur, nitrogen and trace materials in crude oil and other petroleum products. Prospective Strategic Alliances also includes StemSell, a startup company that aims to collect, analyze, process, register and store umbilical cord blood stem cells from donors.
"Ultimately The Owners Group's idea is to make a difference in the small cap marketplace by helping one company at a time," Martin said.
Greg Junek is Business editor. He can be reached at 903.596.6280. e-mail: business@tylerpaper.com
©Tyler Morning Telegraph 2008
=========================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20187 / July 9, 2007
SEC v. Darrel T. Uselton and Jack E. Uselton, Case No. 07-2211 (S.D. Tex. filed July 9, 2007)
SEC Charges Two Texas Individuals in a Penny Stock Spam Campaign Involving Computer Botnets
The Securities and Exchange Commission filed securities fraud charges against two Texas individuals in a high tech spam campaign that involved personal computers nationwide to disseminate millions of spam emails that yielded over $4.6 million for the defendants. The scheme involved the use of so-called computer "botnets" or "proxy bot networks," which are networks comprised of personal computers that, unbeknownst to their owners, are infected with malicious viruses that forward spam or viruses to other computers on the Internet.
The Commission alleges that Darrel Uselton and his uncle, Jack Uselton, both recidivist securities law violators, illegally made more than $4.6 million during a 20-month "scalping" scheme by obtaining shares from at least 13 penny stock companies and selling those shares into an artificially active market they created through manipulative trading, spam email campaigns, direct mailers, and Internet-based promotional activities. Scalping refers to recommending that others purchase a security while secretly selling the same security in the market. In March 2007, the Commission suspended trading in the securities of 3 of the 13 penny stock companies identified in the complaint because they were the subject of repeated spam email campaigns.
The Commission's complaint, filed in U.S. District Court in Houston, alleges that the Useltons violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against each of the individual defendants, as well as a penny stock bar against the Useltons.
In related enforcement actions, the Attorney General's Office for Texas and the Harris County District Attorney's Office indicted the Useltons for engaging in organized criminal activity and money laundering. The Texas criminal authorities have also seized more than $4.2 million from bank accounts associated with the Useltons.
The Commission acknowledges the assistance of the Attorney General's Office for New York and Texas, The Harris County (Houston, Texas) District Attorney's Office, the Federal Bureau of Investigation, the Texas State Securities Board, the State of Oklahoma Department of Securities, the National Association of Securities Dealers and the National Cyber-Forensics & Training Alliance.
The Commission's investigation is continuing.
See Also: Release No. 55420 / March 8, 2007
http://www.sec.gov/litigation/litreleases/2007/lr20187.htm
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Home | Previous Page Modified: 07/09/2007
SEC Spamming Targets Tied to VSE Alumnus Kamerling
by Lee M. Webb
Canada Stockwatch
July 2, 2007
U.S. Securities and Exchange Commission (SEC) spamming targets Darrel T. Uselton and his uncle Jack E. Uselton, who face related criminal charges in Texas, acquired shares used in one of their serial pump-and-dump schemes from Vancouver Stock Exchange graduate and repeat securities violator Beverlee Kamerling, a Stockwatch investigation reveals.
As previously reported by Stockwatch, a Texas grand jury indicted Darrel and Jack Uselton for organized criminal activity and money laundering related to the manipulative trading scheme on July 3.
The indictment was unsealed on July 6 and investigators from Texas Attorney-General Greg Abbott's special investigations unit arrested 40-year-old Darrel Uselton the same day. An arrest warrant was issued for 69-year-old Jack Uselton, who turned himself in to authorities on July 11.
Bail was originally set at a whopping $8-million each, but according to a spokesperson at the attorney-general's office it was subsequently reduced to $500,000 apiece and the Useltons bonded out of the Harris County jail on July 13. (All amounts are in U.S. dollars.)
The Useltons may find themselves a bit strapped for cash, given that investigators reportedly seized more than $4.2-million from bank accounts associated with the defendants, who are, of course, presumed innocent.
The SEC filed a fraud lawsuit against repeat securities violators Darrel and Jack Uselton in the U.S. District Court for the Southern District of Texas on July 9.
The U.S. regulator alleges that the Useltons obtained cheap or free shares from at least 13 pink sheet companies, primed the market with rigged trades, encouraged management to issue "positive" news releases and then used "botnets" to distribute hundreds of millions of spam e-mails touting the near-worthless stocks while they dumped their shares on gullible investors and pocketed at least $4.6-million.
Neither Uselton has yet filed an answer to the SEC complaint and the allegations have not been proven in court.
The SEC continues to lead the way in cracking down on stock-touting spammers in both the U.S. and Canada by issuing 10-day trading suspensions against spam stocks and investigating and suing spammers from both sides of the border.
"This latest step in the Commission's anti-spam initiative is intended to protect investors from fraud artists who would treat the investing public as their personal ATM machines," SEC chairman Christopher Cox said about the lawsuit against the Useltons.
"We remain aggressively committed to tracking down anyone attempting to use bots to prey on investors with false or misleading spam about securities," Mr. Cox added.
North of the border where securities regulation falls to a patchwork of independent provincial and territorial watchdogs, British Columbia Securities Commission (BCSC) chairman Doug Hyndman has been claiming credit for a dramatic drop in stock spam.
While the SEC has suspended approximately 40 spam stocks, many with connections to B.C., since unveiling Operation Spamalot in March and has been actively investigating and prosecuting spammers, Mr. Hyndman thinks that the BCSC's Spamwatch initiative launched in May has produced remarkable results.
"In some cases, we are imposing three-day trading halts," Mr. Hyndman said about the BCSC anti-spam program in a June 25 speech to the Vancouver Board of Trade. "To date, we have imposed five halt trading orders, and surprise, surprise, the volume of spam has dropped dramatically.
"What this told us is that the people responsible for the spam are well aware that we are now watching and acting."
Notwithstanding Mr. Hyndman's parochial perspective and arguably goofy assessment about the effect of the BCSC's three-day halts, which have absolutely no weight beyond the province's borders, it is far more likely that any decrease in spam is the result of the suspensions, investigations and lawsuits by Canada's most respected securities regulator, the SEC.
In the first two articles in this series, Stockwatch sketched the regulatory history of Darrel and Jack Uselton and, among other things, provided an overview of their alleged spamming, market manipulation and scalping scheme.
In a July 20 article, Stockwatch began a review of the individual spam campaigns, beginning with Oretech Inc. and moving on to Intelligent Sports Inc.
In what follows, Stockwatch will pick up its examination of the 13 spam stocks by reviewing Advanced Powerline Technologies Inc., fleshing out the details and providing additional context.
Advanced Powerline
Advanced Powerline is identified as the third of the baker's dozen of stocks spammed by the Useltons. The U.S. regulator says that the pink sheet outfit is an Oklahoma-based company "that purports to be in the broadband over powerline industry."
On its clunky and not fully operational website, Advanced Powerline makes a number of claims reminiscent of the promotional puffery of so many dubious plays that tried to cash in on the irrational exuberance of the tech bubble in the 1990s.
The company boasts that it is "poised at the pinnacle of the most modern technologies since the development of cable fiber optics" and has "fathered a quantum leap forward in advanced cable free high-resolution video."
While waiting to unleash its revolutionary technological marvels, Advanced Powerline has apparently been flogging run-of-the-mill LCD digital television sets manufactured elsewhere under third party contracts.
The television-flogging enterprise has been far from lucrative. As of Dec. 31, 2006, the company had a paltry $480 in cash, accounting for all of its current assets, and a working capital shortfall of more than $2.8-million.
The company's website contains exterior pictures of what it calls "our factory," another embroidered claim.
The 52,000-square-foot building is actually an empty shell requiring at least a $1.4-million build-out, the addition of equipment and perhaps an employee or two to warrant being called a factory.
In November of 2004, Advanced Powerline entered into a 15-year lease at $13,000 per month on the building with the not-for-profit Woodward Industrial Foundation in Oklahoma and undertook to complete the spec building.
In June of 2005, the lease was amended to change the date for the rent to commence from May 1, 2005, to Sept. 1, 2005. The lease was amended again in September of that year, changing the start date for the rent to Feb. 1, 2006.
Advanced Powerline never made any rent payments and the Woodward Industrial Foundation finally sued the company for $123,000 in September of last year.
Oddly, while Advanced Powerline denied the allegation that it had never made a single payment, the penniless company reported an accrued liability of $143,000 for its lease obligation to the Woodward Industrial Foundation at the end of 2006. That represents exactly the amount of rent due from Feb. 1, the second amended starting date for lease payments, to the end of last year.
The rent dispute was resolved without prejudice in an undisclosed out-of-court settlement in March of this year.
Returning to the SEC fraud suit against Darrel and Jack Uselton, the regulator says that the Texas spammers glommed on to a large chunk of stock from one of Advanced Powerline's predecessors.
"The Useltons, and individuals and entities connected to the Useltons, appear to have received a large amount of common stock from a predecessor company to Advanced Powerline in 2004," the SEC rather vaguely claims.
As it happens, like an astonishing and disproportionate number of OTC Bulletin Board and pink sheet companies -- the BCSC perhaps conservatively pegs the number at 700 issuers and acknowledges that a similarly disproportionate number are associated with abusive market practices -- Advanced Powerline has connections to B.C.
In fact, Advanced Powerline's corporate existence traces back to a numbered B.C. company established in 1982.
Just why the promotion-in-waiting lay dormant for so many years remains something of a mystery, but 254300 B.C. Ltd. redomiciled to Nevada and became Bronzesport Industries Inc. in 1999.
In June of 2004, Bronzesport briefly changed its name to AC/DC Communications Inc. before changing its name again to Advanced Powerline on Aug. 11, 2004.
While the SEC claims the Useltons got control of their Advanced Powerline stock in 2004, an opinion letter removing the restrictions on more than 9.7 million shares indicates that Jack Uselton, Michael L. Uselton and a number of companies allegedly controlled by the Texas spammers, including Warrior Capital LLC, acquired the majority of those shares in 1999 and 2001.
However, according to the allegations in a 2006 lawsuit filed by Van Steed, a former officer and director of Advanced Powerline, the 2004 opinion letter is bogus.
Mr. Steed claims that he was snookered out of a promised 92-per-cent control of the company and lost more than $1-million as a result of a fraudulent scheme involving Frank, Mark, Michael and Scott Uselton in addition to SEC-targeted Darrel and Jack Uselton, among other individuals and corporate entities.
Mr. Steed alleges that in June to September of 2004, Frank and Scott Uselton were made ex post facto officers of Advanced Powerline and then fraudulently backdated corporate minutes to September of 1999 as part of the scheme to obtain the bogus opinion letter from allegedly complicit lawyer Tolan Furusho.
Interestingly, Mr. Steed claims that until May of 2004 the corporate records were in the control of Beverlee Kamerling, also known as Beverlee Claydon, who allegedly provided the vehicle for the fraudulent scheme in the form of Bronzesport.
While Darrel, Jack, Frank, Michael and Scott Uselton, collectively known as "the Warrior defendants," deny the substantive fraud allegations in Mr. Steed's suit, they do acknowledge that Warrior acquired its interest in Advanced Powerline's predecessor Bronzesport, along with the corporate records, from a company owned or represented by Ms. Kamerling.
The Warrior defendants make no mention of what consideration Ms. Kamerling received in the deal.
Ms. Kamerling, who is among the approximately 20 defendants in Mr. Steed's lawsuit, has filed an appearance in the case, but has not filed an answer to the complaint.
A notorious alumnus of the former scandal-plagued Vancouver Stock Exchange (VSE), Ms. Kamerling is well known to regulators on both sides of the border.
In 1989, B.C.'s regulator imposed a 10-year trading ban and a 10-year officer/director ban on the flamboyant Ms. Kamerling for her illegal trading during the scandalous Ultra Glow Cosmetics promotion.
After the Ultra Glow debacle, Ms. Kamerling evidently took her skills south of the border and, among other smelly OTC-BB plays, hooked up with another disastrous promotion, United Fire Technology, in 1994.
It did not take long before the VSE graduate ran afoul of U.S. regulators. The SEC sued Ms. Kamerling and several other United Fire players in 1997.
In a 1999 consent settlement with respect to the United Fire affair, Ms. Kamerling was permanently banned from acting as an officer or director of any public company and ordered to disgorge $1.06-million in ill-gotten gains and pay approximately $412,000 in prejudgment interest.
Less than two months after signing the settlement agreement and subsequently pleading poverty to the SEC, Ms. Kamerling attended a Marilyn Monroe memorabilia auction where she dropped approximately $68,000 to purchase some of the blond bombshell's clothing, including $23,000 for an assortment of hats.
Apparently giving little consideration to just who might be watching, Ms. Kamerling appeared on the Oprah Winfrey show about a week after her $68,000 bidding binge to present one of the hats to a wheelchair-bound woman who had been an unsuccessful bidder at the auction.
As it turned out, in addition to a number of outraged investors in both Canada and the U.S. who lost money in various stock schemes orchestrated by Ms. Kamerling, SEC officials also happened to take note of the promoter's philanthropic Oprah performance.
In June of 2000, with Ms. Kamerling not having paid a dime of the approximately $1.5-million United Fire disgorgement and interest sanctions, the unhappy U.S. regulator cited her Marilyn Monroe spending spree when slapping a broad asset freeze on the promoter who claimed that she was living "from hand to mouth."
More recently, Ms. Kamerling, along with accommodating lawyer Mr. Furusho, has been embroiled in another regulatory proceeding north of the border, this time as a respondent in a 2006 Alberta Securities Commission (ASC) action involving Nevada-incorporated Goldtech Mining Corp.
In early 2004, Goldtech, yet another OTC-BB promotion, purported to have an interest in several B.C. mining properties acquired in a share transaction. After a rather comical tussle for control of the company between management and a dissident shareholders group, that particular transaction was cancelled.
Like so many of Ms. Kamerling's promotions, Goldtech imploded amid allegations of illegal activity.
In September of 2006, well after the play had collapsed and three months after the company executed a 1-for-100 reverse split and changed its name, the ASC issued a notice of hearing against a number of Goldtech players including Ms. Kamerling and Mr. Furusho.
According to the ASC allegations, the pair were key figures in a dodgy scheme to raise money from Canadian investors and then funnel it through an Ontario company to Mr. Furusho and Ms. Kamerling and then on to Goldtech.
The Alberta regulator's hearing spanned six days through March and April of this year. Mr. Furusho and Ms. Kamerling were among the respondents who testified before the three-member panel, which rendered its decision on June 15.
The ASC panel evidently did not think much of the testimony of either lawyer Mr. Furusho or promoter Ms. Kamerling, both of whom are reportedly based in Bellevue, Wash.
"In general, Furusho presented himself as someone familiar with a litigation environment and cautious in what he said," the panel wrote. "In our view, he attempted to leave us with the impression that his involvement was far more limited, and subsequent in time, to what was in fact the case.
"We did not find him a particularly credible witness."
Elsewhere in the 11-page decision, the panel explicitly said that it did not believe some of Mr. Furusho's "puzzling" explanations.
The ASC characterized Ms. Kamerling as "as an associate of Furusho," though not a lawyer, who helped him with his legal work for Goldtech.
"We find from the evidence that Furusho and Kamerling worked as a team in matters relating to Goldtech," the panel remarked.
If the Alberta regulator had a clue about Ms. Kamerling's regulatory history and string of promotional debacles, it cannot be gleaned from the June 15 decision.
"The evidence also indicates that Kamerling is a businesswoman who has been engaged in negotiating deals and raising capital," the panel blandly wrote.
"Kamerling was an emotional witness," the panel went on to note. "Her testimony and oral submissions appeared more reflective of a long-standing and wide-ranging series of differences with Kroeker (another respondent) than directed to the narrower issues before us and, as such, they were of limited assistance to us."
In the end, the panel found that Ms. Kamerling, Mr. Furusho and a third respondent, Lee Kroeker, each engaged in illegal trades and distributions and acted contrary to the public interest.
"The Alberta Goldtech investors were put at risk -- indeed, their money has apparently been lost," the panel wrote. "As a result, overall confidence in the fairness and integrity of the Alberta capital market was also jeopardized."
Having arrived at that weighty determination, the ASC has not been in any rush to sanction the offenders.
"These findings conclude the first portion of this proceeding," the panel declared on June 15. "The hearing will resume to consider the issue of whether it is in the public interest to order sanctions against all or any of the respondents."
To this point, no sanctions have been issued. In the event the ASC gets around to penalizing the respondents for their illegal activities, of course, the sanctions will have no effect outside of the province of Alberta.
Turning again to the SEC lawsuit against the Useltons, with an unspecified number of shares under their control, the U.S. regulator claims that the pair orchestrated a series of at least four separate spam e-mail campaigns touting Advanced Powerline between July and October of 2005.
The e-mail spam, which consisted of baseless claims and price projections, boasted about profits of 300 per cent to 750 per cent on other weekly hot picks and urged investors to jump into Advanced Powerline for a huge return.
According to the SEC, the spam e-mails traced back to "servers leased to, paid for, and controlled by the principal spammer," an as yet unidentified individual who charged the Useltons at least $126,000 for the Advanced Powerline spam job.
The regulator claims that between July 1 and Oct. 18, 2005, a period coinciding with the spam campaigns, Darrel and Jack Uselton unloaded more than 818,000 shares of Advanced Powerline for proceeds of at least $533,000.
Just over a year later, the Useltons allegedly kicked off another spam campaign heavily touting the purported broadband-over-powerline outfit between Nov. 26, 2006, and Dec. 8, 2006.
"An incredible announcement is expected out of the company very soon," one of the second round of spam e-mails proclaimed. "This will be backed by a PR blitz and I'm sure you can guess what will happen to the price of this stock!
"Tech companies blast off on news like this. Get in before this one takes off and ride it all the way to the bank!"
The SEC complaint makes no mention of any payment to the principal spammer for the 2006 encore spam campaign in which the Useltons allegedly dumped more than 3.16 million shares of Advanced Powerline and rode off to the bank with proceeds of approximately $267,000.
While that marks the end of the SEC's allegations concerning Darrel and Jack Uselton spamming Advanced Powerline, it is not the end of the story regarding the touted broadband-over-powerline outfit.
On Jan. 25 of this year, Advanced Powerline sued Lorena Uselton and Penny Uselton along with SEC-targeted Darrel and Jack Uselton as well as approximately a dozen entities associated with the alleged spammers. The lawsuit also named a number of other individuals.
Interestingly, the lawsuit indicates that Advanced Powerline hired the Useltons in July of 2006 "to aid in the seeking of funding opportunities" for the penniless promotion.
While the purported agreements were allegedly inked between the 2005 and 2006 spam campaigns orchestrated by the Useltons, the company claims that it did not have a clue about the "evil operations" until Nov. 25 of last year.
Among other things, the $20-million lawsuit levelled allegations of tortuous interference, disparagement and defamation, bribery, fraud, RICO violations and "implied breach of implied contract" against the defendants.
Even from the lay perspective of this reporter, the Advanced Powerline complaint appeared to be a muddle of vague and deficient claims.
Lawyers for various defendants evidently made a similar assessment and figuratively shredded the sloppy filing in answering the complaint on behalf of their respective clients.
Citing an "irreconcilable conflict" with the company, Advanced Powerline's attorney filed a motion to withdraw as the plaintiff's lawyer on March 28.
No lawyer subsequently filed an appearance on behalf of the company and after Advanced Powerline failed to appear at a properly noticed hearing, the judge conditionally dismissed the case on April 16.
The court gave the company 60 days to show up with a new lawyer, but when Advanced Powerline again failed to appear, a final judgment dismissing the lawsuit was issued on June 26.
By that time, the touted broadband-over-powerline outfit was facing its own regulatory difficulties.
Advanced Powerline was part of the kennel of 35 pink sheet dogs that the SEC suspended when it unveiled Operation Spamalot on March 8.
The U.S. regulator said the suspension was ordered because of questions about the adequacy of publicly disseminated information about the company's assets, operations, financial condition and/or financing arrangements involving the issuance of shares.
In the wake of the SEC suspension, Advanced Powerline was booted down to the grey market.
Advanced Powerline last traded on July 18, when 1,400 shares changed hands in a single transaction at one-10th of a penny.
[ RGM Short Selling Home page ]
Its Due Diligence entity is building ActivReport, an online search engine that performs linear searches of individuals and allows people to find out about other people before they invest their money. Such information most often does not exist in the small cap arena, Martin said.
"It searches for involvement with other companies and other people, and it brings everything together in one easily read report," he said. "If a person is bad and he has hurt shareholders before - 10 years ago or five years ago - and nobody knows about it and now he shows up here, then shareholders need to know this guy has done it before. What's going to stop him from doing it again?"
----------------------------------------------
American Security Resources Corporation
(ARSC is a fully reporting OTCBB stock)
has passed our initial due diligence Check!
http://www.theownersgroupinc.com/arsc.php?PHPSESSID=97e898e6669abd56be4930b3a91ef13a
======================================================================
http://www.sec.gov/Archives/edgar/data/1085069/000137219806000087/form10ksba.htm
On September 8 and 27, 2005 the Company issued 60,000 shares and 40,000 shares to B&B Marketing Communications, pursuant to a consulting services agreement. Also on September 27, the Company issued 1,000,000 shares to the Owners Group, Inc. pursuant to a Consulting Services Agreement.
On December 8 and 12, 2005, pursuant to a consulting services agreement with OTC Services, Inc., the Company issued 1,400,000 shares to OTC Services, Inc. and 1,400,000 shares to Darrel T. Uselton.
AMERICAN SECURITY RESOURCES CORPORATION 10KSB/A 1 form10ksba.htm FORM 10K SBA
-----------------------------------------------------------------------------
Texans Charged With Using Botnet In Pump-And-Dump Scheme
An investigation was launched after the two Texans allegedly sent one of their spammed e-mail messages to an SEC lawyer, who became interested in the case.
By Sharon Gaudin
InformationWeek
July 10, 2007 12:44 PM
The Texas attorney general charged two men with running a pump-and-dump spam scam that defrauded investors out of more than $4.6 million.
On Monday, Darrel Uselton, 40, of Katy, Texas, and his uncle, Jack Uselton, 69, of Houston, face organized criminal activity and money laundering charges, along with securities fraud charges. Both men, who were indicted on July 3 by a Harris County grand jury, still are the subject of an ongoing investigation being conducted by several states and the Securities and Exchange Commission.
Both men are accused of using a nationwide botnet of hijacked computers to distribute the spam. The investigation reportedly began after an SEC lawyer received one of the fraudulent e-mails at work.
Darrel Uselton was arrested and is being held in Harris County Jail in lieu of $8 million bond. An arrest warrant has been issued for Jack Uselton.
"Investors will not tolerate scam artists who use the Internet to illegally manipulate stock prices," Attorney General Greg Abbott said in a written statement. "Together with several states and the SEC, we have uncovered an elaborate scheme to defraud unwitting investors. The Office of the Attorney General will aggressively prosecute market manipulators, spammers and con artists whose illegal schemes defraud unsuspecting citizens."
For the past several months, security professionals have been warning about the burgeoning number of pump-and-dump e-mail schemes that are buffeting the Internet. Pump-and-dump refers to potentially fraudulent spam that hypes small-company stocks with phrases like "Ready to Explode," "Ride the Bull," and "Fast Money." The spammers invest in these generally low-cost stocks before the spam campaign begins. Once people are duped into buying the stocks, the share prices go up and the spammers sell off and cash in. The sell-offs, though, usually drive the stock prices down, and the other investors lose their shirts.
The Useltons reaped millions in illegal profits by promoting shares from at least 13 penny stock companies, according to information released by the Attorney General's Office. The suspects then allegedly secretly sold those stocks into an artificially active market they created with manipulative trading schemes, spam campaigns, direct mailers, and Internet-based promotional activities.
The Attorney General's Office reported that its investigators seized more than $4.2 million from the Useltons' bank accounts.
"Unfortunately for the SEC, pump-and-dump spam campaigns don't seem likely to go away any time soon," said Graham Cluley, senior technology consultant at Sophos, in a written statement. "The use of compromised networks of computers to spread these illegal spam messages can result in quick fortunes for the scammers, and can have serious detrimental effects on the stock involved. But it seems that these criminals were in such a rush to make their millions that they forget to pay any attention to which e-mail addresses were being spammed and in the end, this looks likely to be their downfall."
In March, the SEC suspended trading on 35 companies that had been touted in recent spam campaigns. The trading suspensions -- the most ever aimed at spammed companies -- were ordered because of questions regarding the adequacy and accuracy of information about the companies, according to an advisory put out by the SEC.
=============================================================
GROUP PROMOTES FRAUD FREE INVESTMENTS
http://www.zwire.com/site/printerFriendly.cfm?brd=1994&dept_id=226362&newsid=17425071
11/04/2006
GROUP PROMOTES FRAUD FREE INVESTMENTS
By GREG JUNEK, Business Editor
BUILDING ‘OASIS’: John Martin, left, and Bill Frizzell stand outside the offices of The Owners Group, 602 S. Broadway Ave.(Staff Photo By Amy Peterson)
John Martin and Bill Frizzell just wanted assurance that they and others could invest money without fear of fraud or scam.
So Martin and Frizzell established The Owners Group Inc., 602 S. Broadway Ave., after they, along with tens of thousands of other shareholders, saw their money disappear in a penny stock company that could not provide investors proof of stock ownership.
Martin said TOGI was begun based on the principles of honesty and transparency.
"We had these feelings for these shareholders and we wanted to do something for them," Martin said. "So we formed a company, The Owners Group, which is almost like an oasis out there for people to be involved in without worry and fear of scam."
In early 2004, Martin, a former wholesale business owner, and Frizzell, a Tyler attorney, purchased shares of CMKM Diamonds, which traded under the symbol "CMKX," had mining leases in Saskatchewan and traded on Pink Sheets. The allure of finding diamonds caused a buying frenzy, and more than 70,000 people purchased about 700 billion shares of stock in the company.
"You could buy a million shares for a hundred bucks," Martin said. "It was alluring to be able to own a million shares of anything in the stock market. And if they hit, that .0001 stock could possibly run to a quarter or a dime, and you'd make a lot of money. So the allure was rather large, and the people involved in the company itself were promoting it in such a way where they had their own top fuel race cars, they were advertising on the raceways out in Las Vegas, and before they knew it, it spun out of control."
SUSPICIONS
But CMKM was not filing its scheduled reports with the Security and Exchange Commission. Martin became suspicious and he asked Frizzell, who had a 28-year law practice, to look for a way to get information from the company.
Frizzell and Martin suspected the market was "naked shorting" the company, or selling stock without backing it with actual stock certificates.
"A broker will sell you electronically a stock - you give them the money and they put a marker in your account - but they don't have the actual certificate to back that stock up," Martin said. "A large number of penny stock companies that have sold billions and billions and billions of shares out there eventually get delisted. When they're delisted, they go away, and the brokers don't ever have to find the stock to match the money that they got. It's a very complicated process and a lot of people don't believe it happens. They think it's a conspiracy type thing, but it's very prevalent, not just in the small markets but also in the larger markets."
In May 2004, Frizzell intervened as a third-party representative for the CMKM shareholders in an SEC administrative hearing on whether to revoke the company's license that allowed it to trade on the stock market. The company's license was revoked in October 2005.
"I don't really have a securities law background," Frizzell said. "My background is in litigation, and early in my practice I tried a lot of criminal cases, federal and state cases. But when I got to looking into things that were happening to this stock and to these shareholders, it was my thought that this was the most obvious and blatant crime that you could ever see and the regulators were not doing anything about it."
Frizzell's representation of third-party interests in the SEC hearing was the beginning of he and Martin building "the largest shareholder advocacy base in the history of the stock market," Martin said.
"(Frizzell) intervened in the administrative hearing and we started getting information from the SEC, which is very unusual," Martin said. "The SEC doesn't share information with anybody, but the judge ordered that they turn over their investigative work on CMKM to Bill because Bill had gotten into this administrative hearing."
TOGI's effort is ongoing to get at least some return to the shareholders on their investment. Frizzell said CMKM sold "a very significant asset" to another publicly traded company, and the shareholders received 45 million shares for the asset. But the company said stock certificates would be required to assure the shareholders' identity and the group has been working since November 2005 to identify the shareholders.
The company wanted proof of ownership, which required a shareholder to have a certificate for his or her shares. Shareholders called their brokers to request the certificates and faxed them to the group's office.
Martin said 40,000 people have faxed in their certificates, and one year later thousands of people cannot get their brokers to send them their certificates.
"According to our records, there are still some 50 billion shares unaccounted for in the legitimate share count," he said. "My question is, why can't the shareholders get their certificates when they own them? It's their property. The answer to that is once the brokers pass out all of the shares, then they can't claim that there is no naked short. As long as they have some certificates, they can always claim that there is no naked short."
Martin said that CMKM has announced it would file an interpleader action with the federal court in Las Vegas.
If the action is approved, a federal judge would decide who the shareholders are and the mode of payment of the company's shares, he said. The judge could also give attorneys for the company subpoena power to open the brokers' books to determine the identities of the legitimate shareholders.
SHAREHOLDER PLIGHT
A small number of CMKM shareholders and Martin met one Saturday morning and called Frizzell, and The Owners Group grew out of those discussions.
Martin said he, along with many other shareholders, had become addicted to tracking the stock, and would stay on the computer for hours. After the SEC administrative hearing started, he and Frizzell were the shareholders' point of contact.
"They looked to me and Bill, because we were the only voice for the shareholders," he said. "We were the only people they knew to contact."
Martin said there were times he left his office in tears after reading correspondence from some of the shareholders. Some were addicted to watching the charts and reading the chat boards, and they wrote Martin about how they lost their families because the money the just knew they would make with CMKM never materialized.
Some wrote suicide notes. Some, in frustration over losing their money, lashed out at Martin and Frizzell.
"The people have no idea how many lives are ruined in the penny stock market because of scams on a daily basis," Martin said.
The CMKM debacle was not one-sided, he said. Both the brokers and some insiders at the company scammed the shareholders.
"If we had known this about this stock before we invested, we never would have invested in it," Frizzell said, referring to shareholders' comments. "Wouldn't it have been nice if we had a company that could check these things out before we invest? So they said, 'You guys know how to do a lot of good due diligence. ... Let's start a company that does that.'"
Word spread about the group's work in investigating the CMKM issue, and people "with some really good technology and some really good projects" began inquiring if the group could help them get their companies on the public and private markets.
Now, TOGI consists of several entities.
Its Due Diligence entity is building ActivReport, an online search engine that performs linear searches of individuals and allows people to find out about other people before they invest their money. Such information most often does not exist in the small cap arena, Martin said.
"It searches for involvement with other companies and other people, and it brings everything together in one easily read report," he said. "If a person is bad and he has hurt shareholders before - 10 years ago or five years ago - and nobody knows about it and now he shows up here, then shareholders need to know this guy has done it before. What's going to stop him from doing it again?"
Another entity, The Owners Group Entertainment Co. will publish three books, Martin said.
Author Mark Faulk is writing the CMKM story, "The Naked Truth." Martin said the book is about 95 percent complete.
Also, Peggy Sue Gerron of Lubbock, the person about whom Buddy Holly wrote the song "Peggy Sue," approached the group about publishing a book about her life surrounding Buddy Holly and The Crickets in the 1950s. Martin said Ms. Gerron for years has wanted to clear up inaccuracies contained in the movie "The Buddy Holly Story," and the book seeks to do that.
Another book project is an autobiography of Bryan Abrams of the group Color Me Badd.
Faulk is assisting Ms. Gerron and Adams in writing their stories.
TOGI Strategic Alliances entity is working with Data Flow Technologies, which is promising a new way to send data at a much higher speed. Martin said scientists who built the technology have called it "evolutionary."
Its Public Company Promotions entity has a contract with American Security Resource Corp., which is developing high efficiency hydrogen fuel cells that can be mass produced. It is also involved with Diamond I Inc., which develops wireless gaming products.
TOGI also has a Prospective Strategic Alliances entity, which includes Petrosonics, a company that is developing technology for low-cost reduction of sulfur, nitrogen and trace materials in crude oil and other petroleum products. Prospective Strategic Alliances also includes StemSell, a startup company that aims to collect, analyze, process, register and store umbilical cord blood stem cells from donors.
"Ultimately The Owners Group's idea is to make a difference in the small cap marketplace by helping one company at a time," Martin said.
Greg Junek is Business editor. He can be reached at 903.596.6280. e-mail: business@tylerpaper.com
©Tyler Morning Telegraph 2008
=========================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20187 / July 9, 2007
SEC v. Darrel T. Uselton and Jack E. Uselton, Case No. 07-2211 (S.D. Tex. filed July 9, 2007)
SEC Charges Two Texas Individuals in a Penny Stock Spam Campaign Involving Computer Botnets
The Securities and Exchange Commission filed securities fraud charges against two Texas individuals in a high tech spam campaign that involved personal computers nationwide to disseminate millions of spam emails that yielded over $4.6 million for the defendants. The scheme involved the use of so-called computer "botnets" or "proxy bot networks," which are networks comprised of personal computers that, unbeknownst to their owners, are infected with malicious viruses that forward spam or viruses to other computers on the Internet.
The Commission alleges that Darrel Uselton and his uncle, Jack Uselton, both recidivist securities law violators, illegally made more than $4.6 million during a 20-month "scalping" scheme by obtaining shares from at least 13 penny stock companies and selling those shares into an artificially active market they created through manipulative trading, spam email campaigns, direct mailers, and Internet-based promotional activities. Scalping refers to recommending that others purchase a security while secretly selling the same security in the market. In March 2007, the Commission suspended trading in the securities of 3 of the 13 penny stock companies identified in the complaint because they were the subject of repeated spam email campaigns.
The Commission's complaint, filed in U.S. District Court in Houston, alleges that the Useltons violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against each of the individual defendants, as well as a penny stock bar against the Useltons.
In related enforcement actions, the Attorney General's Office for Texas and the Harris County District Attorney's Office indicted the Useltons for engaging in organized criminal activity and money laundering. The Texas criminal authorities have also seized more than $4.2 million from bank accounts associated with the Useltons.
The Commission acknowledges the assistance of the Attorney General's Office for New York and Texas, The Harris County (Houston, Texas) District Attorney's Office, the Federal Bureau of Investigation, the Texas State Securities Board, the State of Oklahoma Department of Securities, the National Association of Securities Dealers and the National Cyber-Forensics & Training Alliance.
The Commission's investigation is continuing.
See Also: Release No. 55420 / March 8, 2007
http://www.sec.gov/litigation/litreleases/2007/lr20187.htm
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Home | Previous Page Modified: 07/09/2007
SEC Spamming Targets Tied to VSE Alumnus Kamerling
by Lee M. Webb
Canada Stockwatch
July 2, 2007
U.S. Securities and Exchange Commission (SEC) spamming targets Darrel T. Uselton and his uncle Jack E. Uselton, who face related criminal charges in Texas, acquired shares used in one of their serial pump-and-dump schemes from Vancouver Stock Exchange graduate and repeat securities violator Beverlee Kamerling, a Stockwatch investigation reveals.
As previously reported by Stockwatch, a Texas grand jury indicted Darrel and Jack Uselton for organized criminal activity and money laundering related to the manipulative trading scheme on July 3.
The indictment was unsealed on July 6 and investigators from Texas Attorney-General Greg Abbott's special investigations unit arrested 40-year-old Darrel Uselton the same day. An arrest warrant was issued for 69-year-old Jack Uselton, who turned himself in to authorities on July 11.
Bail was originally set at a whopping $8-million each, but according to a spokesperson at the attorney-general's office it was subsequently reduced to $500,000 apiece and the Useltons bonded out of the Harris County jail on July 13. (All amounts are in U.S. dollars.)
The Useltons may find themselves a bit strapped for cash, given that investigators reportedly seized more than $4.2-million from bank accounts associated with the defendants, who are, of course, presumed innocent.
The SEC filed a fraud lawsuit against repeat securities violators Darrel and Jack Uselton in the U.S. District Court for the Southern District of Texas on July 9.
The U.S. regulator alleges that the Useltons obtained cheap or free shares from at least 13 pink sheet companies, primed the market with rigged trades, encouraged management to issue "positive" news releases and then used "botnets" to distribute hundreds of millions of spam e-mails touting the near-worthless stocks while they dumped their shares on gullible investors and pocketed at least $4.6-million.
Neither Uselton has yet filed an answer to the SEC complaint and the allegations have not been proven in court.
The SEC continues to lead the way in cracking down on stock-touting spammers in both the U.S. and Canada by issuing 10-day trading suspensions against spam stocks and investigating and suing spammers from both sides of the border.
"This latest step in the Commission's anti-spam initiative is intended to protect investors from fraud artists who would treat the investing public as their personal ATM machines," SEC chairman Christopher Cox said about the lawsuit against the Useltons.
"We remain aggressively committed to tracking down anyone attempting to use bots to prey on investors with false or misleading spam about securities," Mr. Cox added.
North of the border where securities regulation falls to a patchwork of independent provincial and territorial watchdogs, British Columbia Securities Commission (BCSC) chairman Doug Hyndman has been claiming credit for a dramatic drop in stock spam.
While the SEC has suspended approximately 40 spam stocks, many with connections to B.C., since unveiling Operation Spamalot in March and has been actively investigating and prosecuting spammers, Mr. Hyndman thinks that the BCSC's Spamwatch initiative launched in May has produced remarkable results.
"In some cases, we are imposing three-day trading halts," Mr. Hyndman said about the BCSC anti-spam program in a June 25 speech to the Vancouver Board of Trade. "To date, we have imposed five halt trading orders, and surprise, surprise, the volume of spam has dropped dramatically.
"What this told us is that the people responsible for the spam are well aware that we are now watching and acting."
Notwithstanding Mr. Hyndman's parochial perspective and arguably goofy assessment about the effect of the BCSC's three-day halts, which have absolutely no weight beyond the province's borders, it is far more likely that any decrease in spam is the result of the suspensions, investigations and lawsuits by Canada's most respected securities regulator, the SEC.
In the first two articles in this series, Stockwatch sketched the regulatory history of Darrel and Jack Uselton and, among other things, provided an overview of their alleged spamming, market manipulation and scalping scheme.
In a July 20 article, Stockwatch began a review of the individual spam campaigns, beginning with Oretech Inc. and moving on to Intelligent Sports Inc.
In what follows, Stockwatch will pick up its examination of the 13 spam stocks by reviewing Advanced Powerline Technologies Inc., fleshing out the details and providing additional context.
Advanced Powerline
Advanced Powerline is identified as the third of the baker's dozen of stocks spammed by the Useltons. The U.S. regulator says that the pink sheet outfit is an Oklahoma-based company "that purports to be in the broadband over powerline industry."
On its clunky and not fully operational website, Advanced Powerline makes a number of claims reminiscent of the promotional puffery of so many dubious plays that tried to cash in on the irrational exuberance of the tech bubble in the 1990s.
The company boasts that it is "poised at the pinnacle of the most modern technologies since the development of cable fiber optics" and has "fathered a quantum leap forward in advanced cable free high-resolution video."
While waiting to unleash its revolutionary technological marvels, Advanced Powerline has apparently been flogging run-of-the-mill LCD digital television sets manufactured elsewhere under third party contracts.
The television-flogging enterprise has been far from lucrative. As of Dec. 31, 2006, the company had a paltry $480 in cash, accounting for all of its current assets, and a working capital shortfall of more than $2.8-million.
The company's website contains exterior pictures of what it calls "our factory," another embroidered claim.
The 52,000-square-foot building is actually an empty shell requiring at least a $1.4-million build-out, the addition of equipment and perhaps an employee or two to warrant being called a factory.
In November of 2004, Advanced Powerline entered into a 15-year lease at $13,000 per month on the building with the not-for-profit Woodward Industrial Foundation in Oklahoma and undertook to complete the spec building.
In June of 2005, the lease was amended to change the date for the rent to commence from May 1, 2005, to Sept. 1, 2005. The lease was amended again in September of that year, changing the start date for the rent to Feb. 1, 2006.
Advanced Powerline never made any rent payments and the Woodward Industrial Foundation finally sued the company for $123,000 in September of last year.
Oddly, while Advanced Powerline denied the allegation that it had never made a single payment, the penniless company reported an accrued liability of $143,000 for its lease obligation to the Woodward Industrial Foundation at the end of 2006. That represents exactly the amount of rent due from Feb. 1, the second amended starting date for lease payments, to the end of last year.
The rent dispute was resolved without prejudice in an undisclosed out-of-court settlement in March of this year.
Returning to the SEC fraud suit against Darrel and Jack Uselton, the regulator says that the Texas spammers glommed on to a large chunk of stock from one of Advanced Powerline's predecessors.
"The Useltons, and individuals and entities connected to the Useltons, appear to have received a large amount of common stock from a predecessor company to Advanced Powerline in 2004," the SEC rather vaguely claims.
As it happens, like an astonishing and disproportionate number of OTC Bulletin Board and pink sheet companies -- the BCSC perhaps conservatively pegs the number at 700 issuers and acknowledges that a similarly disproportionate number are associated with abusive market practices -- Advanced Powerline has connections to B.C.
In fact, Advanced Powerline's corporate existence traces back to a numbered B.C. company established in 1982.
Just why the promotion-in-waiting lay dormant for so many years remains something of a mystery, but 254300 B.C. Ltd. redomiciled to Nevada and became Bronzesport Industries Inc. in 1999.
In June of 2004, Bronzesport briefly changed its name to AC/DC Communications Inc. before changing its name again to Advanced Powerline on Aug. 11, 2004.
While the SEC claims the Useltons got control of their Advanced Powerline stock in 2004, an opinion letter removing the restrictions on more than 9.7 million shares indicates that Jack Uselton, Michael L. Uselton and a number of companies allegedly controlled by the Texas spammers, including Warrior Capital LLC, acquired the majority of those shares in 1999 and 2001.
However, according to the allegations in a 2006 lawsuit filed by Van Steed, a former officer and director of Advanced Powerline, the 2004 opinion letter is bogus.
Mr. Steed claims that he was snookered out of a promised 92-per-cent control of the company and lost more than $1-million as a result of a fraudulent scheme involving Frank, Mark, Michael and Scott Uselton in addition to SEC-targeted Darrel and Jack Uselton, among other individuals and corporate entities.
Mr. Steed alleges that in June to September of 2004, Frank and Scott Uselton were made ex post facto officers of Advanced Powerline and then fraudulently backdated corporate minutes to September of 1999 as part of the scheme to obtain the bogus opinion letter from allegedly complicit lawyer Tolan Furusho.
Interestingly, Mr. Steed claims that until May of 2004 the corporate records were in the control of Beverlee Kamerling, also known as Beverlee Claydon, who allegedly provided the vehicle for the fraudulent scheme in the form of Bronzesport.
While Darrel, Jack, Frank, Michael and Scott Uselton, collectively known as "the Warrior defendants," deny the substantive fraud allegations in Mr. Steed's suit, they do acknowledge that Warrior acquired its interest in Advanced Powerline's predecessor Bronzesport, along with the corporate records, from a company owned or represented by Ms. Kamerling.
The Warrior defendants make no mention of what consideration Ms. Kamerling received in the deal.
Ms. Kamerling, who is among the approximately 20 defendants in Mr. Steed's lawsuit, has filed an appearance in the case, but has not filed an answer to the complaint.
A notorious alumnus of the former scandal-plagued Vancouver Stock Exchange (VSE), Ms. Kamerling is well known to regulators on both sides of the border.
In 1989, B.C.'s regulator imposed a 10-year trading ban and a 10-year officer/director ban on the flamboyant Ms. Kamerling for her illegal trading during the scandalous Ultra Glow Cosmetics promotion.
After the Ultra Glow debacle, Ms. Kamerling evidently took her skills south of the border and, among other smelly OTC-BB plays, hooked up with another disastrous promotion, United Fire Technology, in 1994.
It did not take long before the VSE graduate ran afoul of U.S. regulators. The SEC sued Ms. Kamerling and several other United Fire players in 1997.
In a 1999 consent settlement with respect to the United Fire affair, Ms. Kamerling was permanently banned from acting as an officer or director of any public company and ordered to disgorge $1.06-million in ill-gotten gains and pay approximately $412,000 in prejudgment interest.
Less than two months after signing the settlement agreement and subsequently pleading poverty to the SEC, Ms. Kamerling attended a Marilyn Monroe memorabilia auction where she dropped approximately $68,000 to purchase some of the blond bombshell's clothing, including $23,000 for an assortment of hats.
Apparently giving little consideration to just who might be watching, Ms. Kamerling appeared on the Oprah Winfrey show about a week after her $68,000 bidding binge to present one of the hats to a wheelchair-bound woman who had been an unsuccessful bidder at the auction.
As it turned out, in addition to a number of outraged investors in both Canada and the U.S. who lost money in various stock schemes orchestrated by Ms. Kamerling, SEC officials also happened to take note of the promoter's philanthropic Oprah performance.
In June of 2000, with Ms. Kamerling not having paid a dime of the approximately $1.5-million United Fire disgorgement and interest sanctions, the unhappy U.S. regulator cited her Marilyn Monroe spending spree when slapping a broad asset freeze on the promoter who claimed that she was living "from hand to mouth."
More recently, Ms. Kamerling, along with accommodating lawyer Mr. Furusho, has been embroiled in another regulatory proceeding north of the border, this time as a respondent in a 2006 Alberta Securities Commission (ASC) action involving Nevada-incorporated Goldtech Mining Corp.
In early 2004, Goldtech, yet another OTC-BB promotion, purported to have an interest in several B.C. mining properties acquired in a share transaction. After a rather comical tussle for control of the company between management and a dissident shareholders group, that particular transaction was cancelled.
Like so many of Ms. Kamerling's promotions, Goldtech imploded amid allegations of illegal activity.
In September of 2006, well after the play had collapsed and three months after the company executed a 1-for-100 reverse split and changed its name, the ASC issued a notice of hearing against a number of Goldtech players including Ms. Kamerling and Mr. Furusho.
According to the ASC allegations, the pair were key figures in a dodgy scheme to raise money from Canadian investors and then funnel it through an Ontario company to Mr. Furusho and Ms. Kamerling and then on to Goldtech.
The Alberta regulator's hearing spanned six days through March and April of this year. Mr. Furusho and Ms. Kamerling were among the respondents who testified before the three-member panel, which rendered its decision on June 15.
The ASC panel evidently did not think much of the testimony of either lawyer Mr. Furusho or promoter Ms. Kamerling, both of whom are reportedly based in Bellevue, Wash.
"In general, Furusho presented himself as someone familiar with a litigation environment and cautious in what he said," the panel wrote. "In our view, he attempted to leave us with the impression that his involvement was far more limited, and subsequent in time, to what was in fact the case.
"We did not find him a particularly credible witness."
Elsewhere in the 11-page decision, the panel explicitly said that it did not believe some of Mr. Furusho's "puzzling" explanations.
The ASC characterized Ms. Kamerling as "as an associate of Furusho," though not a lawyer, who helped him with his legal work for Goldtech.
"We find from the evidence that Furusho and Kamerling worked as a team in matters relating to Goldtech," the panel remarked.
If the Alberta regulator had a clue about Ms. Kamerling's regulatory history and string of promotional debacles, it cannot be gleaned from the June 15 decision.
"The evidence also indicates that Kamerling is a businesswoman who has been engaged in negotiating deals and raising capital," the panel blandly wrote.
"Kamerling was an emotional witness," the panel went on to note. "Her testimony and oral submissions appeared more reflective of a long-standing and wide-ranging series of differences with Kroeker (another respondent) than directed to the narrower issues before us and, as such, they were of limited assistance to us."
In the end, the panel found that Ms. Kamerling, Mr. Furusho and a third respondent, Lee Kroeker, each engaged in illegal trades and distributions and acted contrary to the public interest.
"The Alberta Goldtech investors were put at risk -- indeed, their money has apparently been lost," the panel wrote. "As a result, overall confidence in the fairness and integrity of the Alberta capital market was also jeopardized."
Having arrived at that weighty determination, the ASC has not been in any rush to sanction the offenders.
"These findings conclude the first portion of this proceeding," the panel declared on June 15. "The hearing will resume to consider the issue of whether it is in the public interest to order sanctions against all or any of the respondents."
To this point, no sanctions have been issued. In the event the ASC gets around to penalizing the respondents for their illegal activities, of course, the sanctions will have no effect outside of the province of Alberta.
Turning again to the SEC lawsuit against the Useltons, with an unspecified number of shares under their control, the U.S. regulator claims that the pair orchestrated a series of at least four separate spam e-mail campaigns touting Advanced Powerline between July and October of 2005.
The e-mail spam, which consisted of baseless claims and price projections, boasted about profits of 300 per cent to 750 per cent on other weekly hot picks and urged investors to jump into Advanced Powerline for a huge return.
According to the SEC, the spam e-mails traced back to "servers leased to, paid for, and controlled by the principal spammer," an as yet unidentified individual who charged the Useltons at least $126,000 for the Advanced Powerline spam job.
The regulator claims that between July 1 and Oct. 18, 2005, a period coinciding with the spam campaigns, Darrel and Jack Uselton unloaded more than 818,000 shares of Advanced Powerline for proceeds of at least $533,000.
Just over a year later, the Useltons allegedly kicked off another spam campaign heavily touting the purported broadband-over-powerline outfit between Nov. 26, 2006, and Dec. 8, 2006.
"An incredible announcement is expected out of the company very soon," one of the second round of spam e-mails proclaimed. "This will be backed by a PR blitz and I'm sure you can guess what will happen to the price of this stock!
"Tech companies blast off on news like this. Get in before this one takes off and ride it all the way to the bank!"
The SEC complaint makes no mention of any payment to the principal spammer for the 2006 encore spam campaign in which the Useltons allegedly dumped more than 3.16 million shares of Advanced Powerline and rode off to the bank with proceeds of approximately $267,000.
While that marks the end of the SEC's allegations concerning Darrel and Jack Uselton spamming Advanced Powerline, it is not the end of the story regarding the touted broadband-over-powerline outfit.
On Jan. 25 of this year, Advanced Powerline sued Lorena Uselton and Penny Uselton along with SEC-targeted Darrel and Jack Uselton as well as approximately a dozen entities associated with the alleged spammers. The lawsuit also named a number of other individuals.
Interestingly, the lawsuit indicates that Advanced Powerline hired the Useltons in July of 2006 "to aid in the seeking of funding opportunities" for the penniless promotion.
While the purported agreements were allegedly inked between the 2005 and 2006 spam campaigns orchestrated by the Useltons, the company claims that it did not have a clue about the "evil operations" until Nov. 25 of last year.
Among other things, the $20-million lawsuit levelled allegations of tortuous interference, disparagement and defamation, bribery, fraud, RICO violations and "implied breach of implied contract" against the defendants.
Even from the lay perspective of this reporter, the Advanced Powerline complaint appeared to be a muddle of vague and deficient claims.
Lawyers for various defendants evidently made a similar assessment and figuratively shredded the sloppy filing in answering the complaint on behalf of their respective clients.
Citing an "irreconcilable conflict" with the company, Advanced Powerline's attorney filed a motion to withdraw as the plaintiff's lawyer on March 28.
No lawyer subsequently filed an appearance on behalf of the company and after Advanced Powerline failed to appear at a properly noticed hearing, the judge conditionally dismissed the case on April 16.
The court gave the company 60 days to show up with a new lawyer, but when Advanced Powerline again failed to appear, a final judgment dismissing the lawsuit was issued on June 26.
By that time, the touted broadband-over-powerline outfit was facing its own regulatory difficulties.
Advanced Powerline was part of the kennel of 35 pink sheet dogs that the SEC suspended when it unveiled Operation Spamalot on March 8.
The U.S. regulator said the suspension was ordered because of questions about the adequacy of publicly disseminated information about the company's assets, operations, financial condition and/or financing arrangements involving the issuance of shares.
In the wake of the SEC suspension, Advanced Powerline was booted down to the grey market.
Advanced Powerline last traded on July 18, when 1,400 shares changed hands in a single transaction at one-10th of a penny.
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