Investing in volatile, low-priced "penny stocks" is always risky.

Doing business with a penny stock company can be equally perilous, as Canton, Ill., learned after Canton Industrial Corp. set up a tire recycling business there in 1992.

Although city officials did not know it at the time, a federal judge later concluded that Canton Industrial was controlled by Allen Z. Wolfson, who had three felony convictions for financial crimes and was barred from serving as an executive or director of any company.

Wolfson's nephew, Richard D. Surber, and other managers were Canton Industrial's public face.

The city of about 15,000, nearly 200 miles northeast of St. Louis, was counting on the company to replace some of the 2,700 jobs lost when International Harvester Co. closed its plant in 1983.

Canton was so desperate for jobs that it didn't delve too deeply into the backgrounds of people wanting to set up businesses, said Public Works Director Clif O'Brien.

"We made a lot of bad deals," he said.

Canton Industrial took in hundreds of thousands of tires, but money and equipment problems plagued the shredding side of the business. It abandoned the operation in 1993, leaving behind 600,000 to 700,000 scrap tires and, ultimately, more than $500,000 in unpaid taxes and assessments.

The state of Illinois got a court order in 1995 requiring Canton Industrial to remove the tires from the property. But it wound up doing the work itself and billing the company.

The state got a court order in 1995 requiring Canton Industrial to remove tires from the property. But it wound up doing the work itself and billing the company.

Canton Industrial changed its name to CyberAmerica Corp. in 1996, when it went into a new business - developing and marketing online shopping malls.

When that venture faltered, it took the name Axia Group Inc.

In the summer of 1997, a fire broke out in a six-story building near the heart of the complex. The inferno spread to surrounding buildings and burned for three days, fueled by chemicals, paint and other materials left over from previous operators.

Axia still owes the Illinois Environmental Protection Agency nearly $237,000.

Axia's most recent SEC filings describe it as a "shell company" seeking businesses to acquire. Axia's stock was being offered to foreign investors last year by a boiler room that the agency later sued, charging fraud. The defendants in the SEC's civil case include David Wolfson, who is Surber's cousin and Allen Wolfson's son. But the SEC has not alleged wrongdoing by Surber.

The elder Wolfson's involvement with other penny stock companies led to his indictment in 2000 on charges of stock fraud, wire fraud and conspiracy. It was part of the FBI's Operation Uptick, which produced more than 120 arrests for securities-related offenses. He was convicted last year and is in a federal prison in New York.

O'Brien, Canton's public works director, was unaware that Axia has been trying to raise fresh capital from foreign investors. But he said the city had all but given up on collecting the back taxes and other debts the company owes.

The Illinois EPA and the federal EPA still are pursuing the company, he noted, and their claims rank ahead of Canton's in legal priority.