Stock tout firm masquerades as 'research' company
Beacon Equity Research, a stock tout service based in Tyler, Tex., has been urging me to invest in "one of our all time favourites -- GreenChek Energy Resources."
By The Vancouver SunApril 18, 2009
Beacon Equity Research, a stock tout service based in Tyler, Tex., has been urging me to invest in "one of our all time favourites -- GreenChek Energy Resources."
In a series of unsolicited and unwanted e-mails, Beacon has been regurgitating GreenChek's ludicrous revenue projections for its "proprietary, hydrogen-generating system that helps internal combustion engines burn fuel more cleanly and efficiently."
Beacon said that, according to GreenChek president Lincoln Parke, the company's manufacturing facility will be operational in just eight weeks and spin off 1,050 units per month, which translates into gross revenue of $50.4 million per year (all figures in U.S. dollars).
Beacon said that, with the stock trading at less than 25 cents, it could be the "perfect time" to buy some shares. "GCHK has a pattern of making HUGE moves very quickly and we don't want members to miss out on ANY of the trading action," it screamed.
Beacon has been hot on this stock for some time. In September, one of its analysts-for-hire, Victor Sula, who is said to have earned his PhD from the Academy of Economic Studies of Moldova (a country between Romania and Ukraine), rated the stock a "speculative buy."
At the time, the stock was trading at 73 cents on the dreadful OTC Bulletin Board in the United States, but he set a target price of $3.42. With 64 million shares outstanding, that would have given the company a total market capitalization of more than $200 million.
But this is not exactly an independent report. The disclaimer reveals that a company called Pine Mountain Ventures paid Blue Wave Advisors (which owns Beacon Equity) $100,000 "as a marketing budget to manage a comprehensive investor awareness program including the creation and distribution of this report."
Pine Mountain Ventures is identified only as a shareholder. There's no indication who's behind it. This is typically how these promotional programs are de-linked from the company, giving the appearance that they are not being orchestrated by company insiders.
The disclaimer acknowledges this payment creates a conflict of interest, and the report should therefore be regarded as nothing more than a "commercial advertisement."
As a research document, it's worthless. But as a promotional tool, it seems to work. On Sept. 28, 2008 -- two days after Sula issued his so-called research report -- the stock peaked at $1.07.
The stock rise may have also been a function of tight share supply. Like so many of these bulletin board promotions, GreenChek started out a classic Howe Street set-up called Ridgestone Resources Inc.
Ridgestone was incorporated in Nevada in 2006 by Pardeep Sarai, a Telus employee who, we are supposed to believe, wanted to go into the mineral exploration business.
Sarai bought five million shares at one-tenth of a cent, and sold the remaining 3.9 million shares to friends and family for one cent each, raising a grand total of $35,000.
He then paid $3,300 to stake a piece of B.C. moose pasture, which became the pretext for taking the company public on the bulletin board.
In June 2007, Sarai filed a registration statement with the U.S. Securities and Exchange Commission. This qualified the already-issued shares for re-sale to the public.
The filing solicitor was Conrad Lysiak of Spokane, Wash., who routinely provides legal services for companies that turn out to be shams. The auditor was Michael Studer of Freeport, N.Y., who has had numerous run-ins with the SEC, NASD and the U.S. Public Company Accounting Oversight Board.
What typically happens in such cases is there is no real intent to develop the business. It's just a process to distribute shares to close friends and family, then gather up those shares when they are qualified for re-sale. This creates a nice tight, clean shell that can be easily controlled, making it the perfect vehicle for some future promotion.
Sure enough, a year later -- in June 2008 -- after conducting no exploration work whatsoever, Sarai decided he didn't want to be in the mineral exploration business after all.
Instead, he announced the company would license emission-reduction technology from a private Chinese company called Bright Star Development Ltd. for $3.5 million in staged payments and 60 per cent of the stock. This gave Bright Star, led by promoter Lincoln Parke, control of the company.
According to GreenChek's filings, Parke -- who now serves as president -- previously worked for Sol Produce Imports Ltd., a Vancouver-based produce distributor, and Jiaxin Consulting Ltd., said to be a facilitator of mergers and acquisitions between North American and Chinese companies. According to the B.C. corporate registry, both companies are defunct.
Parke appointed Antoinette Boquiren as the company's chief financial officer. According to GreenChek's filings, Boquiren is a UBC psychology graduate, which I have confirmed. GreenChek also says she is:
n A certified public accountant, but I was unable to confirm this because there is no central database for CPAs.
n A certified fraud examiner, but the Association of Certified Fraud Examiners in Austin, Tex. -- which licenses CFEs -- says it has no record of her.
n A Business Valuator Accredited in Litigation, but the Institute of Business Appraisers in Plantation, Fla. -- which awards BVALs -- says it has no record of her.
n A mathematics graduate from the University of Alberta, but the university says it has no record of her attending.
I wanted to asked Boquiren about this, but she was nowhere to be found.
Financial statements show GreenChek was scheduled to make its first instalment of $300,000 on the licensing deal in August 2008, but didn't have enough money, so it only paid $211,000, which means it is already in default of its licensing agreement.
More critically, the company decided that none of the more than $3 million in carrying costs were recoverable, so it wrote off the entire investment. The net result is that the company is showing a $3.2-million liability and no corresponding asset.
I wanted to ask Parke about this, but he didn't return several calls on Thursday and Friday.
The company is ostensibly based in San Francisco, but I have learned this is simply a virtual office that provides an answering service and a mailing address. The receptionist told me she has never seen Parke in the office.
It's not clear where Parke and Boquiren reside. Parke earlier told me he and Boquiren divide their time between Toronto and Hong Kong, but I was unable to confirm this. I wouldn't be surprised if they both live in Vancouver.
The day after Beacon sent its e-mail urging me to buy GreenChek shares, it sent a follow-up message boasting that the stock had jumped by 20 per cent. But we're talking pennies here. It closed Friday at 21 cents, just two cents off its all-time low. But no worries, Beacon has another deal for us.
"We have been closely watching a tiny stock that trades for around 10 cents right now," it said in the same e-mail. "The way things are going it looks very close to a huge breakout."
I smell another column coming my way.
dbaines@vancouversun.com
AI
Market Data 
Markets 
