Chapter 3--The Transfer Agent, The Audit and More...
For starters, I have no one but myself to blame. I violated one of the most sacred of investment rules (one of mine too). Never invest when the transfer agent is in-house. Especially when affiliated with a known crook. Period end of story.
So December 2005 rolls around and our fearless leader announces we have a much higher share count than we thought. Billions and billions of over issued shares have been dumped into the market easily diluting each shareholders position by half if not more. The short answer is: the accounting firm did its job and found the information. It's all MF's fault is the message delivered and everyone seemingly wants to believe. I don't buy it for one minute and after a year of holding and short-term promises have been not kept, I'm starting to become peturbed.
Our CEO talks to everyone he knows and says MF "promised" shares weren't being sold without 'My' knowledge. The fact of the matter is this: How can you be a CEO of company with no employees, associated with a known thief (who's relative is the transfer agent) and say he promised. Sounds 2 five-year olds squabbling over the swing in the back yard.
So one of a couple of scenarios has happened:
1. Mike knew what was happening and let MF take the fall.
It would have been easy to do since he's the one with the tarnished name and image.
2. Mike did not know it was happening. Therefore he either purposely tried not to pay attention or didn't pay attention.
If it was the former, then the CEO is subject to criminal lawsuits (more to come later on this too). If it was the latter and since I don't for sure I'll assume the following: THE CEO IS INCOMPETENT AND WILLFULLY ENGAGED IN NEGLIGENT CONDUCT. How are you in this situation and not address it? It's all MF's fault. Absolutely no way. Shareholders want to believe something else and aren't reviewing the facts. In cases like this, CEOs get strung up and in conjunction with Sarbanes Oxley have serious criminal problems. You must have controls (even outside of SOX and SEC guidelines) and our CEO did not. So as CEO I have cost you over half of your investment because of my lack attention to this matter. It's the CEO's fault and he should have been fired immediately! PERIOD END OF STORY.
During the audits and coincidentally during this time, no more video, no more PRs, the website is shut down, etc.
So let's talk about the audit we were and have been promised for several years. Any guesses as to why it has nor will ever get done? THERE ARE 2 REASONS WHY THE COMPANY NEVER COMPLETED AN AUDIT AND CORROBORATES MY DUE DILIGENCE PROCESS: Reason #2 will come later on during the story.
Ask any CPA of any size and reputation and tell them about the overissuance with paper certs, periodic halts on trading, etc. The simple answer is no CPA would approve an audit. I won't tell you how many and which firms I have contacted but the response was unanimous.
In order to do so you must be able to verify the Owner's Equity side of the balance sheet and the company could not do so. The shares were illegally issued and therefore cannot be approved. I'll bet the company still can't even account for all of the shares. There's only way a firm would approve: THE COMPANY WOULD HAVE TO BUY BACK EVERY SINGLE ILLEGALLY ISSUED SHARE!
At this point I've been in a year and I missed on the 2.5 cents earlier in the fall and realize what has just happened. I knew a fair amount about how a mining stock is developed but at this juncture I am horrified. I had a personal conversation with our CEO and like he always does blames someone else.
The CEO has a history of hiring people who know less than he does so he can big brain them. He refrains from conversations with people who know more. He will plead ignorance and his special plead is "I'm not discerning, I'm naive". He'll also say stuff like "I said this on purpose to see if anyone would spread the rumor". Fact of the matter is he knows what is happening and he is master politician and has a self-proclaimed gift of persuasion. Because of the constant spinning he forgets who he tells what to including me.
So let's wrap up this chapter. I have done extensive due diligence with accounting firms. No way an audit will ever be certified. No way Sox will ever be completed. Anything the CEO says is the excuse ("we don't have the money, we don't need to do it"). There might be some truth to both responses but the reality is it will never get done and he knows it. We'll discuss the ramifications of this Gross Negligence and Personal Promises later on.
In the next chapter we'll discuss shareholder revolt, more due diligence, a new Board of Directors, promises to shareholders and more.
One last note, I may have missed incorporating everything as I am typing so hang in there. It will become crystal clear sooner than later.
END OF CHAPTER
