OSC says Agoracom rigged forum discussions
Ticker Symbol: C:*OSC

OSC says Agoracom rigged forum discussions

Ontario Securities Commission (C:*OSC)
Monday April 05 2010 - Street Wire

by Janice Shell

Last year, stock promoter Charles Desjardins was unusually excited. His company, North American Gem Inc., had just appointed Agoracom its investor relations firm. He said Agoracom had replaced the telephone and e-mail as IR devices.

The year before, Robert Bick of Evolving Gold Corp. was almost giddy. His company would even be named as one of the prestigious Agoracom 100, an elite and exclusive group of great Canadian small-cap companies. "With $18 million in the bank, and a discovery in Western USA, we want as many people as possible to know about EVG."

Other excited companies included African Gold Group Inc., Firestone Ventures Inc., Northern Tiger Resources Inc., Crosshair Exploration and Mining Corp., Nevada Sunrise Gold Corp. and Garibaldi Resources Corp. to name a few.

On April 1, 2010, the OSC had a surprise for Agoracom and its many clients, and it was no joke: it announced an enforcement action against Agoracom Investor Relations Corp., Agora International Enterprises Corp., George Tsiolis and Apostolis (Paul) Kondakos.

The notice of hearing

The OSC will conduct a hearing on this matter on April 26, 2010, in Toronto. The purpose of the hearing is to determine whether the securities registration of Mr. Tsiolis and Mr. Kondakos should be suspended, restricted, or terminated, or that terms and conditions be imposed on the registration. The two men may also be prohibited from trading in or acquiring any securities, temporarily or permanently; they may also be banned as directors or officers in any issuer, and barred from working as promoters as well. They could be fined up to $1-million apiece for their alleged transgressions, should the commission see fit.

The stakes are high for Agoracom, Mr. Tsiolis and Mr. Kondakos. Agoracom could, perhaps, be shut down; its founders might find themselves unemployed and unemployable in their chosen line of work.

The OSC's allegations

The OSC's allegations centre on the Agoracom website, and specifically address management's administration of the discussion forums. According to the statement of allegations, between Sept. 1, 2006, and July 31, 2009, Mr. Tsiolis and Mr. Kondakos required their representatives, as part of their daily responsibilities, to post anonymously to the client forums using aliases. To post anonymously, the representatives created fictitious usernames and posed as investors blending in with other users, investors, and interested persons. Representatives had between 40-50 aliases (some had up to 200) and were required to make a requisite number of posts per hub per day or risk having their pay docked, says the OSC. On occasion, Agoracom staff conversed with themselves on the forums using different aliases.

The OSC explains further that Agoracom management and employees posted more than 24,000 anonymous messages on client and non-client hubs, using more than 670 aliases. The messages were promotional in nature, and advised buying or holding the stocks in question.

Some of these posts were made from Mr. Tsiolis s home.

According to the OSC, neither site members nor Agoracom clients knew that Agoracom staff were posting anonymously on the user forums. As part of the company's investor relations services, clients received monthly reports detailing the number of posts made on the client's hub, and the number of shareholder inquiries received. Clients were not told that many of those posts were written, and inquiries made, by Agoracom representatives.

Agoracom attempted to conceal their staff s posting activity, says the regulator. In March, 2009, an employee using the alias Goldilocks accidentally gave himself away. Mr. Tsiolis, pretending shock, put out an official statement in which he assured users that this was an isolated incident, and promised that the miscreant would be punished by a 60-day suspension.

The OSC views the conduct described above as misleading and fraudulent, believing its intention was to persuade clients to renew their contracts, to attract new clients, and to increase the value of Agoracom's stock options. It suggests the client companies would have been unhappy with Agoracom's practices.

Agoracom's response

Only hours after the OSC action was made public, Mr. Tsiolis rushed to defend Agoracom, his partner Mr. Kondakos, his staff and himself. Mr. Tsiolis insists that far from engaging in dishonest practices, Agoracom has spoken out against the pitfalls of an industry plagued by fast-money boiler rooms, e-mail and fax spam, and chose to focus on long-term online investor relations campaigns. He adds that the OSC allegation of fraud pertaining to traffic and activity on client HUBS is unfounded and without merit.

He does not precisely deny the allegations or the activities in question; he objects to their characterization as fraudulent. Explaining that the posts in question were meant to act as catalyst[s] to spark conversation, he offers his personal insight into the minds and habits of message board posters: "From our first days in school, to our first high-school dance, to the local town hall meeting, people are naturally afraid to be the first to speak or act Small-cap investors are no different. I have heard time and time again about their fear of asking simple questions that might demonstrate a perceived lack of knowledge, or contributing information that isn't smart."

Agoracom was facilitating this.

History of Agoracom

Agoracom International Enterprises was founded in 1997; Agoracom Investor Relations in 2007. Run by Mr. Tsiolis and Mr. Kondakos, both companies are domiciled in Toronto. The investor relations firm contracts with clients, for the most part small companies trading on the TSX Venture Exchange, to provide public relations services. The two companies, known together as Agoracom, maintain a financial website that offers information about small cap companies, and features message boards on which members of the public can discuss their investments. Every company covered has its own hub. Each hub contains links to news, statements by management, press releases, stock quotes, photos supplied by the company, and two discussion boards, one on topic, the other off topic. All Agoracom s clients have hubs; so do many other companies not represented by Mr. Tsiolis and Mr. Kondakos.

The client companies are for the most part distinguished from the non-client companies by their inclusion in the Agoracom 100, a list featured prominently on several pages of the website. Currently, there are only 38 entries. In an accompanying video, Mr. Tsiolis explains that the Agoracom 100 is designed to contain up to 100 wildly promising little companies that are bound to be of great interest to savvy investors.

Agoracom s clients are offered several different pricing models, the most common of which entails payment of a monthly fee, usually $3000, and stock options equaling the greater of 250,000 shares or 0.5 per cent of the company's shares. A few clients prefer to pay a higher monthly fee, with no accompanying options.

Mr. Tsiolis and Mr. Kondakos are also principals in a subsidiary of Agoracom Investor Relations called Agoracom Capital. Agoracom Capital is a fully licensed limited market dealer offering help with private placements. Both Mr. Tsiolis and Mr. Kondakos are registered as dealing representatives and approved as permitted individuals under the category of exempt market dealer.

A nefarious plot

Agoracom is not without its supporters. Chief among them is Dominic Jones, an investor relations professional and founder of IR Web Report. In the wee hours of the morning after the news from the OSC broke, Mr. Jones posted on Twitter that he was so upset he was unable to sleep. Wondering if there was more to the enforcement action that met the eye, he noted: Way I see it, OSC wants to hurt agoracom And who benefits? Well, a couple of Toronto IR firm competitors have close links to OSC brass.

Mr. Tsiolis evidently suspected the same thing. On his blog the evening of April 1, he wrote a piece titled Blackballed by the Big Boys on Bay Street, he reminded readers how the Agoracom Noront Shareholder Community had courageously staved off a hedge fund takeover of Noront Resources. Richard Nemis, chairman emeritus of Noront, gave full credit to the investor group, saying, Without the Agoracom support, we never would have come to a balance with Rosseau and never have been able to negotiate the kind of agreement that we did negotiate

Mr. Tsiolis further contends that his site's Aurelian Warriors prevented a friendly takeover of Aurelian Resources by Kinross Gold in 2008. He believes that as a result of these two shareholder revolts, Agoracom was blackballed immediately.

This lament has, of course, nothing to do with the OSC's actual allegations.

Commentators and clients

Some fallout from the OSC's bomb has already drifted to earth. On the night of Easter Sunday, Peter Grandich, a paid promoter, investor relations man and Agoracom Chief Commentator, resigned his post, explaining, "In light of the allegations brought by the Ontario Securities Commission against Agoracom and certain of its directors and officers, I felt I had no choice," adding, "What was to be four days of solomn prayer then celebration ended up four of the worse days in my life."

None of Agoracom s 36 current clients (for some reason not all client companies are on the site's Agoracom 100 list, and not all Agoracom 100 companies are clients) has publicly announced a parting of the ways with its investor relations firm.

Several of the company s clients made video testimonials that are posted on the website. David Lucatch, CEO of Intertainment Media, has been with Agoracom since its inception. He could not be happier: "Agoracom provides me access through their web opportunities to things we never originally contemplated when we started our business. That includes the IR Hub, press releases, and quality service that include the Blackberry opportunities, Yahoo, Google, and we're very pleased with the services we receive from Agoracom and I would recommend them to every small cap company in the marketplace today."

Nigel Lees, president and CEO of Sage Gold (TSX.V: SGX), is equally impressed: "We ve engaged Agoracom for over a year to do our external IR. They work very well with our internal team. They provide, in my view, excellent service. They've got excellent reach, online reach, a very large audience, and basically I think they've been extremely helpful in creating interest and liquidity in our shares."

Evidently some clients remain undismayed by the OSC enforcement action. On his Twitter page, Mr. Tsiolis proudly reports: "Client text message I have no doubt you'll come out the other end ok. You're one of the good guys. Love ya. We have awesome clients."

A final oddity pops up for anyone who goes to the Agoracom website and does a keyword search for Agoracom. The searcher is rewarded with information that Agoracom trades on the U.S. OTCBB with the ticker AGORA. Even more surprisingly, the Agoracom Gold Investment Community is said to trade on the AMEX with the ticker HUI. The Agoracom Silver Investment Community supposedly trades on the AMEX as well, as SLV. The last two tickers do exist, and do trade on the AMEX as indices, but they have nothing to do with Agoracom.

� 2010 Canjex Publishing Ltd.