RADIO DAZE FOR INVESTORS: STATIC GROWS AS SCHLOCK SHOWS PUSH STOCK PICKS WITH A VALUE NEAR NIX

The way Michael Cardascia tells it, Fix-Corp International Inc. is one of the stock market’s undiscovered gems.

“The potential revenue growth is absolutely mind-boggling,” Mr. Cardascia recently informed listeners to Inside Wall Street, his talk show on New York radio station WEVD-AM. “It’s absolutely incredible what’s going on.”

Later in the show Fix-Corp President Mark Fixler touts the growth potential of the company’s core businesses — recycling plastic and recovering oil from used fuel containers. He claims Fix-Corp’s revenues will soar to $200 million in 2001 from $3.7 million last year.

“Unbelievable,” gushes Mr. Cardascia.

Omitted from this discussion is the fact that Fix-Corp lost $828,466 last year, the second straight year the company was awash in red ink. Mr. Cardascia also fails to mention that he and his show are the target of an Securities and Exchange Commission lawsuit. Or that he recently settled a prior SEC suit stemming from his days as a stockbroker in Florida.

Why is Mr. Cardascia so bullish about Fix-Corp? It turns out that Fix-Corp paid his company, Strathmore Equity Services in Port Washington, N.Y., $14,500 in order to appear on Inside Wall Street. Only after the SEC launched an investigation last month did Mr. Cardascia begin telling listeners the details of such arrangements.

Mr. Cardascia is one of two WEVD hosts now being sued by the SEC for failure to fully disclose such payments. The other, Jerome Wengert, also faces criminal charges brought by the U.S. Attorney’s Office in Manhattan that he and 17 others committed securities fraud. Attorney Mary Jo White has not ruled out filing charges against WEVD, which sells airtime to Mr. Cardascia and other hosts.

The crackdown on radio show personalities like Messrs. Wengert and Cardascia comes at a time when more novice investors are playing the booming stock market. Con artists who once relied on cold calls are now flocking to radio, television and the Internet.

“It’s the elderly, the less sophisticated investors who act upon what they hear on the radio without doing much investigation,” says John Markese, president of the American Association of Individual Investors. “They believe someone on the radio touting a stock has legitimacy simply because he is on the radio.”

Even if Mr. Cardascia’s listeners are inclined to do their own research, investigating the companies he promotes is no easy task. None are followed by analysts with major securities firms. Several of the companies have been late in filing earnings statements with the SEC.

Mr. Cardascia’s attorney, Ira Lee Sorkin of Squadron Ellenoff Plesent & Sheinfeld in New York, says his client now discloses any payments he receives and thus is in compliance with federal securities laws.

prosecution difficult

Mr. Cardascia would still be violating the law if he is willfully misleading investors about the prospects of the companies he promotes. But prosecution would be difficult.

SEC officials are less circumspect. “Obviously, if he’s making misrepresentations about a company’s growth potential, that would be another issue that we could get involved in,” says Anahaita Kotval, senior trial counsel with the SEC. “But that kind of thing is not easy to prove.”

Another company Mr. Cardascia promotes on his show is Campbell Technologies Inc., a Canadian firm that develops software and sells Internet service provider, or ISP, franchises. Campbell’s stock price has declined 60% over the past year and now trades at less than 50 cents per share.

Yet that hasn’t stopped Mr. Cardascia from plugging the stock. ” He tells listeners: “Just mention you’re selling a product over the Internet, and stocks are tripling and quadrupling.”

Campbell has yet to file a financial report with the SEC, but company official Tom Dodd tells Inside Wall Street listeners that he expects revenues from software and ISP franchise sales to reach $4 million this year and then increase tenfold by 2003.”Wow,” replies Mr. Cardascia. Moments later, he discloses that Campbell paid Strathmore 50,000 shares of its stock in order to appear on the show.

Mr. Cardascia is just as excited about Biopharmaceutics Inc., a Bellport, N.Y., firm developing a new cancer drug called Mitolactol. Biopharmaceutics is at least a year away from getting Food and Drug Administration approval but that doesn’t stop Mr. Cardascia.

‘great things’ — like 23% drop

“There are some really great things happening with (your) company,” he tells Biopharmaceutics Chairman Edward Fine on a late April show. Mr. Fine then predicts annual revenues from the drug could hit $250 million once it is approved. The host later discloses that the firm paid 50,000 shares to appear on the show. Not disclosed is that the stock is down 23% this year or that in no prior fiscal year have total revenues exceeded $9 million.

Firms that pay Mr. Cardascia for air time insist they’re not concerned about his legal woes. Joe Lanza, who was on Inside Wall Street on behalf of Xecom Corp., says the SEC’s action was unwarranted.”Don’t you know these are ads?” says Mr. Lanza. “If listeners don’t know that, I think they’re being very foolish.”

Crain News Service