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Sunday, April 29, 2007

Giving New Meaning to Green Revolution


The full page ad in Wednesday's New York Times suggested to me that my industry's ad sales must be really struggling. It promised riches to anyone who bought Nano Chemical Systems Holdings, a penny stock with two very important nanotech patent applications for biofuel production: "NCSH is the right company at the right time for savvy investors looking for big gains."

Nano Chemical (NCSH) actually makes spray wax sold in discount stores. The shares (ticker: NCSH) ended Wednesday at 72 cents. It takes heroism to sell print ads these days, but the Nano Chemical copy read like a spammer's e-mail. To this worshipful New York Times reader, it was as if the book of Leviticus carried a massage parlor ad -- and that was before I discovered the Environmental Protection Agency's hazardous waste proceeding against this "Green" company's factory; the Securities and Exchange Commission's open investigation; the chief executive's undisclosed fraud settlement with the SEC; and its investment banker's conviction for cocaine trafficking.

Calling the ad's phone number for more information, I reached Redwood Consultants in Novato, Calif. While I waited for a reply, I found that Redwood is run by Jens Dalsgaard, who used to be a broker with A.G. Edwards before the Big Board's regulators fined him $15,000 in 1999 for secretly trying to arrange a short squeeze in the shares of Diana Corp., a meat distributor that went bankrupt after trying to become an Internet company. Dalsgaard didn't return my call.

So I called Nano Chemical directly in Seaford, Del. When I asked for Chief Executive Alexander H. Edwards III, they referred me to the Tampa, Fla. offices of John Stanton, an accountant who's controlled several of Edwards' previous employers. Edwards became CEO this month, after the company borrowed $300,000 from a Stanton business. The company bio on Edwards details his 1987 graduation from the U.S. Naval Academy and his stint as president of a publicly-held surgical supply company. While I waited for Edwards' return call, I found that his bio left out the part about his paying $50,000 in 2003 to settle (without admitting) the SEC's civil fraud charges that he faked the surgical company's sales.
I can't blame Nano Chem for turning to The New York Times. Little else seems to have worked. In 2005, it arranged to get $1.7 million from an Italian financier who had previously bankrolled a chain of topless nightclubs called Scores. That money never materialized. In the last year or so, it's sold stock to Tampa area investors like Robert M. Esposito and Raymond J. Carapella. Esposito's Barrington Financial is Nano's investment banker. Before that, he ran nightclubs and got busted for selling cocaine. Carapella's long criminal record includes convictions for armed robbery and a scam in which he sold fake diet pills with his older brother George, who consented last year to an SEC bar against his participating in penny stock dealings, because of his prior history of running pump-and-dump stock frauds. The SEC subpoenaed Nano Chem itself last year.

When CEO Edwards called me back Friday, he said he was very bullish about where the company was headed. Since its nano-enhanced Green cleaners and lubricants were as good as or better than non-environmentally friendly products, he said, why wouldn't consumers buy them? "Lord have mercy, I have four children," he said. "I would hope that everybody would buy it."

What about the company's EPA problems? He said those were the responsibility of prior owners. The SEC? The investigation is closed, said Edwards. After glowing testimonials about IR-man Dalsgaard and banker Esposito, he said he knew nothing about their histories. "They have no active management in the company," Edwards said about their records. "And I don't see that that's germane to what we're talking about."

Was his own fraud settlement with the SEC germane? Time had passed, he said, so that he wasn't required to make the disclosure. "You sound like my wife's divorce attorney," he told me. "But I hope you put a positive spin on what we're doing here."

Stanton, Esposito and the Carapellas didn't return calls. After my inquiries to the company and its promoters on Friday, the shares plunged 27% to close at 43.5 cents, on six times their average trading volume.

The Times ad was placed by a just-formed corporation paid $232,102.94 by a "third party." That corporation's phone number is Esposito's.