SEC sets up its own investment hoax on the Web, complete with leptins

Would you invest in an established company that develops and markets handheld bio-hazard detectors? You can find out more about this unique investment opportunity at http://www.mcwhortle.com/ .

On the surface it reads like a reasonable investment. But since the 11 September 2001 attacks, the U.S. has experienced an upsurge in fast-buck artists trying to cash in on the public's hypersensitivity to terror-related fears, along with an upsurge in patriotism. Many of the scams have involved investments, and in late January the U.S. Securities and Exchange Commission (SEC) itself devised a phony investment opportunity to show how easy it is to use the Web for fraud.

Rather than preach once again about the dangers of investment hoaxes, the SEC decided to use many of the con artists' tricks to design an impressive, but fraudulent Web site to attract investors. The site claims to be that of McWhortle Enterprises, Inc., a non-existent company that developed a battery-powered device to detect "microscopic levels of hazardous bio-organisms." This device, also non-existent, "can detect even the finest-milled, weapons-grade biohazards from 50 feet, long before the risk of inhalation or cutaneous infection, by testing for the distinctive surface leptins."

By the way, a leptin, according to MedicineNet.Com is "a hormone involved in the regulation of body fat," not exactly what you want to use to protect yourself from biological hazards.

The phony investment opportunity got rolling on 25 January with a press release for the company's initial public offering (IPO), sent over PRNewswire that gets distributed to hundreds of news and business portals and Web sites, and syndicated to probably thousands more. The release gave a detailed description of the product, "Bio-Hazard Alert Detector, measuring only 3 by 7 inches, is small enough to slip into a man's jacket pocket, a woman's purse or a child's backpack." It included the standard boiler plate about "forward-looking statements" for authenticity. The site even provided a photo of the company headquarters and a streaming audio interview with the company president, Thomas James McWhortle III.

The site talked about "major financial backing from a top-tier investment banking firm (the name of which will be revealed to those who decide to invest)" and the investment was guaranteed to at least triple the value of the initial investment. Another page says the pre-IPO offering is oversubscribed, but the second stage offering should return over 400 percent of the $10 share price.

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