Don't Be The SuckerAmid all of the truly groundbreaking new technologies, innovative companies, and fresh-minded thinking surrounding renewable energy, organic agriculture, distributed generation, and other green memes lurk ugly, but familiar beasts — the penny stock operator and the private placement promoters. With a penchant for press releases and the skillful use of all the appropriate buzz words, these charlatans are not only making off with some ill-gotten booty from unsophisticated investors, they are diverting much needed investment dollars that could otherwise be going to the more deserving ventures.

It is amazing that people fall for these things a mere six years after the meltdown of the "new economy" internet debacle. However, if you know how to look, they are not that hard to spot. Here are some tips to protect yourself:

1) No listing… no dice. Qualifying for a listing on the NASDAQ is not that hard for a company, and qualifying on the AMEX is even easier. Profits are not a requirement and neither is revenue, for that matter. This is a good rule, by the way. Some industries, especially in technology and medicine, require many years before a product is ready for market. It only takes about $40,000 in listing fees, $4 million in assets, and about 400 investors. If a company has what it takes to survive in the public markets, such as a solid management team, an interesting product or technology, and a reasonable business plan, it is also not that hard to find a reputable underwriter to help you meet these requirements. Usually, a pink sheet stock is on the pink sheets because the reputable underwriters took a look at the prospects and said "no way". This alone should clue you in to the highly speculative nature of the enterprise.

2) Is it news, or fluff? If you look at the company's web site, or widespread personal finance sites like Google Finance, you can usually spot the "Company News" link. In many cases, what looks like news is only a press release. Sometimes, it is more cleverly disguised, but it still amounts to fluff. If the source is Business Wire, PR Newswire, CSR Wire (which is for the SRI crowd), or something similar, then this "news" was written by someone with an agenda. It's not the wire's fault. That is what they do. Even if the source seems more real, see if the reporter is critical in the analysis. Many local papers are anxious to write about local "success stories".

3) …and you are? If the first two reasons have not scared you off, take a look at the management team. First off, there should be more than one, and they should all have different last names. You would think that investors would not be so gullible, but I was pitched just last week by someone hoping to fund a "blank check company" with one CEO and one director (the same person). What is likely to happen is that the "officers" will form a compensation committee (of one) and decide on a grossly exhorbitant salary for the management team. Second, it is reasonable to expect that company leaders have proven themselves to be good stewards of public money.

4) The Woody Allen Rule. Seriously, unless you are yourself a multi-bazillionaire, ask yourself why people would want you to join their country club. Like Woody Allen, you should resolve that any club that would have you as a member is not a club you want to belong to. The very best IPO's and private placements are reserved for Wall Street's best clients. This unfortunate fact is conspiratorial and wrong, but a fact nonetheless. It is a good rule to follow for ANY investment, whether real estate, "fine art" Dali prints, collectibles, or stocks and other securities.

5) … and you are (part 2)? A lot of companies that failed to ignite investor interest in other fields, are just changing their names and starting anew. Take, for example, Western Wind Energy, a company that was, until a few months ago, a mining firm. Another example is Newgen Technologies, also a former mining company, now on its third name. Neither company ever produced a nickel's worth of revenue.

Some of these scams have legitimate sounding names and even more legitimate business plans, but watch your wallet. As always, be diversified, keep investment costs low, maximize your company's 401(k), and be systematic in your saving. You will do just fine.

Mark Brandon is the owner of First Sustainable, a Registered Investment Advisory catering to socially responsible investors. His column appears in Green Options on Mondays.