By Bill Alpert
Not quite a year ago, Barron's exposed the shameless stock promoters and
thugs connected to Ivana Trump's latest business venture. Within days of the
story's appearance, a micro-cap stock promoter named Maier Lehmann
called to tell us that a pair of Russian gangsters named Michael and Boris Vax
had been making threatening visits to people they suspected had been sources
for the story. Last week, Lehmann and fellow stock promoter Alain Chalem
were murdered execution-style in Colts Neck, New Jersey. This, then, is
what the merciless world of micro-cap stock manipulation has come to.
This is also the world with which Ivana Trump, wittingly or not, has associated
herself.
We're not suggesting that anyone at her
company, the 5th Avenue Channel, had anything
to do with these murders. It is becoming
increasingly clear, however, that some of the
players involved in this particular stock are no
angels.
Case in point: Employees at the 5th Avenue
Channel recently found their way from the firm's
unglamorous strip mall headquarters in North
Miami Beach to the offices of the Securities and
Exchange Commission. There they are testifying
about how unauthorized trades in the stock
were made in the name of a senior executive in
the company-presumably in a bid to boost the share price-by brokers at
Glenn Michael Financial, a Long Island boiler room.
Then there is stock promoter Charles S. Arnold, a onetime consultant to the
firm. Arnold's various companies, including Amber Capital, of Rolling Hills,
California, and Ocean Marketing, of New Smyrna Beach, Florida, once
controlled 29% of 5th Avenue Channel's shares -- shares received as
payment for services rendered.
Also consider Boris and Michael Vax, convicted Russian racketeers and
onetime partners of a jailed Russian godfather. After Barron's published the
first of several stories on the seamy side of Ivana's business ("Ivana Get Rich,"
December 7, 1998), the Vaxes visited several persons they suspected were
our sources, allegedly demanding compensation for any harm the article might
have done to Arnold's holdings. "If you don't pay up," Michael Vax allegedly
told one terrified man, "you should worry about your kids."
At the time, Melvin Rosen, chief
executive of the 5th Avenue Channel
(which was then known as Tel-Com
Wireless Cable TV), dismissed the
Vaxes' house calls as a short-sellers'
stunt to scare Ivana. She accepted the
company's denial of "any connection
whatsoever with any criminal element"
and went on to become hostess of the
company's shopping Website and its
planned TV channel. She also
accepted a monthly stipend of
$10,000, payable in advance on the
first of the month, $15,000 per four-hour appearance and 800,000 shares of
stock and options.
Indeed, Ivana has shown herself to be a valuable asset. Shortly before our
first story appeared, she appeared on The Rosie O'Donnell Show, and the
stock shot from $6 to an intraday high of 25 almost overnight. It has since
come to rest, recently trading at 4 1/4.
In contrast to the posh treatment Ivana received from the execs and
shareholders of the 5th Avenue Channel, several employees report an ugly
scene below decks. Even while receiving daily inspirational faxes from his
rabbi, chief executive Rosen cursed and derided subordinates while
aggrandizing himself. "I'm the smartest man you'll ever meet," many report him
saying, "that's why I'm a multi-multi-millionaire."
Ivana's publicist says she gamely addressed the proud chief executive as "your
lordship." And employees remember many instances when a jubilant Rosen-a
man given to quoting biblical aphorisms, like "He is wise who looks into the
future," waved his arms announcing an Internet deal with a famous
luxury-goods merchant. Employees say few contracts ever materialized.
Rosen says a number of business deals collapsed in the wake of negative
press.
Last year, Barron's revealed connections between the company and a scurvy
brokerage firm called Meyers Pollock Robbins. Rosen indignantly claimed in
a press release that he'd had nothing to do with Meyers Pollock-that is, not
since 1997, when principals of the firm were indicted during a federal
prosecution of Mafia stock fraud. Soon after, however, several Meyers
Pollock brokers moved to Glenn Michael Financial, where they stayed in
regular contact with Rosen's company. "I don't know that people's lives have
to end just because they worked for a certain company," says Rosen
solicitously. The Glenn Michael brokers, he says, were among the few "that
really made the effort to get to know the company."
Among the Glenn Michael brokers who got to know the company were
Michael J. Lake and James W. Cannon Sr., gruff and burly New Yorkers
who came to answer questions about the company at the annual stockholders'
meeting last February. Cannon's curriculum vitae includes stints at
now-banned penny-stock houses Americorp and Kensington Wells, as well
as a 1981 assault charge (to which he pled guilty to first-degree harassment).
Lake's resume includes jobs with Stuart-James, Robert Todd Financial and
Vanderbilt Securities, as well as a 1993 conviction for disorderly conduct.
Closer to home, several 5th Avenue Channel employees have made sworn
statements to the SEC about unauthorized trades in the company's shares,
made in the name of Gerard Ferri, the channel's TV programmer. According
to these employees, Ferri claimed to have learned of the trading after
receiving confirmations from Glenn Michael's clearing firm. Ferri, they
testified, boasted that he was hanging on to the confirmations for his own
protection. Ferri denies that any of these incidents occurred.
Also of note, a company phone listing contains a cell-phone number for Boris
Vax. Rosen says the company does no business with the Vax brothers.
Pressed, he acknowledges meeting them once, after he took charge of the
company in 1997 (and shortly after the brothers had served a prison term
after pleading guilty to conspiring to evade federal gasoline taxes). Rosen says
he turned down a Russian TV deal they proposed.
While denying that they made threats, the Vaxes have acknowledged making
visits on behalf of Arnold (who denied authorizing this). The day before those
visits, a press release issued by Rosen and Ivana in response to the story in
Barron's claimed that the company had terminated its relationship with Arnold
in 1997.
But some connections appear intact. That same company phone listing
contains numbers for Arnold in New York, North Carolina and Florida, not
to mention two cell-phone numbers for him. Rosen now acknowledges
meeting with Arnold in Switzerland in 1998, in an unsuccessful pitch on behalf
of the 5th Avenue Channel to a wealthy investor. What's more, the 5th
Avenue Website contracted services from Cyber Realm, a Rockville,
Maryland, Web hosting firm closely linked to Chuck Arnold. Cyber Realm
also hosts Arnold's own Sound Money Investments Website, along with that
of StockMaker, a tout site that features stocks of Arnold's consulting clients.
(Also buried within the StockMaker site is a disclosure that it got shares in
exchange for plugging Ivana's company.)
After the embarrassing stories last year, Ivana sent Rosen an angry note about
Chuck Arnold: "We must not advertise US on his Web-get rid of TODAY,"
she scrawled. "He must be OUT and not promote us."
Arnold sells his stock-promotion services in exchange for shares and options
in client firms. And his ambit has stretched far beyond the 5th Avenue
Channel. Consider, for example, the following links:
Cyber Realm president Bruce Bertman is an officer or director at
several of Arnold's investor relations clients, including EBOnline, the
Internet wing of Rockville, Maryland-based Eastbrokers International, a
firm that has bought several troubled micro-cap brokers, including
Cohig & Associates in Denver and J.B. Sutton on Long Island.
In September 1998, EBI Securities, a division of Eastbrokers, put out
a Strong Buy recommendation on the Arnold consulting client Coyote
Sports.
Three months later, Investor Resource Services, an Arnold-controlled
firm, swapped 140,000 Coyote Sports shares with Eastbrokers for
125,000 Eastbrokers shares, in a deal valued at $500,000. Coyote has
since filed for bankruptcy protection.
Bertman didn't return calls seeking comment. Arnold's secretary said that he
was out of the country and referred queries to Jerome Selvers, a New Jersey
lawyer who has represented such accomplished wealth-builders as First
Jersey Securities' Robert E. Brennan and Brennan's minions. Selvers declined
to comment beyond saying that Arnold hasn't engaged in any wrongdoing.
Nor, it seems, is Mel Rosen unaware of the peculiar brand of broker relations
practiced by Arnold. A December 31, 1998, letter from Robert N. Hunter
Jr., a prominent Greensboro, North Carolina, attorney representing
companies affiliated with Arnold, to 5th Avenue Channel's in-house counsel,
states that "an option to purchase 100,000 shares by my clients would be
granted at $4 per share to a third party for broker-relations work." The
shares were trading at about $9 at the time, so the "third party" would make a
tidy $500,000 profit on the $4 options.
When Barron's asked Hunter if those 100,000 shares were used to bribe
stockbrokers, he also referred us to Selvers, who, as mentioned, denied any
wrongdoing on Arnold's part.
Despite the publicity from Ivana and a 5th Avenue Channel-sponsored polo
match featuring Prince Charles, the Internet luxury-goods business hasn't
delivered the fundamentals that might support Ivana in the style to which she
has become accustomed. Through June (the latest reported quarter),
deepening losses had pushed the firm into a working capital deficiency. Rosen
now says that he's disenchanted with the economics of online retailing, so he
wants out.
"Our whole Website is irrelevant to our operations," he declares, adding that
the company's consulting arrangement with Arnold affiliate Cyber Realm has
been "terminated" (despite a "Produced by Cyber Realm" credit line that last
week was on the site at www.5thavenuechannel.com). Rosen says his new
plan is to turn the company into a multi-channel financial television network
delivered by cable and Internet to brokerage houses throughout the Western
Hemisphere. Rosen has already locked up exclusive television broadcast
rights to Zacks Investment Research and is building an archive of interviews
with analysts, brokers and top executives. "We're creating an alternative to
CNBC and Bloomberg," announces Rosen, who says he has a commitment
from a Netherlands investor that Rosen says will enable the financially
strapped firm to achieve this fabulous ambition.
Rosen now says there won't be an Ivana channel. Instead, her only role will
be as a TV host, specializing in financial advice for women. "I wanted to be
divorced from the old business plan," he says. "We met with her this week" to
discuss "restructuring her financial position." Ivana was traveling, said her
publicist, and couldn't be reached. Her lawyer didn't return calls.
Of course, being restructured out of this crowd may be the best thing that
could possibly happen to her."
