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Conmen who exploit terror fears By Tony Hetherington
Say what you like about the stockmarket sharks who use tall tales to sell shares in shaky companies - but they do know a bandwagon when they see one. And as a result the contents of your average newspaper or TV bulletin at the moment A few months ago, I warned against investing in a Newcastle-upon-Tyne-based company called Worldwide Bio Refineries. Offering shares through a long list of unlicensed brokers, the firm's selling point was that it turned vegetables into diesel fuel, cutting out the need for oil. Investors were being charged up to 50p a share, with the story that they were about to be listed on the stockmarket. But today the shares remain unlisted and the company is caught up in an investigation by the Serious Fraud Office. Bio-fuels may be a fashionable idea, but a shady share is still a shady share. Take Viaspace as another example. According to an expensive-looking full-colour brochure sent to thousands of homes all over Britain, this California company has developed a hand-held device that can detect chemical, biological and nuclear weapons, as well as drugs and explosives. Against the background of a sinister looking picture of Osama Bin Laden, the brochure confidently claims: "Viaspace has the answers to homeland security issues." Investing in security Equally prominent is the question eager investors are invited to ask: "Could my £1,000 investment turn into £100,000 or more if I get in early?" The answer, of course, is yes it could, with big money to be made from the US's huge security budget. In fact, there are big figures scattered throughout the brochure. The US and Europe are reckoned to spend £44 billion a year on security. And Viaspace's boss used to work for NASA with a budget of £40 million. Yet there are no concrete figures for current earnings. No accounts. No projections. Nothing that any prospective investor could weigh up before making a decision. The best you are offered is an 0800 telephone number that actually rings through to the US, and a smart address in Mayfair in London that turns out to be a maildrop, with no sign of Viaspace. Now here's the crunch: what I have not mentioned so far is that this brochure was issued two years ago, so we can see today how things have worked out. Then, Viaspace shares stood at about $5 (almost £2.50) in the lightly regulated over-the-counter market. Since then, almost without interruption, the shares have slid and have recently been changing hands at just over 30 cents (15p). This is because the glossy brochure failed to mention the fact that the main thing Viaspace makes is losses. In fact, it has told investment watchdogs in the US that it may never show a profit at all. The brochure's optimistic claims about detecting terrorists were nothing more than a bid to bump up the share price on the back of the 2005 London tube bombings. When companies offer loads of information about their industry, but little about themselves, and when they are clearly climbing aboard a fashionable bandwagon, that should be enough to start alarm bells ringing and warn investors to keep their cheque books closed. Tony Hetherington is Consumer Champion of the Year 2006.
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