Grifco Inc (GFCI)

[Trinityz1]

JD's statement/response

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK (FOLEY SQUARE)
__________________________________________
:
ROBINSON REED, INC. AND FFC3 APS, : Case No. 1:07-cv-00584-PAC
:
Plaintiffs, : ECF
vs. :
:
GRIFCO INTERNATIONAL, INC., :
: DECLARATION OF
Defendant. : JIM DIAL
:
__________________________________________:
I, JIM DIAL, President and Chief Executive Officer of Grifco International, Inc.,
2507 N. Frazier Street, Suite 410, Conroe, TX 77303, declare in accordance with 28
U.S.C. Section 1746, that the foregoing is true and correct.
1. I am the President and Chief Executive Officer of the Defendant Grifco
International, Inc. ("Grifco"), a Nevada corporation.
2. In November 2004, Defendant Grifco (which was then a private company) began
trading on the Pink Sheets after completing a "reverse merger" with a public company
formerly known as Litfibre, Inc. Defendant Grifco is non-reporting issuer with the U.S.
Securities and Exchange Commission.
3. Grifco is a manufacturer of tools for the oil and gas industry. Grifco maintains a
public website at www.grifco.org.
4. In the summer of 2005, Defendant Grifco needed bridge loan financing. Defendant
Grifco was introduced to Plaintiffs Robinson Reed, Inc. and FFC3 APS through Andy
Baum who was the principal of a Los Angeles, CA consulting firm.
5. At first Plaintiff FFC3 and its principal Mads Ulrich proposed acting as the
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syndicator of an offshore Regulation S offering to provide the bridge financing. See,
Exhibit A.
6. As negotiations continued, Plaintiff FFC3 then introduced Defendant Grifco to
Plaintiff Robinson Reed stating that both of them would provide the bridge loan
financing. There was no further mention of the syndication of the Securities.
7. Throughout this process, Baum assisted the parties in negotiating a final deal
earning himself a finder's fee of $150,000 from the bridge financing proceeds. This
finder's fee was disclosed and Baum was paid at closing on the bridge loan financing
which took place on September 1, 2005 in New York, NY.
8. All closing documents were prepared by Plaintiffs Robinson Reed and FFC3 and
their attorneys in New York, NY.
9. The bridge loan financing provided that Plaintiffs FFC3 and Robinson Reed would
purchase $1,200,000 in Securities (e.g. convertible promissory note, warrants and pledge
shares) through a Note Purchase and Warrant Purchase Agreement. See, Exhibit B.
10. The purchase of the Securities was broken-up into two traunches. The first trauche
in the amount of $1,200,000 was paid at closing. The second traunche of $300,000 was
never paid since we were not able to register the Securities.
10. As part of the Agreement, Defendant Grifco issued to Plaintiffs Robinson Reed
and FFC3 a total of 11,150,000 shares of its common stock as a "pledge".
11. The parties acknowledged in the Agreement that all of the shares, warrants and
shares upon conversion of the warrants (collectively the "securities") were being issued
in reliance upon the exemption from securities registration afforded by Section 4(2) of
the U.S. Securities Act of 1933, as amended, and the rule and regulations thereunder
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including Regulation D and Regulation S.
12. As a condition of closing, Defendant Grifco obtained an expert opinion form Levy
& Boonshoft, P.C., Attorneys at Law, 477 Madison Avenue, New York, NY 10022. See,
Opinion Letter, Exhibit C.
13. Defendant Grifco spent over $200,000 attempting to complete financial audits
necessary for filing a registration statement with the SEC as required under the
Agreements. However, Defendant Grifco was unable to complete the audits in the time
required under the Agreements.
14. After going into default, Plaintiffs Robinson Reed and FFC3 demanded repayment
of principal plus penalties and interest as provided for under the Agreement.
15. Based on the calculations of Plaintiffs Robinson Reed and FFC3, Defendant Grifco
owes more than $2,000,000 in penalties and interest on the original $1,200,000 purchase
of Securities for a total of $3,336,000 (almost 200% in penalties and interest).
16. At all times relevant herein, Plaintiffs Robinson Reed and FFC3 have demanded
that any payments by Defendant Grifco go first against the penalties and interest before
any pay-down of the principal.
17. In or about May 2006, I had a telephone conversation with a representative of
Plaintiff Robinson Reed and FFCS (e.g. Chris Pederson) who was based in Lausanne,
Switzerland. Mr. Pederson stated that it was urgent that monies should be paid
immediately since over 60 investors and their attorneys were calling him about their
investment in Defendant Grifco. Further, Mr. Pederson demanded that I immediately
wire $500,000 to him so the monies could be paid out to these 60 plus investors.
18. This was the first time I had any knowledge that Plaintiffs Robinson Reed and
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FFC3 had syndicated out the Securities purchase under the Agreement with Defendant
Grifco since I had relied upon their representation that this was not the case.
19. After further conversations and emails, I finally sent a delegate to meet with Mr.
Pederson at his offices in Lausanne, Switzerland in August 2006. However, the offices
turned out not to be Mr. Pederson's office but a German language sales room staffed by
over 20 persons in what can only be described as a telephone boiler room.
20. At the time I did not understand the significance of either the syndication of the
Securities to 60 plus investors by Plaintiffs Robinson Reed and FFC3 or the Lausanne,
Switzerland sales office.
21. After doing a "google" search on Plaintiffs Robinson Reed and FFC3, I discovered
that both of these firms had been issued a "cease and desist" order from the Kredittilsynet
(The Financial Supervisory Authority of Norway) on August 24, 2005
(http://www.kredittilsynet.no/wbch3.exe?d=4804) for selling financial instruments to
Norway citizens without being registered as a broker dealer under the laws of Norway.
This date is significant in hindsight in that it is just days before closing on the September
1, 2005 Securities purchase with Defendant Grifco. See, Exhibit D.
22. I have reported all of my findings to Peter Campitiello, Esq., a partner with Levy &
Boonshaft, P.C., Attorneys at Law, who was responsible for executing the Opinion
Letter. I asked Attorney Campitiello if his law firm would have issued the Opinion Letter
without the Purchasers representations of Plaintiffs Robinson Reed and FFC3 and he
stated "No". I further asked Attorney Campitiello if his law firm would have issued the
Opinion Letter if the Purchasers representations of Plaintiffs Robinson Reed and FFC3
were, in fact, untrue in that they had syndicated the Securities purchase to over 60
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investors and he stated "No." If called to testify as a witness, Attorney Campitiello
stated that he was competent to testify to the above.
23. As President and CEO of Defendant Grifco, I would not have voted in favor of
entering into the Agreement with Plaintiffs Robinson Reed and FFC3 if I had known that
they were not the real investors as represented and warranted.
24. As President and CEO of Defendant Grifco, I would not have aided and abetted
Plaintiffs Robinson Reed and FFC3 in their deception of being the real investors as
represented and warranted to me in the Agreement, by filing a false registration statement
with the SEC thereby subjecting me to criminal and civil prosecution for securities fraud
violations.
25. As President and CEO of Defendant Grifco, I want the Securities purchase and the
Agreement with Plaintiff Robinson Reed and FFC3 to be rescinded on the basis of fraud,
and thereafter to make sure that the $1,200,000 which was received on account from the
60 plus investors is paid in full subject to their filing a proof of claim with a court
supervised special master or equity receiver together with such information as may be
required under the U.S. Patriot Act's international anti-money laundering and financing
terrorists provisions, as well as, any other applicable laws.
26. Significantly, Plaintiff Robinson Reed is a "B.V.I." incorporated entity with
management offices in Cyprus, a notorious haven for money-laundering. Plaintiffs
Robinson Reed and FFC3 are not registered in any capacity in either the U.S. or in
Europe to broker the sale of financial instruments or act as fiduciaries for other people's
monies.
27. Further, within days after being served with a copy of the January 16, 2007 demand
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letter written to Mr. Baum (by the same attorneys representing Plaintiffs Robinson Reed
and FFC3 in this litigation) claiming 10b-5 securities fraud, I authorized my attorneys to
seek removal of the New York State action. This was timely filed.
28. I have read the declaration and pleadings authored by Eric O'Connor, attorney for
Plaintiff Robinson Reed and FFC3 suggesting that Defendant Grifco has somehow
"waived" its right to be in federal court. However, prior to receiving notice of the
demand letter to Baum, it should be apparent that Plaintiffs Robinson Reed and FFC3
intentionally concealed from the court and Defendant Grifco their intended pursuit of
10b-5 claims against a necessary party. This concealment should not be rewarded either
on the basis of denying removal and/or to prejudice Defendant Grifco's contractual right
to enforce forum selection before the U.S. District Court for the Southern District of New
York as provided for in the Agreement.

Executed this ____ March, 2007 in the City of Conroe, TX
By:___________________________
Jim Dial, President and CEO
Grifco International, Inc.
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