Toreador: The Story behind the Stock's Wild Bull Run
by Melissa Davis - 3/11/2010 8:00:09 AM
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Shortly before New York Times reporter Zachery Kouwe resigned for plagiarizing the work of others, he wrote a speculative column about Toreador Resources (Nasdaq: TRGL) that – in an ironic twist -- spawned copycat reports by competing journalists. Those stories, suggesting an imminent buyout of Toreador that failed to materialize, raised some eyebrows even before Kouwe’s public fall from grace.
At the time that Kouwe penned his Jan. 20 “DealBook” column, Toreador desperately needed to raise money for looming debt obligations that could trigger massive payments later on this year. As a small resource company with ambitious plans, Toreador also needed cash to finance an expensive drilling program in Paris – home to its controversial new vice chairman – in order to reinvent itself as a major energy player on the international stage.
Toreador counts its acreage in the Paris Basin, a mature oil play with slowly declining production, as the company’s primary asset. While those Paris Basin wells currently generate fewer than 1,000 barrels of oil per day – and that number has been sliding – Toreador hopes to significantly boost its output through modern drilling techniques already considered by much larger players. Last fall, in fact, a tout sheet (resembling those normally reserved for overhyped penny stocks) claimed that the company had hatched a grand scheme to drill for oil beneath the Eiffel Tower and “legally ‘steal’ 40 billion barrels” of black gold from the French.
To be fair, Toreador told The Street Sweeper that it supplied no information – or funding – to the newsletter and roundly dismissed the report’s spectacular claims. The publication itself failed to return a phone call from The Street Sweeper seeking comments for this story.
One fact remains clear, however. Before Toreador could launch any massive projects on its Paris acreage, the company needed to avert a possible liquidity crisis first. With just $10.6 million in the bank – and upcoming debt payments totaling up to five times that amount – Toreador spent the latter part of 2009 arranging to sell stock so that it could bolster its financial resources. Less than two weeks after regulators finally authorized that stock offering, however, Kouwe suddenly reported that Toreador had changed its plans.
Specifically, Kouwe claimed, Toreador had entered into serious negotiations with three giant oil companies – Royal Dutch Shell (NYSE: RDS-A), BP (NYSE: BP) and Statoil (NYSE: STO) – about a partnership or outright merger deal instead. That story, citing mysterious unnamed sources, sparked a flurry of media coverage that fueled a well-timed rally in Toreador’s shares.
Within days, Toreador’s stock – already boosted from $5 to $8 on the earlier newsletter tout -- had rocketed 40% on massive volume to $13.69 a share. That lift helped cushion the blow when the company reported disappointing results from an important drilling project in Paris before ultimately moving forward with its stock sale.
On Feb. 9, three weeks after Kouwe reported that Toreador had shelved its stock offering in favor of a likely merger, the company announced an overnight financing deal. With assistance from its underwriter Thomas Weisel Partners – which had also publicized the Kouwe buyout story – Toreador managed to raise $23.5 million by selling 3 million shares of stock priced at $8.50 a share. While Toreador sold that stock at a 16% discount to its previous closing price, critics argue, the company still pocketed far more than it would have without Kouwe’s heavily regurgitated DealBook column.
Toreador’s stock, which barely fetched $2 a year ago, now trades for $9.50 a share. Based on typical metrics such as production and reserves, however, some believe that Toreador was more fairly valued around last year’s lows instead. They feel convinced that Kouwe, while now gone from the Times, had a lasting impact on Toreador’s stock price.
Notably, since Kouwe’s departure, even the Times itself has identified possible risks associated with its popular DealBook section.
“Much of the copy gets read only once by an editor,” the newspaper’s public editor admitted in a story over the weekend. So “it may need added oversight.”
Kouwe officially resigned from the Times the week after Toreador’s successful stock offering, never identifying the source (or sources) who supplied the tip for his buyout story before he left. A spokesman for Toreador, who declined to answer other questions for this story, told The Street Sweeper that he had no idea who had provided that information. To some, however, Toreador’s own Vice Chairman Julien Balkany – the subject of a fawning profile by Kouwe last fall – looks like a possible suspect.
(Note: Kouwe recently contacted The Street Sweeper to offer his side of the story. Specifically, Kouwe said that he had “never spoken or otherwise contacted Julien Balkany in (his) life.” Instead, Kouwe said that he received his tip from an investor letter sent to him by a longtime source in the hedge fund industry. He also insisted that he never portrayed a Toreador buyout as “imminent” and continues to stand behind the reporting in his story.)
Behind the Curtain
A native of Paris, home to Toreador’s new headquarters, Balkany first scored headlines here in the U.S. when he attempted a doomed takeover of another Texas energy company a couple of years ago.
His brand-new investment firm, Nanes Delorme Partners, surprised Houston-based VAALCO Energy (NYSE: EGY) when it suddenly became the company’s largest shareholder and demanded aggressive actions – including boardroom changes and a possible sale of the company – in March of 2008. Balkany himself personally signed the demand letter, claiming that his firm had lost its “initial confidence” in VAALCO’s management team and become “extremely frustrated” with the company’s stock price.
Balkany’s firm actually had little time to lose that confidence or deal with that frustration, however, since it had just started purchasing VAALCO’s stock after opening for business earlier that year. In essence, VAALCO would soon argue in a lawsuit, Nanes Delorme was asserting that it had paid too little for the stock it had only recently acquired.
That particular concern looked almost mild, however, compared to other allegations in the lawsuit. Notably, VAALCO claimed that Nanes Delorme had secretly conspired with Loik Le Floch-Prigent -- a fellow Frenchman convicted in a notorious corruption case five years earlier – when assembling its big stake in the company. In its coverage of that case, which featured Le Floch-Prigent in a starring role, The Guardian newspaper referred to the scam as “probably the biggest political and corporate sleaze scandal to hit a western democracy since the second world war.”
The former chairman of French oil giant Elf Aquantine (Paris: AQ.PA), VAALCO noted, Le Floch-Prigent served a year in prison before winning early release in 2004 to seek medical treatment. Two years later, VAALCO claimed, Le Floch-Prigent helped launch Pilates Energy – which soon wound up with a big stake in VAALCO – and secretly ran the company from behind the scenes.
Between November of 2007 and January of 2008, VAALCO’s lawsuit stated, Pilates quietly acquired 4.6% of VAALCO’s stock. With its ownership stake fast approaching the 5% threshold that would trigger disclosure requirements, the lawsuit said, Pilatus then joined forces with Nanes Delorme – a firm established less than one month earlier – by transferring its VAALCO stock into the new firm’s name.
“Pilatus Energy would not have contributed over $12.5 million worth of VAALCO stock to a newly formed limited partnership being managed by a 27-year-old French citizen,” the lawsuit argued, “without some agreement as to how those shares were to be utilized.”
Within a month of that Valentine’s Day transaction, the complaint noted, Nanes Delorme presented itself as VAALCO’s largest shareholder (without identifying its partner) and began taking the first steps toward a full-blown proxy fight. A judge stepped in to intervene as the battle heated up in May of 2008, Dow Jones reported, paving the way for a court-ordered deposition of Balkany ahead of the official proxy vote. Nanes Delorme suddenly abandoned its fight later that month, just days before Balkany was scheduled to be deposed.
By the end of that year, however, Balkany had already hatched a similar plan. This time, his firm simply shifted its focus a little farther north – from Houston to Dallas – and began targeting sleepy Toreador instead.
The Second Act
Balkany’s renamed firm, Nanes Balkany Partners, began purchasing Toreador’s stock in October of 2008 for a little more than $7 a share. The firm continued to build its stake – buying the stock at cheaper and cheaper prices – over the course of the next two months. By the time Nanes Balkany had accumulated 5% of the company’s stock in December of 2008, Toreador had tumbled below $4 a share.
At that point, Balkany issued a letter to Toreador’s board – eerily similar to the one fielded by VAALCO nine months earlier – demanding aggressive actions that would supposedly unlock the true value of the company’s stock. Taking a familiar stand, Balkany complained about Toreador’s stock performance during a period that largely preceded his firm’s purchase of the company’s shares.
Balkany’s firm fared much better this time around, however. Less than two months after hearing Balkany’s “concerns,” Toreador had agreed to major changes – including a leadership overhaul and a major asset sale – that left Balkany himself serving as vice chairman of the company’s board.
Toreador’s stock nevertheless continued to dive for a while, ultimately bottoming out in March of 2009 at barely $2 a share. As Toreador’s new leaders rose to power, however, the stock quickly reversed course – more than tripling in price – during a three-month span.
When the stock later slid from $7 back toward $5 last summer, an obscure newsletter suddenly “discovered” Toreador and came to the rescue. Without actually identifying Toreador by name, The Money Map Report dropped enough telling hints about its favorite stock pick for investors to recognize the company. It claimed that the company (which it nicknamed the “Tiny Texan”) was tapping a “$2.8 trillion oil reserve under the Eiffel Tower” that could produce enough oil to supply the entire United States for years.
Urging readers to subscribe quickly – so they could learn the actual name of the stock – the newsletter went on to proclaim that the company would begin “bringing this mother lode to market just days from now” and see its share price skyrocket when the “mainstream American financial press” discovered its big plans. Toreador’s stock quickly surged, jumping from $5 to $8 a share, as investors piled in early for projected gains of 1,800% or more.
The week after that report, however, the “Stock Gumshoe” weighed in with a blunt warning about the apparent tout-fueled rally in Toreador’s shares.
“I was hoping that, if I waited a few days to write to you about it, the initial enthusiasm over these shares would die down a bit,” the Stock Gumshoe stated on Sept. 17. “But they’re still holding pretty firm at just under $8 a share, a good 50% jump from the $5 or so that the shares traded at before this ad began running last week.
“The price seems very likely to come down a bit,” he cautioned. “Big spikes like that from newsletter attention don’t usually last that long. I could be wrong, of course, but I’d be surprised if we didn’t see the shares tail off a bit in the coming weeks if the marketing push slows down.”
The Unfolding Drama
With Toreador itself releasing a string of news, however, the company’s stock continued to march higher instead.
Just one day before the Stock Gumshoe’s warning, for example, Toreador announced the appointment of Marc Senges – the former CFO of Maurel & Prom – as its new finance chief. When releasing that news, Toreador described Maurel & Prom as the second-largest publicly traded oil and gas company in France without mentioning its recent sanctions by government authorities or its past ties to Balkany.
Last year, Africa Energy Intelligence noted, French regulators fined Maurel & Prom for overstating its reserves in 2005 – when Senges reportedly served as CFO – and then revising the figures after insiders had sold stock in the company at inflated prices. Notably, Internet records show, Balkany himself acted as an advisor to Maurel & Prom when it acquired the reserves that wound up being overstated.
When Kouwe profiled Balkany in his DealBook column the month after that CFO change, he never mentioned the young fund manager’s checkered past at all. Rather, he portrayed Balkany as a “young hotshot” whose recent gains rivaled those posted by far more experienced market players. He specifically pointed to Toreador – with its 210% gain for the year – as Balkany’s big “home run.”
The next (and only) time Kouwe covered Toreador again, he was predicting an imminent buyout of the company based on tips from unnamed sources.
Meanwhile, the month after that favorable profile appeared, Toreador began a flurry of activity. In mid-November, less than a week after posting unimpressive third-quarter results, Toreador filed a registration statement in preparation for a planned stock offering. The next day, Toreador followed up by announcing that it had officially hired RBC Capital Markets to pursue strategic alternatives – including possible securities offerings and/or “various corporate transactions” – for the company. A few days later, the company finished up with news of a fresh drilling project in the Paris Basin.
Although Toreador expected to finish testing that well within 20 days, the company failed to deliver any concrete results for months. When Toreador finally issued a vague update on the project in mid-January, the company simply announced an unexpected delay – which it blamed on an outside drilling rig – and set a new completion date near the end of the month. Meanwhile, one day after that news release, Kouwe published the speculative buyout column that sent the company’s stock soaring to new highs.
That bounce came in handy when Toreador released some bad news a couple of weeks later. Near the end of a Feb. 1 press release otherwise focused on its estimated reserves, Toreador discreetly revealed that it had generated only “limited quantities” of oil from its latest Paris Basin well. While the company’s stock fell 7% to $11.70 a share on that buried announcement, it still fetched about $2 more than it did before Kouwe’s buyout report.
Toreador’s shares remained in double-digit territory until the company executed its overnight stock sale – after reportedly shelving those plans – one month ago. Although Toreador plunged 16% the following day, the stock has since recovered most of that lost ground.
With a market capitalization of $205 million, Toreador currently trades at roughly 6.5 times its actual book value – more than double the multiple sported by giant ExxonMobil (NYSE: XOM) – despite its falling revenues and operational losses. Two of the biggest past drivers of Toreador’s stock, the DealBook column and the newsletter tout, still seem baked into the company’s share price. Just as some investors counted on a buyout that failed to materialize, others continue to wait on a Paris oil boom – and its ability to launch Toreador’s stock toward $100 a share – that looks no closer now then it did before the stock’s big rally first began.
Meanwhile, the unrealized promises that helped trigger that surge still linger to this day.
“You could turn a small speculation of $5,000 into $100,000 starting just a few weeks from today,” The Money Map Report pledged six months ago. “But you must act right now … We’re talking about a $100 million oil company, trading around $6, that’s about to ‘pop the cork’ on more than 40 billion barrels of crude oil worth as much as $2.8 trillion.
“This situation,” the tout sheet proclaimed with confidence, “is unprecedented.”
* To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.
Clicker 'Body-Slammed' after Tout by Pro Wrestler
Shawn Ambrosino may have retired from professional wrestling, but as a penny stock promoter – touting the likes of Clicker (OTC: CLKZ.OB), Clenergen (OTC: CRGE.OB) and Enhance Skin Products (OTC: EHSK.OB) – he can still inflict an awful lot of pain.
This month, Ambrosino delivered his latest knockout blow with a powerful recommendation of CLKZ that has since left investors reeling. With CLKZ sitting at $1 a share, Ambrosino urged investors to buy the stock before it surged past $20 as the company – a cash-poor outfit with just a handful of employees – conquered Craigslist to become the new heavyweight leader of the online classified advertising world. CLKZ did march higher on that paid tout, ultimately reaching $1.37 a share on Wednesday, but never approached even Ambrosino’s $5 short-term target before staging a remarkable collapse.
The stock, hammered by a sudden selling spree that began the same day it peaked, now fetches just 53 cents a share. Even at that lower price, however, CLKZ still boasts a market value of $31.2 million that looks rather lofty for a company that – just six weeks ago – cautioned that it lacked the funds necessary to finance its operations for more than 30 days.
more...Tradeshow, Skymark Kicked off the Stage
Canadian regulators aren’t buying the story that Tradeshow Marketing (OTC: TSHO.PK) and Skymark Research – a paid promoter led by the son of TSHO’s founder – tried so hard to sell.
The Alberta Securities Commission has issued a cease-trading order for TSHO’s stock, while banning Skymark from trading or recommending any securities, after uncovering tell-tale signs of a classic pump-and-dump scheme. When explaining its move on Monday, the ASC cited concerns originally raised by TheStreetSweeper in a detailed investigative report almost six months ago. (Click here for the original story, complete with links to backup documents.)
Specifically, the ASC claimed that TSHO had soared on bullish Skymark forecasts secretly generated by relatives connected to the company. The ASC also noted that John Kirk, the sole director of Skymark and the son of TSHO’s founder, “held a significant number of shares” in the company – as did TSHO founder Bruce Kirk himself – at the time of the stock-boosting promotions. It pointed out that Ben Kirk, another son of the founder, worked for Skymark during the publicity campaign as well.
more...Liqiudmetal: Keeping Mum about Apple and Far More
This year, Liquidmetal Technologies (OTC: LQMT.PK) has kept some telling – and arguably material – secrets from its investors.
Take LQMT’s recent deal with Apple (Nasdaq: AAPL) as an obvious example. In a cryptic 8-K filing on Aug. 9, LQMT suddenly announced a contract with Apple that – on the surface – seemed to warrant a full-blown press release. Specifically, LQMT revealed that it had signed a “master transaction agreement” that would allow Apple to commercialize its technology for future use in its consumer electronics products.
LQMT never disclosed the terms of that licensing contract, however, allowing hopeful speculation to fuel the company’s shares instead. LQMT’s stock, which fetched just 13 cents a share a month ago, rocketed to a multiyear highof $1.76 last week before swiftly crashing on the lack of details associated with that high-profile deal. The stock, down another 10.6% on Wednesday, has now lost most of its Apple-related gains and currently trades for just 76 cents a share.
This spring, in the months leading up to that dramatic deal, LQMT kept quiet about another important development as well. In an even shorter 8-K filing on March 8, LQMT quietly disclosed that longtime Chairman John Kang had left the company without giving any reason for his departure. One week earlier, Kang was convicted at trial on fraud charges – carrying a potential five-year prison sentence – for inflating the financial results of another company he had previously led.
more...Local.com Rolls the Dice on Another Troubling Deal
Local.com (Nasdaq: LOCM) better hope that investors don’t start using Google (Nasdaq: GOOG), its far more powerful rival, to search for information about the last company it acquired.
Last month, Local agreed to pay $5 million -- plus another $5.9 million in potential earn-out bonuses -- for a startup technology company that provides “domain-based local advertising solutions” to small business customers. When announcing that transaction, which looks rather extravagant for a company that’s recorded net losses for the past five years, Local identified its buyout target as Octane360 and the firm’s leader as Adam Rioux. Local only later revealed in an official 8-K filing that it had actually purchased Simply Static, doing business as Octane360, a company co-founded by Rioux and a second man by the name of Mark Roah.
Local may have buried this information for a reason. In 2003, Roah agreed to plead guilty to criminal charges for artificially inflating the revenue at L90 – an Internet firm where he served as senior vice president of business development – and another web-based company called Homestore.com. According to Internet records, Roah received a one-year prison sentence, followed by three years of supervised release, as punishment for those crimes. A man with the same name and age as Roah served time in federal prison, an official database shows, regaining his freedom less than three years ago.
more...Has Local.com Moved into a Bad Neighborhood?
Local.com. (Nasdaq: LOCM) investors might want to take a closer look at corporate insiders and the recent deals they’ve inked in order to boost the company’s growth.
CEO Heath Clarke has issued bullish projections, lifted by aggressive acquisitions of website customers, and thendumped almost half of his stock in the company. CFO Brenda Agius has been placed in charge of finances even though her past experience at that post, racked up at former Internet highflier FindWhat.com, ended in disaster for investors. Moreover, one of the company’s directors has worked as an investment banker at several firms – including two with connections to a shady penny-stock outfit known as SpongeTech (SPNG.PK) – that have left stains on his record as well.
Meanwhile, in an effort to expand beyond its core Internet search-engine business, Local has been acquiring customers from companies with some black marks of their own. Local purchased most of those subscribers from LaRoss Partners, a firm that appears to be led by a past target of securities regulators with links to two Internet businesses accused of billing customers for website hosting services they never ordered. It has acquired the rest of its subscribers from LiveDeal (Nasdaq: LIVE), a company with an “F” rating by the Better Business Bureau due to massive customer complaints.
more...TheStreetSweeper Helps Investors Escape Massive Losses
Cramer raked in millions during his past life as a hedge fund manager, but he has still made mistakes – and suffered withering criticism – as a celebrity stock picker willing to make his calls in public. He cannot avoid offering at least some bad tips, given the unpredictable nature of the stock market, and he cannot avoid taking some real heat when that inevitably happens.
With this in mind, I was initially hesitant to track the performance of stocks we cover here at TheStreetSweeper. We focus on exposing risky stocks that look poised for massive losses, after all, in a broader market that typically delivers consistent gains instead. To me, it seemed, we would be working without gravity – or even luck – on our side.
That was nine months ago. Remarkably, as the official "Stock Report" to the right shows, we have gone on to achieve a near-perfect track record since that time. (At the end of last week, Suntech -- which rebounded this month from a steep decline – stood out as the sole gainer in the pack.) Even better, we have helped our readers escape more than $2 billion worth of stock-related losses along the way.
more...AIG and Goldman Sachs: The Deceptive Blame Game
The question is this: “How did AIG really collapse?” It is not: “How did the company get in trouble?” Nor is it this: “Who is to blame?”
Rather, the curious still want to know: What led a firm with a AA rating, around $160 billion in market value and $14 billion in profits – with real cash-generation capacity to boot – in fiscal 2006 to effectively go out of business two years later? The answer is not Goldman Sachs (NYSE: GS).
more...Ecosphere: A Clean Energy Company with a Dirty CEO?
Either Ecosphere Technology (OTC: ESPH.OB) CEO Dennis E. McGuire simply shares a lot in common with a twice-convicted drug felon – a coincidence of remarkable proportions – or he is the former jailbird himself.
Based on public records and news stories gathered by TheStreetSweeper, supplemented with a 63-page personal background report, the CEO and the ex-con look very much the same. The names and birth dates match. The names of multiple relatives come up as matches, too. Other key identifying traits – including addresses, business ties and even partial social security numbers – correspond as well.
McGuire’s original corporate bio, published in regulatory filings, hints at further parallels. That bio begins when McGuire graduated from community college in 1974 and, following a long and unexplained hole, picks up in detail when he invented his first cleaning technology (armed with a mere associate’s degree) more than 15 years later. The mysterious gap in between corresponds with the very period when the convicted McGuire operated a drug business, news reports show, and twice served time in jail.
more...DLR: Reading between the Lines for Signs of Risk
As corporate bromides go, this is a palatable one. Among other things, it provides that investors be given all available information on the relationships between a corporation’s officers and directors and the companies they do business with. But that is not to say it’s perfect.
For example, an investor reading Fannie Mae’s 2003 proxy statement would, around page 30, discover this: Ken Duberstein, a board member and Republican political arm twister, had spent the previous 11 years providing “consulting services” to the company, with his most recent fees totaling $375,000. Yet, when the deluge came in 2004, investors seemed totally caught off guard.
This brings to mind Digital Realty Trust (NYSE: DLR), a San Francisco company that has been a darling of Wall Street for some time now.
more...PennyStockChaser Fails to Outrun the SEC
PennyStockChaser, a promotional website that caught the attention of TheStreetSweeper seven months ago with its breathless recommendations of dubious microcap companies, cannot run away from government authorities any more.
The U.S. Securities and Exchange Commission cracked down on PennyStockChaser this week, filing charges against the website, its two owners – Carol McKeown and Dan Ryan – and two investment firms under their control. In its formal complaint, the SEC accused the defendants of “clandestinely selling millions of shares” in the same stocks that it was urging investors to buy. All told, the SEC estimates, the defendants pocketed at least $2.4 million from their so-called stock-scalping scheme.
more...Houston American: How Slick Can This Oil Company Be?
An oilfield services company headed by one of Houston American's directors, John P. Boylan, also went under, in part because he took hundreds of thousands of dollars in loans from the business without the knowledge or consent of his partners.
A third member of Houston American's five-person board, Edwin C. Broun III, was described in court documents last year as suffering from alcohol-related brain damage that could affect his ability to "process information and make sound decisions." The filing, submitted in his defense, characterized him as a recluse who slept all day, drank all night and hadn't opened his mail in two years.
more...Why Can't Ecosphere Score a Deal with BP?
Maybe Ecosphere Technologies (OTC: ESPH.OB) should have added Kevin Costner, the celebrity backer of a competing water-treatment device, to its star-studded team.
Despite ringing endorsements from its own superstars – including a big-name environmentalist and two retired professional athletes – ESPH has so far failed to secure an order from BP (NYSE: BP) for machines that, it says, can effectively address the company’s massive oil spill. Costner’s company, Ocean Therapy Solutions, fielded an order from BP for 32 of its machines almost two full weeks ago. ESPH is still waiting on an order, however, even though the company claims that it offers a superior device.
more...CGA and CSKI: Lost in Translation?
Dick Fuld: From Wall Street Highs to Penny Stock Lows
There were benefits to this beyond the likely $500 million in compensation Fuld booked between 2000-2007 (although that did help in acquiring some trophies). All agree that he wore his reputation like a glove.
more...Suntech Power Still Seeking Shelter from the Storm
Last week, Suntech Power (NYSE: STP) tried – but failed – to please the market by presenting its latest results in the best possible light.
Yes, Suntech beat revenue expectations for the first quarter and even raised its production outlook for the rest of the year. But the company also encountered multiple headwinds that left investors in a rather dark mood.
As expected, Suntech suffered a big hit from the falling Euro that triggered a rare earnings miss. Even worse, the company reported glitches with the breakthrough technology that’s supposed to fuel its future sales. Meanwhile, the company still hasn’t collected the cash for deals inked by the Global Solar Fund (GSF) – a mysterious firm that it largely controls – more than a year ago.
more...SpongeTech: The Dirty Mess It Left Behind
That conclusion really needs to be revisited.
SpongeTech was no ordinary pump-and-dump penny-stock scheme; it was, to play off Churchill’s famous definition of Russia, a fraud wrapped in a stock-market rig inside a money-laundering conspiracy.
more...Junior Mining Companies and the 'Temple of Doom'
Ever since AmeriLithium (OTC: AMEL.OB) purchased some mining assets from GeoXplor -- a Vancouver outfit led by the so-called “Indiana Jones” of the lithium trade -- the company has taken investors on a wild and, at times, thrilling ride. If history repeats itself, however, AMEL investors better not count on a happy ending to their journey.
After all, GeoXplor has sold mineral claims to several other microcap companies that met with rather ugly fates. Even worse, government records show, GeoXplor founder Clive Ashworth has been previously banned from the securities industry for an alleged scam – which resulted in criminal convictions for two stock promoters – involving yet another resource company.
Nevertheless, Ashworth continues to win over junior mining companies and those who promote their risky stocks alike.
more...Suntech Deals Cast Dark Cloud over Company
For a giant solar company, Suntech (NYSE: STP) sure seems to be keeping its own investors in the dark about some shady-looking deals.
Take Suntech’s massive sales to its majority-owned Global Solar Fund (GSF), for example, which have hung over the company like a dark cloud for almost a year. Thanks to those transactions, which accounted for almost one-third of Suntech’s quarterly revenue at the time, the Chinese company managed to satisfy Wall Street growth expectations and follow up with a secondary stock offering that prevented a potential liquidity crisis. Based on extensive research byTheStreetSweeper, however, Suntech apparently sold those solar products to itself and is still awaiting payment on 95% of the resulting revenue that it booked to this day.
more...Untangling the Intricate Web Woven by InterOil's CEO
* Editor’s Note: This article has been republished with the permission of iBusiness Reporting. Click here for access to the original story, complete with graphics of back-up documents, and similar investigative reports.
Since Interoil Corp.’s (NYSE: IOC) inception in 1997, CEO Phil Mulacek has made a habit out of doing business with family members and leaving many of the relationships undisclosed.
For instance, during a three-year period ending in 2005, InterOil paid Direct Employment Services Corp. (DESC) nearly $1.8 million for unspecified "services" provided by "executive officers and senior management." InterOil disclosed that 50% of DESC was owned by Christian Vinson, who was serving at the time as InterOil’s COO and a director of the company.
But InterOil didn't reveal other related-party facts. For starters, Vinson is Mulacek's brother-in-law. Vinson, who has been with InterOil from the beginning, now serves as InterOil’s executive vice president of corporate development and government affairs, a role that places him in charge of dealing with Papua New Guinea's corrupt government.
more...Putting Together the Puzzle at Big Bear Mining
If Big Bear Mining (OTC: BGBR.OB) would risk hiring a bankrupt CEO with a checkered past to serve as the “public face” of the company – and essentially give him $30 million worth of stock for the favor – then investors might want to search for even darker secrets that the junior gold miner is still trying to keep.
They could start by examining BGBR’s original address. That address, listed in past BGBR regulatory filings as 1728 Yew St. in Vancouver, shows up in filings for several other penny stock outfits as well. Those companies share at least one glaring trait: They count Shane Whittle, a busy Vancouver stock promoter, among their top executives.
more...Fearing Risks, Big Bear Promoter Tells Investors to Flee
Big Bear Mining (OTC: BGBR.OB) has scared off one of its most powerful fans.
James DiGeorgia, editor of the Gold and Energy Advisor newsletter, this week suddenly reversed his “strong buy” recommendation on BGBR and started urging his followers to sell the stock instead. His abrupt about-face came just one day after The Street Sweeper raised serious questions about BGBR’s true value and the paid promoters – including DiGeorgia himself – who have been touting the heavily traded stock.
“Based on new information I received in the last 24 hours that I was not presented with when I initially reviewed and recommended the stock, I believe it would be in the best interest of any investors holding shares in this company to sell them,” DiGeorgia stated in an official press release on Tuesday. “It doesn’t matter if you’ve made money or lost money holding BGBR.OB. Everyone who has based their purchase of shares on my recommendation should sell their shares.”
more...Could Big Bear Mining Investors Get Caught in a Trap?
Four years ago, regulatory filings show, Aaron Hall – the founder and largest stockholder of Big Bear Mining (OTC:BGBR.OB) – worked as a security guard at a Vancouver nightclub while dabbling in mineral claims on the side. When BGBR’s stock soared this month on paid promotions, however, the young Canadian suddenly found himself worth $175 million before the company found a single ounce of gold.
If Hall sold his 72-percent stake in BGBR, still valued at $121 million despite a hit to the stock last week, the 33-year-old Canadian could afford to retire right now as a very rich man whether the company ever strikes gold or not. According to BGBR, however, Hall has agreed to walk away from that fortune instead. (BGBR refused to provide Hall’s phone number, so The Street Sweeper could not call him about his decision.)
more...Are Medifast and Pre-Paid Legal up to the Same Tricks?
MSEH: The Secrets behind Pataki's Favorite Penny Stock
Does the NanoLogix Rally Make Any Sense?
The NanoLogix (OTC: NNLX.PK) stock chart featured on a YouTube video – set to the catchy “Money Song” tune from Monty Python – looks rather outdated following this spring’s incredible, if inexplicable, spike in the company’s share price.
When that video first surfaced in the fall of 2007, NNLX was still focused on increasing hydrogen production with the help of grape juice while allowing Nutra Pharma (OTC: NPHC.OB) – the company’s former partner – to pursuebreakthroughs in its current business of diagnostic technology. (NPHC’s own volatile rally, staged late last year, has already come to an end.) Back then, NNLX’s stock had almost doubled in a month but still fetched only 15 cents a share. Since moving into the medical arena and converting a barn-like structure into a “clean room” for producing diagnostic testing kits (with the construction project captured in yet another YouTube video), however, NNLX has seen its stock rocket more than 200% in recent weeks to pass $1 a share.
Even Bret Barnhizer – NanoLogix’s own CEO – cannot explain that move.
more...With China Tel, Has Tobin Smith Been 'Outfoxed' Again?
Tobin Smith, co-star of Fox News Channel’s popular “Bulls & Bears” investment show, recently declared a challenging new “mission in life.” In an upbeat message to his 2,700-plus followers on Twitter last week, Smith promised to helpChina Tel Group (OTC: CHTL.OB) – a penny stock company he has been touting for months – secure the financing it needs in order to survive.
To be sure, CHTL could use some assistance. More than a year ago, CHTL agreed to pay $195 million for a 49% stake in Chinacomm – an Asian broadband wireless company that ranks as its primary asset – but it still lacks the money required to actually pay for that deal. Although CHTL has inked plenty of financing agreements in the meantime, most recently with two mysterious firms known as Excel Era and the Isaac Organization, the company never seems to collect promised cash from those backers in the end.
more...Storm of Controversy Continues to Brew over InterOil
One fact that InterOil fans and skeptics can agree on is this: Mulacek's integrity and business history are critical factors in assessing the company's future success. more...
InterOil Case Packed with Explosive Bombshells
And sifting through the papers in the Todd Peters et al. v. Phil Mulacek et al. lawsuit, one gets a better sense of why Mulacek attempted a legal Hail Mary three months ago and had one of the companies he controls file for bankruptcy protection, a move Mulacek's attorneys said was calculated to get the Peters' litigation swept into federal bankruptcy court and derail a potentially massive judgment. (See iBusiness Reporting’s original story here.)
more...Has Atlantic Wind and Solar Been Fueled by Hot Air?
Atlantic Wind and Solar (OTC: AWSL.PK) is suspected of blowing a lot of hot air in an effort to inflate the company’s stock price.
A year ago, AWSL supposedly acquired a 47.5% stake in Hybridyne Power Systems – later touting Hybridyne’s “best-in-class” technology and its access to an expansive research team – for $2 million worth of its own stock. After publicizing a string of stock-boosting projects secured by Hybridyne, however, AWSL suddenly announced this month that it had canceled its acquisition of the company due to an “unfortunate default by the vendor” that rendered the transaction “null and void.”
Notably, Hybridyne itself now claims that the acquisition never took place at all.
more...InterOil CEO Slapped for 'Bad Faith' Bankruptcy Filing
Can the Batteries Last on Overcharged Lithium Stocks?
Lithium Corporation (OTC: LTUM.OB) sure looks a whole lot prettier in paid tout sheets than it does in its regulatory filings.
In recent months, stock promoters have treated LTUM – a company with no revenue and just $855 in the bank – like a surefire winner that’s poised to supply giant automakers with the lithium they will need to power tomorrow’s battery-operated cars. The promoters offer similar reasons for their incredible confidence, led by soaring demand for lithium and LTUM’s ready access to lithium mines, while carefully excluding their compensation for touting the stock from its list of key attractions.
more...Look Again: CSKI Appears to Be Deteriorating Fast
Following a swift decline in sales, China Sky One Medical (Nasdaq: CSKI) is no longer the picture of health that it once seemed to be.
With a Rare Earnings Miss, CSKI Is Looking Rather Sick
China Sky One Medical (Nasdaq: CSKI) looks like it could use a miracle cure.
With Yuhe Losing its Auditor, Could CSKI Be Next?
* Editor's Note: This report has been republished with the permission of its author, Manuel Asensio, an accomplished investor with a track record for spotting possible fraud long before the market itself. Click here to read more of Asensio's research on CSKI and other companies.
CSKI Auditor Accused of Blessing Fuzzy Math
* Editor's Note: This report has been republished with the permission of its author, Manuel Asensio, an accomplished investor with a track record for spotting possible fraud long before the market itself. Click here to read more of Asensio's research on CSKI and other companies.
A private investor has filed a lawsuit against the auditor of China Sky One Medical (NASDAQ: CSKI), alleging "fraudulent misconduct" and violation of securities laws for failing to correct CSKI's "materially false" financial statements.
The complaint states: "MSPC became aware of the fact that the CSKI financial statements were materially false and misleading and its unqualified opinion with respect to them was baseless. Despite becoming aware of these problems, and despite having a duty to correct the information that it knew to be false which had been disseminated into the market via the 10-K, MSPC failed to issue corrected statements or withdraw its support from the CSKI financial statements." more...
Is IMGG's CEO Pulling the Plug on His Company?
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To some, Imaging3 (OTC: IMGG.OB) CEO Dean Janes appears to be giving up on his own company.
On Feb. 11, exactly one month after IMGG announced the latest in a series of regulatory setbacks, Janes reportedly began pitching a new investment opportunity to his 1,000-plus “friends” on Facebook. In his biggest insider transaction on record, Janes then sold 2.6 million shares of IMGG stock the very next day. more...
Tradeshow Marketing Knows How to Sell Its Stock
Give Tradeshow Marketing (OTC: TSHO.PK) some credit. For a company riddled with so many ugly conflicts, TSHO sure knows how to put on a pretty face for investors.
TSHO can thank SkyMark Research – a promotional firm operated by the apparent son of TSHO’s own founder – for reshaping its public image. For years, TSHO looked like a failed business with limited appeal to even speculative investors willing to place bets on high-risk penny stocks. After SkyMark launched favorable coverage of TSHO late last year, however, the company saw interest in its long-overlooked stock suddenly skyrocket. more...
CSKI Linked to 'Counterfeit' Drugs in China
* Editor's Note: This report has been republished with the permission of its author, Manuel Asensio, an accomplished investor with a track record for spotting possible fraud long before the market itself. Click here to read more of Ansensio's research on CSKI and other companies.
Eight products manufactured by China Sky One Medical (NASDAQ: CSKI) appear in a Chinese government notice of "counterfeit drug products," which states that pharmacies should "immediately stop the sale" of these products.
The government document is titled "Notice of the Ministry of Health of the People's Republic of China," dated November 5, 2009, and is available on the China State Food and Drug Administration website. Click here for the full notice, and click here for a translation. more...
If Genoptix Is So Healthy, Why Are Insiders Selling?
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Genoptix (Nasdaq: GXDX) CEO Tina Nova keeps sending mixed – and potentially troubling – signals about the value of her company’s stock.
Take Nova’s latest insider sale, for example. On Feb. 3, Nova pocketed more than $500,000 by exercising cheap stock options years before they were formally set to expire. She sold that stock for $31.13 a share – near a four-month low – even though analysts were forecasting a $10 rise in the company’s share price. more...
AENY: Look What's Hiding beneath that Former Shell
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Americas Energy Company (AENY.OB) exposed some ugly flaws when it emerged from its corporate shell.
Following its heavily hyped reverse merger, AENY now counts CEO Christopher Headrick – a longtime dealmaker with a history of failure – as its sole officer, director and member of its staff. Although AENY has announced plans to expand its senior management team, the company aims to do so by hiring leaders who have benefited handsomely from a series of generous related-party deals. One of those potential executives, already identified as a company vice president in the past, has agreed to plead guilty to felony tax evasion charges and could face up to five years in prison for his crime. more...
AENY: The Plot, the Players and the Shadowy Past
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Americas Energy Company (AENY.OB) has managed to reinvent itself with backing from a network of long-connected players in the murky world of penny stocks and offshore financing.
Last week, AENY suddenly announced that it had completed a merger that would transform the company into a legitimate coal-mining operation. The move came as a surprise to many, since AENY had delayed the merger – pending an additional $8 million in financing – just a few weeks earlier. With skeptics portraying AENY as an overvalued corporate shell, however, the company abruptly finalized the deal after raising less than half of the $8 million called for under its new financing arrangement. more...
Jayhawk, No Longer a Highflier, Crashes to Earth
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Following a swift plunge that cut its stock price by almost half, Jayhawk Energy (JYHW.OB) stepped forward this week to blame the recent volatility on outside promotions followed by aggressive profit-taking – a classic, if softened, description of a “pump-and-dump” scheme – with no connection to the company’s actual operations. JYHW insisted that the company itself played no role in the stock’s short-lived rally, even though its top officer profited from the stock’s big run-up before its subsequent crash. more...
AENY: The Dirty Truth behind the Pretty Coal Stock
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Last fall, around the same time that British Columbian regulators issued a cease-trading order for Americas Energy Company (AENY.OB) stock, U.S. investors began fielding bullish emails urging them to buy the company’s shares.
The Intelligent Investor Report, a promotional newsletter published by Jarret Wollstein, highlighted AENY (then trading under the ticker symbol TRET) as his top coal pick of 2009 and predicted that the company would be producing more than $100 million worth of coal annually by the end of next year. He portrayed AENY – a shell company with limited operations -- as a likely “10-bagger” for fast-acting investors willing to buy the shares early and then hold onto them for the long term. more...
IMGG Fails to Paint a Pretty Picture for Investors
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The picture at Imaging3 (IMGG.OB) just got a whole lot uglier.
IMGG dropped a bombshell on investors this week, when it revealed a major setback in its lengthy battle to secure regulatory approval of its Dominion 3-D scanning device. For months, IMGG has indicated that the company simply needed to resolve one minor issue – involving the Dominion’s label – in order to satisfy reviewers at the U.S. Food and Drug Administration. During a conference call with shareholders on Tuesday, however, IMGG reported that it has now fielded more than a dozen questions from FDA staffers who are evaluating the company’s device. more...
IMGG Investors Grow Tired of Holding Their Breath
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Imaging3 (IMGG.OB) suffered another major setback this week, triggering a massive selloff in its stock, as the company fielded additional questions from federal regulators about its Dominion scanning device.
By now, IMGG investors have waited years for the U.S. Food and Drug Administration to clear the company’s Dominion scanner for sale under a 510(k) process that normally takes just a few short months to complete. More than 900 days after IMGG first submitted its 3-D scanner for review, however, the company is still waiting for the FDA to bless its breakthrough device. more...
For NXTH Investors, 2010 Could Be Hard to Swallow
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NXT Nutritionals (NXTH.OB) shareholders who trust the company’s sweet outlook for 2010 could wind up with a bitter taste in their mouths.
The company’s rosy forecast included plenty of hype about its SUSTA-brand sweetener but none of the actual financial projections that normally dominate official guidance. It also failed to mention a looming threat – massive dilution – that could soon hammer its generous share price. more...
NXTH and The Shaq: A Sweet-and-Sour Deal?
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When NXT Nutritionals (NXTH.OB) recently announced that basketball legend Shaquille “Shaq” O’Neal had agreed to endorse the company’s sweetener, investors rushed to celebrate their good fortune. That blessing could turn into a curse, however, if history serves as any guide. more...
Talk Is Getting Cheap at Imaging3
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Imaging3 (IMGG.OB) is learning an important, if painful, lesson: A picture really is worth a thousand words.
IMGG has been trying for years to secure regulatory clearance for a new device that, it says, can produce real-time 3D images that will revolutionize the practice of medicine. Now that yet another projected date for approval of the device has passed without results, however, investors are starting to ask a very basic question. Specifically, they want to know why IMGG has failed to share the remarkable images that its device is supposed to be capable of delivering. more...
AWSL Chairman Has Some Skeletons in His Closet
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Gilles Trahan, the chairman of both Atlantic Wind & Solar (AWSL.PK) and MSE Enviro-Tech (MEVT.PK), better hope that investors don’t start judging him by the company he keeps.
After all, Trahan has ties to Basil Meecham – a past target of securities regulators – that date back at least eight years. The two men remained connected as Facebook friends as recently as last month, although they have since taken steps to block visitor access to their personal information. The Street Sweeper captured evidence of that Facebook friendship weeks ago, however, in anticipation of such changes. more...
The Picture Gets Even Fuzzier at Imaging3
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Imaging3 (IMGG) is now fielding questions from two regulatory agencies.
More than two years after submitting its Dominion 3-D scanner for clearance by the U.S. Food and Drug Administration, IMGG is still trying to address concerns raised by the agency about its breakthrough medical device. Meanwhile, the company is now attempting to overcome issues raised by the U.S. Securities and Exchange Commission – which derailed its annual shareholder meeting -- as well. more...
NXTH & CLRH: Connected Like Siamese Twins
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Investors blinded by the pretty stock prices for NXT Nutritionals (OTC.BB:NXTH) and Clear-Lite Holdings (OTC.BB:CLRH) might want to take a closer look at other – less attractive – traits shared by these two companies.
After going public through reverse mergers with shell companies earlier this year, both NXTH and CLRH promptly hired the same part-time CFO to keep their books in order. They also retained the same auditing firm in Boca Raton – a region viewed by regulators as a hotbed for securities-related fraud – to bless their financial statements. They even chose the same tainted public relations firm to attract potential investors. (That firm failed to answer questions about the companies for this story.) more...
IMGG Investors Still Waiting for Judgment Day
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The story at Imaging3 (OTC.BB:IMGG) is following the same familiar plotline made famous by the popular movie “Groundhog Day.”
Every morning, IMGG investors wake up with high hopes that the U.S. Food and Drug Administration will finally clear the company’s Dominion 3-D scanning device for sale. Every night, they return to bed with a sense of disappointment lightened only by the chance that tomorrow will somehow be different and bring the good news they so crave. more...
Are Those Dark Spots on That X-Ray of Imaging3?
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Based on comments made in a spring episode of “Health This Week with Don Baillargeon” – a program hosted by a repeat target of securities regulators – Imaging3 CEO Dean Janes has been waiting six months for an urgent phone call from the U.S. Food and Drug Administration that he will probably never receive.
Janes appeared on the show in May with high hopes that the FDA was finally nearing approval of IMGG’s Dominion 3-D imaging device. Although two years had passed since IMGG first submitted the Dominion for FDA review, using a speedy 510(k) process that often takes just months to complete, Janes acted as though the agency’s long-awaited blessing might come at any moment. more...
The Truth Behind the New 'Salt-Free' Diet at AWSL
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When Atlantic Wind & Solar (AWSL) issued its latest investor update, the company buried a potential bombshell – disclosing plans to abandon a celebrated project with Morton Salt – beneath announcements about a revised business strategy and a new corporate headquarters.
Just two months ago, AWSL claimed that it had landed a contract with Morton to carry out a feasibility study for the generation of renewable power at the company’s big salt-producing facility in the Bahamas. Back then, at least, AWSL seemed excited by the deal and the opportunities it might bring. more...
Surgeon Seeks to Cut Influence of Device Industry
Charles Rosen is a soft-spoken spine surgeon who has earned the kind of reputation that’s normally assigned to a hard-nosed cop.
He first blew the whistle on a giant healthcare company a decade ago, when a hospital owned by Tenet – the second-largest publicly traded hospital chain in the country – failed to inform him that its operating-room sterilizer had not been working properly for months. As the hospital’s chief of surgery, Rosen was asked to minimize the problem during an upcoming inspection by the Joint Commission on Accreditation of Healthcare Organizations. Instead, Rosen sounded an alarm during JCAHO’s annual visit and promptly resigned in protest when the agency – which counted one of the hospital’s directors among its own board members – ignored his concerns. more...
Force Protection Gives Management Royal Treatment
Last month, as Force Protection (FRPT) prepared to slash its workforce in an effort to save money, the company quietly adopted a new policy that could expand the bonus awarded to its well-paid CEO.
Michael Moody, who earned seven figures as Force Protection’s brand-new CEO in 2008, could score even more this year despite plummeting orders for the company’s military vehicles. Originally, Force Protection guaranteed Moody a salary of at least $540,000 – and a bonus that could equal up to 75% of that amount – under his formal contract with the company. With a recent amendment to that agreement, however, Force Protection essentially removed any limits on Moody’s 2009 cash bonus.
