Holiday Island Holdings Inc (HIHI)

[boinker]

A LITTLE HISTORY - http://investorshub.advfn.com/boards/read_msg.aspx?message_id=97315067

NOT MY RESEARCH BUT THROUGH

Re: shell3 post# 2728
Post # 2731 of 20909

I just did some quick research on HIHI and specifically S. Gene Thompson the guy newly listed.

Looks like big time scam over there on the HIHI board.

http://sharesleuth.com/investigations/2012/12/small-companies-big-questions-chinese-toll-road-and-shipping-companies-take-north-american-investors-on-strange-trips

WINLAND OCEAN SHIPPING

Winland Ocean Shipping Corp. (Pink Sheets: WLOL) went public in August 2008 through a reverse merger with a Houston-based company called Trip Tech Inc.

According to SEC filings, Trip Tech issued 76.9 million common shares to Pioneer Creation Holdings Ltd., a British Virgin Islands-registered entity. It also got preferred stock that could be converted into additional common shares.

Shareholders of Trip Tech, which had been seeking to develop an online travel business, emerged with 23.1 million shares. Trip Tech had executed two separate stock splits in June of that year, nearly tripling its outstanding shares.

SEC filings show that S. Gene Thompson, the chief executive of Trip Tech, owned 23.7 million shares before the reverse merger. He surrendered 7.1 million for cancellation, leaving him with 16.6 million shares of the combined company.

Winland is based in Hong Kong and provides shipping and logistics service for customers around the world. At the time of the reverse merger, it operated a fleet of 13 vessels.

Thompson’s stake represented nearly three-fourths of the company’s public float. Other investors got the remaining 6.5 million shares.

As with some of the other Chinese reverse mergers packaged by Kelley and his associates, the percentage of stock that went to the investors in Trip Tech far exceeded that company’s apparent financial contributions.

Trip Tech’s last quarterly SEC filing before the reverse merger showed that it had recorded just $59 in revenue since its creation in November 2006. Its sole asset at the end of the May 2008 was just under $33,000 in cash.

SEC filings related to the reverse merger said Winland had $70 million in revenue and nearly $18 million in operating income the previous year. That company listed total assets of more than $94 million prior to the merger.

SHARES DISAPPEAR

When Winland filed its initial annual report with the SEC on March 31, 2009, Thompson no longer was listed among the individuals or entities holding 5 percent or more of the company’s common stock.

Thompson never reported selling any shares, and Winland’s trading volume was so low that he would have been unable to dispose of them in the open market.

Trip Tech’s SEC filings offered few details on Thompson’s business career or prior relationships, so we searched the filings of other public companies to see if he showed up anywhere else.

We discovered that Thompson, like others involved in the Chinese reverse merger network, was an associate of Ruth H. Shepley, who lives in the Houston area and specializes in creating or marketing shell companies.

As we noted in the previous articles in this series, Shepley was an investor in the reverse-merger deals that created Telestone Technologies Corp. (Nasdaq: TSTC) and China INSOnline (Pink Sheets: CHIO). She also controlled the shell company that became CH Lighting International Corp. (Pink Sheets: CHHN).

SEC filings show that Thompson had been president of Jordan 1 Holdings Co., a shell that did a reverse merger with a U.S.-based company in 2006. Those filings show that Shepley was the majority owner of Jordan 1.

Shepley’s longtime partner, Michael J. Fearnow, orchestrated the Telestone and China INSOnline deals, and also played a behind-the-scenes role in the reverse merger that created Kandi Technologies Corp. (Nasdaq: KNDI).

When Sharesleuth asked Thompson what became of his shares in Winland, he referred us to Fearnow – whose name did not appear anywhere in the SEC filings related to that deal.

As we reported in the first two stores in this series, the SEC brought charges against Fearnow in 2000 in connection with his involvement in several earlier reverse mergers. The SEC alleged that he participated in the pricing and structuring of the deals, thus engaging in securities transactions without being registered as a broker/dealer.

SEC filings also show that Siu Choi Fat, a lawyer in Hong Kong, was listed as executive director of one Winland’s owners, an entity called Wallis Development Ltd. Our investigation found that Fat was involved in at least four of the other 11 Chinese reverse mergers that Kelley and his associates helped package.

DOWNTURN IN BUSINESS

Winland’s shipping business declined sharply in 2009, partly because of the global economic crisis. Revenues fell 40 percent, to just over $50 million, and the company posted a loss of $7 million.

Winland said revenue rebounded to more than $74 million in 2010, with profits coming in around $3 million. But investors took little interest in its stock.

Winland said revenue for 2011 was a little less than $61 million, with profits again topping $3 million. The company sold several of its vessels during that year, contributing to the drop in sales.

Winland also executed a 1.5-for-1 stock split in 2011, boosting the number of outstanding shares to 195 million.

In its first three years as a public company, fewer than 1.5 million shares had traded hands on the open market.

PAID PROMOTIONS AND A TRADING SURGE

Because Winland’s trading volume was so low, Thompson — or whoever held the 16.6 million shares reportedly issued to him — would not have been able to convert many of them to cash.

However, one or more people connected to the company financed a $700,000-plus promotional campaign in December 2011 that included tout reports on at least a dozen stock-related websites.

Research Driven Investor LLC, which runs a cluster of stock-promotion sites, featured Winland on most of them. It said in a disclaimer that it was paid $655,000 for a month-long investor relations campaign on Winland’s behalf.

Research Driven Investor said the money came from Reason Success Ltd., which it described as a “non-affiliated third party.’’

From Dec. 1 to Dec. 20, 2011, more than 12.8 million of Winland’s shares changed hands. The company’s stock price doubled, going from 28 cents to a high of 59 cents.

If whoever held Thompson’s original 16.6 million shares was able to unload one-third of those shares at an average price of 40 cents a share, they would have collected more than $2 million.

Winland’s total trading volume for the month of December and the first few days of January was roughly 14.5 shares. When the promotional campaign ended, the company’s stock price quickly retreated, falling below 25 cents a share.

The other stock promoters who were paid to tout the company included:

– Jonathan Lebed, who previously settled charges with the SEC stemming from his alleged manipulation of the markets through false and misleading Internet postings.

– Raymond L. Dirks, who was fined and suspended by the NASD in 2004 for issuing favorable reports on companies that omitted material facts and made false and misleading revenue and price projections.

Lebed said he was paid $20,000 by Wall Street Grand LLC, another stock promotion firm.

Dirks predicted in his Dec. 12 report on Winland that its stock was likely to “quadruple in price within six months to about $1.50 a share.” Dirks said he was convinced the stock would climb to $3 within a year, provided the world economy recovered, and could hit $4 by the middle of 2013.

Other sites that touted Winland said in their disclosure statements that they were paid by Research Driven Investor.

Pennystockalerts.com said Research Driven Investor had agreed to pay it as much as $40,000 for a two-day campaign. Another site, Pennystockprophet.com, said it expected to receive as much as $35,000 for one-day campaign.

Beacon Equity Research, which had touted Orsus Xelent in 2007, New Oriental Energy in 2008 and China Infrastructure Investment in 2010, said it got $30,000 from Research Driven Investor to promote Winland.

Its report in mid-December was headlined “Traders are Backing Up to Grab WLOL by the Truckload.’’

Interest in Winland’s stock has since waned, to the point that there is no buying or selling on some days. The company’s shares now trade for a nickel.

Winland notified the SEC in August that it intended to terminate its securities registration and would cease filing reports with the agency.

MARKET INTERVENTION

Our research found that early in Winland’s existence, a Hong Kong-registered company called Winner International Group Ltd. intervened in the public market to boost the price of Winland’s shares.

As we reported in the first two parts of this series, Winner International played a hidden role in the reverse mergers that created four other Chinese companies, including Orsus Xelent and New Oriental Energy.

Winner International covered the legal, accounting, investor relations and listing expenses for those companies in return for millions of shares of cheap, pre-merger stock.

Paul Kelley, who helped create Winland, was Winner International’s vice president from 2002 to 2009. Records show that he opened its U.S. brokerage accounts and had trading authority over them.

Testimony in a Canadian court case showed that Winner International acted to prop up Winland’s stock after Jack Tang, the operator of Medallion Capital Corp. (China), sold shares and sent the price plunging.

According to that testimony, Tang asked a woman named Liya Wu – who worked with Kelley – if she could find someone to buy shares in the open market to reverse the damage. It appears that when Wu could not find an outside investor to buy shares, another of Kelley’s associates took direct action.

A forensic analysis of the trading in Winland’s shares on Nov. 18, 2008 showed that the stock opened at $3.60 and tumbled to 51 cents a share by mid-afternoon. Between 2:48 p.m. and 3:40 p.m., Winner International bought 27,000 shares on the open market at progressively higher prices, lifting the price per share to $3.70.

According to Canadian court documents, the trades were conducted by an associate of Kelley’s, Jay Tien Chiang, through Winner International’s account at E*Trade Securities.

Court records show that Tang later sent Winner International the same amount of money it spent to buy the Winland shares.

According to testimony in the Canadian case, Chiang was the person who connected Kelley with Tang and played an important middleman role in the first four reverse mergers.

The judge in the Canadian case ruled in July that Chiang had an undisclosed 50 percent ownership interest in Winner International. Court records show that the stock it held in the first four companies was worth upwards of $20 million.

OTHER CONNECTIONS

Thompson, who headed the shell company that became Winland, currently is executive vice president of an Arkansas real estate company called Holiday Island Development Corp. It has created a planned community on Table Rock Lake, near Eureka Springs.

Holiday Island also has been home to Roger D. Lockhart, a former stockbroker, and his wife, Davina S. Lockhart. They invested in at least two of the other Chinese reverse-merger companies.

Our research found that the Lockharts, like Thompson, previously invested in domestic reverse-merger deals alongside Shepley and Fearnow.

We also noticed one more unusual connection: The home page for the Holiday Island Development site that featured Thompson’s profile also included a paragraph describing an offshore company called Hong Kong Alliance Fund Ltd.

When we took a closer look, we found that two of the people behind Hong Kong Alliance fund were Jeffery S. Stone, a convicted felon, and his wife, Janette Diller Stone.

The SEC obtained judgments against both of the Stones in 2009 in connection with the manipulation of a penny-stock company called WebSky Inc. The Stones were ordered to pay $462,247 in disgorgement and interest and $180,000 in penalties.

But they moved to Japan before satisfying the judgment, and Jeffery Stone said in an interview with Reuters that he had “no intention of ever paying.”

SEC filings show that Jeffery Stone’s Crescent Fund LLC — which was implicated in the fraud case against him — once provided funding to a shell company where Thompson was president and Shepley was the majority owner.

We also found a press release from last year announcing that Thompson had been appointed interim chief financial officer at Chatterbox Call Centers Ltd. (OTCBB: CXLL), a company that was involved with another entity connected to the Stones, Wakabayashi Fund LLC.

CHINA AUTO LOGISTICS

China Auto Logistics Inc. was created in November 2008 through a reverse merger with Fresh Ideas Media Inc., a Colorado company that had marketed greeting cards and school folders.

China Auto Logistics sells and trades imported vehicles from the United States, Europe and other nations. The Tianjin-based company also helps buyers with financing and shipping, and operates websites that feature vehicles and services.

Bright Praise Enterprises Ltd., a British Virgin Islands holding company, got 11.7 million shares of China Auto Logistics, or nearly 65 percent of the total outstanding after the merger.

SEC filings show that Fresh Ideas Media had just $125 in cash at the end of September 2008, and a little more than $23,000 in total assets. Still, its owners got nearly one third of the stock in the post-merger company.

They came away from the deal with 6.4 million shares.

China Auto Logistics said it had $81 million of revenue in the first six months of 2008, and a little over $2 million in profits.

SHARE TRANSFERS

The two main shareholders of Fresh Ideas Media were Philip E. Ray and Ruth Daily. Together, they held nearly 3 million of its 7.5 million shares. In connection with the reverse merger, they surrendered 1.1 million shares for cancellation, leaving them with 1.8 million shares.

The owners of Fresh Ideas Media’s other 4.6 million shares were not identified in the merger filings.

SEC filings show that on Sept. 19, 2008, Ray and Daily each sold 50,000 of their shares, at $4.63 a share. There was no public market for Fresh Ideas media’s stock at the time, so the sales had to have been private. The buyers were not identified.

Like many of the other shell companies used in the Chinese reverse mergers, Fresh Ideas Media split its stock in the weeks leading up to the deal. On Sept. 25, the company executed a 5-for-1 forward split, creating nearly 7 million new shares.

A FAMILIAR NAME

The reverse merger was completed on Nov. 10. As part of the transaction, a Toronto area accountant named Howard S. Barth was appointed to China Auto Logistics’ board of directors.

Barth is a longtime associate of Paul Kelley’s father, Stafford P. Kelley. Barth also sat on the boards of three other Chinese companies that gained U.S. listings through reverse mergers packaged by Paul Kelley.

Those companies were Orsus Xelent, New Oriental Energy and Guanwei Recycling Corp. (Nasdaq: GPRC).

Orsus Xelent and New Oriental Energy were delisted from the Nasdaq last year. Guanwei Recycling received a delisting notice earlier this year, as did China Auto Logistics.

MORE SHARE TRANSACTIONS

SEC filings show that 10 days after the reverse merger was completed, Ray and Daily each sold 682,500 additional shares for 0.6 cents a share. The transfers left Ray with 552,500 shares and Daily with 2,500 shares.

At the time, the company’s stock was trading on the open market for more than $2 a share.

The individuals or entities that bought the stock from Ray and Daily wound up with nearly 1.9 million shares, or just over 10 percent of China Auto Logistics, at an average price of 25 cents a share.

The day after the reverse merger was completed, shares of the combined company rose 25 percent, to $2.50. The second, they rose a further 18 percent, to $2.95. More than 400,000 shares changed hands in the first two days of trading.

Over the next two weeks, the stock climbed to nearly $4 a share, albeit on much lower volume.

Roughly 1 million shares of China Auto Logistics’ stock changed hands in its first two months as a public company. Trading dropped significantly after that, to fewer than 100,000 shares a month.