By Joel Warner
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Highly speculative in nature, penny stocks appeal to investors hoping to make a killing in a short period of time. In the 1980s Denver was a major center for the penny-stock industry, but those days came to an end after a scandal brought down Meyer Blinder, Denver's penny-stock king. The elderly Blinder served forty months in federal prison after being convicted of racketeering, money laundering and securities fraud in 1992. Blinder helped deceive investors as part of a $25 million offering for a company that held no assets and had no business purpose.
The uproar over that and other penny-stock ripoffs led the SEC to crack down on the penny-stock business. That sent many promoters scurrying over the border to a Canadian city that's become an important penny-stock center: Vancouver.
Securities regulation in Canada is much looser than in the United States, and that's made the Great White North a favorite destination for penny-stock hustlers. "A lot of activity has moved to Vancouver," says Colorado Securities Commissioner Phil Feigin. Vancouver always had an active penny-stock market, Feigin adds, but it never attracted much attention until American authorities clamped down on activity here.
When he was indicted in October, Harper was actually in Vancouver, where he was working as an investment advisor for Western States Consultants, a penny-stock firm. He returned to Colorado and was allowed to post a $25,000 bond.
Feigin says some penny stocks are for legitimate but risky business ventures, while others are based on nothing but hype. The first phase of a penny-stock offering is often purchased by insiders. "Virtually anyone buys a penny stock in the belief the price will go higher," he says. "They're trying to get in on the ground floor."
Many sophisticated investors will even invest in private-placement offerings they know are scams, on the assumption they can make a quick profit when the company goes public, selling their shares before it becomes obvious the business is a fraud. "There's a greater-fool theory," says Feigin. "There's always somebody down the road who will be even stupider than you are."
Feigin says the bull market of the past few years has made some investors overly confident. He cautions those interested in high-risk investments to tread carefully. "If you're dealing with a start-up company with wild ideas, red flags should go up," he says.
Harper intended to take his Argo Tunnel scheme public after completing the private placement. Under SEC regulations, private-placement solicitations--known as regulation D offerings--are limited to people who already have a business relationship with a broker and have substantial cash reserves. The intent is to protect inexperienced investors.
After wrapping up the private-placement offering, Harper was planning to return to the market and do a regulation A offering for $5 million to the general public. For example, he could have pitched shares to the 3,000 people who responded to the radio and television advertising campaign.
But by last summer the CBI's investigation of the Argo Tunnel scheme was under way, and Harper and his cronies dropped the planned public offering. Their opportunity to make a quick fortune also probably vanished.
For now, all that's left of Christian and Cheryl Harper's once-lavish lifestyle is a lengthy court record, including lawsuits from sundry creditors. Legal actions against the Harpers include a December 1990 suit filed by Stevinson Jaguar, alleging the Harpers wrote a bad check for $35,000 on an account at the Royal Canadian Bank. The 1990 Range Rover they purchased with that money was repossessed by order of Denver District Judge Lynne Hufnagel.
In 1992 Harper was arrested in Cherry Hills Village after a contractor working on his Viking Drive home claimed he had given him a bad check for $75,000. The home was in the process of being foreclosed on by Aurora National Bank. Harper later pled guilty to a class-three misdemeanor for writing the check.
The pressures of the CBI investigation may have taken a personal toll as well. In August of 1995 Christian Harper was arrested on a domestic-violence charge, after he allegedly assaulted Cheryl at home. He was also charged with flourishing a weapon. Both charges were later dropped.
Despite his repeated brushes with the law, Harper remains free to travel. He won that privilege when his attorney successfully convinced a judge that Harper hasn't tried to bolt from police since he was a young car thief. "That [earlier] immature behavior was severely punished," Cross noted in his motion for bond reduction, and since then Harper has been more willing to show up in court. After all, the attorney wrote, Harper came back to Colorado to stand trial after he was arrested in New York on the bad-check charge from Cherry Hills Village.
Today, the attorney added, his client needs to travel to earn a living, including taking trips to places like Vancouver. And with the commitment from Achieva to buy out the Argo Tunnel Corporation assets, Harper clearly hasn't given up on selling the bright future of the Argo Mill. To this day, visitors to the mill receive no inkling that anything's amiss with the fantastic monorail project that landed Harper in front of a grand jury.
The bright-red five-story building is something of a landmark along Interstate 70, and for $10, anyone can tour Maxwell's mill and the old mine. A scale model of the Argo project still sits in the gift shop, showing the massive parking structure next to the mill and the gleaming monorail heading off into the mountain.