Pierpont Revisits Tomato

This from last weeks AFR...

Blue Chip investors left even bluer ... 11/10/02

AFR News - 11.10.02 03:42

One thing Pierpont has often noted about horse races is that they don't always go as planned. If proof is needed, take last Sa*urday at Randwick when Pierpont attended to help his old chum Tom Ford cheer for Victory Vein who was an odds-on favourite in the Flight Stakes.

It was a perfect day. The weather was fine and Tom (who is syndicate manager for Victory Vein) shouted his guests a spiffing lunch. Pierpont spent the afternoon surrounded by copious wine and fair ladies and even laid out a small wager on the filly.

The only fly in the ointment was that Victory Vein lost interest halfway down the straight and ran second. "Ah well," Mrs Pierpont observed philosophically, sipping another glass of champers, "We all have our off days."

True, and it could have been worse. Pierpont was left with a hole in his wallet, but it could well have been larger if he'd been subscribing to the various racing systems that are being flogged to punters these days - usually from Queensland.

Back on September 20, Pierpont mentioned one system (variously called Autotab or Offtrack) which had been slammed by the Australian Competition and Consumer Commission. Since then your correspondent has been alerted to the fact that the Queensland Office of Fair Trading (OFT) issued a warning to punters last June about investment in these systems. It was a general warning, not confined to the systems Pierpont mentioned in his column.

In June, the OFT said scams involving get-rich-quick schemes and gambling systems were the number five category of consumer complaints in OFT's top 10 for 2001-02.

An OFT spokesperson said: "We have received a number of complaints about computer-based gambling systems and stockmarket schemes."

What intrigued Pierpont about this announcement was that the OFT was bracketing punting software with sharemarket systems. Indeed, the statement had a particular system in mind.

"We are currently investigating complaints about a number of other computer-based gambling and stockmarket products, including investment share trading stockmarket products marketed by Micro Corporation Australia," the OFT said.

That should be an item of interest for investors in Tomato Technologies (one of Australia's best-performing floats in the past couple of years) because Micro Corp is a wholly owned subsidiary of Tomato and the product it sells is called Blue Chip Trader.

Blue Chip must be familiar to Pierpont's readers, because at least half a dozen of them have sent him Micro Corp brochures over the past few years.

Pierpont picked one up at random from his desk. It started with the words: "On average 256 new Aussie millionaires are made every week ... Sounds incredible but it's true. Could the next one be you?"

A couple of pages further on it said: "Successful investors use leading-edge technology to generate wealth. We believe our technology is the most sophisticated of its type ... but it's so easy to use, you don't even need any computer experience and it's home-based. Has there ever been a simpler way to make money?"

Well, that wasn't the experience of one Pierpont reader who recently won a case against Micro Corp in the Small Claims Tribunal at Southport. Cameron Clark said: "I was able to successfully prove that while Blue Chip Trader was in my possession for approximately two months, it did not work as intended. The judge ordered a full refund."


Blue Chip comes in two parts. There is a software program that a subscriber buys and installs on his or her home computer. Then every day the user logs on to a site that downloads the latest stock prices. Blue Chip scans the data, draws a chart and waits for the subscriber to insert flags showing where he wants to buy and sell.

Cameron claims he bought Blue Chip for $5,900 and installed it but then found that he could only download the data intermittently. For a share trader, this would be a critical flaw, because he could miss buy and sell signals.

That worried Pierpont because Blue Chip is not a new system. Pierpont first wrote about Blue Chip in April 2000, nearly two years before Cameron bought his package in January this year.

The OFT received its first complaint about Blue Chip in 1999. The system should therefore have been around long enough for any early bugs to have been detected and removed.

Cameron has told Pierpont he was using Windows on a standard IBM personal computer. A data system that can't download into that combination would seem to have at least a few basic bugs. Indeed, if that's a typical performance by the most successful technology of its type, then Pierpont would be forced to conclude that sharemarket software is still in the Stone Age.

When Cameron reached the Small Claims Tribunal on September 2, he found he was not the only person there seeking recourse against Micro Corp. Indeed, Micro Corp's lawyer told him there were many other cases.

One other was that of Eileen Dighton from the Gold Coast. Eileen told Pierpont: "Every time I went in to download, it would stop on every third or fourth share and you would have to hit the enter key up to 200 times to get it right. And then the stocks we picked weren't very good anyway."

Eileen said that every time she complained to Micro Corp, it told her it was a fault in her computer. "They said they'd never had this problem with anyone else," Eileen said. "Then when I went to the Small Claims they said they had heaps of people with the same thing."

Thinking he'd better check this, Pierpont wrote to the OFT asking how many cases and complaints had been brought by dissatisfied customers about Blue Chip. The OFT was guarded in its reply but said that a significant number of complaints had been lodged. The OFT pointed out that a complaint was not necessarily an indication of illegal activity.

However, complaints about Blue Chip had been investigated and some redress had been obtained for some consumers. The OFT couldn't say how much had been paid out by Micro Corp because some customers had signed non-disclosure documents as part of their settlement.

"To date enforcement action has not been initiated by OFT and can only be done when sufficient admissible evidence has been obtained," the OFT said. "Proving that the software does not work can be difficult as companies often claim consumers have not followed the instructions and then have elaborate modelling details proving the products do work."

If Pierpont were running a company that had that many complaints about its major product, he would be a mite perturbed. But the chaps who run Tomato are even more relaxed than Mrs Pierpont. Pierpont has scanned several of Tomato's recent announcements but has yet to find a word about product complaints.

So Pierpont rang Tomato's chief executive officer, Craig Duffy, who assured him all was right with the world. "Like every business, we get the odd complaint here," Craig said. "We've had the OFT come and visit in relation to a few complaints. They looked at the files . . . and were pretty happy."

Craig agreed that the online data system was unavailable "from time to time". Users with the smaller internet service providers tended to suffer more. He pointed out that Blue Chip did not give users advice on which stocks to buy or sell.

Meanwhile, the Tomato ASX releases take a benignly positive view of the world. They paint a picture of rising revenues and international expansion. Indeed, Blue Chip is undergoing additional development to make it a world version aimed at punters in Canada, the USA, Germany, Italy, the UK and even Finland.

Pierpont just hopes they get it working for all these customers better than they could for Cameron and Eileen. Otherwise the Southport Small Claims Tribunal will have to hire an interpreter.