Parting the rich from their wealth isn't as difficult as one would imagine: especially if all the right ingredients are in place an apparent money-making opportunity, a seemingly creditable scheme and a reasonably greedy investor.
This summer tale is passed on by the Dublin independent broker, Mr John Gilmartin, and the Government stockbrokers, Campbell O'Connor, who witnessed one of their clients nearly becoming $30,000 (£21,700) poorer after being offered an "opportunity of a lifetime" to buy shares in a high-tech company through rather unconventional means.
The client, a wealthy, but not-so-gullible businessman is the latest person of means to be tempted by a number of get-rich-quick schemes this summer, which include the Nigerian letter scam and the international fax/Internet directory offer.
The shares concern a perfectly legitimate California technology company, MIS Solutions which has IBM partnership status, and is quoted on the Nasdaq smaller companies exchange. The catch is, however, that its shares are seldom traded.
The offer, on the other hand, is far from legitimate and involves a British "share adviser" who works out of offices in Belgium and Switzerland. He cold-calls his marks in the evening, insisting that he has been passed their name by reliable, mutual sources.
The share adviser claimed that his firm specialises in placing this Californian company's shares with only a select group of investors; he emphasised its "superb" performance on the Nasdaq, its position as a coveted IBM partner company and its excellent future prospects. "My client was told the shares were trading at $7.50 but were likely to rise to over $11.00 in a matter of months," says Mr Gilmartin. For a mere $30,000 and 5 per cent commission the Irish investor could be a rich man in no time, the cold caller said.
Despite his initial enthusiasm, the client wisely consulted his broker Mr Gilmartin, who in turn consulted stockbroker Campbell O'Connor. Together they ascertained that the so-called share adviser operating out of a serviced office in Basle, Switzerland, but registered in Antwerp, was working outside of any British, Irish and EU regulation.
His scam: to sell shares at an inflated price to unsuspecting punters who would find them difficult or impossible to unload.
"What happens is these guys `the share advisers' buy a line of stock, say, for the sake of argument at 27 cents, from the small, Nasdaqlisted company that needs some cash," says Brendan O'Connor of Campbell O'Connor.
"They then prepare some `research' of their own, do a prospectus and say the shares are worth 40 cents. This gets sent out, they start cold-calling prospective investors they cross reference all sorts of company registers and international business directories and once they get through they emphasise the Nasdaq and IBM connections, which sounds impressive. What they fail to mention is at what level this company has its listing. The further down the Nasdaq you go the less liquid the shares. It's only later the investor discovers that there are no bidders for their shares and if a buyer is eventually found, they will have to sell at a seriously discounted price." MIS Solutions's shares closed two days ago at $6.60, when 2,000 shares were traded; over the last 52 weeks its price has only moved two dollars between $5.50 and $7.50.
Rogue share traders are conmen who need to keep jumping across different borders to keep ahead of regulators, says Mr O`Connor. They'll sell their share lots in lumps of as little as $2,000 and are not particularly fussy about who they burn.
