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With China Tel, Has Tobin Smith Been 'Outfoxed' Again?

by Melissa Davis - 4/22/2010 9:41:21 AM

Tobin Smith, co-star of Fox News Channel’s popular “Bulls & Bears” investment show, recently declared a challenging new “mission in life.” In an upbeat message to his 2,700-plus followers on Twitter last week, Smith promised to helpChina Tel Group (OTC: CHTL.OB) – a penny stock company he has been touting for months – secure the financing it needs in order to survive.

To be sure, CHTL could use some assistance. More than a year ago, CHTL agreed to pay $195 million for a 49% stake in Chinacomm – an Asian broadband wireless company that ranks as its primary asset – but it still lacks the money required to actually pay for that deal. Although CHTL has inked plenty of financing agreements in the meantime, most recently with two mysterious firms known as Excel Era and the Isaac Organization, the company never seems to collect promised cash from those backers in the end.

For its part, CHTL has blamed outside forces for those failures.

“All of the equity deals have been negotiated during the biggest capital contraction since the Great Depression,” CHTL stated in response to questions from The Street Sweeper on Thursday. “Beyond that, the company cannot speculate on the specific reasons Excel or any other investor did not come through after signing a contract.”

So far, those financing deals have served as little more than catalysts for temporary rallies in CHTL shares that inevitably end when the money fails to appear. CHTL’s latest arrangement, a private placement that suggested a market value of $1.33 billion for the bleeding company, stands out as perhaps the best example of all. 

On Feb. 9, CHTL announced that it had secured a deal to sell a 48% stake in the company to Excel and Isaac for $640 million or the equivalent of $3 a share. The stock, available on the open market for one-third of that price just a few days earlier, rocketed 50% to an intraday high of $1.80 – with a staggering 11.7 million shares changing hands – on the news. The shares, worth less than 40 cents a year ago, continued to trade above $1 over the course of the next few weeks.

By then, however, CHTL skeptics had already begun to raise serious questions about the celebrated financing deal. They focused on Excel, a Hong Kong firm that had pledged to deliver three-quarters of the $640 million in funds, in particular.

Although Excel claimed to manage more than $200 billion in assets – a sum that would make it one of the largest investment funds in the world – the firm seemed to burst onto the scene out of nowhere. Before announcing its big investment in CHTL, in fact, Excel failed to register on the public radar at all.

Even so, as a huge fan of CHTL, Smith saw no reason for alarm.

“Understand that many, many investment firms in Asia are NOT publicly held and do NOT ‘advertise’ their business success,” Smith wrote when reiterating his strong buy recommendation and $8 price target on CHTL in late February. 

“Nothing obviously will do more to build their credibility and CHTL’s credibility than making their (promised) payment,” he added. But “I now have ZERO doubt as to their ability and intent to not only make their payment deadlines but advance the deadlines” and deliver the funds early.

CHTL was supposed to receive its first big payment, totaling $240 million, by March 1. Four days after that deadline passed, however, CHTL suddenly announced that Excel had decided to scale back its investment and allow Isaac to make up the difference. Excel has since dropped out of the financing deal altogether, and even Isaac – which hasalready collected huge chunks of CHTL stock – has decided to renegotiate the terms of its own contract “in light of recent developments” and withhold any further payments to the company in the meantime.

Nevertheless, Smith has expressed total confidence that Isaac will deliver the promised funds. In an interview with The Street Sweeper on Thursday, Smith said that CHTL had already negotiated a new $300 million financing arrangement with Isaac and would announce details of that contract by “Monday or Tuesday at the latest.” Smith has offered broader reassurances to his followers on Twitter, with CLRH’s stock bouncing from 55 cents to 74 cents over the past week in response.

With Excel now out of the picture, however, critics have decided to take a closer look at CHTL’s remaining finance partner

Until now, skeptics note, Isaac has focused primarily on real estate projects – carrying much smaller price tags – and the firm needed bank loans itself for some of those. (In a curious move, Isaac did branch out last fall by investing in a B-list movie starring a former “Playmate of the Year.”) If Isaac truly has $300 million to spare, critics ask, why has the firm – which has apparently been involved with CHTL from the start – waited until now to suddenly pledge the funds? Furthermore, they wonder, why would such a cash-rich firm list a U.S. address that corresponds with a UPS store(suggesting that it operates out of a post office box) instead of a legitimate headquarters?

Regardless of the answers, CHTL clearly needs some funds. According to its latest quarterly report, which will soon berestated because of regulatory concerns, CHTL has $280 million in current liabilities and almost no money available to cover those looming debts. Since it went public two years ago, CHTL has instead issued loads of company stock – while waiting for big cash infusions that never seem to materialize -- in order to cover its mounting bills. 

Meanwhile, CHTL itself has readily admitted that the company must resolve its liquidity problems and ultimately achieve profitability if it hopes to continue operating as a going concern.

CHTL insiders, paid with millions of shares of company stock, have already begun to cash out some of their holdings while they wait for better times. If CHTL follows the same devastating path blazed by some of Smith’s previous microcap picks, however, the company’s best days may already be behind it.

Outfoxed

Despite his popularity, as evidenced by two bestselling business books and a highly rated show on Fox, Smith has a checkered track record at best.

Smith actually began stumbling about a decade ago. He helped launch a high-tech mutual fund at the height of the dot-com bubble in 2000, Reuters revealed, only to see it shut it down as a result of massive losses – with his second-largest holding plummeting by 90% -- less than one year later. He has gone on to embrace some other notorious money-losers since that time.

For example, Smith has often recommended some of the same ill-fated stocks exposed by Citron Research (formerly known as StockLemon) before they crashed. He has also criticized the bearish website, despite its early calls on several doomed companies, along the way.

When Immtech (OTC: IMMP.PK) fell 30% on a devastating StockLemon report seven years ago, in fact, the company relied on comments from Smith (who wasn’t even following the stock) for help. Less than a month earlier, Immtech pointed out, Smith had dismissed StockLemon as “nothing more than a mouthpiece for short-selling hedge funds or syndicates of individuals who have an incentive to drive the price (of targeted stocks) down.”

Immtech’s stock, which fetched $25 before StockLemon’s report, now trades on the lowly Pink Sheets for 10 cents a share. Meanwhile, Smith has gone on to promote several stocks exposed by StockLemon/Citron Research – including InterPharm (OTC: IPAH.PK), Emcore (Nasdaq: EMKR) and Zeros & Ones (OTC: ZROS.OB) – that have fared quite poorly as well.

Smith has favored risky companies targeted by other stock detectives, too. In 2006, for example, Smith took aim atsharesleuth.com – a new website launched by billionaire short seller and Dallas Mavericks owner Mark Cuban – when it examined Xethanol, a stock that Smith himself had highly recommended, in its first-ever investigative report. Although sharesleuth.com had raised legitimate concerns about Xethanol, backing up its claims with solid evidence, Smith nevertheless blasted the report and sided with the company instead.

“Listen, ever since we were notified on this misguided (at best) attack on Xethanol, I have been working with management and others to rebut the incredibly inaccurate slam job done by sharesleuth.com on XNL,” Smith wrote at the time. Meanwhile, “I am reiterating our strong buy (rating) under $8 here for your legacy portfolio. And to help remove the stock from short-selling inventory, I’m recommending putting a ‘good-till-canceled’ sell order for $30 on the shares you hold.”

Xethanol, which hit $15 at its peak, had fallen below $5 a share by that time. The stock continued to plunge in the months that followed, triggering a class-action lawsuit by Xethanol shareholders who later scored a multimillion-dollar settlement from the company. Although Xethanol tried to reinvent itself under a new name – and somehow secured a listing on the New York Stock Exchange for a while – the company wound up filing for bankruptcy, rendering its stock virtually worthless, late last year.

During a telephone conversation this week, Smith told The Street Sweeper that his firm originally purchased Xethanol itself but ultimately sold the stock after realizing that the company lacked a feasible business model.

Meanwhile, Smith has long since moved on and declared CHTL his new favorite in the microcap arena. He began recommending CHTL at 35 cents last summer and says that he bought 4 million shares of the stock on the open market himself. While some of Smith’s loyal fans have followed his lead, other investors – burned by his advice in the past – have decided to steer clear of all his stock picks.

“I followed Tobin Smith’s teasers for a while, doing a bit of my own gumshoeing,” one investor wrote after the Stock Gumshoe website scrutinized Smith’s endorsement of CHTL last summer. “His microcap picks were incredibly, staggeringly bad – the worst of all his bad stuff. In fact, I really don’t believe that any of the micros (save one) ever did anything but sink into oblivion.”

With CHTL more than doubling to peak at $2 by January, however, Smith won over plenty of others in the volatile penny-stock trade.

“Tobin Smith is putting his career and reputation on the line with his aggressive stance on China Tel Group,” Monster Stock Alerts wrote in late January, with the stock already falling from its recent highs. “Mr. Smith … has placed an $8 short-term target price on CHTL common stock. (He) will either become a hero or a prisoner!!! Monster Stock Alerts believes that he will indeed come out on top.”

Overextended

CHTL actually began trading around $1 a share – 25% above its current price – when it surfaced as a new telecommunications company a couple of years ago.

By then, regulatory filings show, CHTL had already agreed to give John Isaac (of the Isaac Organization) 5.5 million shares of stock for serving as an “independent contractor” for the company. Since then, CHTL has gone on to awardmillions of additional shares to other independent contractors and consultants – including members of its own management team – as compensation for their services.

“The company has no employees and limited cash,” CHTL explained on Thursday, “so historically has paid as many consultants and vendors as possible using stock.”

Of course, CHTL has been hoping for piles of cash all along. Within months of going public, CHTL was already hunting for partners willing to pay big bucks for a stake in the company. By October of 2008, the company’s regulatory filings show, CHTL had inked a “strategic frame agreement” that would allow an outfit called Runcom Technologies to buy 28% of its stock for $100 million. However, as reflected by CHTL’s dismal cash balance, Runcom never actually came through with those funds.

Undeterred, CHTL went ahead and promised $195 million for a 49% stake in Chinacomm regardless. CHTL made a small down payment on that big-ticket purchase in late 2008, regulatory filings show, and then issued a huge promissory note (originally scheduled to come due last month) for the rest. Meanwhile, CHTL arranged to sell almost half its stock to a firm called Olotoa Investments so that it could pay its upcoming bills.

When CHTL asked Olotoa to make a $50 million payment on its purchase in May of 2009, however, the firm failed to deliver. When CHTL asked Olotoa for an even larger $65 million payment two months later, the firm failed to deliver once again.

After waiting in vain for the promised funds to appear, CHTL finally cancelled the Olotoa deal – which Smith hadpreviously celebrated – in November of last year.

Today, Smith continues to praise CHTL’s “incredible” business model and “successful” management team. At the same time, however, he readily admits that the company has suffered some major setbacks in the financing arena.

“These are engineers and construction guys,” Smith told The Street Sweeper. “They’re not capital market guys.

“When it comes to capital structure,” he conceded, “they’re knuckleheads.”

CHTL has certainly treated its stock like an endless money supply. For example, regulatory filings show, CHTL issued more than 30 million shares of stock to consultants and contractors – causing its overhead costs to skyrocket -- during the first nine months of 2009 alone. Since then, those filings show, the company has issued millions of additional shares for similar consulting services. 

With the stock blowing past $1 near the end of last year, CHTL insiders began to cash in some of their chips. Isidoro Gutierrez, identified in regulatory filings as CHTL’s chief administrative officer and uncle to two of the company’s top executives, sold at the highest prices – fetching up to $1.55 a share – around the time the stock hit its peak. 

In early February, however, a mysterious Mexican trust holding 4.8% of CHTL’s stock (just short of the 5% stake required for detailed disclosures) reported the most lucrative sales of all. Between Dec. 17 and Jan. 22, the trust sold more than 2 million shares of CHTL – at prices ranging up to $1.91 a share – and pocketed almost $3 million in proceeds in the process.

Kenneth Waggoner, CHTL’s outside legal counsel, executed some well-timed sales as well. On the same day thatCHTL announced that Excel had reduced its original funding commitment, for example, Waggoner sold 15,000 shares of stock at just under $1 a share. Two days after CHTL learned that Excel would be unable to make its first big payment – and three days before the company actually disclosed that news – Waggoner followed up with an even bigger sale by cashing in 40,000 shares as the stock headed below 70 cents a share.

This week, CHTL itself downplayed those transactions.

“Since the insiders receive no cash compensation and devote their full attention to the company’s business, the company assumes the stock sales are to meet the personal obligations of the selling insiders,” CHTL stated on Thursday. Moreover, “those who have sold have only sold a small fraction of their total holdings.”

CHTL took a big hit in the meantime. By the time that CHTL officially announced that it had terminated its agreement with Excel on April 1, the company’s stock had already begun to plummet and ultimately closed that day at a four-month low of just 55 cents a share. 

To be fair, CHTL has since made something of a comeback. Over the course of the past week, CHTL has jumped backabove 70 cents a share – soaring 17% on Thursday alone – with Smith loudly promoting the company.

“Spent day with George Alvarez, CEO of CHTL, talking EVERYTHING – including new debt financing, new Isaac equity deal, etc.,” Smith wrote in Twitter shorthand on Wednesday. “Our capital structure plan is coming together nicely.”

Smith’s “tweet,” suggesting that he might personally participate in a financing deal, triggered wildly mixed reviews in online chat rooms. While fans celebrated the update, expressing renewed confidence in their investment, skeptics ridiculed the news.

“If Toby says it,” one poster concluded sarcastically, “then it MUST be true."

* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.

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Jammin Java (JAMN): Hot Stock ... Bitter Aftertaste?

It’s time to wake up and smell the coffee! That’s exactly what Jammin Java (OTC: JAMN.OB), a heavily promotedcoffee company, and – for very different reasons – TheStreetSweeper would like investors to do.

Since the beginning of the year, JAMN has miraculously risen from the ashes of the “Grey Market” graveyard to become one of the liveliest – and richest – stocks in the entire microcap arena. JAMN has seen its stock shoot straight toward heaven, soaring from 55 cents to peak above $6 a share on massive daily volume, with its market value nowtopping $355 million despite the company’s limited resources and operating history. (As covered in more detail below, two of the Internet tout sheets pushing JAMN the hardest effectively vanished -- disabled by their Internet servers -- on the day the stock’s trading volume exploded past 20 million shares.) 

JAMN stands out for its powerful connections, the first loudly celebrated by the company and the second – involving a notorious stock promoter – carefully hidden from view.


 

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Powerful Warrior Joins Fight against Fraud

TheStreetSweeper is proud to formally introduce Janice Shell, one of the most experienced – and feared – investigators of penny-stock fraud in the country, as the newest member of its decorated editorial team. Shell most recently worked for StockWatch, where she focused on covering dubious microcap companies with ties to Canada: a notorious haven for shady stock promoters.

Heralded as “the unofficial queen of cybervigilantes” by Fortune magazine more than a decade ago, Shell boasts a long and impressive record of exposing fly-by-night microcap companies – and warning investors away from their stocks – well before their shares ultimately collapse. She has attracted a devoted group of followers, which includes some topnotch financial journalists, along the way.

“It wasn’t called ‘Internet sleuthing’ when Janice and a small band of colleagues at Silicon Investors invented it,” saysRoddy Boyd, a former stock-market reporter for both the New York Post and Fortune who now runs a hard-hittinginvestigative news site of his own. “Yet, starting in the ‘90s, Janice and her cyber-partners did what the SEC, the FBI and frankly the media could not or would not do: They asked questions. They dug into files, found the forgotten postings and buried press releases and, slowly but surely, began to nail one fraud and witless promotion after another.

“In a just society, Janice and her partners would get medals,” Boyd adds. “We don’t live in a just society. But thankfully, Janice has found a roost at TheStreetSweeper to deliver well-reported, crisply written justice upon the sundry sleazebags of the capital markets.”

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LEXG: The Biggest Snow Job of the Year?

With oil prices on the rise worldwide, and nuclear reactors leaking in Japan, alternative energy stocks continue to soar, especially in Pennyland. Green may be good, but many of the “green” companies trading in the microcap arena – particularly highflying Lithium Exploration Group (OTC: LEXG.OB) – could burn investors if they run out of fuel and crash.


They can still be promoted and played, of course, as veterans of the shady penny-stock world well know. And companies promising to search for lithium, which powers the batteries used in new and increasingly popular electric cars, rank among the clear favorites in this risky space.

Today, LEXG stands out as the biggest star by far. The company generates no revenue, corporate filings show, and will likely need years to do so if it manages to survive that long. It had no cash on hand at the end of 2010, either, and it managed to raise a mere $250,000 through a private placement deal earlier this year. But thanks to a $3.3 millionpublicity campaign – possibly record-breaking in price – LEXG has skyrocketed from 12 cents to almost $4 a share in barely a month and now boasts a market value that’s approaching $200 million. 

If history serves as any guide, however, LEXG will fail to hold onto even a fraction of those remarkable gains. A year ago, TheStreetSweeper scrutinized three similar companies in a detailed report entitled “Can the Batteries Last on Overcharged Lithium Stocks?” That question has long since been answered, alas, with all three stocks sinking from impressive highs to increasingly miserable lows.

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HHWW: Another Hyped-Up Stock That's Dressed to Kill?

The corporate headquarters for Horiyoshi Worldwide (OTC: HHWW.OB), located within blocks of several Los Angeles homeless shelters servicing Skid Row, looks rather modest for a high-end fashion company that recently sported a market value approaching $200 million.

Earlier this month, TheStreetSweeper sent some locals to HHWW’s home office after watching the company’s stock rocket from $1 to $3 a share on a blizzard of paid promotions. They found a tiny operation, manned by a single staffer (focused on investor relations), that housed little more than two clothing racks containing about 20 T-shirts apiece.

Based on prices supplied in HHWW’s regulatory filings, those T-shirts represent an estimated $6,000 worth of inventory for the company. While meager, that figure nevertheless eclipses the $912 in total sales reported by HHWWfor the second quarter of this year.

To be fair, HHWW has yet to release third-quarter results that might reflect an uptick in sales following the company’s adoption of an aggressive growth strategy. Still, corporate filings show, HHWW actually saw its quarterly revenue plummet – sinking from $152,175 to less than $1,000 – in the months leading up to that grand plan. 

Even so, stock promoters – paid huge sums to tout HHWW – have painted an incredibly rosy picture of the company. Last month, for example, Eric Dickson of Breakaway Stocks predicted that HHWW could soar more than 4,500% by the end of this year. The stock, currently trading at $1.63, must somehow find a way to reach $45.38 a share over the next few days for that wild forecast to come true

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Regulators Turn up the Heat on Alternate Energy

Two months after TheStreetSweeper began sounding alarms about Alternate Energy (OTC: AEHI.PK), federal regulators have officially filed charges against the company and two of its officers for allegedly fleecing investors through a long-running pump-and-dump scheme.

In a formal complaint this week, issued just days after halting AEHI’s stock, the U.S. Securities and Exchange Commission flatly accused the company and two senior executives – CEO Donald Gillispie and his girlfriend Vice President Jennifer Ransom – of scamming investors while secretly enriching themselves. Since it went public four years ago, the SEC says, AEHI has raised millions of dollars by promising to build a nuclear power plant even though the company has “no realistic possibility” of ever achieving that goal. Meanwhile, the SEC says, AEHI insiders have quietly dumped big chunks of stock while publicly expressing strong confidence in the company.

“The company has made multiple misrepresentations, including claims that its executives had such confidence in AEHI that they had not sold a single share of company stock,” the SEC stated on Thursday. However, “records obtained by the SEC show that Gillispie and Ransom have instead secretly unloaded extensive stock holdings and funneled the money back to Gillispie.”

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HHWW: Another Hyped-Up Stock That's Dressed to Kill?

The corporate headquarters for Horiyoshi Worldwide (OTC: HHWW.OB), located within blocks of several Los Angeles homeless shelters servicing Skid Row, looks rather modest for a high-end fashion company that recently sported a market value approaching $200 million.

Earlier this month, TheStreetSweeper sent some locals to HHWW’s home office after watching the company’s stock rocket from $1 to $3 a share on a blizzard of paid promotions. They found a tiny operation, manned by a single staffer (focused on investor relations), that housed little more than two clothing racks containing about 20 T-shirts apiece.

Based on prices supplied in HHWW’s regulatory filings, those T-shirts represent an estimated $6,000 worth of inventory for the company. While meager, that figure nevertheless eclipses the $912 in total sales reported by HHWWfor the second quarter of this year.

To be fair, HHWW has yet to release third-quarter results that might reflect an uptick in sales following the company’s adoption of an aggressive growth strategy. Still, corporate filings show, HHWW actually saw its quarterly revenue plummet – sinking from $152,175 to less than $1,000 – in the months leading up to that grand plan. 

Even so, stock promoters – paid huge sums to tout HHWW – have painted an incredibly rosy picture of the company. Last month, for example, Eric Dickson of Breakaway Stocks predicted that HHWW could soar more than 4,500% by the end of this year. The stock, currently trading at $1.63, must somehow find a way to reach $45.38 a share over the next few days for that wild forecast to come true.

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Regulators Pull the Plug on Alternate Energy

Four years after Alternate Energy (OTC: AEHI.PK) went public, courting investors with grand plans to build a multibillion-dollar nuclear power plant, the U.S. Securities and Exchange Commission has finally suspended trading in the controversial penny stock.

This week, the SEC halted AEHI due to questions about “the accuracy and adequacy of publicly disseminated information” about the company. When cracking down on AEHI, the SEC cited concerns about several issues – including company finances, executive compensation and insider sales – examined by TheStreetSweeper in its recent coverage of the company. (Click on these three links to access those stories and the backup documents used to prepare them.)

AEHI critics, who have been sounding alarms about the company for years, expressed clear relief at the long-awaited news.

“It was a scam from the beginning,” declared Joe Weatherby, a former planning and zoning commissioner in AEHI’s home base of Idaho. “This has been a long time in coming.

“I didn’t think it was ever going to happen,” he added. “So it was a great Christmas present.” 

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Alternate Energy: Another Radioactive Stock Pick?

Alternate Energy (OTC: AEHI.PK) investors might want to take a closer look at some of the outfits that have embraced the company’s stock.

Just last month, two different firms – both known for risky microcap picks -- rushed to defend AEHI with bullishrecommendations after TheStreetSweeper raised legitimate concerns about the company. The first one, Pinnacle Digest, owns AEHI’s stock and admitted in a disclaimer that it plans to “sell every share” for its own profit without advance notice to its followers. The second one, WallStreetCorner.com, regularly collects cash and/or stock from the companies it endorses and has directed investors into some notorious losers along the way.

Years ago, for example, WallStreetCorner’s Larry Oakley touted a company known as Accident Prevention Plus that served as the vehicle for an illegal pump-and-dump scheme. The so-called “mastermind” behind that scam wound up sentenced to 10 years in prison last month – just three days before Oakley issued his ringing endorsement of AEHI – as punishment for his crimes.

Oakley has embraced other ill-fated stocks, such as eMax Holdings (OTC: EMXC.PK) and Hathaway Corporation, as well. In certain ways, AEHI now resembles both of those doomed companies.

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AEHI: The Story, the Holes and the Secrets They Hide

Alternate Energy (OTC: AEHI.PK) has spent the past four years selling investors an incredible – if incomplete – story.

The basic plotline goes something like this: AEHI will somehow secure the funding and approval necessary to build a multibillion-dollar nuclear power plant in Idaho that’s virtually guaranteed to deliver eye-popping profits for investors. That version of the story contains some gaping holes, however, filled with pesky secrets that threaten to ruin this fairy-tale ending.

Take the first chapter in this ongoing saga, just for starters. Initially, AEHI CEO Donald Gillispie said the company would build its nuclear power plant in Owyhee County – touting a deal inked with “prominent Idaho landowner and businessman” James Hilliard -- and spent the next year portraying that site as a suitable location for such a project. In the spring of 2008, however, AEHI suddenly announced that it had abandoned that site due to troubling fault lines and shifted the project to nearby Elmore County instead.

In a sworn deposition that surfaced last month, however, Gillispie offered far different reasons for that abrupt change of plans.

“There were two things going on,” he states in that document. “First of all, we had not received funding because we lost our silent partner there … The other thing going on was that Hilliard would not – he had been extending the contract whenever it came up, like a six-month contract – and in early ’08, he didn’t extend it.”

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Alternate Energy: Power Stock or Toxic Waste?

Four years ago, Alternate Energy (OTC: AEHI.PKCEO Donald Gillispie arrived in one of the poorest counties in Idaho and began selling company stock to local investors impressed by his grand plans.

Although AEHI had spent just $1,000 on research and development during the previous two years, regulatory filings show, the company boasted all sorts of remarkable inventions. AEHI claimed that it had developed a breakthrough fuel additive that could slash the costs of natural gas-powered electricity, for example, and that it was also creating mini reactors that would “revolutionize nuclear power in an urban setting.” Even better, the company said that it was poised to become “the first company to harness the natural energy delivered in a bolt of lightning” – a goal later portrayed as “hopeless” by a national lightning expert interviewed by The New York Times.

While ambitious, however, those projects ranked as mere side shows for the young public company. If possible, AEHI had even bigger plans. Despite its minimal resources, skeptics say, AEHI promised to build a multibillion-dollar nuclear power plant – the first project of its kind for decades -- in a rural Idaho desert that lacked the vast water supply and available transmission lines normally required to make such projects work.

“They have no money; they have no plans,” a county commissioner told the local Owyhee Avalanche newspaper at the time. “Most (locals) think that it’s … a daydream or a fairy tale.” 

Since then, records show, AEHI has announced funding deals with at least three obscure financial firms – including one whose leader would later be charged with alleged securities fraud – but still lacks the money required for even the equivalent of a down payment on a nuclear power plant. AEHI also keeps changing the planned location for its proposed plant, local news coverage reveals, currently settling on an Idaho county already ruled out by Warren Buffett’s MidAmerican Nuclear Energy because it made no economic sense.

Nevertheless, AEHI has still managed to sell its own investors on the massive project. The company’s volatile stock, which once fetched mere penniescurrently trades for 87 cents a share. With a share count of 320 million, up from about 40 million a few years ago, AEHI now boasts a market value of $280 million.

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RMCP: The Tiny Syringe Maker Stings Investors Again

Less than four years after changing its name in an effort to put its checkered past behind it, Revolutions Medical (OTC:RMCP.OB) is suspected of engaging in the same sort of stock-boosting activities that led regulators to crack down on the company in the first place.

Ever since RMCP filed the paperwork last month to clear the way for massive sales of its stock, the company has been issuing a flurry of press releases containing increasingly upbeat news. RMCP kicked things off with a couple of announcements about its MRI technology in mid-August, which proved effective enough to push the company’s stockfrom 28 cents to 40 cents a share. When RMCP shifted its attention to the company’s new “safety syringes,” however, the stock really started to fly. By Sept. 13 – less than a month after RMCP began churning out its steady stream of good news – the briskly trading stock had soared to an all-time high of $1.74 a share.

Three announcements, issued over a one-week span this month, fueled most of that surge.

The first two celebrated a manufacturing deal, calling for the production of 5 million safety syringes, inked with an obscure firm led by an apparent insider of the company itself. (As noted in more detail below, that firm does not seem to exist.) The third, even more powerful, announcement hinted at a looming syringe order from none other than the federal government.

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Clicker 'Body-Slammed' after Tout by Pro Wrestler

Shawn Ambrosino may have retired from professional wrestling, but as a penny stock promoter – touting the likes of Clicker (OTC: CLKZ.OB), Clenergen (OTC: CRGE.OB) and Enhance Skin Products (OTC: EHSK.OB) – he can still inflict an awful lot of pain.

This month, Ambrosino delivered his latest knockout blow with a powerful recommendation of CLKZ that has since left investors reeling. With CLKZ sitting at $1 a share, Ambrosino urged investors to buy the stock before it surged past $20 as the company – a cash-poor outfit with just a handful of employees – conquered Craigslist to become the new heavyweight leader of the online classified advertising world. CLKZ did march higher on that paid tout, ultimately reaching $1.37 a share on Wednesday, but never approached even Ambrosino’s $5 short-term target before staging a remarkable collapse.

The stock, hammered by a sudden selling spree that began the same day it peaked, now fetches just 53 cents a share. Even at that lower price, however, CLKZ still boasts a market value of $31.2 million that looks rather lofty for a company that – just six weeks ago – cautioned that it lacked the funds necessary to finance its operations for more than 30 days.

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Tradeshow, Skymark Kicked off the Stage

Canadian regulators aren’t buying the story that Tradeshow Marketing (OTC: TSHO.PK) and Skymark Research – a paid promoter led by the son of TSHO’s founder – tried so hard to sell.

The Alberta Securities Commission has issued a cease-trading order for TSHO’s stock, while banning Skymark from trading or recommending any securities, after uncovering tell-tale signs of a classic pump-and-dump scheme. When explaining its move on Monday, the ASC cited concerns originally raised by TheStreetSweeper in a detailed investigative report almost six months ago. (Click here for the original story, complete with links to backup documents.)

Specifically, the ASC claimed that TSHO had soared on bullish Skymark forecasts secretly generated by relatives connected to the company. The ASC also noted that John Kirk, the sole director of Skymark and the son of TSHO’s founder, “held a significant number of shares” in the company – as did TSHO founder Bruce Kirk himself – at the time of the stock-boosting promotions. It pointed out that Ben Kirk, another son of the founder, worked for Skymark during the publicity campaign as well.

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LIqiudmetal: Keeping Mum about Apple and Far More

This year, Liquidmetal Technologies (OTC: LQMT.PK) has kept some telling – and arguably material – secrets from its investors.

Take LQMT’s recent deal with Apple (Nasdaq: AAPL) as an obvious example. In a cryptic 8-K filing on Aug. 9, LQMT suddenly announced a contract with Apple that – on the surface – seemed to warrant a full-blown press release. Specifically, LQMT revealed that it had signed a “master transaction agreement” that would allow Apple to commercialize its technology for future use in its consumer electronics products.

LQMT never disclosed the terms of that licensing contract, however, allowing hopeful speculation to fuel the company’s shares instead. LQMT’s stock, which fetched just 13 cents a share a month ago, rocketed to a multiyear high of $1.76 last week before swiftly crashing on the lack of details associated with that high-profile deal. The stock, down another 10.6% on Wednesday, has now lost most of its Apple-related gains and currently trades for just 76 cents a share.

This spring, in the months leading up to that dramatic deal, LQMT kept quiet about another important development as well. In an even shorter 8-K filing on March 8, LQMT quietly disclosed that longtime Chairman John Kang had left the company without giving any reason for his departure. One week earlier, Kang was convicted at trial on fraud charges – carrying a potential five-year prison sentence – for inflating the financial results of another company he had previously led.

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Ecosphere: A Clean Energy Company with a Dirty CEO?

Either Ecosphere Technology (OTC: ESPH.OBCEO Dennis E. McGuire simply shares a lot in common with a twice-convicted drug felon – a coincidence of remarkable proportions – or he is the former jailbird himself.

Based on public records and news stories gathered by TheStreetSweeper, supplemented with a 63-page personal background report, the CEO and the ex-con look very much the same.  The names and birth dates match. The names of multiple relatives come up as matches, too. Other key identifying traits – including addresses, business ties and even partial social security numbers – correspond as well.

McGuire’s original corporate bio, published in regulatory filings, hints at further parallels. That bio begins when McGuire graduated from community college in 1974 and, following a long and unexplained hole, picks up in detail when he invented his first cleaning technology (armed with a mere associate’s degree) more than 15 years later. The mysterious gap in between corresponds with the very period when the convicted McGuire operated a drug business, news reports show, and twice served time in jail.

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Why Can't Ecosphere Score a Deal with BP?

Maybe Ecosphere Technologies (OTC: ESPH.OB) should have added Kevin Costner, the celebrity backer of a competing water-treatment device, to its star-studded team.

Despite ringing endorsements from its own superstars – including a big-name environmentalist and two retired professional athletes – ESPH has so far failed to secure an order from BP (NYSE: BP) for machines that, it says, can effectively address the company’s massive oil spill. Costner’s company, Ocean Therapy Solutions, fielded an order from BP for 32 of its machines almost two full weeks ago. ESPH is still waiting on an order, however, even though the company claims that it offers a superior device.

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Junior Mining Companies and the 'Temple of Doom'

Ever since AmeriLithium (OTC: AMEL.OB) purchased some mining assets from GeoXplor -- a Vancouver outfit led by the so-called “Indiana Jones” of the lithium trade -- the company has taken investors on a wild and, at times, thrilling ride. If history repeats itself, however, AMEL investors better not count on a happy ending to their journey.

After all, GeoXplor has sold mineral claims to several other microcap companies that met with rather ugly fates. Even worse, government records show, GeoXplor founder Clive Ashworth has been previously banned from the securities industry for an alleged scam – which resulted in criminal convictions for two stock promoters – involving yet another resource company.

Nevertheless, Ashworth continues to win over junior mining companies and those who promote their risky stocks alike

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Putting Together the Puzzle at Big Bear Mining

If Big Bear Mining (OTC: BGBR.OB) would risk hiring a bankrupt CEO with a checkered past to serve as the “public face” of the company – and essentially give him $30 million worth of stock for the favor – then investors might want to search for even darker secrets that the junior gold miner is still trying to keep.

They could start by examining BGBR’s original address. That address, listed in past BGBR regulatory filings as 1728 Yew St. in Vancouver, shows up in filings for several other penny stock outfits as well. Those companies share at least one glaring trait: They count Shane Whittle, a busy Vancouver stock promoter, among their top executives.

Armed with credible outside leads about Whittle’s connection to BGBR, TheStreetSweeper decided to call him and politely ask about his ties to the company. Whittle’s response came across as nothing short of violent.

He immediately claimed “no involvement” with BGBR and then warned of possible legal action for the “harassing” phone call. Specifically asked if he was making a threat, he replied with this: “Yeah, 100% … Take your phone call and shove it up your ass.” 

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Fearing Risks, Big Bear Promoter Tells Investors to Flee

Big Bear Mining (OTC: BGBR.OB) has scared off one of its most powerful fans.

James DiGeorgia, editor of the Gold and Energy Advisor newsletter, this week suddenly reversed his “strong buy” recommendation on BGBR and started urging his followers to sell the stock instead. His abrupt about-face came just one day after The Street Sweeper raised serious questions about BGBR’s true value and the paid promoters – including DiGeorgia himself – who have been touting the heavily traded stock.

“Based on new information I received in the last 24 hours that I was not presented with when I initially reviewed and recommended the stock, I believe it would be in the best interest of any investors holding shares in this company to sell them,” DiGeorgia stated in an official press release on Tuesday. “It doesn’t matter if you’ve made money or lost money holding BGBR.OB. Everyone who has based their purchase of shares on my recommendation should sell their shares.”

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Does the NanoLogix Rally Make Any Sense?

The NanoLogix (OTC: NNLX.PK) stock chart featured on a YouTube video – set to the catchy “Money Song” tune from Monty Python – looks rather outdated following this spring’s incredible, if inexplicable, spike in the company’s share price.

When that video first surfaced in the fall of 2007, NNLX was still focused on increasing hydrogen production with the help of grape juice while allowing Nutra Pharma (OTC: NPHC.OB) – the company’s former partner – to pursuebreakthroughs in its current business of diagnostic technology. (NPHC’s own volatile rally, staged late last year, has already come to an end.) Back then, NNLX’s stock had almost doubled in a month but still fetched only 15 cents a share. Since moving into the medical arena and converting a barn-like structure into a “clean room” for producing diagnostic testing kits (with the construction project captured in yet another YouTube video), however, NNLX has seen its stock rocket more than 200% in recent weeks to pass $1 a share.

Even Bret Barnhizer – NanoLogix’s own CEO – cannot explain that move.

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Has Atlantic Wind and Solar Been Fueled by Hot Air?

Atlantic Wind and Solar (OTC: AWSL.PK) is suspected of blowing a lot of hot air in an effort to inflate the company’s stock price.

A year ago, AWSL supposedly acquired a 47.5% stake in Hybridyne Power Systems – later touting Hybridyne’s “best-in-class” technology and its access to an expansive research team – for $2 million worth of its own stock. After publicizing a string of stock-boosting projects secured by Hybridyne, however, AWSL suddenly announced this month that it had canceled its acquisition of the company due to an “unfortunate default by the vendor” that rendered the transaction “null and void.”  

Notably, Hybridyne itself now claims that the acquisition never took place at all.

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Can the Batteries Last on Overcharged Lithium Stocks?

Lithium Corporation (OTC: LTUM.OB) sure looks a whole lot prettier in paid tout sheets than it does in its regulatory filings.

In recent months, stock promoters have treated LTUM – a company with no revenue and just $855 in the bank – like a surefire winner that’s poised to supply giant automakers with the lithium they will need to power tomorrow’s battery-operated cars. The promoters offer similar reasons for their incredible confidence, led by soaring demand for lithium and LTUM’s ready access to lithium mines, while carefully excluding their compensation for touting the stock from its list of key attractions.

To some, however, even LTUM’s most “legitimate” selling points look suspect. They point to a recent article in The New York Times, entitled “The Lithium Chase,” as evidence.

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Is IMGG's CEO Pulling the Plug on His Company?

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To some, Imaging3 (OTC: IMGG.OB) CEO Dean Janes appears to be giving up on his own company.

On Feb. 11, exactly one month after IMGG announced the latest in a series of regulatory setbacks, Janes reportedly began pitching a new investment opportunity to his 1,000-plus “friends” on Facebook. In his biggest insider transaction on record, Janes then sold 2.6 million shares of IMGG stock the very next day. more...



Tradeshow Marketing Knows How to Sell Its Stock

Give Tradeshow Marketing (OTC: TSHO.PK) some credit. For a company riddled with so many ugly conflicts, TSHO sure knows how to put on a pretty face for investors.

TSHO can thank SkyMark Research – a promotional firm operated by the apparent son of TSHO’s own founder – for reshaping its public image. For years, TSHO looked like a failed business with limited appeal to even speculative investors willing to place bets on high-risk penny stocks. After SkyMark launched favorable coverage of TSHO late last year, however, the company saw interest in its long-overlooked stock suddenly skyrocket. more...



AENY: Look What's Hiding beneath that Former Shell

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Americas Energy Company (AENY.OB) exposed some ugly flaws when it emerged from its corporate shell.

Following its heavily hyped reverse merger, AENY now counts CEO Christopher Headrick – a longtime dealmaker with a history of failure – as its sole officer, director and member of its staff. Although AENY has announced plans to expand its senior management team, the company aims to do so by hiring leaders who have benefited handsomely from a series of generous related-party deals. One of those potential executives, already identified as a company vice president in the past, has agreed to plead guilty to felony tax evasion charges and could face up to five years in prison for his crime. more...



IMGG Fails to Paint a Pretty Picture for Investors

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The picture at Imaging3 (IMGG.OB) just got a whole lot uglier.

IMGG dropped a bombshell on investors this week, when it revealed a major setback in its lengthy battle to secure regulatory approval of its Dominion 3-D scanning device. For months, IMGG has indicated that the company simply needed to resolve one minor issue – involving the Dominion’s label – in order to satisfy reviewers at the U.S. Food and Drug Administration. During a conference call with shareholders on Tuesday, however, IMGG reported that it has now fielded more than a dozen questions from FDA staffers who are evaluating the company’s device. more...



PennyStockChaser Hides Profits, Secrets from Investors

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This June, shortly after PennyStockChaser announced that it had become the most popular website for “hot penny stock tips” in the business, the Internet-based tout sheet began dropping a familiar name that once carried considerable weight on Wall Street.

It listed Mike Schonberg – a name formerly attached to such legendary investment firms as Dreyfus and UBS – as its official contact person. Keeping with its secretive nature, however, the website stopped well short of offering any details about Schonberg’s professional background. more...



Convicted Swindler Touts Risky Penny Stocks

Rich Roon had already served time in prison for swindling investors when he decided to reenter the securities business as a penny stock promoter.

In 2003, just 16 months after his release from jail, Roon quietly established a consulting business that targets obscure microcap companies desperate for publicity. Roon’s firm, known as Oceanic Consulting, aggressively promotes penny stocks on its OTC Reporter website in exchange for shares of the companies being touted. Over the years, Oceanic Consulting has collected – and promptly sold – billions of free shares of penny stocks that have lost money for average investors. more...