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SFU grad hyped erectile dysfunction stock under assumed name 2012-08-06
By David Baines

In November 2009, I reported that Vancouver-based Global Health Ventures Inc., which claims to be developing a drug to treat erectile dysfunction, was being promoted by a U.S. penny stock newsletter called The Stock Profiteer.

"Load-up the truck and buy shares in Global Health ... and get ready to QUADRUPLE your money in the next 60 days," editor Joe Marino urged in the newsletter.

Marino said the prospect of a male sexual-enhancement drug rival-ling Viagra and Cialis "has got Big Pharma drooling" and it was only a matter of time before Global Health was acquired by a major drug company.

An email version of this tout sheet was sent to millions of prospective investors. The fine print at the bottom revealed that a company called Emma Marketing Services Inc. had paid Stock Profiteer $500,000 US to create and distribute the newsletter. I noted that the beneficial owner of Emma was not disclosed.

Whoever was behind this promotion, it had the desired result: Within a month, the stock - which trades on the OTC Bulletin Board in the United States - tripled to $1.38 on heavy trading volume.

The B.C. Securities Commission was not amused. On Nov. 10, 2009, it issued a cease-trade order, but lifted it the following week when Global Health founder and president, Dr. Hassan Salari, denied any involvement in the newsletter.

As events unfolded, Global (now called Kedem Pharmaceuticals Inc.) never generated a cent of revenue, let alone profit, and the stock is now trading at the equivalent of one-hundredth of a cent.

On Tuesday, BCSC enforcement staff issued a notice of hearing alleging that "Joe Marino" was not a U.S. newsletter writer, rather he was Colin McCabe, who I have learned is a 27-year-old Simon Fraser University graduate who worked from his home in Abbotsford.

Enforcement staff also allege that Emma Marketing Services is a British Virgin Islands company controlled by Erwin Speckert, who obtained a science degree from the University of Western Ontario and an MBA from Queen's University and now splits his time between his home in Minden, Ont., and Zurich, Switzerland, where he runs a firm called Everest Asset Management.

According to the commission, Speckert - working on behalf of unnamed clients - hired McCabe to write reports featuring a bulletin board stock called Guinness Exploration Inc.

During the first quarter of 2010, McCabe dutifully wrote three glowing reports on the company, using three different newsletters (and personas) that he had created.

He wrote one as Joe Marino, editor of Stock Profiteer (which had pumped Global Health Ventures). He penned another under the alias of Roger Gaines, editor of Resource Stock Advisor, and he authored the third under his real name, only this time as editor of the Elite Stock Report.

Little did investors know, but - according to the commission - these people were one and the same, and they were not based in the United States, they were based in Abbotsford.

McCabe's hype had the desired result. Guinness's share price spiked up to $1.30 on heavy volume, affording insiders the opportunity to make huge trading profits.

The BCSC alleges that Speckert paid for McCabe's promotion of Guinness by transferring $2.5 million through offshore companies to McCabe's accounts in the Lower Mainland. For acting as an intermediary, Speckert was paid $200,000 US.

So where did all this money come from? Obviously from people who had a vested interest in increasing the stock price, but exactly who is not known. Speckert refused to tell BCSC investigators, (conveniently) claiming he is constrained by Swiss confidentiality laws.

With these sorts of U.S. over-the-counter companies, it's difficult for outsiders to know who is really running them. They are often fronted by nominees. Guinness is a good example.

When it went public in 2007, the company was nominally based in Coquitlam.

Its only asset was a uranium prospect in Saskatchewan that cost less than $16,000. Its president and con-trolling shareholder was said to be Dan Kello, an elevator repairman who had no prior experience in mineral exploration.

Before going public, the company sold a bunch of seed shares at dirt-cheap prices to friends and family members, then filed a registration statement with the U.S. Securities and Exchange Commission, clearing those shares for resale.

We have seen this pattern many times before.

As soon as the shares are cleared for resale, the nominees quit and the people who are really running the show gather up the shares, creating a tightly held vehicle for some future promotion.

Sure enough, shortly after the SEC approved the registration statement, Kello quit the company and the uranium property was dumped. Control passed to a New Zealand promoter named Alastair Brown who acquired some mineral claims in Yukon. This is the basis upon which McCabe promoted the company.

What Brown knew about McCabe's activities, if anything, is not clear. I tried calling him Friday, but Guinness has deregistered its shares and its phone is no longer in service.

BCSC enforcement staff also allege that in December 2010, McCabe received an email from somebody con-ducting investor relations for Tuffnell Ltd., a bulletin board company that had gold claims in Nevada and Arizona.

"The individual indicated that he preferred to pay McCabe through an account that was not in Canada. With-out making any inquiries, McCabe agreed to perform the work on those terms," the notice alleges.

I note that McCabe's report, published in his Elite Stock Report, was predictably effusive. He asserted that "this tiny unknown gold stock could return 15 times your money inside of the next three weeks" and that it could be his "TOP performing gold stock of the DECADE."

In a familiar refrain, the stock spiked up to $1.14, but is now trading at half a cent.

For his services, the commission alleges, McCabe issued invoices for $1.2 million US, with instructions to wire the funds to a Hong Kong account he controlled.

I somehow doubt that all this money accrued to McCabe. Even allowing for the expense of creating and distributing this promotional junk, it seems like extravagant compensation. But if he even received a portion, he must have been the envy of his SFU classmates.

NEXT: We probe deeper into the activities of McCabe and Speckert.


 
 
 
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