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Trouble in Electric Ladyland

The best just got better

Meet The Weasels
The web site designers your mom warned you about

Free High Speed Access Arrives
What to Expect

Wanna e-trade?
No thanks

Software we'd Like to See:
From the people who brought you Autonuke: software to warm your heart. Introducing Bidnessbot

Taking your Business online? Look before you link
The web site that launched a thousand (annoying) e-mails.

Do unto Microsoft
Our top ten alternative punishments for Microsoft...

The Motley Fool
Cool fool

You're thinking something. Tell us what it is.

On the surface the idea sounds like a winner - create an online portal where dot coms can sell shares directly to the public instead of going through the traditional IPO process.

The advantages seem obvious. Businesses avoid paying steep underwriter's fees. Small investors have unprecedented access to the traditionally exclusive IPO process.

And the host?

The host makes out like the proverbial bandit, collecting from everybody involved.

The founders of MainstreetIPO must have thought they were on to a pretty good thing. With the public hungry for access to Internet stock offerings, and more than willing to trade electronically, the self-underwritten IPO concept sounded like an idea that could very easily take off.

The North Brunswick, New Jersey based company expected to recruit plenty of customers willing to pay the one hundred thousand dollar flat fee it plans on charging for hosting stock offerings.

That was before reporter Johnathan Rabinowitz revealed a number of unsettling details about the company in a February article for the Industry Standard. Among the most damaging revelations - details of CEO Joe Salvani's past business dealings and his partners track record of problems with the Securities and Exchange Commission.

A master of a seldom-used financial end-around known as "the reverse merger", where a privately held company merges with a publicly traded business, effectively bypassing the IPO process, Salvani used the tactic himself this time, making Mainstreet probably the only Internet company on the board that got there by merging with a company that specializes in kidney dialysis - Dialysis Corporation of America - assuming of course, the deal is approved by regulators.

Salvani has a clean record with the SEC but a history of leaving large black clouds of suspicion behind him.

A 1998 Forbes magazine article titled "The Master Tout" accused Salvani of hyping the value of certain stocks on behalf of clients in an effort to manipulate the market, a charge the financier laughs off. To make matters worse, the executive is being sued by his former partners at the Boston Group, for alleged conspiracy to defraud and divert assets.

As if that wasn't enough to frighten off most people, there are the old SEC charges that Salvani's business partners engaged in illegal trading and the distribution of unregistered stock to consider. Although the charges were resolved without any admission of wrongdoing on the part of the principals with the return of $5 million in profits,

Our conclusion?

While there's no direct evidence to suggest any wrongdoing on Salvani's part, and nothing to suggest any impropriety at Mainstreet, there are plenty of danger flags - more than enough to make potential clients pause for a moment to consider their options carefully before jumping on board.

Go see what all the fuss is about

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