Interesting 19Feb article on CAJT in Dallas MNews...
"12:00 AM CST on Tuesday, February 19, 2008
By ERIC TORBENSON / The Dallas Morning News
etorbenson@dallasnews.com
Dallas entrepreneur Jason Wynn's idea seemed genius in its simplicity: create the one-stop online shop for private jet charters.
And when it took off last summer, Connect-A-Jet Inc. drew a lot of attention. The stock peaked at $2.74 a share in September after the company ran commercials touting its concept on cable business channel CNBC.
But the brakes squealed soon after. Companies that Connect-A-Jet claimed to be partnering with disavowed any connection. The company's flight search engine wasn't fully operational – and still isn't.
On Oct. 1, citing suspicions of market manipulation, the Securities and Exchange Commission halted trading for two weeks in the company's stock, which today is valued around 5 cents a share.
Now the SEC says in a court filing that its ongoing "nonpublic" investigation indicates that Mr. Wynn and others may have broken securities laws. The SEC was responding to a lawsuit in which Mr. Wynn unsuccessfully sought to prevent investigators from seeing any more of his bank records.
Those court filings and other public records, interviews and published reports depict Mr. Wynn as a 25-year-old serial entrepreneur whose companies aren't always what they seem, who had to borrow $250,000 from a friend to help promote Connect-A-Jet and who was involved in a second questionable penny stock promotion late last year.
Mr. Wynn, who records show spent his teenage years in Flower Mound and Houston, was scheduled to talk with SEC investigators last month in Chicago about the Connect-A-Jet case.
In a prepared statement, his attorney said Mr. Wynn has cooperated with SEC officials but "has no reason to believe" that he is a target of the SEC's investigation.
While he calls himself the "former founder" of Connect-A-Jet, Mr. Wynn sold his stake in the company and now serves as a consultant, the statement said.
How he sold that stake is a question that interests investigators.
"The commission staff has information tending to show that Wynn and others have sold, or participated in the sale of, securities issued by Connect-A-Jet as to which no registration statement was or is in effect or on file with the commission," the SEC filing said.
Mr. Wynn paid $100,000 to acquire 10 million of Connect-A-Jet's 150 million outstanding shares, the SEC said in its filing. It's not clear when Mr. Wynn sold his shares, but such a stake would have been worth nearly $28 million at the stock's peak in September.
The SEC said in its filing that it had information indicating Mr. Wynn and the company's backers failed to tell investors the company's true financial condition and probably broke securities laws when the company became publicly traded in a reverse merger in August.
Instant scrutiny
In the world of penny stocks, a typical promotional campaign involves positive reports on Web sites, maybe some e-mail and faxes. The Connect-A-Jet approach was much more audacious, and it brought instant scrutiny.
Flashy commercials ran on CNBC for two weeks starting Sept. 4, and ads ran in newspapers, including The Dallas Morning News and USA Today.
They touted Connect-A-Jet's new approach to booking private jets and prominently displayed its CAJT stock symbol. The SEC says Mr. Wynn paid for the promotional activity.
The ads immediately attracted the attention of penny stock investors, with postings on blogs and chat rooms asking why a start-up company would spend so much money promoting its stock.
According to a lawsuit in state District Court in Dallas, at least some of the promotional money was borrowed from a friend of Mr. Wynn's.
Nick Daryanani and his company, Kool Kids Inc., have sued Mr. Wynn; his holding company, Wynn Industries LLC; and a business partner, Ryan Reynolds, contending Mr. Daryanani lent Mr. Wynn $250,000 in late 2006 to promote Connect-A-Jet and was never repaid.
According to the suit, Mr. Wynn told Mr. Daryanani that he would give him 1.8 million shares of Connect-A-Jet in lieu of the $250,000. Those shares were never given over, according to the suit.
Mr. Wynn's attorney, David Clouston, said that the lawsuit's allegations are baseless and that Mr. Wynn would vigorously defend himself. Mr. Reynolds' attorney also denied any wrongdoing by his client.
'Partner' questions
As Connect-A-Jet's profile grew in the fall, so did questions about its veracity.
The company said on its Web site that it was developing a seamless online booking tool that would link to major jet service companies such as NetJets Inc., owned by Berkshire Hathaway Inc. Connect-A-Jet would make its commissions on customer bookings.
The trouble was that some of its "partners" said they knew nothing of Connect-A-Jet.
For example, Aviation Research Group/U.S. Inc., which monitors safety and other issues for charter jet companies, says on its Web site: "ARG/US has no relationship whatsoever with the charter company Connect-A-Jet. Not only does ARG/US not audit their operation nor those of their affiliates, we have repeatedly requested that Connect-A-Jet remove any reference to ARG/US from their Web site."
Although Mr. Wynn helped develop the booking engine behind Connect-A-Jet, the company's chief executive is attorney Martin Cantu in Austin, whose law offices are also Connect-A-Jet's headquarters.
Calls to Mr. Cantu requesting comment for this article weren't returned.
According to federal court records, the Department of Labor won a default judgment against Mr. Cantu in 2006 after accusing him of failing to send employee payments into retirement accounts at his Bedford-based mortgage company.
Bookings unclear
It's not clear how much business Connect-A-Jet is doing. Its last news release, dated Oct. 22, said it just had its biggest booking with a $90,000 flight, it was still nearing completion of its booking tool and it had just passed 5,000 "flight requests."
Those flight requests apparently come from the rudimentary travel questionnaire on its Web site that still stands in for the promised booking tool.
The site also offers a phone number; a call last week was met with a greeting of "Hello?" and the explanation that the company acts as a broker for spare jet capacity.
While the SEC has not formally accused Mr. Wynn of wrongdoing, the same can't be said of his co-defendant in the Daryanani lawsuit.
The SEC sued Mr. Reynolds and other stock promoters Sept. 26, alleging violations of securities law involving a host of penny stock companies that allegedly were created with the help of Dallas attorney Phillip Offill. Mr. Offill has denied wrongdoing.
The SEC accuses Mr. Reynolds of acting as an unregistered broker for the penny stocks, helping the other defendants evade securities laws.
He denied the allegations in court filings; his attorney, Spencer Barasch of Andrews & Kurth, said Mr. Reynolds wouldn't comment on the lawsuits or his involvement with Mr. Wynn.
Mr. Reynolds, who has run several finance companies, filed Chapter 7 bankruptcy in 2002. He does business from the same building as Mr. Wynn, 4514 Cole Ave. in Dallas. The building formerly housed Market News First, a Web site that touted penny stocks before it shut last year."
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