Political contributions are as American as apple pie, but a lot more controversial. Lately, the political fundraising process has become a lightning rod for debate. It certainly helped fuel Senator John McCain’s rise to national prominence in the early Republican primaries. Senator Bill Bradley espoused the concept too. Of course they’re both gone now. But Vice President Al Gore is still around, and he has become a staunch advocate of campaign finance reform - political fundraisers at Buddhist temples are now in his rear view mirror.
Politicians may have proposals and programs for changing the way campaign funds are raised, but they are not alone this political season. An OTC Bulletin Board company called Ecom.com, Inc. says it has an idea of its own. Ecom.com’s plan? Dialing for dollars. The Company says it has rights to two telephone numbers – 1-900 DEMOCRAT and 1-900 REPUBLICAN. It is suggesting that the two major political parties use those phone lines to raise contributions from party members around the country.
Ecom.com has been promoting this proposal since at least July 1999, through press releases and online newsletters. The Company’s announcements apparently have had some effect on investors – Ecom.com shares, which were trading at under 10 cents in December 1999, closed at 69 cents on March 14, 2000 (after hitting 75 cents that day) on volume of 980,000 shares.
The Ecom.com press releases have included financial projections that suggest significant potential profits for the Company. Still, investors may wonder whether all those numbers – especially the 900 ones - add up.
Dialing 411
Information about Ecom.com is sparse. The Company does maintain a web site, but other than promoting the 1 900 DEMOCRAT and REPUBLICAN telephone numbers as "the most significant 1 900 pay-per-call telephone numbers in the US," the site provides little information for investors. It does identify the Company’s Chairman as Sidney B. Fowlds, and its office address in Denver, Colorado (although the area code for the Company’s office is in Vancouver, British, Columbia). It does not offer any guidance on the Company’s financial condition, or provide the names of any other corporate officers, directors or employees..We were unable to find any financial information on the Company filed through the SEC’s Edgar system or through a search of other publicly available documents. (To add to the confusion there is another, apparently unrelated OTC Bulletin Board company called, of all things, Ecom.Ecom.com).
That means investors must rely upon information provided by the Company or, in this case, by a handful of press releases sent out by the Company and a series of reports by online investment newsletters that have been compensated by the Company. Even those sources, however, offer minimal information about the Company’s structure and business plan – and no details of its financial condition, operating history, management, officers or directors.
Press releases issued by the Company since mid-1999 have a common theme: Ecom.com is proposing that the Republican and Democratic parties utilize the Company’s 900 telephone numbers to raise campaign funds. When a caller dials a 900 telephone number, a fixed charge for that call is billed to the caller. Therefore, the Company suggests, by simply telephoning one of these numbers, an individual can make a political contribution.
The potential windfall? According to Company Chairman Sidney Fowlds, "each political party has over 73 million registered members, combined that’s approximately 150 million people. If every registered member of every party just phoned once, at $25 per call the parties would gross approximately $3.5 Billion….Hundreds of millions of dollars could continue to be raised every month using these two telephone numbers."
Which is basically the same as saying that if every American citizen mailed you a dollar tomorrow you would soon have almost $300 million in the bank. It’s a plan, but we wouldn’t suggest you run out and spend the money just yet.
Ecom.com has even issued pro forma cash flow projections for the project. According to the Company, there are approximately 23 million active registered Democrats and 23 million active registered Republicans. Ecom.com projects that if just 10% of those active party members (that’s 2.3 million people) called each 900 number every month, it would result in gross revenues of $23 million. Sixty five percent of those funds, or $14 million would go to the political party after expenses. Those expenses? Principally telephone company and connection charges and an 11% fee to Ecom.com.
Based on those revenues, Ecom.com projects it would receive fees of approximately $2.5 million a month, for a total of $30 million a year. If the number of callers rose to 20% of active party members, Ecom.com says its fees would total about $5 million a month or $60 million a year.
Why stop there? Ecom.com projects that if 40% of active party members made $10 contributions each month the Company would receive fees of approximately $10 million, or a total of about $120 million a year.
There’s one problem, of course. What leads Ecom.com to conclude that the phones will start ringing off the hook, even if the political parties did decide to give the 900 system a try? And just how would this program operate? Will Ecom.com be required to supply any staff, equipment or other resources? Does Ecom.com have any resources? Does Ecom.com bring anything to the proverbial table besides the two catchy 900 numbers? The Company has not addressed these questions.
Nor has Ecom.com provided investors with any basis for concluding that the political parties are even interested in utilizing the 900 line approach to fund raising. And, if they are so inclined, why would they want to pay an 11% fee to Ecom.com just for use of the 1 900 DEMOCRAT and 1 900 REPUBLICAN phone numbers? After all, that fee could reach $120 million a year, based upon Ecom.com’s projections. Surely, creative minds at both parties could find acceptable alternatives – "900-Go 4 Dems" or, "900 4 The GOP," for example – and save the payments to Ecom.com. After all, that extra $120 million buys a lot of television advertising.
Last August, Ecom.com even issued a press release indicating it would "move forward the date of release of its 1-900 ‘DEMOCRAT’ and 1 900 ‘REPUBLICAN’ political fund raising numbers to individual political candidates in order to allow candidates access to mass fund raising support prior to the upcoming primaries." Whatever became of that plan? The presidential primaries are over and, while campaign finance reform became a central issue of the campaign, none of the individual candidates appears to have availed themselves of Ecom.com’s 900 lines.
Investors may also wonder how the 900 numbers can be utilized within the framework of existing campaign finance laws. For example, if individual candidates were to use this fund raising system, how would they assure compliance with restrictions on contributions by corporations and foreign nationals? What would prevent people from using business telephones to make calls to the 900 numbers, and would such calls constitute improper corporate contributions? How would the parties monitor who was actually using a telephone to make the contribution, or be sure that campaign finance limits were not being exceeded by crafty individuals using a variety of phone lines to place calls?
Ecom.com’s press releases do not address any of these issues, or suggest what efforts would be necessary, or possible, to assure compliance with existing, or future laws.
Strange Bedfellows
Ecom.com’s announcements have created something of a buzz on the Internet – chat rooms and message boards anxiously exchange rumors of pending developments. Investor interest has apparently been fueled by the Company’s periodic press releases and a series of reports by online financial newsletters. One such newsletter, called Market DD.com, has recently reported on the Company’s plans for 1 900 DEMOCRAT and 1 900 REPUBLICAN. Market DD.com also offers its readers a few facts that are not contained in the Ecom.com press releases. It states, for example, that the Company has 24 million shares outstanding and a public float of 1.5 million shares. It also suggests that Ecom.com received 86,000 telephone calls on a similar 900 line to raise funds for victims of the recent Croatian crisis, at the rate of $1 a call.What did Ecom.com do with those funds? Did it coordinate its efforts with Croatian relief agencies or the Red Cross? How much did the Company retain as a fee? None of these details are included in the Market DD report. Nor are any details of Ecom.com’s financial state. The report does state, however, that Market DD.com received 75,000 shares of Ecom.com stock for issuing the report and future coverage of the Company. At about 50 cents a share, that comes to a fee of approximately $37,500, based upon share prices at the time the report was published.
Market DD.com has not been the only recipient of Ecom.com shares. Another online service calling itself JMAX Direct has joined the chorus. JMAX, whose web site bears the banner "Serious Stocks for the Serious Investor," has also profiled Ecom.com’s political fundraising plans. JMAX, which reiterates much of the information contained in the Ecom.com press releases, reports that "in excess of US$5 million has been expended on research and development of the eCom "Telemanagement" system." How were those expenses incurred? Where did the money come from? JMAX offers no details. JMAX does disclose, however, that it received 16,600 free trading shares of Ecom.com stock in consideration for publishing the report.
How much weight can investors give to the Market DD.com endorsement or the JMAX report? As holders of 75,000 and 16,600 shares, respectively, both newsletters stands to benefit from any increase in share value that results from heightened investor interest.
E.T. – Phone Home
The Company that now calls itself Ecom.com was known as E.T. Capital, Inc. until October 1999. The E.T. Capital web site (last updated in November 1996) indicated that the Company was incorporated in Colorado in 1978, but maintained offices in Vancouver, British Columbia, Canada. It identified Sidney Fowlds as the contact for investors and brokers. It also indicated, at the time of that last update, that E.T. Capital had almost 59 million shares outstanding and a market float of approximately 19 million shares.How did those 19 million shares shrink to the 1.5 million share public float recently disclosed in the Market DD.com newsletter? A November 8, 1999 press release announced that the Company had changed its name from E.T. Capital to Ecom.com and had "restructured on the basis of 1 share of ‘eCom.com. Inc.’ for 3 shares of E.T. Capital, Inc." That would account for a reduction from the 19 million share level to slightly more than 6 million shares. How were the shares further reduced to the 1.5 million level? Another reverse split? More important, how can investors obtain an accurate picture of Ecom.com’s present capital structure?
The E.T. web site described the Company as "an integrated financial company with interests in Oil and Gas, Telecommunications, Fundraising and Investment Banking." What were those interests? The E.T. web site provided no further information on any of these operations.
So how did E.T. spend its time before it began to promote political fundraising proposals? Time sharing, perhaps? At least that’s what one on-line newsletter was saying in May 1999. Back on May 25, 1999, a newsletter called "Below10.com" said that E.T. was planning to auction "timeshare units" online through a site called ebuyauctions.com.
Individuals purchase "timeshares," generally in resort properties, so that they can schedule vacations at specific destinations at a designated time or times each year. According to Below10.com, E.T. had acquired a timeshare and real estate marketing company called Resort Magic Vacations, and planned to establish a secondary market in timeshare units on the Internet beginning June 1, 1999. How would the Company generate revenues through this venture? The report from Below10.com was somewhat vague on that score, but it suggested that Resort Magic would receive $150 for every unit listed on its auction site and that, "in addition to the fees, Resort Magic is negotiating a 100% financing package for all properties to be listed." The report also indicated that Resort Magic was a licensed real estate broker and would receive real estate commissions for all sales conducted through ebuyauctions.com. That, however, could pose a problem unless Resort Magic maintained those licenses in every jurisdiction where property was sold.
Now, investors should not confuse ebuy with ebay (any more than they would confuse Ecom.com with Ecom.ecom.com), but what was the fate of this venture? Did Resort Magic ever obtain any listings, or receive any revenues? The ebuyauctions.com site is not presently active and there is no information available that suggests the Company ever moved forward with plans to auction timeshares on the Internet.
And what of Below10.com’s affection for the Company? In July 1999, Below 10.com disclosed that it had received 40,000 shares of E.T. Capital stock after incurring "substantial expenses" to assist E.T. Capital in "increasing its awareness within the investment market." Below10.com apparently has not issued any recent reports on E.T. Capital (or its successor, Ecom.com.)
While Ecom.com has repeatedly reiterated its intention to make the 900 telephone numbers available to Republicans and Democrats, those phone lines apparently remain dormant. Our efforts to dial those numbers met with one response – a recorded message saying "We’re sorry. Your call cannot be completed as dialed. Please check the area code and number and dial again."
On the other hand, curious investors seeking information about Ecom.com, or any other public company, will find that the following numbers are in service, and welcome their calls:
The Securities & Exchange Commission - (800) SEC-0330 and;
NASD Regulation - (202) 728-8000
And neither agency charges an 11% fee.
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