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State Regulators Probe DirectNet Entrepreneur

March 16, 2001|DEBORA VRANA | TIMES STAFF WRITER

California securities regulators said Thursday that they are "actively investigating" Los Angeles entrepreneur Craig N. Kirt, who sold shares in a company that promised to incubate dozens of Internet-related start-up businesses.

Kirt's venture, which has gone by three different names in the last year--DirectNet Inc., Incubanks Inc. and most recently 2M Labs--solicited money from investors in 1999 and 2000 via a so-called private placement offering.

However, in offering documents, Kirt failed to disclose that he had been suspended several years ago from selling unrelated securities in Pennsylvania. Private placement securities offerings are high-risk deals in which investors give funds directly to an entrepreneur or company and receive shares that generally can't be publicly traded. As such, the offerings aren't reviewed by any state or federal agency.

Kirt's offering was the subject of a Times article Feb. 26. Some investors who bought the stock said they had been unable to reach Kirt to learn the status of their investment.

"We are actively investigating this situation," said Andre Pineda, a spokesman for the Department of Corporations in Sacramento.

Kirt did not return phone calls left by a Times reporter this week.

In his offering documents, Kirt said he planned to help start-up firms become "successful, cutting-edge Internet businesses." The offering sought to raise $1 million.

Subsequent newsletters to shareholders described a series of planned initial public offerings of DirectNet companies worldwide, in some cases including projected stock prices and expected first-day gains. But none of the IPOs appears to have occurred.

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