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Absolutely not. Petro is completely misusing the term "Safe Harbor". The Safe Harbor laws protect a company from liability against forcasts made in good faith. Those forcasts are generally limited to earnings estimates and the like. For example, if Microsoft forcasts (through a method which complies with Regulation FD, of course, another regulation which Petro seems to be completely unfamiliar) they will earn 30-33 cents next quarter, but only earns 29 cents, it is protected under safe harbor, assuming that the original forecast was made in good faith and was based on all the information available at the time. However, if Microsoft knew there was no way they could earn 30 cents due to other factors but yet told everyone that they would, that statement would not qualify under safe harbor. If they knew or had reason to believe the forecast was inaccurate (or an outright lie), it would not qualify under safe harbor. There is no way the statements made by Petro would ever qualify under safe harbor as they completely ignore known facts (such as not ever having filed a 15c-211 or having audited US GAAP financial statements). Safe Harbor in practice is pretty narrow in what it covers, and under no circumstances does it give a company the right to lie (or even guess - a company pretty much has to be almost completely sure of something before they make a public statement these days). If it did give a company the right to lie, there would never be a stock fraud case, and all you have to do is look at the SEC's and DOJ's list of cases to see that is not how it works.
Actually, they both are. Illegal, that is. It is called a "pump and dump", and the SEC and DOJ take it very seriously. A surprisingly large portion of the SEC's caseload is pump and dumps.
Yes, and I come up with three more letters - D.O.J.
The filing of a Form 15 in November 2008 was a HUGE red flag here. OTCBB shells are worth multiple times more than a Pink Sheet shell because they have already completed the SEC registration process. The SEC changed the rules several years ago on reverse-mergers to require additional disclosure of merger companies, but an existing OTCBB trading shell is still substantially more valuable. There is no valid business reason to buy control of a more expensive OTCBB shell and immediately voluntarily downgrade it to a Pink Sheet company. In the past, other promotions have done it in order to avoid SEC filing requirements and be able to conduct their illegal activities without direct regulatory oversight (see CMKM Diamonds for an example). Whenever this situation comes up, you can bet it catches the SEC's attention automatically.
As far as the calls go, there have been similar cases in the past, and the conference calls would qualify as solicitations. So do the E-mail campaigns. Both would be general solicitations, and neither was restricted to "accredited investors", or business associates.
That is incorrect. EVERY State has rules about sales, and as my post presented earlier, Petro didn't follow the rules until they were caught. Even then, they only sort of followed the rules in some states and not at all in others. The evidence also clearly points to the conclusion that they violated the Federal rules in several important ways as well.
Missouri was just the first state to catch them breaking the rules. Usually in these cases, other states will also begin to investigate UNTIL the Feds get involved. At that point they cooperate with the SEC and DOJ, but usually will suspend their own cases until the Federal cases are resolved. They do that because the SEC and DOJ have much greater powers (and penalties) than the States do, and the States have very limited resources and don't want to spend them overlapping what the Feds are already doing. Because the SEC entered the picture soon after the Missouri case, and also because they are still involved, I think it unlikely that we will see any more State actions filed at this time. Although, you might see some States take action against the third party sellers. Reselling shares at a profit is illegal unless you are a registered broker, which very clearly these people are not. States take that very seriously, and it is a pretty easy case to prove.
I think it suggests the opposite. Actually, the California registration was only filed AFTER Missouri had already caught them not registering. It is curious that in the Missouri action, the Missouri investigator in Item 20(c):
c. Respondents offered and/or sold investments in PAC to investors in California, Kansas, Texas, Oregon, Tennessee and Missouri
PAC is not listed as having filed the Form D with Texas, but has with California. It makes you wonder if that they filed the California documents only because they had already sold shares there and knew that the public (and California) would know that as soon as the Missouri document was filed? The Missouri action says the Texas investor contacted by Missouri did not buy shares (Item 11), so perhaps they thought they could skip the Texas filing?
Also, in regards to the filing date of the Reg D with the SEC, I was likely wrong. It does seems to have been filed late. As stated in Missouri's Item 23:
"In addition, the attorney provided a list of over three hundred Missouri investors who had invested over one hundred thousand dollars ($100,000) in PAC since September 22, 2008."
If the Reg D was filed on time, the first sales would have been on October 1. The statement from Petro's own attorney says that the first sales in Missouri closed more than a week prior, on September 22nd. Note something else regarding timing - Missouri sent the letter to Petro inquiring about registration on October 9. The Reg D was filed on the 10th. Coincidence? Probably not. It suggests they only filed the Reg D after they were already caught. It also directly contradicts the statement by Owen to the Kansas City Star regarding the exemption. He said he was relying on the Federal Reg D exemption to cover his Missouri stock sales, but he didn't even apply for the Federal exemption until after he was caught and had already sold millions of shares. His memory on that point seems quite faulty.
The Reg D filing is not currently available on EDGAR, but it is available online with the State of California at this link:
http://134.186.208.228/caleasi/PDFDocs/005082549.PDF
I find it curious that:
The Reg D was filed with California on the SAME DAY Missouri nailed the Company for correctly registering there; and
The Reg D also says they were soliciting the offering in EVERY state. However, I wonder if they correctly registered the offering in every state and paid the required fees in which they sold the offering.
I think the filing date Reg D is not the biggest issue Petro has. It is possible that they did not actually sell any shares until October 1st (dating is from the accepted date).
This filing was a 504 exemption, which limited them to $1,000,000 of shares sold in a year. A Reg D filing does not specify the price that each share is to be sold, just the dollar amount. It is highly likely they not only exceeded the allowed sales amount, but also the time period allowed. They are also required to file the Reg D and related state documents with the State securities commission (and pay the required registration fees) in every state in which they are selling shares. I reviewed the California Database and the Reg D offering was correctly registered there. The filing was made by a business consultant in Fort Lauderdale, Florida and dated October 28, 2008. It does reflect that they paid the required $300 fee. However, I believe it has been mentioned that some Texas residents have shares, and that someone in Texas was soliciting sales. Yet, I did not see Petro on the Texas approved list. If that is the case, and they did not file the Reg D there, no one in Texas should own the stock.
Since Petro filed the Reg D, the SEC has changed the rules and now require all Reg D's to be filed electronically and be available for review on EDGAR. Over the last 10 years, the SEC has gradually requiring companies of all sizes to only file electronically, and has also been shifting certain Forms from paper to electronic filing. As part of this change, they have also been (very) slowly scanning in documents correctly filed on paper under the old rules and making them available online on EDGAR. Even though this Reg D is not on EDGAR, you can still request a copy from the SEC. They will send you a copy.
If you would ever like to present some actual facts which suggest my researched conclusions are wrong, I would be very interested in reading them.
I have yet to see any actual facts that suggest Petro is a real company like they say they are. If there are any, they certainly have not been presented by anyone here.
Many of the facts which would prove they are a scam cannot be known at this time to anyone but the authorities investigating it. In the absence of subpoena power, we cannot "know" for sure. However, the government does have that power, and if civil and/or criminal suits are filed the public will then be able to review that evidence. Considering my experience and what we do know about Petro, I would say there is a 99.999% chance those files would prove my logical deductions.
No, not theories. Instead, it is logical conclusions. Take all the available evidence and this is what comes out.
It would be surprising to me if they did - I have seen a lot of these schemes, and most of the players here don't seem to have the knowledge or sophistication required to hide anything overseas. They all seem pretty amateurish to me - otherwise, they would have done a better job in the promotion and not come to the attention of the regulatory authorities as quickly as they did. Even so, this is why the SEC and DOJ often subpoena everyone's financial records early in these investigations.
However, the MLM people are another matter. Since it seems many of them already have overseas contacts, they might be preparing something.
Define "real".
Actually, I think you have most all the information you need. You just don't like what it tells you, which is this "company" is not real.
That is the way it used to be, but the Vancouver Exchange is long gone. That exchange is now the TSX Venture Exchange, which has really clamped down on bad actors. I doesn't mean there are not some still there, but the old Vancouver scene and players have moved almost entirely to the US Pink Sheets and OTCBB and do not trade in Canada at all. There has been an explosion of scam OTC companies run out of Vancouver for this reason.
I could write volumes on the situation, but I think it will suffice to say that in the last 10 years the Canadian exchanges have thrown out the worst elements and really morphed into much cleaner markets. As it stands, Petro has zero chance of listing in Canada.
I have news for Jan Brown. Petro trading on a Canadian Exchange is no more likely to occur than trading on a US Exchange. In other words, no chance.
There are only 3 Canadian markets, and all require audited financial statements (that conform to GAAP) and on-time regulatory filings, neither of which Petro is likely to ever be in a position to deliver. The same is true of London, the German Exchanges, and South Africa.
I wish that all business people were as prepared to perform due diligence as you are, but it is certainly not the case.
Some of it is certainly greed - they are blinded by the assurances of the promoter that the deal is a sure thing and they will make lots of money. Many are swayed by the promoter's sales pitch, and there is usually a prepared answer for each pointed question. For instance, regarding the financial questions, they might say that the audit is being performed now, but once the numbers are in, the price will skyrocket and it will be too late. A surprising number of people will buy that.
Many of these people have very little knowledge of how the markets actually work. For instance, take Petro's July 23rd 2009 news release after the 10-day trading suspension expired. The release is full of untruths, but most people cannot and will not recognize them. As an example, the statement "Naturally we are excited that the SEC found no wrong doing...." and "Hawkins was confirmed correct in his assessment when the SEC lifted the suspension and allowed for trading to resume". The SEC's never "lifted the suspension" or "allowed trading to resume" as the SEC has no choice - they are limited by the courts to 1 10-day suspension, and trading automatically resumes. Additionally, the statement that they found no wrong doing is comical. But, if people don't have experience in penny stocks and SEC suspensions, they are likely to actually believe that. The same is true for many other statements. These people may be great at tops in their fields, but when it comes to investing in penny stocks, they are in entirely unfamiliar territory.
Except that usually in similar types of operation, the shares are not "gifted" at all, but instead given to other insiders or cooperating operatives and resold to unsuspecting new investors. A portion (if not most) of the money is then kicked back to management and pocketed.
If this is happening here, that would explain where the third-party selling is coming from. Since the authorities are certainly investigating, the company is now trying to characterize it as "gifting" of shares and "donating" funds back to the company. If it is actually happening that way, it doesn't matter what terminology they use - it is still illegal.
I have been following stock promotions and stock frauds for almost 25 years, and a hallmark of similar types is that there are actually very few knowledgeable people who get caught is this type of promotion. The few that do are usually guilty of failing to conduct even rudimentary due diligence. They turn over money in haste or are simply greedy. Then, when it becomes clear that they have been snared, they will often involve themselves even deeper, either thinking that they can perhaps find a way to extricate themselves whole, or are simply unwilling to admit their mistake and "lose face". Also, many successful people have little knowledge of capital markets. Someway may be a successful businessperson or professional but that does not make them an expert in the stock market (i.e., medical doctors are often prime targets for stock scammers - plenty of money but with little time and knowledge about the inner workings of the financial markets. Same is true of many small business owners).
Since this stock was primarily flogged through churches and MLM channels, I think it is safe to assume that very few saavy financial "experts" involved.
I think it is pretty clear someone is not being truthful about all these "book value" assets. Accounting has specific rules about how an asset is valued on a company's balance sheet, and anything produced has to comply with US GAAP. Even if they did have valuable assets (which I don't believe they do), claiming those assets are worth billions on the balance sheet clearly does not comply with GAAP, and no legitimate accounting firm would ever sign an audit to that effect. There is no legal way this company has the book value that they claim.
And, if a company tries to file a Registration Statement with the SEC claiming inflated asset values, they are likely to end up in the gray-bar hotel and the CPA who performed the audit will be thrown out of the public company auditing business (See Conversion Solutions Holding Corporation). There is no chance Petro will ever be successful in passing a Registration Statement with the SEC using the numbers they claim, which means there is no chance the stock will ever trade on an exchange or regulated marketplace. None. But, then again, I don't think it was ever management's intent to try.