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By MICHAEL GRABELL and BRENDAN M. CASE / The Dallas Morning News
NOTE: See numbered footnotes to view sourcing for this report.
KEMP, Texas – In this Kaufman County ranching town between Gun Barrel City and Styx, up a gravel driveway at a baseball field, amid the flies and the July heat, John Eckerd digs through a burnt orange Dumpster.
It is a last-ditch effort to save his ticket to the big time – a Girls Gone Wild-style video filmed at NASCAR races called Racetrack Girls Go Nutz.2
For so long, it seemed nothing could bring down Mr. Eckerd. Not being thrown out of NASCAR tracks when a film crew showed up with an emcee dressed like a pimp. Not the lawsuits from investors who accused him of fraud. Not the arrest on hot check charges. Not bankruptcy. Not the flak he took when he helped organize a protest against racism in NASCAR. Not even the allegations of extortion.3
Now, he had been undone by a single piece of paper – a faxed stock tip that jeopardized the Addison company he helped start, Consolidated Sports Media Group, and made him wonder if his own lawyer had been working with others to cheat him and average investors out of millions of dollars.4
Mr. Eckerd had come here on a hunch that the Dallas businessmen who helped take his venture public were trying to cover something up. 5
After staking out the woman who handled the company's paperwork at her home in Kemp, Mr. Eckerd and his private investigator followed her husband to the baseball field and watched him throw something in the Dumpster.6
After the man left, Mr. Eckerd's private investigator reached in and pulled out three or four bags. He ripped one open.7
Inside was a cardboard box from the company's lawyer and the corporate record book for Barcode Enterprises.8
Mr. Eckerd knew little about the mysterious Nevada shell company that had been used to take the Racetrack Girls venture public. 9
But the book would be a decoder for Mr. Eckerd to piece together what he says was a massive scheme by his lawyer and others to fabricate corporate records, manipulate stock prices, dump millions of shares on average Joe investors and funnel the profits to offshore trusts. 10
"I can't explain the amount of pressure that one feels," Mr. Eckerd said. "But there were growing signs that we had been sandbagged by our own lawyer."11
As he dug on that summer day in 2005, unknown to Mr. Eckerd, numerous companies that had used the lawyer and consultants were already drawing scrutiny from the U.S. Securities and Exchange Commission. 12
The SEC investigation into a Dallas-based penny stock network dubbed the "shell creation group" remains open two years later, and no one involved with Consolidated Sports has been charged with a crime. 13
But the lawyer, Phillip Offill – a former SEC attorney at the time representing Halliburton at Godwin Gruber – has been sued twice by the SEC in recent months, accused of violating federal securities law and participating in a penny stock scam.14
He has denied wrongdoing in both cases. And he and the consultants say they were the victims of Mr. Eckerd's own mismanagement and misdeeds. 15
The sudden rise and fall of Consolidated Sports is typical of many companies that trade on the penny stock market, which some have deemed "Wall Street's Wild West."16
While many penny stocks are legitimate, there is an underworld, an Internet Las Vegas where millions can be made overnight, where spikes in stock price often have nothing to do with the economics of a company, but with bursts of junk faxes and spam.17
It is a world increasingly accessible to ordinary Americans, with the ease of online stock trading and the flood of spam investment tips. It is also a world of growing concern to regulators, as securities lawyers have lined up legal shortcuts allowing shareholders to trade stock with few of the rules required by companies such as Exxon Mobil and Dell. 18
As a result, rogue gangs of stock promoters are making millions every year. And thousands of small-time investors are each losing thousands, simply chalking it up to the gamble of the stock market. 19
"I purchased 11,000 shares for about $5,000, and it went up and it went up and then it tanked," said Richard Gottfried, a Consolidated Sports investor.20
His shares are now worth a total of 1.1 cents.21
Was Consolidated Sports a victim of one of these gangs?
Shell of a company
To answer that question, Mr. Eckerd turned to the corporate record book.
The origins of Barcode Enterprises are somewhat fuzzy. It was incorporated in Nevada, in 1998 by a friend of Tulsa attorney G. David Gordon. Some have called Mr. Gordon one of the smartest securities lawyers in the country. Others have called him a mastermind of the pump-and-dump stock fraud scheme.24
What exactly Barcode was formed to do is in dispute. But no business plan was ever executed, and Barcode remained a shell of a company – having shareholders but no business.25
Such shell companies can provide an easy and cheap way for a private company to go public without the more cumbersome process of applying to the SEC for an initial public offering.26
A private firm can slide into the shell, change its name and quickly begin trading on the stock market.27
But according to lawyers hired by Consolidated Sports after it went bust, Barcode was simply a sham.28
By the time Mr. Eckerd first heard of Barcode in June 2004, the people behind it – Mr. Gordon and his business partner Doyle Mark White of Colleyville – had acquired checkered reputations. 29
Mr. Gordon was being accused of stock fraud by his brother and father in a messy court battle over his brother's jewelry business, which was later dismissed.30
Mr. White had been fined by the SEC and suspended from being a stockbroker.31
According to Mr. Eckerd and others behind the Racetrack Girls videos, their attorney, Mr. Offill, knew he was setting the company up for a scam when he introduced them to Barcode.32
Mr. Eckerd had turned to Mr. Offill to raise money for the video venture. After spending 14 years as an attorney for the SEC, Mr. Offill was now representing a big-time company, Halliburton, for a big-time law firm, Godwin Gruber.33
The plan was for the Racetrack Girls enterprise to slide into the Barcode shell through a series of transactions – a legal shortcut known as a reverse merger. They would use an exemption to SEC regulations intended to open the stock market to small-business men. 34
But the exemption is often abused by companies who want to avoid scrutiny. In pump-and-dumps, a company can go public quickly, hype the stock price without disclosing critical information and dump its shares in a matter of months.35
In July 2004, Barcode changed its name to Consolidated Sports. 36
The chief executive officer – Mr. White's Baptist pastor – would step down and transfer his shares to Mr. Eckerd's business partner, a former Jiffy Lube manager named Scott Schepper.37
On paper, Mr. Eckerd would appear to have nothing to do with the company, a decision that would complicate matters to the end. 38
Filling in the blanks
With the deal in place, someone needed to put the paperwork together. Barcode's corporate record book was missing a lot of information – including who the shareholders were and what happened at annual meetings. 39
Coppell accountant Mark Lindberg, who specialized in taking companies public, was brought into the deal. And he turned to his former secretary, Chasity Thompson, who now ran a consulting business in the Uptown gallery district.40
Ms. Thompson wrote into the record book that on Nov. 18, 2001, Barcode had issued 3 million shares to five investors – all of whom were tied to Mr. White and Mr. Lindberg.41
The date is important. Usually, insiders in companies receive restricted stock, meaning they can't sell it right away.42
But Barcode and Consolidated Sports used an exemption that allows certain investors who have held the restricted stock for at least two years to freely trade their shares without filing reports with the SEC, going through a broker or announcing the sale to regulators. 43
If the date was correct, it would allow the five investors to sell their shares immediately after Consolidated Sports went public instead of holding them long-term to see if the company succeeded. 44
Consolidated Sports' attorneys allege that the book was fabricated to qualify for the exemption. The five investors had nothing to do with the company and were merely holding shares for Mr. Offill, Mr. Gordon and their friends, they say.45
In depositions taken last summer, the purported Barcode shareholders gave testimony supporting the attorneys' allegation.
• Mr. White's Baptist pastor said he didn't even know he was CEO of Barcode until 2003 or 2004 and didn't recall convening the 2002 and 2003 annual meetings described in the book.47
• Another shareholder, Jason Freeman, said he had never heard of Barcode either until 2003 or 2004. Back in 2001, he was working at Enterprise Rent-A-Car and didn't know any of the people supposedly involved in the deal.48
• Two companies listed as shareholders didn't even exist in November 2001.49
If the investors actually received their shares in 2004, right before the merger, it would be illegal for them to sell them as quickly as they did.50
For a while, Mr. Eckerd's deal with Mr. Offill seemed to work as planned. In July 2004, hundreds of thousands of dollars from the stock offering were wired into Consolidated Sports' bank account. That allowed the film crew to shoot more footage and promote the Racetrack Girls videos.51
But what Mr. Eckerd didn't know at the time was that the consultants and investors who helped take his company public had known each other for years.
Several had been brokers for Mr. White's brokerage firm, including the investor who introduced him to Mr. Offill and Joshua Lankford, a stockbroker at Oak Lawn brokerage Barron Moore who was tapped to raise money for Consolidated Sports.53
Mr. Lankford also was a former business partner of Mr. Lindberg. They started one of the companies listed as a Barcode shareholder. Ms. Thompson and Mr. Freeman were their employees.54
Some investors and consultants had been clients of Mr. Offill. 55
But Mr. Eckerd said he didn't know about these connections when the stock split in July 2004, increasing the shares of the five initial Barcode investors from 750,000 each to 6.25 million each. 56
In most cases, such a split would deflate the value of the shares. But if the stock price could be inflated with a junk fax, the split could mean huge profits for those who held them.
What happened next was a series of unexplained stock transfers to several companies, where who's really in charge is often hard to decipher. Millions of shares were transferred for little or nothing in return.58
For example, in September 2004, Mr. Lindberg transferred nearly 6 million shares, worth about 20 cents each or about $1.2 million, to two offshore companies – Putnam International Consulting and High Charm Limited. Mr. Freeman also transferred 3.5 million of his shares, worth about $700,000, to High Charm.59
According to the SEC, the two companies, managed in London, have profited off junk faxes in the past. Putnam, which according to its attorney is based in Mauritius, an island off the coast of Madagascar, has even appeared on a fax saying that it had paid for the promotion. 60
The SEC has linked the two companies to an international businessman whom Mr. Lindberg met in the late '90s while working for a Web company. The businessman couldn't be reached for comment, and Mr. Lindberg said in a deposition that he couldn't recall why those companies ended up with most of the shares.61
After giving up a total of 6.2 million shares, worth more than $1.25 million, Mr. Freeman testified that he didn't recall receiving anything in return.62
Consolidated Sports' attorneys would rake him over the coals for this in a deposition.63
"You transferred stock worth roughly 10 times more than your current net worth to High Charm Limited in London, England, and you don't know why?" asked attorney Lewis Sifford.64
"That is correct," Mr. Freeman replied.65
With the free-trading shares now offshore or in companies not directly associated with the people who brokered the deal, it would be difficult to track who was profiting if the companies sold their shares.
Fax and figures
Talk of a fax promotion appears to have started on Oct. 6, 2004, when somebody faxed a draft from Barron Moore, where Mr. Lankford worked, to Mr. Offill at Godwin Gruber.67
"NASCAR has the largest fan base in the world whom spend millions up on millions of dollars every year on merchandise!! NOW they will go nutz to buy this New Release "TRACK Girls" Video!" the fax hyped. 68
The cover sheet had "D. Mark White" on the letterhead. 69
Consolidated Sports' attorneys say that means the junk fax was orchestrated by Mr. Lankford, Mr. White and Mr. Offill. 70
But the cover sheet to the fax looked odd. The "to" and "fax number" blanks were heavily scribbled out and replaced with "Phillip Offil," his last name spelled wrong.71
Mr. White denies that he sent it. And Mr. Offill says he was out of town and never saw it, even though his paralegal said she received it and put it on his desk.72
Knowing who was behind the fax is important because it often leads to who made money from the hype. Such "blast faxes" often include trumped-up information and can send a stock price skyrocketing. 73
Mr. White admits distributing the blast fax, even though he denies sending the draft. According to Mr. White, Mr. Eckerd made a deal with him. He would get 100,000 shares of stock if his company acted as a middleman between Consolidated Sports and a Miami fax company known for sending out unsolicited stock tips.74
Consolidated Sports denies it knew anything about the fax. 75
After the junk fax went out Nov. 10, Consolidated Sports' normally stagnant stock price doubled from 23 cents to 46 cents in five days. 76
But the good fortune didn't last. By Nov. 22, the stock had plummeted back to 22 cents, causing anyone who bought in after the hype to lose money.77
Who cashed in? Trading records are confidential. Consolidated Sports alleges that Mr. Offill, Mr. Gordon, Mr. White and their associates made millions.78
The accused say they lost money like everyone else as Mr. Eckerd took the shareholders' money and ran, which Mr. Eckerd denies. In all the finger-pointing, exactly who made money remains an open question. 79
By the end of 2004, Consolidated Sports was falling hard, and courts from Orlando to Dallas to Las Vegas were left to put the pieces back together.
In December 2004, NASCAR sued Mr. Eckerd over the junk fax for trademark infringement. It obtained an injunction barring him from filming at any NASCAR race in the country.81
In a second lawsuit in August 2005, Consolidated Sports accused Mr. Offill and Mr. White of setting the company up for a pump-and-dump. 82
Mr. Freeman fired back in a third lawsuit filed in March, accusing Mr. Eckerd of a Ponzi scheme. He said Mr. Eckerd had been getting investors to "pony up" money for various video projects for years and had used Consolidated Sports' money to pay off investors in past failed ventures. 83
But as the attorneys for Consolidated Sports worked to prove their case, Mr. Eckerd secretly began working on a deal of his own. 84
A not-so victory lane
Mr. Eckerd's pursuit of the American dream had taken him from a bus full of topless girls to a picket line protesting racism to the penny stock market and now to a Dumpster in Kaufman County.
For several weeks in the summer of 2005, he and others staked out Ms. Thompson, the corporate secretary, at her home in Kemp. They had seen a moving van at her Uptown office. Curious, they began poking in trash bins at her office, her home and Barron Moore. They brought the garbage bags to their attorneys' office and wondered at the scraps they found. 86
"There was something that was just not right," Mr. Eckerd said. "Based on the amount of trash out there, it looked like a mass exit." 87
Mr. Offill sent the Barcode corporate record book to Ms. Thompson's house in Kaufman County to cover up a scam, Mr. Eckerd said. 88
Ms. Thompson's attorney, Jules Slim, denies that the book was ever thrown in a Dumpster. He says it's more likely that Mr. Eckerd somehow intercepted the box and put it in the trash himself.89
But as support, Mr. Eckerd has FedEx records from the shipment and photos of Ms. Thompson's husband throwing stuff in the Dumpster. 90
In May, Mr. Eckerd finally won.91
The Consolidated Sports' lawsuit settled. Mr. Offill and Godwin Gruber paid $4.8 million but denied liability. The other parties paid nothing. 92
Despite being the driving force behind Racetrack Girls, Mr. Eckerd wasn't entitled to much of the settlement. He technically had nothing to do with Consolidated Sports because of his arrangement making Mr. Schepper the CEO.93
Attorneys for Consolidated Sports and Mr. Schepper had spent two years building a complicated financial fraud case against Godwin Gruber, tracking bank accounts and trying to prove that Mr. Offill, one of the law firm's stars, had secretly been breaking the law. 94
Under the fee agreement, which is typical in such cases, the attorneys for Consolidated Sports and Mr. Schepper were entitled to 50 percent of whatever their clients received.95
But unknown to some if not all of the attorneys, Mr. Eckerd negotiated a deal with his friend Mr. Schepper to steer most of the money to himself. 96
Mr. Eckerd and his company, Wheels Off Production, would get 85 percent of the money. Mr. Schepper and Consolidated Sports would get 15 percent. Because Mr. Eckerd had his own attorney, the three law firms that did most of the work would have to split just 7.5 percent of the settlement, or $360,000.97
Nowak & Stauch, one of two law firms representing Consolidated Sports, sued Mr. Eckerd in late July, demanding a greater share of the money. Mr. Eckerd wasn't involved in the lawsuit until the last minute, it said, because of his bankruptcy, his gaggle of creditors, his prior lawsuits and his "overall bad reputation."98
They accused him of perjury and fraud.99
"Oddly enough, this is the same behavior Eckerd was accusing Offill and [Godwin Gruber] with, and Eckerd's pattern of fraudulent behavior continues today," the lawsuit says.100
Five years have passed since Mr. Eckerd came up with the Racetrack Girls concept, and little remains of Consolidated Sports.
The stock now trades at one-ten-thousandth of a penny. 102
What's left is a tiny office at the end of a hallway on the top floor of an Addison office building and a stack of DVDs in the corner. 103
Mr. Eckerd says, "All we were trying to do was make a buck." 104
Any notion that he made out like a bandit is ridiculous, he says. His portion – about $4 million – evaporated after paying off attorneys and creditors, he says.105
"On paper, it looked like a great business model and a great money opportunity," he said. "In hindsight, which I know is 20/20, it's not something I'm proud of."106
1: Deposition of James Conner, John Eckerd's private investigator, in lawsuit, Consolidated Sports vs. Godwin Gruber, et. al, filed 8/4/05 (05-07541, Dallas state court), pp. 80-87; interviews with John Eckerd. The details of how the baseball field looked are also from personal observation.
2-3: NASCAR vs. Eckerd, et. al. (6:04-CV-1781, Orlando federal court), p. 11; "Thinking Outside the Track," by Cammy Clark, The Miami Herald, 11/14/04; Frank Howard, et. al. vs. Consolidated Sports, et. al., filed 12/30/05 (06-00106, Dallas state court); Acme Enterprises vs. Wheels Off Production, et. al., filed 11/18/05 (05-11686, Dallas state court); State of Texas vs. Eckerd (CR-2004-04015-Z, Denton county criminal court); Mr. Eckerd's bankruptcy (03-44263, Sherman bankruptcy court); letter from the Alston & Bird law firm to Mr. Eckerd; deposition of Phillip Offill in Consolidated Sports vs. Godwin Gruber, pp. 49-51.
4: Consolidated Sports junk fax; NASCAR vs. Eckerd, et. al.; SEC subpoena of Barron Moore, dated 6/23/05, re: In the Matter of Artec Inc. and Certain Entities Organized by a Shell Creation Group, HO-10117; interviews with Eckerd.
5: Interview with Mr. Eckerd.
6: Conner deposition, pp. 83-87; photographs of Jeffrey Thompson, Conner deposition, ex. 5, photos 2, 15; motor vehicle registration records for Mr. Thompson.
7-8: Consolidated Sports vs. Godwin Gruber petition, pp. 23-24; Conner deposition, pp. 88-90.
9: Barcode Enterprises corporate charter from Nevada Secretary of State, deposition of Chasity Thompson in Consolidated Sports vs. Godwin Gruber, ex. 12.
10: Consolidated Sports vs. Godwin Gruber petition.
11: Interview with Mr. Eckerd.
12: SEC subpoena of Barron Moore, dated 6/23/05, re: In the Matter of Artec Inc. and Certain Entities Organized by a Shell Creation Group, HO-10117; SEC subpoena of Barron Moore, dated 3/24/05, re: Certain Pink Sheet Companies Trading Under the "Unsolicited" 15c2-11 Exemption, D-02681-A; SEC Order Directing Private Investigation, dated 12/14/04, re: In the Matter of Artec Inc.
13: SEC vs. Gary Zinn subpoena enforcement action, dated 12/15/05 (1:05-MC-00511, DC federal court); SEC vs. John Shrewder, et. al., dated 2/6/06 (06-80126, West Palm Beach federal court); SEC vs. Dean Sheptycki subpoena enforcement action, dated 2/23/06 (06-MS-00074, DC federal court); SEC litigation release no. 19970 re: Shrewder settlement, dated 1/17/07.
14: Deposition of Phillip Offill in Consolidated Sports vs. Godwin Gruber, pp. 22-23; deposition of Don Godwin in Consolidated Sports vs. Godwin Gruber, pp. 11-14; SEC vs. Peter Fisher, Tyler Fisher, David Stocker, Phillip Offill and Collective Thought Holdings, dated 6/14/07 (07-CV-12552, Detroit federal court); SEC vs. Phillip Offill, et. al., dated 9/26/07 (07-CV-01643, Dallas federal court).
15: Interviews with Mr. Offill; Jason Freeman vs. Scott Schepper, et. al., filed 3/9/07 (A537434, Las Vegas state court); 2/27/07 e-mail from Jules Slim, attorney for Mr. Freeman and Ms. Thompson; interviews with Mr. Slim, G. David Gordon and Doyle Mark White and Richard Sayles, an attorney for Godwin Gruber and Mr. Offill.
16-19: Research on SEC's Web site regarding securities fraud and recent enforcement cases; various interviews with SEC officials and securities attorneys over the past year; interview with Georgetown finance professor James Angel; Letter from Pink Sheets CEO R. Cromwell Coulson to SEC Secretary Nancy M. Morris; "If Nasdaq ditches a stock, you should, too" by James Kelleher, The Orange County Register , 8/6/00; "Wall Street's Wild West" by Ronald Campbell, The Orange County Register, 3/4/07.
20: Interview with Richard Gottfried.
21: Bloomberg News.
24: Articles of Incorporation, Thompson deposition, ex. 12; interviews with former Barcode CEO Jesse Clayton and Mr. White; counterclaim in Trucolor, et. al. vs. National Storm Management, et. al., filed 2/27/06 (06-02594, Dallas county court), p. 8.
25: Interview with Mr. Gordon; Barcode Enterprises confidential private offering memorandum, p. 17, deposition of Terry Washburn in Consolidated Sports vs. Godwin Gruber, ex. 27; interviews with Consolidated Sports' attorneys. Mr. Gordon says the company was formed to invest in a Texas franchise that sold supermarket barcode scanners. But documents that Mr. Eckerd says he found in the trash described Barcode as "deluxe concierge service," arranging limousines, jewelry and clothing for professional athletes.
26-27: Consolidated Sports vs. Godwin Gruber petition, p. 6; White deposition in Consolidated Sports vs. Godwin Gruber, pp. 248-249; interviews with Consolidated Sports' attorneys. Filing for an initial public offering is cumbersome and expensive. Companies must produce a detailed information statement about their business and follow complex securities laws and regulations – all of which typically means paying for pricey lawyers. There is also the matter of hiring an investment bank to handle the sale of stock, usually in exchange for a chunk of the IPO proceeds. Consolidated Sports traded on the Pink Sheets LLC penny stock exchange.
28: Consolidated Sports vs. Godwin Gruber petition, p. 6.
29: Annual List of Officers filed with Nevada Secretary of State, Washburn deposition, ex. 42; e-mail from Mr. Offill to Ms. Thompson, dated 2/15/05, Thompson deposition, ex. 17.
30: "A Mini-Enron on Every Corner," by Kurt Eichenwald, The New York Times, 5/29/05. James Gordon and Lisa Gordon vs. George David Gordon, SGD Holdings, David Covey, dated 1/2/03 (03-01-00006, Montgomery County state court); Con-Tex Silver Imports bankruptcy case (03-43783, Fort Worth bankruptcy court), report of examiner; interviews with Greg Gordon, G. David Gordon and Mr. Slim. While Mr. Gordon's brother and father accused him of stock fraud, he in turn accused his brother of stealing corporate funds. The fraud lawsuit was dismissed when a state district judge ruled that Greg Gordon had failed to prove his allegations. But a bankruptcy examiner in a case involving the jewelry company pointed some of the blame at Mr. Gordon. "David Gordon's representation of SGD Holdings Ltd. as its 'securities counsel' as described below and his apparent failure to adhere to applicable ethical standards calls into question whether the SEC should act to deny Mr. Gordon the privilege of appearing or practicing before the SEC," the examiner Robert E. Crawford of Dallas wrote in his report. He later told The New York Times, "A similar network of people show up again and again and again in these deals, most of which seem to end up in bankruptcy."
31: SEC Administrative Proceeding File No. 3-9954, In the Matter of RichMark Capital Corporation and Doyle Mark White.
32: Consolidated Sports vs. Godwin Gruber petition, p. 30.
33: Offill deposition, pp. 22-23; Godwin deposition, pp. 11-14.
34: Consolidated Sports Information and Disclosure Statement; Consolidated Sports vs. Godwin Gruber petition, p. 6; Amendment to Articles of Incorporation to Nevada Secretary of State, Thompson deposition, ex. 5; fax from SPO Group to Securities Transfer Corp., Thompson deposition, ex. 27; interview with Mr. Sayles, attorney for Mr. Offill and Godwin Gruber.
35: Research on SEC's Web site regarding securities fraud and recent enforcement cases; various interviews with SEC officials, securities law experts and attorneys over the past year.
36: Amendment to Articles of Incorporation to Nevada Secretary of State, Thompson deposition, ex. 5.
37: Consolidated Sports resolution, Thompson deposition, ex. 28; Washburn deposition, pp. 13-20.
38: Consolidated Sports Information and Disclosure Statement.
39: Thompson deposition, pp. 93-96.
40: Thompson deposition, pp. 23-27; corporation documents from Texas Secretary of State and Nevada Secretary of State offices.
41: Minutes of 11/18/01 Barcode meeting, Thompson deposition, ex. 21; deposition of Mark Lindberg in Consolidated Sports vs. Godwin Gruber, pp. 28-32, 153; Texas Secretary of State corporation records; interview with Paul Johnson; golf articles from The Dallas Morning News in 2001 and 2004; deposition of Joshua Lankford in Consolidated Sports vs. Godwin Gruber, pp. 22-33. The initial investors were Jason Freeman, who shared an office with her; Paul Johnson, a neighbor of Mr. White; Jim Locklear, a golfing buddy of Mr. Lindberg; and BBX Unit Investment Trust and BBX Support, business consulting firms run by Mr. Lindberg.
42-44: SEC Rule 144 (k) allows investors who are not affiliated with the issuer and who have held restricted stock for at least two years to sell the stock without several of the conditions the rule requires.
45: Consolidated Sports vs. Godwin Gruber petition, pp. 7, 24; interviews with Consolidated Sports' attorneys.
47: Washburn deposition, pp. 46, 62, 103-104.
48: Deposition of Jason Freeman in Consolidated Sports vs. Godwin Gruber, pp. 11, 12, 37-38
49: Lindberg deposition, pp. 38, 145; Lankford deposition, pp. 24-28. The other two investors, Mr. Locklear and Mr. Johnson, weren't deposed for the lawsuit. Mr. Locklear said in an interview that he's never heard of Barcode but did less than an hour of insurance and pension research for Consolidated Sports. Mr. Johnson said in an interview that he was letting other people manage his money and investments back in 2001.
50: SEC Rule 144 (k).
51: Wells Fargo bank statements for Consolidated Sports; Wheels Off Production financial records.
53: Financial Industry Regulatory Authority BrokerCheck records; Offill deposition, p. 172, deposition of Barron Moore CEO Katherine Moore in Consolidated Sports vs. Godwin Gruber, p. 108; White deposition, p. 202; Lankford deposition, pp. 38, 51.
54: Lankford deposition, pp. 24-28, 129, 183; Lindberg deposition, pp. 28, 32, 36-37; Freeman deposition, p. 12.
55: Offill deposition; corporation documents from Texas Secretary of State and Pink Sheets.
56: Amendment to Articles of Incorporation to Nevada Secretary of State, Thompson deposition, ex. 6; Minutes of Barcode meeting, 11/18/01, Thompson deposition, ex. 21.
58: Securities Transfer Corp. ledger for 6/22/04-5/31/05; faxes from BBX Support to Securities Transfer Corp., Lindberg deposition, ex. 3 and 4; Freeman deposition, pp. 116-117, 121, 225-226
59: Securities Transfer Corp. ledger for 6/22/04-5/31/05; faxes from BBX Support to Securities Transfer Corp., Lindberg deposition, ex. 3 and 4; Freeman deposition, p. 122, 221.
60: SEC vs. Zinn, pp. 6-7; Deep Rock Oil & Gas fax dated 9/12/05; interview with Fergus Anstock.
61: SEC vs. Zinn, et. al., pp. 5-6; Lindberg deposition, pp. 69-70, 97, 115, 208. Other major shareholders, who received free-trading stock from the initial shareholders, included companies formed by Mr. Offill, investment firms run by Mr. Lankford's 20-year-old half-brother and friends and businesses tied to John Coutris, who introduced Mr. Eckerd to Mr. Offill. Mr. Coutris said in an interview that his signature was forged on several documents involved in the deal, including stock transfer certificates. He added that his investors lost about $500,000. "We're the ones that got hurt in this deal," he said.
62-65: Freeman deposition, pp. 84, 114, 217-218, 221, 225-226
67: 10/6/04 fax from Barron Moore to Godwin Gruber, White deposition, ex. 5
68: Consolidated Sports junk fax.
69: 10/6/04 fax from Barron Moore to Godwin Gruber, White deposition, ex. 5
70: Consolidated Sports vs. Godwin Gruber petition, pp. 13-15. Consolidated Sports' attorneys also point to a Godwin Gruber invoice that lists a teleconference with Mr. White to review "proposed release" on Oct. 6, 2004, and a meeting the next day with Mr. White and Mr. Lankford. Mr. Offill said in his deposition that the meetings with Mr. White and Mr. Lankford were for regular news releases, not junk faxes. Mr. Lankford said in his deposition that he didn't recall the October meetings.
71: 10/6/04 fax from Barron Moore to Godwin Gruber, White deposition, ex. 5
72: White deposition, pp. 135, 137; Godwin Gruber fax transmission sheet, White deposition, ex. 5; interview with Mr. Sayles; Offill deposition, pp. 255, 260. The cover sheet read: "Phil, please review and obtain company approval for this release ASAP. Thank you, D. Mark." "I don't sign my name D. Mark," Mr. White said in a deposition. "This is not my handwriting. And I sign my name Mark White. I don't sign it D. Mark. This is not my handwriting."
73: Review of enforcement cases on SEC Web site.
74: White deposition, pp. 87-91, 118; SEC press release 2005-101, "SEC Charges Stock Promoters in Phony Fax Scam."
75: Consolidated Sports vs. Godwin Gruber petition, pp. 13-15.
76-77: Bloomberg News.
78: Consolidated Sports vs. Godwin Gruber petition, pp. 12-13.
79: Freeman vs. Schepper; 2/27/07 e-mail from Mr. Slim; interviews with Mr. Sayles, Mr. Slim, Mr. Gordon, Mr. White and Mr. Eckerd. Wheels Off financial records show that Mr. Eckerd paid numerous employees to set up tent parties and promote the videos.
81: NASCAR vs. Eckerd.
82: Consolidated Sports vs. Godwin Gruber.
83: Freeman vs. Schepper, pp. 3-5.
84: Nowak & Stauch vs. Eckerd, et. al., filed 7/20/07 (07-07330, Dallas state court), p. 7.
86: Interviews with Mr. Eckerd; Conner deposition, pp. 70, 72, 76-78
87: Interview with Mr. Eckerd.
88: Consolidated Sports vs. Godwin Gruber petition, pp. 23-24.
89: Interviews with Mr. Slim; 2/27/07 e-mail from Mr. Slim.
90: FedEx shipping confirmation records; photographs of Jeffrey Thompson, Conner deposition, ex. 5, photos 2, 15; motor vehicle registration records for Mr. Thompson.
91-93: Nowak & Stauch vs. Eckerd, pp. 7-8; counterclaim by Mr. Eckerd in Consolidated Sports vs. Godwin Gruber, dated 1/3/07; Consolidated Sports Information and Disclosure Statement; Consolidated Sports staff directory.
94: Interviews with Consolidated Sports attorneys.
95-97: Nowak & Stauch vs. Eckerd, pp. 3-4, 7-8.
98: Nowak & Stauch vs. Eckerd, p. 5.
99: Nowak & Stauch vs. Eckerd, pp. 8-9, 13.
100: Nowak & Stauch vs. Eckerd, p. 11.
102: Bloomberg News.
103: Visual observation.
104: Interview with Eckerd.
105-106: Nowak & Stauch vs. Eckerd, p. 8; interview with Mr. Eckerd.