Baines on NW's Levy

[Jack Bennest]

David Baines, Vancouver Sun

The proliferation of shoddy Vancouver-related junior companies that trade on the unruly OTC Bulletin Board in the United States has now reached the stage where they are permeating mainstream radio.

Every Saturday morning, CKNW 980 -- Vancouver's most popular radio station -- broadcasts an hour-long show called Market Matters, featuring junior companies that trade on the bulletin board or the TSX Venture Exchange.

The show is hosted by well-known financial commentator Michael Levy, 63, who provides regular weekday market reports for the station, a half-hour daily commentary on the Bill Good talk show, and an appearance on Michael Campbell's Money Talks program every Saturday from 8:30 a.m. to 10 a.m. An hour later, Levy drops his persona as a media commentator and assumes the mantle of infomercial host, tossing lob-ball questions at officers and directors of junior companies which pay $6,500 each for the exposure that Levy and the program provides.

The program is broadcast on 13 other stations owned by CKNW's parent, the Corus Radio Network, including stations in Kelowna, Kamloops, Calgary, Edmonton, Saskatoon, Regina, London, Hamilton, Toronto and Montreal.

But there is a double edge to all this exposure. The program frequently leads listeners and would-be investors into treacherous waters. Some of the featured companies are riddled with Howe Street promoters who have become embroiled in previous stock market scandals.

One of those companies is Lexington Resources Ltd., a junior oil and gas exploration company that was featured on the June 3 edition of Market Matters.

Lexington trades on the bulletin board, U.S. trading forum that has little regulatory oversight. There are no minimum listing standards, news releases are not reviewed and trading is not monitored. It has become extremely popular with Howe Street promoters who have run into regulatory problems in B.C and want to avoid the more stringent scrutiny on Canadian exchanges.

Representing Lexington was investor relations director Gino Cicci. Before introducing him, Levy issued a disclaimer: "First of all, I have to state that I do have a material interest in this company. I do own shares of Lexington. Once in a while that's going to happen because I do invest in the stock market."

During the interview, Cicci told Levy that through a "very, very great set of circumstances," Lexington was to gain access to the Barnett shale deposit in Texas, which he described as a "very prolific gas area" for coal-bed methane.

"You have arguably some of the best acreages around for coal-bed methane and for drilling," Levy suggested.

"We certainly do, Michael," Cicci agreed.

In a later interview, I asked Levy whether he conducts due diligence on companies before he personally invests in them. "Absolutely," he replied.

Asked whether that due diligence includes management, he once again replied, "Absolutely."

According to securities records, the B.C. Securities Commission cited Cicci in the early 1990s for disseminating misleading promotional material on an exploration property owned by DNI Holdings Ltd., listed on the Vancouver Stock Exchange.

In 1995, the commission stripped his trading rights for six months and prohibited him from acting as an officer or director of any B.C. public company for three years.

Asked whether he knew of Cicci's prior regulatory problem, Levy replied, "No, not at all."

Lexington's chief financial officer is Vaughn Barbon, who previously worked as an administration manager for Montreal Trust. In 1991, he pleaded guilty to embezzling $2.2 million from the trust company and was sentenced to two years in jail.

Asked whether he was aware of Barbon's background, Levy once again replied, "No, not at all."

Another player in Lexington is Brent Pierce. He is named in the company's securities filings as a consultant with International Market Trend AG of Zurich, which has a contract to provide administrative and financial services to Lexington. For its services, Lexington granted International Market Trend options to buy 1.65 million shares, most at pennies per share. Many of those options have accrued to Pierce personally.

Pierce is also well known to B.C. regulators. In 1993, he was prohibited from trading shares or acting as a director or officer of any B.C. public company for 15 years after he admitted to diverting proceeds of the initial public offering of a Vancouver Stock Exchange company called Bu-Max Gold Corp.

Levi said he knows Pierce has been banned, but doesn't consider it critical to his investment decision.

"There's been a lot of people who have been banned from the market, but my God, if we held everything against people who had done anything [improper] in their life, I don't think we could do business with anybody," he said.

Cicci and Pierce are not the only controversial characters associated with Lexington. The company's president and chief executive officer is Grant Atkins, who is well acquainted with Pierce.

In 1993, Atkins and Pierce teamed up to promote Cost Miser Coupons (International) Ltd., which planned to feature missing children on cash register tapes. VSE officials halted trading when they learned that Pierce, then under investigation for the Bu-Max affair, was involved in Cost Miser.

In 1996, Atkins and Pierce were linked to another dubious deal. RCMP alleged in a search warrant that they had manipulated the shares of an Alberta Stock Exchange company called Ultra Pure Water Systems (Canada) Inc. through offshore accounts. No charges were ever laid.

One of Lexington's directors is Stephen Jewett, a Vancouver chartered accountant who the company describes as "the audit committee's financial expert."

But according to the B.C. Institute of Chartered Accountants, he isn't much of an expert. In October 1993, the institute barred him from auditing the books of any company after he audited statements for VSE-listed Axagon Resources Ltd. that turned out to be materially false.

Jewett also popped up in the Bu-Max affair. Pierce gave commission investigators financial statements that were purportedly prepared and audited by Jewett, but Jewett swore he didn't prepare or audit them. In other words, they were forgeries.

If Jewett felt used or abused by Pierce, it appears that all has been forgiven. They are back together again in Lexington.

"Let me put this into perspective," Levy said to Cicci as he was wrapping up the interview. "The commodity is there, it's getting it out of the ground. You are not going out to find the resource, the resource is there. The idea is to mine that resource."

"Yes...," Cicci replied.

"The fact is, that coming up with hurricane season and the demand for natural gas in the United States, that there just seems to be a natural fit here," Levy offered.

"Yes, it's a perfect fit," Cicci agreed.

"Thank you for joining me. Lexington Resources. Trades on OTC. And again, I have a material interest in the company."

n

Market Matters is owned and produced by a Vancouver company called Blender Media, whose president and principal is 28-year-old Amir Adnani.

Blender buys the hour-long time slot from CKNW. "Never before have junior companies been provided with a national forum to tell their stories to the mainstream investing public," Blender says on its website.

Companies pay $6,500 to get on the program. That includes a seven or eight-minute interview with Levy, and fifteen 30-second promos during the week before the interview.

Levi says he does not determine the program line-up: "We [Levy and CKNW] have no input into the selection process at all."

Adnani says he takes full responsibility for program content : "We don't just bring on anybody," he said in an interview. "We really do our due diligence. We want companies that really have a great story. We want people to hear from the company president or CEO."

He said the due diligence is conducted by a "research team," but declined to say who is on the team. "I can't give you the names," he said.

He said the decision whether to profile the companies "comes down to an executive decision," but declined to say who that executive is. "I can't disclose that," he said.

Levi says Blender Media provides him with a fact sheet on each featured company: "I will use it as the basis for an interview, but I'm certainly not tied to it. If I think I'm not getting a forthcoming answer, I dig deeper. I don't take everything at face value."

But it is clear that Levy does not challenge anybody or anything on the program. Asked whether he has ever introduced an element of skepticism, he replied, "No."

Adnani stresses that the program issues appropriate disclaimers: "We are very clear at beginning of the show that it is a paid advertisement."

"If you listen to the show," adds Levy, "it is very clear that it's a paid program and in no way are we telling people to go out and by these stocks."

The disclaimer states: "The following is a paid program. The opinions expressed therein are those of advertiser and don't necessarily express the views and policies of CKNW 980."

Listeners must be quick to catch it, however. It is just a few seconds long, and it is repeated only once more, at the very end of the hour-long program.

Levy also advises listeners during the program to do their own due diligence. Last Saturday, he did it three times, but the message is not always delivered in a very earnest manner. Here is one version:

"We like the uranium stories, but again, it's up to the listener to do their due diligence and talk to their advisors, but [this is] a very good story."

Levy acknowledged that the purpose of the show is to stimulate investor interest in the stocks that are profiled:

"Of course, [the purpose] is to create buying . . . but that's up to the investor. The listener on CKNW is a very astute, educated listener. I don't think we have to assume that just because a company is on the radio, the listener is going to buy the stock. I don't assume that at all."

n

On June 3, the same day that Cicci appeared, Levy interviewed Adnani, not as the president of Blender Media, but as the president of a bulletin board company called Uranium Energy Corp.

"Good day. Thank you for having me on the show," said Adnani, without telling the listening audience that it was his show.

"Oh, it's terrific. You know this is an area that excites me," Levy effused.

Levy asked the usual soft questions. Many appeared to be designed to stimulate interest rather than elicit information. For example, he pointed to the rising price of uranium and suggested to Adnani "it makes these projects extremely viable, does it not?"

Of course, Adnani agreed.

When the interview came to an end, Levy issued another less-than-earnest disclaimer: "Terrific. And again, go to your broker, your financial advisor. This is the speculative part, but let me tell you, I like this story."

There are, however, many reasons -- all unspoken -- not to like this story. Many of the same questionable characters in Uranium Energy are also in Lexington, including Jewett, Atkins and Pierce.

There are also several corporate shareholders domiciled in offshore tax and secrecy havens that hold large blocks of cheap stock, ready to flood the market if it shows any signs of life.

They include 2,735,000 shares held by Isaiah Capital Trust in Jersey in the Channel Islands, and 4,875,000 shares held by Golden West Investments Ltd. in the Turks and Caicos.

The beneficial owners of these shares have not been disclosed. Adnani offered no information about these shareholders, and Levy didn't ask.

Each show features an interview with a financial "expert," but not all qualify as such. One is U.S. newsletter writer Jay Taylor, who publishes the Gold & Gold Stocks Review. He was interviewed on June 10.

Taylor has promoted some obviously fraudulent companies over the years. One was Naxos Resources, an Alberta Stock Exchange company which claimed to have a proprietary method of detecting and extracting gold from desert dirts. Another was Delgratia Mining, which traded on Nasdaq. Both were exposed as frauds.

Another Taylor favorite was Thermo Tech Technologies, a Langley company that developing composting technology. "We continue to believe this company has a share price potential in the $50 to $70," he said in October 1997. But the company was corrupt and continued to amass multi-million-dollar losses.

"Every story needs a story-teller and there is little doubt that newsletter author Jay Taylor is one of the best," Canada Stockwatch reporter Lee Webb wrote in November 1998. "He is articulate and persuasive, and the fact that he is frequently wrong doesn't seem to lessen the appeal of his stories."

Another good story teller is David Hodge, who was interviewed on June 24 as president of Commerce Resources Corp., a mineral exploration company.

Hodge was president of George Resources Corp. in June 1997 when the company issued impressive gold assays on its Bolivia property. The share price soared, then plunged when the company revealed its assay laboratory, Actlabs of Colorado, had inadvertently over-stated gold values by five times.

No fault was attributed to George Resource, which changed its name to Rocca Resources and acquired Siegesoft.com Inc., which claimed to have developed Internet privacy software. "Siegesoft.com's inception reads like a storybook,'' Rocca gushed, describing how a 15-year-old Chicago "whiz kid" had designed the software after he was unable to take an advanced math course.

The whiz kid angle created some positive media coverage and the stock surged, providing a mysterious Turks and Caicos company, which had fortuitously loaded up on shares before the company's announcement, with a huge potential profit.

Alas, the deal was later scuttled and Rocca's stock melted.

"Let's put this in perspective," said Levy. "I am paid a nominal amount to ask questions. I do not have the opportunity to do due diligence on every single person who comes on the show."

Now that he knows the background of some of his interview subjects, does it make any difference to him?

"Absolutely, this could make me change my mind, but I'm not going to react to something that somebody tells me on the telephone," he said.

Asked whether the fact he is interviewing people of questionable character could injure his reputation as a financial analyst, he said: "That's an extremely good question. I had hoped that by putting caveats in myself, that I had eliminated that [possibility]."

However, he added, "You've made me step back and take a deep breath."

CKNW general manager J.J. Johnston stressed that the radio station clearly identifies the program as an advertorial, and that Levy issues additional disclaimers.

But he allowed that the background of some guests "were not completely known. There's nothing illegal about having those guests on, but our reputation is very important to us. We have to do better due diligence, and we will."

dbaines@png.canwest.com

[tuned]

Thanks for posting this. Basically CKNW is selling out the goodwill that has been built up with listeners over many decades for cold, hard cash. Unlike TV infomercials it's alot more difficult to tell you are being sold a bill of goods when the same people generating your editorial content are also shilling for anybody with a big enough wallet. Canwest is in pretty bad shape maybe they can get Tony and some of the other newsies to do some infomercials to fatten up the bottom line. I wonder how much Corus is getting of the 6500 bucks per "client since they can probably jam up to half a dozen in an hour for thirty nine large. The whole thing is ing but the only solution is to turn it off because obviously the CRTC doesn't care, Levy has no integrity and Corus only wants the cheque to clear. Reputable broadcasters shouldn't allow people that contribute editorial content to do what Levy is doing but then Corus probably isn't paying him or are they? The big loss in NWs cume is probably because the weekends are a write off now. One sleazy infomercial after another. Listeners figure it out eventually.

[kat]

Does Michael Campbell not charge a fee for "guests" on his show? I have heard this from several sources over the years. Did a long time talk show producer not depart the Black Tower because of a dispute with Mr. Campbell over the booking of guests when he was filling in on Bill Good's old afternoon show?

Do you really think that the referrals made by Shell Busey on his weekly 3 hour infomercial are being done as a gesture of kindness by Mr. Shell?

Much of the "information" programming on NW is only there becuse it's lining some people's pockets with wads of cash.

Frank Griffiths must be spinning around in his grave.

[segueking2]

I better be careful here....but I want to most emphatically point out that JAY TAYLOR who is basically bad mouthed by the writer - does not get a chance to defend himself...so I will.
He admits he makes mistakes, and yet, he also notes that Baines doesn't mention Mr. Taylor's succesful picks in the past. This is a speculative business, and Baines seems to miss the fact.
Best we let the lawyers watch this one. :ph43r:

[tuned]

Best we let the lawyers watch this one? Why? You don't think Baines should be exposing this kind of crap to listeners who might be tempted to invest their dough in a bunch of "pump and dump" operations? I don't think Baines "bad mouthed" your buddy but just stated the cold, hard facts. Speculative is one thing but fraud and insider dealing is a whole different story. It's a good thing that Canwest doesn't own NW otherwise the story might have been spiked. Good on Baines for shining a bright light on a bunch of hoods and their accomplices at Corus. I have more respect for a guy that puts on a ski mask and sticks up a 7-11 than the smooth talking scamsters that are involved in OTC stock promotions.

[segueking2]

Better be careful before you call someone a FRAUD artist.

Since you have no idea what you are talking about - please continue and keep making a bigger fool out of yourself, than you already have.

You wouldn't know if a "put" bit you right in the "call".

[Glen Livingstone]

J.J. can spin this any way he wants; the fact is anything that casts aspersions on the way a company conducts itself is inherently a bad thing and something to be avoided.

I think - in his article - Mr. Baines has raised enough red flags to at least cause some concern for 'NW. Even if it turns out that everything is completely above board, the question remains: who wants to be seen to be in bed with these promoters?

And if there was the slightest chance that people were buying into these stocks and ended up losing money, of course they're going to be pissed off - and some of that anger will be directed towards 'NW, because that's where they heard about it. That certainly can't be good.

Is the loss of the goodwill of the audience for these advertorials worth the $6500.00?

I guess, according to JJ's explanation, the answer is yes.

[tuned]

I'd better be careful? Is that some kind of threat? I never called anyone a fraud artist.
Why don't you stick to the topic at hand which has to do with radio and NW selling out it's listeners. If you want to defend a bunch of ex VSE crooks go and do it somewhere else pal.

[Stn Brk]

Broadcasting shows like the one hosted by Levy proves to me that Corus does not have long term plans for its radio division. This is short term, wring the money out of the property as fast as possible thinking. Then sell the radio division off in a package - similar to the CHUM deal.

I do feel sorry for the listeners - those who remember when NW was a great radio station and keep hoping for a return to quality programming. It ain't going to happen.

[segueking2]

I love these guys that decide that it's ok to call someone a crook, when you have no freaking idea what you are talking about.
You manage to read most of the big words in one article and you are an expert.
Guess that qualifies you to do what?
Polish Ted's VW?

[Cliff Bashly Kinkade]

Sorry segueking, but nothing in the article struck me as anything other than fair comment. Unless of course you know something of the author's motivations that would imply intent, malice or malpractice, then there is no case. And Levy is far from the last Corus chatter to lob softballs at interviewees to please head office and sales people.
In fact, the whole article has enough wiggle words mixed with what I imagine are checked background facts to be considered safe. The writer is shining a light on the shortcomings of a media outlet. The media in question seems to admit as much with this quote,

"But he allowed that the background of some guests "were not completely known. There's nothing illegal about having those guests on, but our reputation is very important to us. We have to do better due diligence, and we will."

[Mike Cleaver]

This is not a knock on any particular broadcasting operation and I've worked for most of them.
I have a real problem with business news people and business commentators who are not employed by the broadcaster, who are brought in to cover and comment on business news while actively involved in promoting their own businesses.
How can you possibly believe that they are impartial reporters of business news, giving you all sides of the story when their prime focus is in keeping their core business (ie: not radio, television or print) making a lot of money.
You don't think they're going to promote products and services that are going to increase their personal bottom line?
It's just the same as permitting news people to do advertising, lending their news credibility to sponsors for some extra bucks or talk show hosts doing infomercials and commercials.
I also loathe corporations who allow infomercials, even if those infomercials have been proven false and/or misleading in another jurisdiction but allow them to run anyway and simply add a stronger disclaimer which really means "don't believe anything you are about to hear but spend money on it anyway."
It's the same having a pro football coach double as a sportscaster or a hockey team manager doing the sports report.
Listeners, watchers and readers aren't as dumb as you think.
As credibility erodes, so does your audience.

[segueking2]

Mike Cleaver hits the nail on the head.
Nice work.
Think it is rather telling, in CKNW's case = Bill Good mentions that 'these infomercials pay the bills'.
They would not have to rely on weekend shows if they had a product that people cared about.
Once the audience smartens up to what's going on - they move on, and they have.