Sunday, December 5

AEHI Paid Distribution: The Third Factor In Penny Stock Fraud

Let's see how far we've come: I summarized some of the misrepresentations behind AEHI. In a sense this is the original sin in penny stock fraud. I also talked about how technical market manipulation is used in the case of AEHI to directly manipulate the share share price.

But if you want to make money selling shares to retail investors you also need to get the news in front of them. Let's call that aspect "Distribution", it's mostly accomplished via email, fax or mail. Paid distribution is related to astroturfing which AEHI is also engaged in as we've discussed in an earlier post.

It's important to note that paid distribution's only purpose is to drive up or hold up the price for someone who's selling.

No real company would engage in paid distribution campaigns for the following reasons:

  1. They hurt the company because of the direct costs.
  2. They hurt incoming shareholders long term because they buy at inflated prices.
  3. They don't bring in money for the company, only for the sellers.
  4. They are unethical and borderline illegal.
Luckily paid distribution campaigns without disclosing compensation are illegal. That makes it easy to identify them. But the disclosures are buried in the fine print so you do have to look for them.

Lets look at the news coverage about AEHI on Google Finance. In addition to the exaggerated, fluffy and misleading releases of the company we find the following releases:
  2. 12/2/10: Lucky Picks of The Day: (PINKSHEETS:MMUH) - (OTCBB:AEHI ... 
  4. 11/30/10: Lucky Picks of The Day: (PINKSHEETS:SPPH) - (OTCBB:ECRY)- (OTCBB:AEHI) 
  5. 11/22/10: OTC Tip Reporter: Hall of Fame Beverages, Inc. (PINKSHEETS: HFBG), China Medicine Corporation (OTCBB: CHME), Alternate Energy Holdings (OTCBB: AEHI)
  6. 10/14/10: Lucky Picks of The Day: (NASDAQ:GNBT) - (OTCBB:AEHI)- (OTCBB:MNDP) 
  7. 1011/10: OTC Stocks with Top News: AEHI, GMTD, NUBL and MXOM 
Most of these releases are distributed by email to anybody who signed up to their mailing lists. And lets see whether AEHI paid for these distribution campaigns:
  • AEHI — Alternate Energy Holdings, Inc.: We have been compensated $5,000 from Alternate Energy Holdings, Inc.
  • AEHI — Alternate Energy Holdings, Inc.: We have been compensated a total of $10,000 from Alternate Energy Holdings, Inc.
  • Otc Advisors: AEHI - Alternate Energy Holdings, Inc.  We have been compensated a total of $10,000 from Alternate Energy Holdings, Inc.
  • Otc Tip Reporter: Doesn't disclose compensation by company. However the release itself contains this disclosure: Since receives compensation and its employees or members of their families may hold stock in the profiled companies, there is an inherent conflict of interest in statements and opinions and such statements and opinions cannot be considered independent.
  • OTC Stocks with Top News: Because Omni receives compensation for LBNEWS’s dissemination of the Information (as disclosed in our Compensation Disclosure Section), predominately in the form of common stock shares (the”Shares”), our publicy disseminated publications should not be regarded in any manner whatsoever as independent. 

In summary there's overwhelming proof that AEHI does in fact use paid distribution to entice retail investors to purchase its stock.

Note how the promotions have become more intense recently, just as the technical manipulation, yet none of the two have created a sustained advance in the stock price. These are signs that we're close to the end of the life cycle of this operation. There are other signs which I'll discuss in a later post.

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