Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, May 30, 1994 TAG: 9405310117
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: By JANE BRYANT QUINN THE WASHINGTON POST
DATELINE: NEW YORK LENGTH: Medium
Hold onto your wallet. You're being pitched for one of the many technology scams bubbling out of the boiler rooms that specialize in high-pressure telephone sales.
The SMR business itself is legitimate; it's a two-way communications system that might compete with cellular phones; but when you send money to boiler rooms, you can't expect to see it again.
Law enforcement agents say that SMR is the successor ploy to the dubious wireless-cable deals that at least 12 states are investigating.
After SMR may come phone pitches for personal communications services, a mobile system for voice, paging and transmitting data.
Very soon, the Federal Communications Commission will start auctioning sections of the airwave spectrum for PCS and other uses. Every new technological development is fodder for boiler-room artists, who are experts at separating innocents from their money.
The wireless-cable story is a good example of the risks you run when you say yes to a stranger who pitches you for money.
Wireless cable is a small but growing business that transmits cable channels by microwave to a small dish antenna on your roof so you don't need a cable connected to your home. Wireless cable costs less, but can operate only with line-of-sight transmissions. High hills and buildings block the signal.
To run a business, an entrepreneur needs to own a wireless-cable license. He also has to control enough viewing channels - usually 20 or more - to offer an attractive service.
The high-pressure promoters claim to have what they need to launch a successful business. They typically ask investors for $10,000 to $20,000, purportedly to help build the systems. They may promise a ``low-risk'' 600 percent profit after five years.
What the salespeople don't mention is that they may pocket 38 percent to 50 percent of the money you put up. And it's not at all clear whether the remainder will be used for the purposes you expect.
Last month, law enforcement agencies from several states, who are investigating wireless-cable boiler rooms, raided the business offices of lawyer Richard Weintraub of San Diego and Jon Marple of Newport Beach, Calif.; there was also a raid in Georgia. The sweep focused on nine wireless-cable companies. No charges have been brought.
According to California's Department of Corporations, these companies have been offering partnerships and shares in limited-liability corporations all over the country, to acquire, develop and market wireless cable systems in Baton Rouge, Shreveport, La., Des Moines, Boston and Erie, Pa.
The states are investigating whether the promoters should have registered their offerings with the state, what their businesses consisted of, what they told investors and what happened to the money.
Marple issued a statement saying, ``Once we have been able to present all the facts, Micro-Lite Television [Marple's company] will not be charged with any wrongdoing whatsoever.'' An attorney for Weintraub says that Weintraub never offered or promoted wireless cable, nor is he affiliated with any such company.
Indiana has issued cease-and-desist orders to 11 wireless-cable boiler rooms and is investigating at least 20 others. Colorado recently froze the assets of Infotech Group Inc., which was selling $5,000 participations in a wireless-cable deal in Parkersburg, W.Va. (No one answers Infotech's phone.) California has another 57 sales operations under investigation, one of which is offering a system in Madison, Wis.
The Securities and Exchange Commission has brought at least four cases against wireless-cable promoters. The Federal Trade Commission has brought actions, too - as well as actions against five SMR operations.
Investors shouldn't confuse the legitimate wireless-cable business with the boiler-room sales deals.
The industry has a future, but ``it's not realistic for a small investor to be involved,'' says Ralph Widmar of Network Intelligence, a telecommunications consulting firm in Monterey, Calif. ``We're not even sure what the playing field looks like, or who the players are.''
At least seven public companies are getting into wireless cable, four of which went public just this year. A.G. Edwards stockbroker Billy Eskind in Nashville, Tenn., looked at the three older companies (none of which have earnings) and judged them ``speculative stocks selling at outrageous multiples of earnings.''
A far better bet for investors who love the cutting edge are mutual funds that specialize in science and technology stocks. They're up 63 percent over the past three years, according to Lipper Analytical Services, while investors in hyped wireless cable deals are likely to lose every dime they put up.
by CNB