Wize Guys

GlobalTec doesn't want you to read this, so you probably should.

The Dallas company peddles investment software on infomercials, luring naïve customers to seminars in hotel rooms throughout the country, where evangelistic salespeople preach the gospel of get-rich-quick.

GlobalTec's flagship software, Wizetrade, purports to make users rich by telling them when to buy or sell a given stock. This is done through red and green lights. If you can understand a traffic light, where you have to deal with three colors, Wizetrade is supposed to be a cinch. The company also runs a radio talk show and "Traders Television Network," a satellite TV channel where GlobalTec instructors talk about the products.



GlobalTec's legal threats started immediately after the Houston Press, the Dallas Observer's sister paper, asked the most basic questions, and, after reading this story, you'll understand why. But if you want to heed GlobalTec, here are some do's and don'ts the company would like you to follow:

DO: pay $3,000 for software that purports to get you rich through trading in the stock market.

DON'T: read the fine print in the contract, which says the software doesn't come with instructions or training. And when you do finally receive the instructions or training, you automatically forfeit the right to a refund.

DO: believe that GlobalTec's brain trust has securities expertise that makes Warren Buffett look like a drooling baboon.

DON'T: try to verify the brain trust's credentials.

DO: pour thousands into additional books, DVDs and seminars that tell you how to make even more money off the magic lamp you already spent $3,000 on.

DON'T: read this story, because this is where you'll find out what GlobalTec is really about.

If you overlook the fundamental flaw, the infomercial is brilliant.

The fundamental flaw is the same for every infomercial: If a dude has a sure-fire key to fortune, why would he travel around the country selling it to people when he could just use it for himself?

But, as with all get-rich-quick schemes, you must check your logic at the door. And when you do so with Wizetrade, you will enter the world of George Thompson, a financial wizard who built a Dallas trading firm (never identified) before founding GlobalTec and inventing a piece of software that "levels the playing field" for individual day traders. Wizetrade contains a "proprietary algorithm" capable of "thousands of calculations" a second, telling you when you should buy or sell a stock. It dumbs down the process so much that all you have to do is watch the lights: If the light is green, you buy a stock. If it's red, you sell.

As shown on the infomercial, this wizardry allows Thompson to tool around in his Magnum, P.I. Ferrari and race motorcycles. Then come the testimonials from regular schlubs who have been able to quit their jobs and live the high life, thanks to Wizetrade. To augment the look of authenticity, GlobalTec operates a radio talk show and satellite TV channel. When you buy Wizetrade, you're buying into a whole system--these guys are here for you, and they won't let you down.

Don't give your money to self-interested brokers, the ad says. Don't count on your retirement plan. Wizetrade is the way to go. And, lucky you, there happen to be a few free demonstrations at a hotel near you this week.

The Press went to a demonstration in the Clear Lake Hilton near Houston last December. More than 30 people, mostly older white men, made their way into the convention room, where an exuberant man named Fred Mansfield stood before a projection screen showing the Wizetrade software.

Mansfield is from Orlando, where--though he doesn't say it--GlobalTec's corporate parent is located. He was never a stock wizard, only a restaurant manager.

"It's time to take control of your life!" he says. Mansfield speaks only in motivational sound bites. He says Wizetrade has "given me control of my time...you can't TiVo time!"

So Mansfield has oodles of free time for his family, who appear on the screen: his wife, son and two girls with flowers in their hair. The next picture is that of the adorable Mansfield puppy, at play with a neon-green chew toy.

"Red light, green light, that's all we need to know!" Mansfield barks. It's like it says on the Wizetrade Web site: It takes all the guesswork out of trading. It's so easy that his 7-year-old daughter loves it. And now Mansfield takes some time to go on about how much he loves his daughter, who just brought home a wonderful report card and whose baseball team just won some Florida championship. Here's a father who definitely loves his daughter. How could you not buy software from this guy?

And he's looking out for the audience too. Ordinarily, Wizetrade costs $3,995. And if you want the "boot camp DVDs" and the training class thrown in, that would cost $6,285. But today, Mansfield's going to give it all away for $2,995.

"That's it!" he yells.

Some in the audience are less than impressed at the price. So Mansfield does some mental kung fu. He asks how many in the audience think $3,000 is a lot of money. A few hands shoot up.

"If that's truly a lot of money for you, you need this!" he says. Go ahead, put it on your credit card. Don't think of it as a payment. Think of it as an investment.

It looks like about six people bought Wizetrade that day. Who knows how many will read the fine print: "All purchasers of software or other products owned by GlobalTec...are encouraged to consult with a licensed representative of their choice regarding any particular investment or investment strategy."

And: "Trading stocks, options and spot currencies involves substantial risk; and there is always the potential for loss. Your trading results may vary. No representation is being made that any software or training will guarantee profits or not result in losses from trading."

And still: GlobalTec products are "analytical tools only and are not intended to replace individual research or licensed investment advice. Unique experiences and past performances do not guarantee future results! Testimonials are non-representative of all clients; certain accounts may have worse performance than that indicated."

No representation is being made? Then what the hell has Fred Mansfield been yelling about for the last two hours?

According to the Texas State Securities Board, GlobalTec founder George Thompson was never a licensed financial adviser or securities dealer.

Not much is known about Thompson before he met self-described Dallas philanthropist Marc Sparks around 2000. Sparks was in the midst of defending a class-action suit against his failed insurance group, Unistar Financial. Unistar would partially settle in 2001, paying about $1.7 million to investors who said Sparks and others artificially inflated the stock price. In 2003, the SEC filed its own suit against Sparks and Unistar.

According to the suit, pending in the Northern District of Texas, Sparks created Unistar with Houston businessman Phillip H. Clayton (described as a "three-time felon") and a New Yorker named Dino Romano, "a securities fraud recidivist." Sparks, the suit says, issued misleading statements about Unistar's health, all the while buying and selling majority shares to shell companies owned by Clayton and Sparks in a series of unregistered transactions.

A spokeswoman for Sparks stated in an e-mail to the Press, "We are confident that there will be a satisfactory resolution."

Unistar went belly up in 1999, and Sparks needed something to do. According to his self-aggrandizing Web site, www.whoismarcsparks.com, Sparks is the kind of guy who sits around waiting to give money to entrepreneurs who invent The Next Big Thing. That's when, according to his Web site, "Sparks took on a brash, young partner who had developed a remarkable software program but had no idea how to get it out of his garage" and GlobalTec (originally called Stock Decision Software) was born.

The GlobalTec software analyzed real-time stock market data and showed users buy and sell pressure for every conceivable stock. And, really, that's all you needed to know. It's called "black-box trading"--you don't have to know anything about what a company does, how long it's been around or, for that matter, its freaking name. All you need to do is look at how many people have bought and sold the stock in the last five minutes or last five months. If you see a green light, buy the bastard. Red, sell. Boom. Level playing field. No need to give money to some snot-nosed 24-year-old broker in a fancy suit sitting in a fancy high-rise. All he cares about is his own commission anyway.

Although the "proprietary algorithm" behind Wizetrade may be complicated, the concept is not supposed to be. According to the Wizetrade Web site, the software's graphs "analyze the selected stock's market activity and indicate its upward and downward trend."

Those trends are color-coded. The red line "incorporates the algorithms and factors that have driven a price downward, representing the selling interest of the stock," while the green line "incorporates the algorithms and factors that have driven a stock's price upward, representing buying interest of the stock."

The user then employs the "FAST" system:

F for fresh cross: "when the green line crosses over the red line within 1 time frame of the current time frame on the Wizetrade charts."

A for angle: "When you want to take a long position in a stock, you want to see the green line pointing up between 2:00 o'clock and 12:00 o'clock on an imaginary clock face. The higher the angle of the Green Line, the stronger the buying trend [sic]."

S for separation: "When you want to take a long position in a stock, you want to see the red line pointing up between 3:00 o'clock and 12:00 o'clock on an imaginary clock face [sic]."

T for timing: Wizetrade suggests guidelines for whether you're a long- or short-term trader.

The concept was so easy that GlobalTec subsequently sold similar software for the foreign exchange (forex), commodities and options markets.

Understanding the genesis of the forex software is a bit tricky, since it involves the same product sold over and over again under a variety of names. It's almost as tricky as understanding the forex market itself, an especially risky arena where you buy and sell different currencies: yen for euros, dollars for drachmas.

GlobalTec's interest in forex came through a young Wizetrade pitchman, James Dicks of Altamonte Springs, Florida.

Before meeting Sparks and Thompson, Dicks sold a forex system called Trade Signal Pro. His partners were two guys who had previously been accused by the Commodity Futures Trading Commission of defrauding 175 investors out of $760,000. They had purchased a previous incarnation of Trade Signal Pro, called Currency Trading Systems.

One pitchman, Michael Stewart of Arizona, told audiences that he made mad money with Currency Trading Systems when, according to his settlement with the CFTC, he lost $10,500 in the one year he actually used it. His co-defendants lost a combined $54,000 using the system. Stewart did not admit or deny any wrongdoing.

Dicks told Sparks and Thompson about Trade Signal Pro, and they added a similar product called 4X Made Easy. Dicks, Stewart and GlobalTec were sued by disgruntled 4XME buyers in a Denver court in 2004.

Dicks' deposition in that case is a fascinating glimpse into the world of hucksterism.

Before he met Sparks and Thompson, Dicks says in the deposition, he was wasting away in "hypothetical" make-work jobs for his uncle as well as an Orlando company called Dynetech, which later bought GlobalTec. In the promotional material from archived Web sites for one of his previous companies, Dicks was described as having been a licensed professional financial adviser since 1991 whose "last project for a client grossed over 30 million dollars of new revenue." In truth, Dicks didn't get involved in finance until the mid-1990s, and records at the National Association of Securities Dealers do not indicate he was ever a licensed broker-dealer or financial adviser. His previous jobs included working at a company that sold clothes made by Oregon prisoners to retailers in Germany and failing as an affordable-housing developer.

Dicks' interest in finance never matched his business acumen, as he had neither formal education nor raw talent. He dropped out of a Florida community college after two years (his spokesman says Dicks suffered from "a form of dyslexia," adding that Bill Gates never graduated from college either) and was dogged by liens and lawsuits throughout the 1990s. In one instance, he registered a Web domain called "Bank of America Forex," which drew the ire of the real Bank of America.

In all fairness, Dicks never had good role models, starting with his uncle, a onetime business partner of a moneymaking guru named Charles Givens, according to media reports. Dicks' first foray into finance came when he set up workshops for Givens. Givens wrote investment books with titles such as Wealth Without Risk and roamed the country selling suckers his get-rich secrets. In 1996, a civil jury found Givens guilty of defrauding 29,000 California investors, ordering him to repay $14.1 million. Regulators in five other states had previously challenged Givens' business practices. The year before the California case, the state of Florida filed a $1.6 million lien against Givens for failure to pay sales taxes. Givens ultimately filed for bankruptcy, although he kept his Florida palace until his death from cancer in 1998. He shrewdly transferred most of his assets to limited partnerships, making it extremely difficult for his creditors to collect the thousands they'd lost investing in his schemes.

That was Dicks' introduction into the world of finance. So it may not have struck him as odd when, according to his deposition, Sparks and Thompson arbitrarily made him the "founder" of 4XME. Hell, Dicks didn't even know how to use the software. In his deposition, he says he lost money on the damn thing. But he had fresh-scrubbed Waspy good looks, and he gave good seminar.

But when the lawsuit hit, Dicks quit GlobalTec and went back to his uncle. There was now a hole in 4XME where Dicks used to be. Who better to fill it than a guy who worked at two disgraced brokerages and at a firm busted for selling fake life-insurance policies on AIDS patients? Enter Blake Morrow, the new "president" of 4XME. GlobalTec's Web site makes no mention of Dicks; it's only Morrow's smiling mug on the site and in the infomercials. (Morrow was never accused of taking part in the policy scam or the behavior that brought down the firms.)

Here's the kicker: GlobalTec is the rare company whose product lines openly diss each other. In his book, Don't Play in the Street...Unless You Know Which Direction Your Stock is Traveling, Thompson touts stocks above all else, saying "stocks have outperformed any other form of investment mechanism over the long term."

Infomercials for 4XME, however, describe the stock market as a baffling labyrinth that won't get you anywhere.

"No Wall Street nonsense!" the infomercial blares. With 4XME, you focus on six currencies as opposed to 40,000 stocks.

So which is it? Stocks or forex? What does GlobalTec care, since it's getting your money either way?

In 2004, GlobalTec was bought by Dynetech, an Orlando-based company that also owns get-rich-quick real-estate and cash-flow systems.

All Press inquiries were referred to Dynetech spokeswoman Dori Madison, which is a shame for Dynetech, because Madison seems to know little about GlobalTec.

When asked about the credentials of some of the company's national instructors, who work under something called the GlobalTec Training Institute, she said she had never heard of the institute. When asked specifically about the credentials of instructor and GlobalTec radio host Karl Haas, who is prominently featured on the GlobalTec Web site, Madison said, "I don't even know who these people are, honestly. You've got your work cut out for you, I think. I don't know how you're making all these connections to Wizetrade, because they're not in the history of this company."

Madison later cleared up her confusion, saying that Haas did indeed work for the company and, yes, his credentials were misstated. But she wasn't too concerned; she asked how instructors' credentials were "relevant to the product."

"I think that it's a mistake, and we're tracking it down. The thing is, we have a business to run," she said.

Since the Wizetrade infomercials and Thompson's book proudly claim Thompson built and managed a Dallas trading firm before founding GlobalTec, the Press asked for the name of the enigmatic firm. We may as well have been asking the location of the Ark of the Covenant.

"Let me see if I can hunt down George's big bio, because I don't have one that's that deep," Madison said. She got back to the Press about a week later and said that his firm was called Wave on Wall Street, although she was unsure whether it was an actual firm or a piece of software. (A few weeks later, Madison told us that it was a piece of software.)

In GlobalTec's application with the Dallas Better Business Bureau, Thompson identified himself as the president of All Tech Investment Group. A month after the Press asked for the name of Thompson's previous firm, Madison confirmed that it was indeed All Tech, the Houston branch of a nationwide day-trading firm.

In an e-mail, Madison stated that Thompson "was a founding investor in the firm and was never engaged in the brokerage side of the business." She did not clarify in which "side of the business" he engaged.

She also could not tell us how much money Thompson--or Blake Morrow--made using GlobalTec software.

"You cannot possibly expect us to answer this personal question," she wrote. "We respect Mr. Thompson's right to privacy." Apparently, that right to privacy does not preclude infomercials showing Thompson flaunting his Ferrari and speedboat.

Madison quickly tired of questions about GlobalTec's own claims and at one point told us, "I'll answer questions that I can answer today, and then you guys go run around and conjure up what you want."

Shortly after contacting Madison, the Press received a baffling warning from Dynetech's in-house counsel, Stephen Rosin, demanding, among other things, to read this story before publication.

Since Madison couldn't answer our questions--or put us in touch with any happy and successful GlobalTec customers--the Press tried reaching the instructors and happy customers directly. None of the instructors returned our calls, and the closest we got to the people featured in the testimonials was a woman in Carmel, California, named Amber Archangel. In her testimonial, Archangel says, "Without Wizetrade, I wouldn't have a clue how to make a profitable trade."

Archangel did not want to say how much money she made off Wizetrade. She didn't want to say anything at all, explaining that she wanted to check with GlobalTec before commenting. We never heard back.

These calls prompted another warning from Dynetech/GlobalTec, this time from an outside firm.

The final warning, from Rosin, came in early January. Rosin accused the Press of "spreading information about a nonexistent lawsuit involving Mr. George Thompson." However, both Dynetech and GlobalTec (the company Thompson created) are defendants in a Colorado suit.

"It has become clear to our client that you are intent, not on researching and writing an unbiased and objective story based on the facts, but rather on mischaracterizing, misrepresenting and misattributing the facts for the purpose of writing a biased and unrepresentative story," Rosin wrote.

"These guys remind me of carnival barkers in the midway," financial columnist Malcolm Berko says from his Boca Raton home. "It's just as easy to sucker someone in a seminar. These guys have no more conscience than a fox in a poultry farm."

Berko has been in the securities business since 1957. Through his syndicated column, "Taking Stock," Berko has fielded questions about GlobalTec products. He says that Wizetrade "has stuff in it that makes sense" but adds this: "However, in order to profit from it, the person that has the program must be extraordinarily perceptive, must have a laser-like focus, and must have a great understanding of what he or she is doing. Because none of these programs are going to make you money unless you are exceptional at what you do."

He describes GlobalTec's pitchmen as robber barons preying on people's naïveté. "There's only one way to make money in the stock market," he says. "[Y]ou just buy good stocks, you hold on to them for a long time, and when they go up, you sell them. It's as simple as that. I know that's an oversimplification, but there are so many good stocks around."

So what's a good stock?

We asked Paul Larson of Morningstar, an investment research and analysis firm. Larson edits the company's StockInvestor site and is the author of a series of stock investment books. "We look for companies that have sustainable competitive advantages, and then we try to buy those when they get cheap or when they trade at discount to their fair value," he says from his office in Chicago. "And there's a lot of work that goes into that. I'm not sure if I have a whole lot of confidence in black-box investing."

He says software like Wizetrade shows only "market trading patterns, and the market tells you absolutely nothing about the underlying health of the company, how much cash flow the company is generating, etc. We think the way to go about investing is to be an investor, not a gambler."

Larson continues: "I think an important part of investing is to keep the potential return that you can earn in mind...we're expecting stocks, over the long run, to return somewhere in the neighborhood of 10 to 12 percent...over many decades, that's been the historical return. So whenever you see someone that's going to promise you that you're going to double your money in the next year, for instance, that's something you should really be wary of."

Of course, there is no shortage of theories when it comes to investment.

Dimensional Fund Advisors in Santa Monica uses the efficient market theory to manage its $86 billion in assets. It's kind of an anti-theory that states there is no strategy that can consistently outperform the market. The market is "perfect"--all the information is right there in black and white, and the only way to get ahead of everyone else is via insider trading.

So it's no surprise that Dimensional VP Weston Wellington is skeptical of software like Wizetrade. Wellington wasn't familiar with Wizetrade by name but has encountered similar trend-following software in his 30 years in the industry. "Analyzing price patterns in stocks has consumed the careers of many people over decades," he says from Santa Monica. "It just doesn't sound plausible that all the people studying all these patterns could have been looking in the wrong direction until this guy comes along."

Wellington points out efficient market theory's "anomaly" clause--an investment secret can only stay secret for so long. "Let's suppose for the sake of argument...that they have stumbled across some great trading rule," he says. "How long is it going to be a secret? Suppose it is the case that if price patterns do X, then you're almost certainly to see Y. Well, if that becomes common knowledge, people are going to start to trade upon that information ahead of time."

He adds, "It's probably going to have a hard time passing a smell test of statistical significance. But it'll never stop people from trying. There's always going to be some pattern you can find that worked perfectly in the past."

And because people won't stop trying, the CFTC issued a software fraud alert for its domain, forex.

The commission urges investors to avoid doing business with people who won't give information about their background and to stay away from companies that predict or promise big profits.

"The currency futures and options markets are volatile and contain substantial risks for unsophisticated customers," the commission warns. "The currency futures and options markets are not the place to put any funds that you cannot afford to lose. For example, retirement funds should not be used for currency trading. You can lose most or all of those funds very quickly trading foreign currency futures or options contracts."

Forex's highly leveraged transactions "increase your possibility of profit but also increase your possibility of loss exponentially," says Paul Hayeck, the commission's associate director of enforcement. "You can get wiped out in a hurry."

"When you see contracts that are that one-sided and that unconscionable, for me, as a consumer lawyer, that raises red flags about the transaction," Eric Coakley says from his Denver office.

Coakley is looking for class certification in a suit filed against GlobalTec on behalf of frustrated 4X Made Easy buyers. He's talking about GlobalTec's refund and complaint policies. Dicks declined to comment on the suit. GlobalTec/Dynetech spokeswoman Dori Madison, however, says the plaintiffs sued because "They really wanted to work for the company, is what it came down to. Because they loved the product...They really wanted to work with the company, and there just wasn't a spot for them."

Coakley says his clients, wowed by the free demonstration of the software, took it home only to find out the thing was impossible to understand without instructions. "They don't know how to use it; they haven't received the instructions," he says. "So they can turn it on, they can see the red and green lights and all the pretty arrows and everything, but they don't know--they can't interpret it."

According to a 2003 4XME "terms and conditions" purchase agreement, refund rights are forfeited at the end of a one-day training program, on the 15th day from the date of purchase or when the purchaser gets the "4XME DVD Training Series" (the instructions)--whichever comes first.

In an e-mail, Madison stated that the refund policy was inaccurately described and "meets or exceeds the requirements of applicable state and federal laws."

Moreover, the agreement states that customers waive their right to trial by jury and that all disputes must be resolved by arbitration in Orange County, Florida. The arbitration must be conducted by three attorneys with more than 10 years' experience each, unless one of them was previously a judge.

"Would you go in to buy a car...under those conditions, that you had to travel to some distant state and pay $1,200 an hour for a panel of the three guys...to decide whether you got a lemon or not?" Coakley asks.

Dicks is no longer with GlobalTec; Madison said she didn't know why.

Coakley says he doesn't see how people can make money from 4XME. But you could take 4XME "president" Blake Morrow's word that they can. Or you could buy George Thompson's book and get rich off stocks.

The book claims to expose "the truth behind Wall Street scandals, the hidden alliances of corporations and brokerage firms...and how your broker really makes money and what he doesn't want you to know."

What Thompson says makes perfect sense.

Caveat emptor.

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