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With the Q there is no longer an apparent YHOO msg board but the old one is still accessible at http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_L/forumview?rt=1&bn=75005&so=L&ur=1
How did Ahearn and then Kaiser get involved with this thing?
The record for Ahearn as given in SEC filings is confusing. A group organised by Thomas E. Murphy (TM), the former audit committee chair (the "ACE group"), launched a proxy war proposing a slate of directors to be voted on at the Sep 2008 shareholder meeting.
This slate failed to get enough votes against the management slate, organised by then-CEO James Fields (JF; formerly CFO, now co-accused with Jon Latorella JL in the criminal proceedings).
But then in Oct 2008, JF et al let two ACE nominees on to the board, and in Nov 2008 they let all the rest in.
At least that was more or less the way it was described in SEC filings. But actually it wasn't quite like that. Ahearn was
one of the new directors in the Nov decision, but he had never been an ACE nominee in any of ACE's proxy filings, as far as I can see.
Where did Ahearn come from? Was he a TM/ACE guy or did he come from somewhere else?
It's pretty easy to make up stories where JF et al's sudden & otherwise not very explicable backdown re board composition -
right after the Sep vote which they won - had something to do with ex-FBI heavy Ahearn's appearance on the scene.
According to prosecution filings in the JL/JF criminal case, the two knew that they were targets of a criminal investigation by early 2007, the investigation itself having started in 2006.
By late 2008 the case would have been well in progress towards grand jury hearings by August 2009, when O'Riordan, the ex-CEO of the related PDGT scam, first testified, leading to the JL/JF indictments.
According to JF's attorney and LP's own 8-K at the time of the announcement of the SEC action, Kaiser was working with LP
by that August 2009 timeframe. JF's attorney says he met with FBI investigators to discuss the case on LP's behalf around then; the prosecution hasn't (yet) denied this. This was just a few months after Kaiser's resignation as national head of the FBI's criminal investigation division.
Presumably Ahearn and Kaiser would have known each other for a long time - both ex-SAC Boston, both long time old-school FBI heavies etc.
It's just very easy to make up a story along the line JF's attorney is trying to spin, with additional elements, like so:
- Perhaps Ahearn comes to the fore around Nov 08 as an enforcer to make sure that the proxy war & other LP chaos doesn't
spill over into stuff being revealed that he doesn't want to have revealed. Who knows what - perhaps kickbacks in LP's law
enforcement business, or some other nexus of bad stuff involving Ahearn and TM. This intervention results in JF et al suddenly agreeing to cede board control.
- As the LP and PDGT frauds approach the grand jury stage, Ahearn brings Kaiser in to help keep things contained. O'Riordan is positioned as star witness testifying only against JL and JF, not against eg TM or outside counsel Geoffrey Chalmers, who both look very bad from the general record and also from the detailed findings in the SEC admin action against LP's former auditors. On this story, letting the case go wider would once again risk revelation of things which Ahearn/Kaiser did not wish to be revealed.
- Now with the Ch.11 filing Kaiser is leading a push to maintain debtor-in-possession operations, avoid liquidation and keep control of the business and the assets; again, on this story, to prevent outside eyes examing too closely things best left hidden.
- As supporting material: Boston AUSA Victor A. Wild who led the LP/PDGT investigation was at least a professional associate
of Kaiser's from Kaiser's SAC Boston days. He also, bizarrely, serves as director on another pinkie POS (EVRM.PK) for which
Chalmers is outside counsel. Chalmers and TM are old associates, formerly colleagues at Oftring, which underwrote LP's IPO.
- This Wild/Chalmers association via EVRM.PK existed all the way through the LP/PDGT investigations, until Wild handed over to another AUSA in mid 2010. The govt in court filings claims it was a "coincidence" and that Wild didn't even realise Chalmers' LP connection until April 2010. There is on the record a brief summary of an internal "taint" review conducted in 2010 after JF's attroney started kicking up a fuss about this; it found no reason for suspecting wrong-doing. JF's attorney professes to be unconvinced, not surprisingly.
- Wild kept the lead on the O'Riordan case until sentencing in late 2010. The transcript of the sentencing hearing is about the softest such thing I have ever read for a serious fraud. Wild makes a pro forma show of calling for a 2 year sentence (in itself a large downward departure) but heaps praise on O'Riordan for his cooperation & star witness mojo, and does nothing to rebut O'Riordan's attronery's picture of a stupid little fellow with no force of character led astray by an old bud, now full of remorse. O'Riordan got 6 months.
- General note: Collusion between FBI and DoJ officials for unconscionable ends is not unheard of in Boston: witness eg all the Whitey Bulger malfeasance, in the cover-up of which Ahearn played a significant early part.
Most of this is just speculation, of course. But the facts as they stand do raise questions which beg for answers, IMO.
Why did Ahearn and Kaiser get so involved with this crappy little thing? Any answer which has them mainly concerned with building the business, increasing shareholder value, trying to make money etc etc has to overcome many plausibility barriers, IMO.
Perhaps the main barrier is Lifton, who was dismissed as CEO last week, obviously so as not to screw up the Ch.11. Given that he was discharged from his own woeful Ch.7 just before his LP appointment was announced, he clearly had no credibility
as CEO.
Yet Ahearn and Kaiser were OK with him as CEO. Why?
So Kaiser is now CEO and President of Locateplus, after the company decided to file for Ch.11 and boot out Lifton, in an attempt to avoid a foreclosure action by its secured creditor.
http://www.sec.gov/Archives/edgar/data/1160084/000116008411000033/0001160084-11-000033-index.htm
Just head-scratching why a recent head of the FBI's criminal investigation division would get so involved in something which has no evident business prospects & no money, is foolishly defending (rather than quickly settling) an SEC suit and is now attempting to reorganise (futile, IMO).
LP's former auditors, Livingston & Haynes, were slammed in an SEC admin proceeding last week over their appalling LP audits.
http://www.sec.gov/litigation/admin/2011/34-64607.pdf
The detailed findings in that order strengthen suspicions that un-indicted former LP board members and its outside counsel have a lot to answer for. Eg: Thomas E. Murphy, former chair of the audit committee, and his long-time associate, attorney Geoffrey Chalmers both attempted to steer L&H away from red flags. Murphy was heavily conflicted, having amongst other things apparently loaned or guaranteed loans to Latorella, the CEO, secured by Latorella's shares in the company.
It's really easy to make up stories where Kaiser is doing all this to protect in some way former directors, including ex-Boston SAC and ex-LP director James F. Ahearn. But just stories at the moment.
That's a laugh - Stansberry as 1st amendment champion!
Anyway, he lost his appeal shortly after that was written.
If you extend unievrse to include sub $100M enterprise value US-based pinkies which have ever had public financials (even if nothing in 2010), then it looks like this:
- 1,700 companies (38% of total 4,444 sub-$100M US-based pinkies)
- Total retained earnings = negative $51 billion.
- Average = negative $29.7M.
- Median = negative $5.7M.
Think it's fair to guess that if financials were available for all, it would be seen that US-based pinkies with EV < $100M have generated $100B+ in net losses over their histories.
Hmmm. I'm not sure we actually need these things :)
Compare to equivalent listed companies - ie enterprise value < $100M, listed on NASDAQ/AMEX/NYSE. There are about 1,340 of these.
Total retained earnings reported during 2010: $481 billion. Average: $360M. Median: $1.3M. About 52% positive.
I looked at retained earnings for US-based companies with the pink sheets as their primary "listing", and with enterprise value <= $100M.
That's a universe of about 3,900 stocks of about about 5,000 total pinkies.
Only about 1,100 of these, or 29%, have publically available financials for 2010, including retained earnings.
For those that do, the total retained earnings during 2010 was negative $32.6 billion. The average was negative $29M, and the median was negative $5.6M.
Only 16% of these 1,100 companies had positive retained earnings.
Just another indication of the economic nastiness of pinkies.
Presumably including data for the ~2,800 stocks with no public financials wouldn't make this look better :)
Livingston & Haynes, Boston area CPA firm, pinged for appalling audits in the Locateplus (LPHC) scam: http://www.sec.gov/litigation/admin/2011/34-64607.pdf
Cease & desist, $130K fines, and 3 yr suspensions for the two partners involved: Kevin F. Howley and William W. Wood Jr.
They have no more than a couple of other issuer clients, but anyway some names to avoid if they turn up elsewhere.
http://www.lh-cpa.com/
Note that L&H got clean reports from its two PCAOB inspections to date, during the period when it was aware of but doing nothing useful about the forests of red flags planted all over the carcase of LPHC. From which I conclude that PCAOB inspection reports are not necessarily very reliable indications of auditor quality.
The SEC’s Revolving Door
By Michael Smallberg
If you’re looking for evidence of the revolving door that spins between the federal government and Wall Street, look no further than Daniel Gallagher, President Barack Obama’s recently announced nominee for Securities and Exchange Commission commissioner.
Gallagher certainly appears qualified for the job. He previously worked at the SEC as a counsel to then-Chairman Christopher Cox, and later played a key role in organizing the SEC’s response to the financial crisis. Yet Obama’s nomination of Gallagher to help lead the agency during a critical time in its history is also the latest example of the agency’s coziness to the industry it oversees.
Gallagher is currently a partner at WilmerHale. The pricey law firm’s high-profile clients have included Goldman Sachs, JPMorgan Chase, Citigroup, and other Wall Street giants regulated by the SEC. If the Senate confirms him, this would be Gallagher’s second spin through the revolving door — he previously left WilmerHale to join the SEC in January 2006, only to return to the firm in 2010. And he would be the latest on an ever-expanding list of WilmerHale alumni at the SEC, including the current general counsel, deputy general counsel, associate general counsel, corporation finance division director, enforcement division chief counsel, and deputy secretary.
[ .. more .. ]
Michael Smallberg is an investigator for the Project On Government Oversight. www.pogo.org
June 9, 2011 Copyright © 2011 Eastern Group Publications, Inc.
http://egpnews.com/?p=26147
I was thinking more in terms of perhaps Amador cooking up a play with MB to dump everything on Mangiapane, and then screwing it up, somehow or other.
Who knows? Anyway, it's cheap entertainment.
Ken the OC Securities guy proposes a theory re MB's treatment, over at RB.
Like this: MB was to be the main witness against Mangiapane. MB for whatever reason turned out to be a useless witness (Ken suggests this might be because MB is perhaps an untrustworthy little toad with the credibility of a whoopee cushion, or words to that effect). Consequently the feds withdrew their indictment against Mangiapane, back in March. And then punished MB for screwing up the case by designating him bag-holder-in-chief, as seen.
Seems plausible enough.
It'd be interesting to know how Amador figured in this, if at all. The motions around his replacement as MB's attorney by the drunk-driver-defender guy are still sealed, unfortunately.
The plea agreement isn't sealed, just the sentencing submissions.
That would seem to be a good plan for him.
He'd want to hope that the feds are still interested though. They might think they have enough scalps already.
Footnote to para 3 of the prosecution's forfeiture motion says this:
"Defendant Brown is in part jointly & severally liable for the money judgement with certain co-conspirators, who have been charged in separate indictments. Any relevant payment on this judgement by Defendant or his co-conspirators will be credited to all co-conspirators ... Moreover, the US has successfully recovered and forfeited certain assets through the administrative and civil judicial forfeiture processes. To the extent these assets can be traced to the proceeds of the GH3 and Asia Global conspiracies, the govt will move to amend the order of forfeiture to credit this recovery."
He is on the hook for the whole of the amount, but jointly & severally (in part) with others.
The forfeiture motion speaks of finalising things after recoveries are settled from other conspirators, and says there have already been some (unspecified) recoveries from others, or words to that effect.
Bottom line is that MB should end up with a personal liability less than the full amount, but no guesses as to how much less.
This illustrates how much it has always been in his interest to cooperate with the feds in nailing his fellow conspirators. Hard to know with the sentening memos still sealed, but I get the impression he either couldn't or wouldn't do very much on that front.
Prosecution has filed its response to MB's motion for reconsideration. Says it should be denied on procedural and jurisdictional grounds - MB had enough time to respond to original forfeiture motion etc etc.
Alternatively, if the court wants to go into the substance, should also be denied. Cites to established principles under which joint & several liability is the norm in fraud conspiracy cases.
Says completely consistent with plea deal. Their position is that the forfeiture agreement in the plea deal covered all property that was "traceable to, derived from, fungible with or a substitute for" proceeds from the crime overall, and not just property under MB's direct or indirect control at some point (which fwiw was the way I read it).
Plus other arguments. I'm sure the excellent scion will post the response soon.
The article makes it sound like he's still alive - hopefully that continues.
I have blurred feelings about some of this insider trading stuff. IMO the heaviest sanctions really should be against people who breach fiduciary duties. Eg: Rajaratman clearly crossed a line, inducing others to breach duties (and profiting from it), but he never AFAIK breached any himself. He should suffer punishment, but those who actually breached their duties should suffer more, all else being equal.
(Ummm ... well I guess you could say he breached a duty to the Galleon funds by acting illegally, but I know I have some kind of valid point lurking somewhere in there.)
Reading the judge's order approving the motion for dismissal, this was & is a very dumb case.
There were no fiduciary duties breached, and there was no intent to deceive.
The "tip" consisted of the GE fellow asking his old friend working at the fund some general diligence questions about the company in question. The fund guy told his boss about the conversation, and they inferred that the company might be in play. When an unrelated trader called a few days later offering a block of stock in the company, unsolicited, they took it. They were natural buyers, owning a fair chunk already, and they continued to buy in the market after the final transaction was announced.
The GE guy got a letter in his file from management saying he was a bit of a twit for talking to people about a potential client without clearing with legal. That seems to be about the right sanction outcome for this affair.
If there is anything here which constitutes illegal insider trading then everybody might as well give up trying to do business and take up full-time TV watching. OMG but Oprah is gone!
The accounts referred to there are the Hong Kong accounts detailed on pp 23-24 of the indictment, not the US accounts covered in the forfeiture order.
Here's my logically impeccable proof that NSS doesn't exist:
(1) If NSS exists then EIGH isn't just a nasty stupid little scam.
(2) EIGH is just a nasty stupid little scam.
(3) Therefore, by modus tollens on (1) and (2), NSS doesn't exist.
QED HTH HAND
See this http://investorshub.advfn.com/boards/read_msg.aspx?message_id=63677496 for my reading.
His plea agreement didn't cap his liability at all, and made him liable for everything connected to the crime that was ever under his control, directly or indirectly. It also removed any opportunity for him to object.
That he didn't manage to get agt with the feds to restrict liability to his personal gains probably shows IMO that he had poor attorneys and/or that the feds don't like him because he didn't sing well enough.
But it's all just speculation without further info - eg unsealing of the senetencing memos, or maybe the feds' response to his reconsideration motion if that goes into the substance.
Seems a little late to start bee-atching
Particularly given that he agreed in his plea bargain (para 13) to waive any challenges to a forfeiture order "including that the forfeiture constitutes an excessive fine or punishment."
Para 11 defines the property in question to be anything connected with the crime he owns or has or had at some point control over, directly or indirectly; or anything "traceable to, derived from, fungible with or a substitute for" such property.
That seems to clearly make him liable for the the whole $4.8M, to the extent he ever had direct or indirect control over the money, to be satisfied by forfeiture of whatever he owns, and with no right to "bee-atch" about it.
If he didn't understand it that way, he has only himself to blame for being too dumb to get a proper attorney (rather than the ridiculous Amador at the time of his plea bargain, and afterwards this defender of drunk drivers).
Thanks for that site. Matt's bank accounts are there, in the US Attorney's Office PDF, on p84.
OT: For sales of forfeited stuff, see http://www.usmarshals.gov/assets/sales.htm
It's great. Just a few days left to get yr hands on some of the Unabomber's junk! Eg: his old shoes http://www.usmarshals.gov/assets/2011/unabomb-3.jpg
From the motion to adjust schedule for payment of his $50K fine:
3. By order of May 16, 2011, the Court executed a preliminary order of forfeiture for the Defendant’s banking accounts. As a result of the order of forfeiture signed by the Court on May 16, which became final on May 18, Defendant’s disposable cash was depleted immediately following sentencing.
No idea what was in those accounts.
According to the prosecution's forfeiture motion I think the process is something like this:
- Matt's accounts get taken over by the feds; he loses access to them.
- The feds also rope up ay other property Matt might have which is connected to the criminal acts to which he pled guilty.
- The govt publishes notices & any 3rd party who thinks they have a claim on anything has 30 days to file a petition with the court for a hearing before the judge.
- The other accused are also jointly & severally liable for the $4.8M and similar things happen at some point with their property.
- The feds then hoover up $4.8M of the total value taking all of this together (or all of it if there's not enough), after approved 3rd party claims, and any remaining amount goes back to the defendants in some fashion.
All of his bank accounts were sequestered under the forfeiture order, however much was in them.
Get the impression that the DoJ failed to warm to Matt - in effect putting the kingpin label on him? If that's true and it's because he didn't sing nicely, he must be pretty dumb.
I guess he also might have done better with an attorney whose main practice isn't defending drunk drivers: http://www.johnrgarey.com/CM/Custom/Attorneys.asp
He's replaced the appeal by a motion for reconsideration. Says that the timing of the forfeiture order didn't allow him to respond, and that it goes broader than his plea deal, in that it covers not just his personal illicit gains, but everybody else's also.
Says the number should be $117K.
Also says that at sentencing hearing it was stated that the govt failed to indict individuals responsible for $3M of the total amount. Be interesting to see more on that.
Completely unsurprising, if you've ever done much business in China.
It's a great place to build yr stock of bizarre war stories, though. So: the regional GM of one of our things decided he didn't like the company top management anymore, so he stole the company seals and bank accounts and bribed a local commercial judge to approve forged transfer documents.
Because its China the CEO can't go there & work it out, because there might be a loss of face. So a young accountant gets sent. The regional GM has him kidnapped and held prisoner in a hotel room. This is a calculated act to impose a loss of prestige on the the CFO. Everybody has to have a patron; the accountant's patron was the CFO, a major enemy of the GM; kidnapping the accountant showed that the CFO couldn't protect his people. It's all very, very feudal. Kidnapping yr enemies' people is a pretty standard corporate play - there were two other examples in the group during my time there.
Eventually top management worked their own patronage lines to put pressure on the court to have things cleaned up; and the young accountant was ransomed.
The regional GM was replaced by a new hire, formerly regional manager for the branch of the People's Liberation Army responsible for building and operating discotheques and massage parlors. Unfortunately, the new guy soon got caught up in the annual summer anti-corruption sweep, as far as I can work out because *his* patron was an enemy of the new mayor. He spent a year under house arrest, which meant that we all had to go to his home for board meetings.
It goes on & on ...
Cool - looks like somebody might be able to do some discovery at last. Will Ribotsky make a big effort to try to get them to settle before that happens?
Thanks. Reason for asking fwiw is that this little VRAL thing I follow is now paying everybody working for it with promissory notes convertible at holder's will into common at a 20% discount to the 20 day VWAP.
Cash problem solved - let new bag holders pay!
I guess it could be seen as a team-building exercise - now the *whole* company is motivated to run pump'n'dumps.
Thanks
Question: I think under some circumstances stock issued in exchange for debt can be issued without a restriction? Where in the tangle of ruels should I look for something defintiive on that? Thanks!
And a bit further: Ronald (not Roland, sorry) Lifton was associated with two of the companies for which Marvin Winick faked audit reports back in the day: Greentech USA and Information Architects.
See old Stockwatch story posted by Janice for b'ground: http://investorshub.advfn.com/boards/read_msg.aspx?message_id=58229156
Lifton was listed as Greentech USA's COO in the last 10-K they filed. For Information Architects, here is an S-8 giving him a bucnh of consultant shares, along with Winick: http://www.sec.gov/Archives/edgar/data/1018336/000101833604000002/s8a.txt
Seems to have all slipped past LPHC "Chief Risk Officer" Kaiser.
Just a bit further on this: Kaiser actually started working with LPHC as a consultant in 2009, a couple of months after his resignation from the FBI.
The energetic defense attorney for one of the criminally-charged former LPHC execs makes a big point of this, saying that he has been told that Kaiser in 2009 met with FBI case officers investigating LPHC, and making the obvious suggestions re tainting.
But he also makes a big issue of the same fed requirements SEC staffers are subject to - ie no dealing with anything you had "official responsibility" for while employed, for some period after you resign.
Given that Kaiser was actually Asst Director Criminal Investigations from 2007-009 (having moved from Asst Director Inspections after a few months in the role), the question seems much more pointed than eg the one I had about whether Andy Vollmer as acting GC would ever have had "official responsibility" for any SEC enforcement action.
On a different note, I find the current CEO of LPHC, one Roland Lifton, was discharged from Ch. 7 less than a week before his appointment to the company. A July 2010 8-K announcing the appointment touted his supposed track-record of glowing and unmarred business success: http://www.sec.gov/Archives/edgar/data/1160084/000116008410000010/newofficers.htm
This contrasts with his Ch.7 petition - no income, unemployed, no assets apart from equity in his house, survivng partly on hand-outs from his mother.
I believe Item 401(f) of Reg S-K requires personal bankruptcy to be disclosed for directors and CEO. LPHC has never mentioned it, as far as I can see. Given the deep ineptitude displayed by LPHC on many fronts, it's quite possible that nobody else there knows anything about it.
In any event, "Chief Risk Officer" Kaiser seems to have dropped the ball on this one.
Actually, I think a lot of it is enjoyment in suckering people. Often the $$$ are just markers for how well you did with that.
I have wondered whether sociopaths are a separate, parasitic species, not really human at all - like vampires or something.
(That was mainly after an ex-girlfriend stole $30K from me & spent it on cocaine & hats, so I might have been a little unhinged, I admit. They weren't even very good hats.)
Repeated kudos to you for nailing this thing back in the day!
You'd have a more informed view than mine on this, but looking back over the history I got the impression that the original plan was probably pretty consistent with the criminal activity for which he was prosecuted.
My asessment: Pretty good at building & running a web site but otherwise thick as a brick; conscious intention to rip people off; Vegas as main idea for use of funds; stupid scam execution.
Overall: douchebag, and good thing he's going to jail.
I am amazed by people who seem to think that building this shady little operation was some great achievement & benefit to humanity, or whatever.
The sentence was harsher than I was vaguely expecting, I guess because I thought he might provide a lot of useful cooperation to the govt and might be able to swing a dweebie-duped-follower kind of argument. But 4 years certainly doesn't seem unreasonable.
Anyway, hard to get a real handle on it without the sentencing memo's. Hopefully the court unseals them.
I wonder if those IHUB pages he submitted to the court had any impact?
If so, hopefully it was to increase the sentence.
From the docket:
Minute Entry for proceedings held before Judge Sue L. Robinson - Sentencing held on 5/18/2011. Deft. was present with counsel. SENTENCE OF THE COURT: Matthew W. Brown (1), Count(s) 1, 48 MONTHS IMPRISONMENT TO RUN CONCURRENTLY WITH COUNTS 4, 5 AND 8; 3 YEARS SUPERVISED RELEASE TO RUN CONCURRENTLY WITH COUNTS 4, 5 AND 8; $100.00 SPECIAL ASSESSMENT (TOTAL $400.00); $50,000.00 FINE; Count(s) 4, 48 MONTHS IMPRISONMENT TO RUN CONCURRENTLY WITH COUNTS 1, 5 AND 8; 3 YEARS SUPERVISED RELEASE TO RUN CONCURRENTLY WITH COUNTS 1, 5 AND 8; $100.00 SPECIAL ASSESSMENT (TOTAL $400.00); $50,000.00 FINE; Count(s) 5, 48 MONTHS IMPRISONMENT TO RUN CONCURRENTLY WITH COUNTS 1, 4, AND 8; 3 YEARS SUPERVISED RELEASE TO RUN CONCURRENTLY WITH COUNTS 1, 4, AND 8; $100.00 SPECIAL ASSESSMENT (TOTAL $400.00); $50,000.00 FINE; Count(s) 8, 48 MONTHS IMPRISONMENT TO RUN CONCURRENTLY WITH COUNTS 1, 4, 5 ; 3 YEARS SUPERVISED RELEASE TO RUN CONCURRENTLY WITH COUNTS 1, 4, 5 ; $100.00 SPECIAL ASSESSMENT (TOTAL $400.00); $50,000.00 FINE. (Court Reporter V. Gunning.) (fms) (Entered: 05/19/2011)