Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Proposed consent judgements against Michaud and D'Amaro in the Lambo SEC case.
Michaud: Anti-fraud etc injunctions, $40K disgorgement, $50K penalty.
D'Amaro: Injunctions, penny-stock offer bar, $218K disgorgement netted off against disgorgement in the criminal case.
Also, SEC granted leave to file its amended complaint mentioning Meagher by name.
Case is 1:09-cv-00361 in DEDC.
In these situations, I award a mental exploding cigar to the first true believer to come up with a reason why the SEC action is a *good* thing.
RBS issued a tracking certificate on YA Offshore. Judging by the prospectus, it & the underlying fund were designed for morons: http://markets.rbs.com/MediaLibrary/Document/PDF/ProductDocuments/XS0338079709/XS0338079709_EN_Prospectus.pdf
Hint: Letting the manager have: full discretion over valuing a portfolio of illiquid assets + no obligation to give any information on the holdings + comp based on its valuation = invitation to be raped, with very doubtful legal recourse in the event you are.
It's lost 70%+ since inception: http://markets.rbs.com/EN/Showpage.aspx?pageID=10&isin=XS0338079709
YA Global f/k/a Cornell Capital
See that some investors are petitioning to get one of the offshore vehicles wound up, alleging "raud, stock manipulation and self-dealing".
http://www.offshorealert.com/petition-to-wind-up-ya-offshore-global-investments-cornell-capital-mark-angelo-death-spiral-financing.aspx
What a great chart this is: http://rogerpielkejr.blogspot.com/2011/12/bbc-economics-graphs-of-year.html
Excellent picture of the last two decades, and scary.
Nice Roddy Boyd piece on DEER pump'n'dump: http://www.thefinancialinvestigator.com/?p=588
Geebus, that took long enough.
A little puzzled why he isn't been pinged for Locateplus Plus and Paradigm Tactical. These were the subjects of Galvin's action in 2006 against him in MA, and there have been criminal convictions and charges & SEC actions against management in those cases. But never any word how Galvin's action turned out or whether it ever actually went anywhere - so maybe some kind of statue of limitations thinggie or some other screw-up meant these weren't good cases for the federal action.
EDIT: I see Galvin's 2006 actions are mentioned briefly in the complaint, with no further commentary.
A little surprising that people keep getting caught by this kind of sting - third similar operation since Bermuda Shorts?
Any guesses on who "CW" might be?
This (VRAL) is being heavily promoted this week. Fig-leaf is a PR announcing granting of a patent for some old IP they license from the Univ of Colarado. Big volume & price spike, for an old old play.
Actually, that's probably the most interesting thing about it - has been re-rolling basically the same story for 10 years+. Of course, never actually generating any revenue.
They had an SEC investigation back in 2002 on the heels of a pump & dump, which didn't lead to anything beyonmd the usual PR distancing the company from the promoters. Since then, apparently nothing.
Pennyscam kudos to them! Interesting watching to see how long they can keep the thing chugging along ...
Summary of some of the associations from a few months ago: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=62616160
Plus a little correction: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=62620115&txt2find=vral
Since then you can check VRAL's filings at OTC Markets for further involvement by Wonderland Capital and Imperial Consulting. Presumably they are running the current pump.
Note that (as always) the company is late filings its quarterly statement at OTC Markets. The statements themselves tend to give quite detailed disclosure & are worth looking at for anybody wanting to do some real diligence. But don't expect to see anything up to date for quite a while, on past history.
FWIW, this is one of the cases Andy Vollmer became invovled with upon swinging back to WilmerHale through the revolving door from the SEC- see http://investorshub.advfn.com/boards/read_msg.aspx?message_id=63345396&txt2find=Espuelas
He doesn't actually get a mention anywhere in the case docket. Also, as far as I can see, there's no mention of who Moeller's attorneys are either.
Strange, but my guess is that Vollmer & WilmerHale are in fact acting for Moeller.
Aslo on WilmerHale: another revolving-door rider comes back to the SEC after a couple of years with WH, returning as commissioner: http://www.sec.gov/news/press/2011/2011-232.htm
Putting him on a petal stool is excellent.
Hope he doesn't get hoisted with his own pet tard.
I guess it's just one of them Mullah Popper-isms.
(... sorry ...)
a rapists' wit
That one's just scary.
Hmmmm. I'm in the "baffled" group, being looked down on.
Not happy about that, but I guess I can learn to live with it.
I guess the need for an admin hearing is a big bottleneck - lots of overhead involved.
Obviously it should be the other way around - eg if you fail to file for however many quarters, a computer automatically sends you a revocation notice; you can request a hearing if you want within 21 days or whatever, but if you don't then your stock goes phhht, automatically.
But you just know that anything like that would draw howls from the wide range of people - not all self-interested - concerned about rate of company formation and believing it is crucial for economic development.
This belief in rate of company formation is very widespread and embedded amongst those who are vocal on development issues - without real regard for all the evidence supporting the commonsense intuition that it's the rate of *good* company formation that matters, or for the very large proportion of scams amongst new companies in many regions.
(You also saw this kind of crude regard for company formation rates being expressed in the recent microcap fraud roundtable session.)
As an example: The Milken Institute publishes an interesting annual set of indices ranking US states on various innovation measures: http://www.milkeninstitute.org/publications/publications.taf?cat=ResRep&function=detail&ID=38801259
Nevada ranks a lowly 43 on the combined index and down around there on most of the many sub-indices. But one of the sub-indices is rate of business formation per 100,000 population - included because people in this kind of area always look at it as one of the key stats. And for this, Nevada is at 19th place - no doubt bolstered by the large number of scams which are starting up there all the time.
Most of the sub-indices correlate strongly with state median household incomes. More innovation stuff tends to mean richer people (and/or vice evrsa, of course). The business formation sub-index doesn't correlate with MHI at all. It's meaningless, because it includes lots & lots of scams.
Gupta facing criminal charges for leaking Goldman board stuff to Raj, apparently: http://www.ft.com/intl/cms/s/0/9fb2c674-ff63-11e0-9769-00144feabdc0.html#axzz1bqKZ68Il
Which is good. If the allegations are true, it'd be pretty noxious for Raj to go down and Gupta - who actually breached fiduciary duties - to walk.
Rajat Gupta, the former head of McKinsey, will face criminal charges as soon as Wednesday for allegedly passing Goldman Sachs earnings data to Raj Rajaratnam, the hedge fund manager, while serving on the bank’s board, people familiar with the matter say.
Mr Gupta is expected to voluntarily surrender to Federal Bureau of Investigation agents on Wednesday morning, these people say, with the charges expected to be announced by US prosecutors in Manhattan.
Dealbook also: http://dealbook.nytimes.com/2011/10/25/gupta-faces-criminal-charges/
Strong vote against Rupert's idiot sons ...
At the News Corp AGM. About 35% "no" vote for each of Lachlan and James, which is about 75% of non-Murdoch-alllied votes by some counts.
Rupert himself got off more lightly with 14% "no" votes.
James back before UK parliamentary inquiry in November.
http://www.guardian.co.uk/media/2011/oct/24/james-murdoch-news-corp-shareholders-vote
I take that to mean: "We are expecting to be sued by various parties & we are watching our for Wells notices."
My usual response is denial, ill-advised self-medication & eventual hospitalization. Seems to be working so far!
SEC/DoJ subpoenas? Chinese regulatory moves? Imminent collapse of Chinese multi-decade bubble leading to global recession, war, famine & pestilence? Just that nobody wants the rubbish they were packaging any more?
It would have been nice if R&R had said which :)
One member was pretty straight forward and stated that if a company wants to be non reporting then they should be taken private.
Yup.
Defendant James Meagher is a resident of Raynam, Massachusetts. Meagher operates a penny stock website called shakerzandmoverz.com.
So presumably this guy: http://investorshub.advfn.com/boards/profilea.aspx?user=54291
Excellent, thanks.
I've come across several magic-water pseudo-science scams/delusions in far-flung places over the years.
Maybe it'd be interesting to delve into things to see if there's some kind of common historical/religious/whatever "meme" involved. Or on the other hand, it could just be sad.
A classic piece of work.
It should be linked in every IHUB stock board intro page :)
Carl is a trip. He's now chair of LPHCQ after all the previous board resigned upon the Ch.11 filing. Nachef is one of the group who came on to the board with him, but seems to have resigned almost immediately.
Carl's cunning plan to get control of the company ddn't go so well - management hired local cops to guard the offices against him and pleaded with the US Trustee to take over, which happened. They claimed that Carl was seeking to loot assets. He & the others have been enjoined against interfering with the company.
Since then he keeps filing incoherent pro-se motions in the BK actions - more sad than funny, unfortunately. Nachef's lawyer asserts that Carl doesn't have any part in the group seeking to take control of the shell now.
Some indication that ZENG is or was under investigation by the SEC in Chicago. A recent filing in the criminal trial of Jon R. Latorella mentions that he is a subject of an investigation by the SEC's Chicago office.
Latorella of course is the ex-CEO of LPHC, and one of the charges is that he and the ex-CFO set up PDGT n/k/a ZENG as a scam to funnel fake revenue into LPHC.
No surprise if he continued to be involved with the ZENG scam after it changed its name and moved its address to Chi from Boston.
Yep, I was just wondering about that. ZENG was formerly PDGT, set up by Latorella etc as a scam to funnel fake revenue into LPHC. So no surprise if Latorella was still involved somehow after the shell changed its name and moved itself to Chi from MA. Tks.
In the current MA criminal trial of Jon R. Latorella for this http://www.fbi.gov/boston/press-releases/2010/bs111010a.htm from his time as CEO at LPHCQ www.locateplus.com, the prosecution mentions that he has some part in another pennyscam being investigated by the SEC in Chicago.
Don't see what this could be on a quick search - anybody run into anything?
He does appear as CEO at this nasty-looking spy-on-yr-spouse thing www.mobistealth.com
Via the MA bankruptcy court, it looks like the LPHCQ vehicle will end up in the hands of a group headed by one John Nachef of Naples, FL, according to the group's lawyer. If they can get the court to approve a plan, he says the intention is to restructure the capital to give old equity 20% of the company & maintain LPHC as a pinkie.
Nachef appears to be some kind of real estate guy and other filings in bankruptcy actions claim that he has unpaid casino debts and a federal tax lien. He was briefly an LPHC director in July as part of a farcical board spill in conjunction with some other seedy-looking FL types. A possible new pennyscam in the making?
Most of the LPHC assets however look set to be acquired by a thing called USA Protect LLC, controlled by ex-friend-of-Bill Vinod Gupta: founded InfoGroup f/k/a InfoUSA, later agreed to shell out $7M+ to the SEC without admitting or denying that he looted the company for his personal benefit.
http://www.businesswire.com/news/home/20111004006482/en/Everest-Group-LLC-Announces-Acquisition-Assets-LocatePLUS
I guess that one isn't likely to be a new pennyscam, given that Gupta is under a public company officer & director bar as part of his SEC settlement.
But it does raise public interest concerns. LPHC is in the business of aggregating public records on individuals and selling access to the data, mainly to various law enforcement-type organisations. The federal contracts register shows it has material contracts with the DEA, customs, the secret service etc etc. It doesn't seem great to me that somebody like Gupta is in control of that kind of thing ...
Nah, this guy wouldn't do anything spivvy - just a little naive ...
I find the biz models for these funds fascinating in a probably unhealthy kind of way - elegantly feral until the redemptions hit ...
A friend of mine in Oz is mulling over whether there's an opportunity to do something along the same lines there, in a "legitimate" kind of way.
My response:
Is fun to think about how you'd do this as a legit biz. You've obviously thought about this much more than me but anyway I sketched out a little toy model, attached.
I look at it like so:
If I'm looking at the stock and I see one of these deals announced, then I'm going to value the stock right now at a level which takes into account the dilution from discounted deal conversion & the funding.
Obviously I can look at that fair value in a number of different ways:
1. I can look at it as really being a public offer of stock with the funder acting as selling agent, taking its commission via the discount. In this case I might think of the post deal fair value as current market cap + new investment less fees, and further I might think the fair value increases because the company has more $$$ and I think mgt can generate a good return from it. I might not derate the fair value per share very much and I might even increase it.
The challenge for that rosy picture is if the opportunity actually is so good, why can't the company just do a rights issue or an insto placement? Both of these would almsot certainly cost the current equity holders less, right? For the picture to work, the company has to be some kind of speical situation which the market is mispricing, which implies that the funder has to have some very good diligence capability etc etc - which in turn I think goes against the fund model to the extent that these opportunities are going to be relatively rare, unpredictable and require a lot of (expensive, lengthy) work.
2. I can look at it as the company using last resort funding to fund burn. In this case I'll look at the deal as essentially debt paid for by the current equity holders. I might not see it as increasing the fair value of the company, in which case the cost to the equity holders will be high. I will de-rate my view of the fair value of the share price to adjust for the lowered company fair value view, reducing by the cost to the equity holders of the debt repayment.
I might further derate for a lowered view of the opportunity & management quality, given that mgt has decided to sell off shareholders' equity at a big discount, either because they have no other choice or because they are smurfs.
That would get me on the slope to a death-spiral view. The fund model I think requires working off the exposure completely over a max period of a quarter: the fund needs to have that kind of liquidity profile to ensure it doesn't get toasted if there is a redemption surge, right? The lower the fair value of the stock the lower the conversion price => the more vlume the fund needs to sell => the more pressure on the stock price => ....
3. Or something in between :)
In any case, on this cartoon view, the trick is to be able to find enough deals which look more like category 1, without spending a huge amunt on diligence, and to avoid deals which look like category 2. If your name gets attached to category 2 deals, then any deal announcement will be seen as tipping it into category 2 status - you'll no longer be "legit".
To help that along, all of these US PIPE funds spend money on "marketing" (ie stock touts) to try ro make category 2 deals look more like category 1 for a period ...
I think in Oz the job is a bit tougher fundamentally because you can do rights issues, which you can't in the US - so the question of why the company isn't doing one would tend to be a pervasive question, from a perception angle at least.
In devil's advocate mode!
Nice to see Ribotsky pinged. But the complaint does give a good impression of how hard it is to take action against scammy PIPE funders.
The main elements in the complaint are lying to his investors about the liquidity of the holdings, looting the fund and a bodgy sale of fund assets to give the appearance of realised gains.
On the other hand, the complaint doesn't really go to the bigger underlying scam here, ie bogus fund valuations generating millions in management fees paid by the fund to Ribotsky's NIR. This fee was 2% of assets under management plus 20% of any gains over the year, realised or unrealised (standard industry arrangement). Inflated valuations obviously increased the management fee.
Ribotsky's deals were typically debentures convertible into common at a large discount to trailing VWAP. Say the funds invested $1M in company X via a debenture with a 50% discount feature. At valuation date, if the company was still alive, Ribotsky would value the position at something like $1M/50% = $2M, for a $1M gain and generating $40K + $200K in cash management fees. Add more to that for accrued interest, plus the potential supercharging effects of warrants which were typically part of the deals also.
This is regardless of company X's share price, business prospects, trading volume etc - so long as he could avoid having to write down the position because of company liquidation or default. Of course it all fell apart when redemptions started to hit.
The complaint makes it clear that these valuations were absurd by any commonsense standard, but he's not being charged with ripping off his fund investors on this basis. I'm pretty sure that's because he was in fact allowed to do valuations this way under the terms of the management agreement between NIR and the funds. Supposedly sophisticated investors bought into it; hard to get a jury to give them relief from their foolishness.
I think all of the bottom-feeding PIPE funds have similar fee arrangements. It's a reason why you hardly ever see them taking default action against their portfolio companies. The last thing they want is to have to write down the value of a position.
Federal ethics officials are expected to recommend that the Justice Department begin a criminal investigation into actions taken by David M. Becker, the former general counsel of the Securities and Exchange Commission, who determined the agency’s proposal for compensating victims of the Bernard Madoff Ponzi scheme when he had a financial interest in the outcome.
http://www.nytimes.com/2011/09/17/business/sec-official-in-madoff-case-may-draw-a-criminal-inquiry.html?hp
This little affair made Schapiro and the SEC in general look like smurfs.
Fortunately they promoted an ex-WilmerHale guy to replace Becker.
They're inviting comments, so I guess another probably futile opportunity for people to argue that non-reporting companies shouldn't trade publicly, have access to public markets for capital raising etc etc.
I see head of inv banking for Rodman & Renshaw, the China reverse merger player, is on the committee. Any other names which raise an eyebrow?
SEC Announces Formation of Advisory Committee on Small and Emerging Companies
FOR IMMEDIATE RELEASE
2011-182
Washington, D.C., Sept. 13, 2011 — The Securities and Exchange Commission today announced the formation of the Advisory Committee on Small and Emerging Companies to focus on interests and priorities of small businesses and smaller public companies.
The committee is intended to provide a formal mechanism through which the Commission can receive advice and recommendations specifically related to privately held small businesses and publicly traded companies with less than $250 million in public market capitalization.
“Our capital markets are a critical source of funding for emerging companies and smaller public companies,” said SEC Chairman Mary Schapiro. “That is why a key component in our agency’s mission is to facilitate capital formation while at the same time protecting investors. This new advisory committee will increase the input we receive from the small business community.”
The advisory committee will advise and consult with the Commission on such issues as:
Capital raising through private placements and public securities offerings.
Trading in the securities of small and emerging and small publicly traded companies.
Public reporting requirements of such companies.
The co-chairpersons of the committee are Stephen M. Graham, Partner at Fenwick & West LLP in Seattle, and M. Christine Jacobs, CEO and Chairman at Theragenics Corp. in Buford, Ga.
Other committee members include:
David A. Bochnowski, Chairman and CEO, Northwest Indiana Bancorp, Munster, Ind.
John J. Borer III, Senior Managing Director and Head of Investment Banking, Rodman & Renshaw LLC, New York, N.Y.
Dan Chace, Manager, Wasatch Micro Cap Fund, Salt Lake City, Utah
Milton Chang, Managing Director, Incubic Venture Fund, Menlo Park, Calif.
Joseph (Leroy) Dennis, Partner, McGladrey & Pullen, Bloomington, Minn.
Shannon L. Greene, CFO, Tandy Leather Factory, Fort Worth, Texas
Kara B. Jenny, CFO, BlueFly Inc., New York, N.Y.
Steven R. LeBlanc, Senior Managing Director of External Private Market, Teacher Retirement System of Texas, Austin, Texas
Richard L. Leza, Chairman of the Board, Exar Corp., Fremont, Calif.
Paul Maeder, General Partner, Highland Capital Partners, Lexington, Mass.
Kathleen A. McGowan, Vice President - Finance, Tobira Therapeutics Inc., Manalapan, N.J.
Catherine V. Mott, CEO and Founder, Blue Tree Capital Group, Pittsburgh, Pa.
Karyn Smith, Deputy General Counsel, Zynga Inc., San Francisco, Calif.
Dan Squiller, CEO, PowerGenix, San Diego, Calif.
Charlie Sundling, Chairman and CEO, Pipeline Software, Orange County, Calif.
Timothy Walsh, Director, State of New Jersey Division of Investment, Trenton, N.J.
Gregory C. Yadley, Partner, Shumaker, Loop & Kendrick LLP, Tampa, Fla.
The committee also will include as observer members:
Sean Greene, Associate Administrator for Investment and Special Advisor for Innovation, U.S. Small Business Administration
A. Heath Abshure, Arkansas Securities Commissioner and Chairman of the Corporation Finance Section of the North American Securities Administrators Association.
The SEC regularly takes steps to reduce the regulatory burdens on small businesses in raising capital in a manner consistent with investor protection. The committee will provide the Commission with advice in connection with this important ongoing process.
Recently, the staff of the Commission began a review of the SEC’s rules related to the triggers for public reporting and rules restricting general solicitation in private securities offerings. The Commission will seek input from the committee in these two areas among others.
The SEC also is in the process of re-establishing an Investor Advisory Committee. That committee, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, would replace an earlier Investor Advisory Committee that the Commission had set up in June 2009 under the Federal Advisory Committee Act.
http://www.sec.gov/news/press/2011/2011-182.htm
Since you bring him up & he's funny ... http://www.27bslash6.com/f26a.html
A free US sentencing guidelines calculator!
If you haven't seen it before: http://www.sentencing.us/
But I guess that record does suggest that Mak was the big winner. He pays ~$430K to Dynkowski; was this the 20% commission mentioned by the prosecution in Matt's change of plea hearing, below?
If so it suggests Mak got $2M+ of the claimed $4M+ total proceeds from the scam.
So, yeah - why didn't Mak get pinged?
Michael Mak was the CEO and Director of Asia Global, a company purported to be involved in building businesses in emerging markets in Asia. [..]
In early August 2006, Brown sought Dynkowski to trade AAGH. Brown explained that the AAGH stock to be sold would consists of free-trading shares issued through what turned out to be three Non-qualified Incentive Stock Compensation Plans, registered with the SEC through a Form S-8. [..] In this case, the S-8 shares themselves were issued by
Mak/AAGH into nominee brokerage accounts at Advantage Investment
Strategies, AIS in the names of various individuals residing in
Hong Kong.
Brown acted as the liaison between the brokerage firm AIS through separately indicted co-defendant Mangiapane and Dynkowski. Brown sought Dynkowski's expertise in market timing, manipulation, and sales to maximize the proceeds from the sale of S-8 shares.
Dynkowski was to receive 20% of all stock sale proceeds if he met certain date and amount targets. Brown and Mangiapane were likewise to receive their share of the deal based, in part, on commission generated from share sales. For his part, Dynkowski agreed to participate in the deal, but required access to sufficient shares of stock to enable him to
control AAGH's market price.
I think the only detail on the unsealed record is in the transcript of Matt's change of plea hearing, DE #28, with the prosecution stating:
Once the AAGH shares were sold through the nominee accounts at AIS, the proceeds were sent by check or were wired out to HSBC bank accounts in Hong Kong which accounts were set up in the names of the S-8 account holders [the HSBC account numbers are listed in the indictment].
With Brown's knowledge and assistance, proceeds from the AAGH market manipulation eventually found there [sic] way directly back to the United States and to Dynkowski via direct wire transfer to Tetrix [his vehicle].
A portion of the proceeds, however, were redirected to bank and brokerage accounts set up by Dynkowski in Costa Rica during a trip he took to Costa Rica in late October 2006, with Brown and Mangiapane. According to notes obtained during the search of Dynkowski's Newark, Delaware home, in 2006 Dynkowski received a $28,185 wire and cash payments of approximately $400,000 from Mak.
What proportion of the "proceeds ... eventually found their way directly back to the US and ... Tetrix" and to the Costa Rica accounts?
How does this description fit with the prosecution's statement from the sentencing hearing, "... the funds that were generated from the Asia Global fraud were wired offshore. We don't know what happened to them at this point except to know that they were distributed among the conspirators in the fraud."
Did they track the trail through all of the HSBC accounts in HK and try to look to who ended up with all of the money? Or did they just look at what came back to Dynkowski's accounts, not piecing the trail together for the other amounts?
The second sounds most consistent with what the prosecution has stated on the unsealed record. If that's the case, the question remains why they didn't trace everything: Because they weren't able to? Because it wasn't deemed cost effective? Because they had enough to get a conviction against Matt etc which gave them their scalps and Matt's attorneys were too pathetic to make an effective fuss about it? Some other reason?
Think there's just not enough info to really puzzle this out without knowing what's in the sealed submissions.