Pax Clean Energy Inc. (fka PXCE)

[scion]

SEC puts brakes on questionable B.C. stock deal

By David Baines, Vancouver SunMay 1, 2009
http://www.vancouversun.com/Technology/puts+brakes+questionable+stock+deal/1552525/story.html

A stock deal engineered by controversial B.C. chartered accountant Les Hammond has gone from ridiculous to sublimely ridiculous.

In September 2007, I reported that Hammond and a longtime associate, Mike Andric, had formed a company named Pax Biofuels Ltd. The company was incorporated in Delaware but run out of Hammond's home in North Saanich.

According to a registration statement filed with the U.S. Securities Commission as a prelude to going public on the OTC Bulletin Board in the U.S., Pax was going to raise money to build a biodiesel plant in Serbia, of all places.

The registration statement showed the proposed plant was just an idea. The company had no design, construction or operating contracts in place.

It was also unclear how the company was going to finance the project. The estimated capital cost was $5 million to $50 million, but the company had only $23 in its bank account.

Also, Hammond and Andric were former associates of Rakesh Saxena, who had fled to Vancouver after Thai authorities accused him of embezzling $88 million US from the Bangkok Bank of Commerce.

Neither Hammond nor Andric were accused of any wrongdoing, but there was no question they were keeping bad company. Saxena has spent much of the past decade shilling worthless bulletin board stock while he fights extradition to Thailand.

Hammond is no stock dabbler, either. He currently works as vice-president of mergers and acquisitions for Penn Capital Canada Ltd., a Vancouver firm that helps companies go public and raise capital.

Penn's "senior corporate counsel" is Vancouver lawyer Michael Seifert who, in a 1999 settlement agreement with the B.C. Securities Commission, admitted to illegal insider trading through offshore accounts and agreed to a $450,000 fine and a 12-year stock market suspension.

That suspension includes an agreement not to act as solicitor for companies that file documents with the B.C. commission or the TSX Venture Exchange until December 2011.

Meanwhile, the B.C. Law Society -- which is just now getting around to dealing with this matter -- has recommended Seifert be suspended from the practice of law for two months and assessed $25,000 in costs, but that has yet to be ratified by the hearing panel.

I don't think there was ever any question that Hammond is more interested in structuring stock deals than running a biodiesel plant in Serbia.

I think the project was simply a pretext for creating a nice, tight shell (Hammond and Andric ended up with more than 90 per cent of the stock) for some yet-to-be-determined promotion.

Sure enough, in December 2008, Pax announced it had been "unable to locate transactions in the biodiesel industry that were on terms favorable to us" and was therefore going to look for opportunities in the "clean energy market." Accordingly, it changed its name to Pax Clean Energy Inc.

But in February this year, the company switched gears and announced it is going to acquire Mobile Video Development, Inc., a New York-based company that is developing technology to enable mobile device users to share videos and pictures.

The acquisition is structured as a reverse takeover: Pax will issue so many shares to the shareholders of Mobile Video Development that they will become the controlling shareholders.

No financial statements have been provided and there is no indication that the company to be acquired has any operating history. But Hammond said that if his projections come true, the company would be worth $5 billion by 2010, a laughable proposition.

Stimulated by paid Internet hypesters, the stock rocketed to $9.99 by Tuesday. With 17.6 million shares outstanding (assuming the merger deal is completed), the company's total stock market value was now a fanciful $175 million US.

At that point, the SEC stepped in and issued a cease-trade order.

"Questions have been raised regarding the accuracy of publicly disseminated information concerning, among other things, an acquisition by the company, the value of the company after the completion of the acquisition, and the company's current and future financial condition," the SEC stated.

"The commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above listed company."

The cease-trade order lasts for 10 business days, or until May 11.

I couldn't reach Hammond on Thursday, but he earlier told Canada Stockwatch reporter Mike Caswell he had no idea why the SEC halted his company.

"I've got my lawyers speaking to them. If there is anything inaccurate, I'd like to know what it is," he said.

Accuracy is not the question. It's the paucity of information, and a deck of shares sorely stacked in favour of insiders.

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http://www.vancouversun.com/Technology/puts+brakes+questionable+stock+deal/1552525/story.html