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Hitsgalore.com Falls Another 21% as Its Founder Resigns

May 14, 1999|From Bloomberg News

Shares of Hitsgalore.com Inc. fell 21% on Thursday after the Internet company said its founder quit as a director and officer following accusations that he defrauded customers in a previous job.

The shares fell $2.56 to close at $9.44 as 1.3 million shares traded over the counter, more than triple the daily average of the last 30 days.

Dorian Reed, the largest shareholder of the Rancho Cucamonga-based company, resigned as chief technology officer and a director, a spokesman said. The resignation came after Hitsgalore.com stock fell 53% on Tuesday on reports that the firm did not disclose that Reed had been accused of fraud by the U.S. government.

The stock's decline prompted Life Foundation Trust on Thursday to revise the terms of a $100-million investment in Hitsgalore.com.

Trustee Jeanette Wilcher said the per-share price for the investment will be lowered to $20 from $25. The company will receive an interest in a joint venture in oil and gas wells in Texas instead of cash. She called Reed's resignation admirable.

Last month, Reed and Audrey Reed were ordered by a federal judge to pay $613,110 to 100 customers for false claims made by Internet Business Broadcasting, a failed online advertising company they worked for. (It could not be determined if the Reeds are related.)

Hitsgalore.com was founded in July, four months after the Federal Trade Commission sued Dorian Reed. It went public Feb. 11 by merging with Systems Communications Inc., a publicly traded shell company. In federal documents, it said there were no lawsuits or governmental investigations against any of its officers, directors or employees.

The FTC accused Reed and co-defendants of touting a 100% annual return on investments in IBB Internet advertising banners.

The judgment was entered April 19 after the defendants failed to appear for trial.

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