UPDATE: AMERICAN DIVERSIFIED GROUP, INC. (OTCBB: ADGI) – THE TERMINATOR
July 17, 2002
Seeking to avoid further fallout from a tainted relationship, American Diversified Group, Inc. (OTCBB: ADGI) announced on July 16th that it was terminating its association with the besieged investment banking firm, Hornblower & Weeks.
That decision came just days after the National Association of Securities Dealers (NASD) charged that Hornblower & Weeks had violated an NASD ban when it published a research report on the Company. See Hornblower & Weeks – In Trouble Again. As we previously reported, in early May the NASD suspended Hornblower & Weeks from engaging in any research activities for six months after finding that the investment bankers had issued a misleading and incomplete research report on MyTurn.com. See New Rules For Analysts.
The NASD has not alleged any wrongdoing by the Company. It has, however, asserted that the Hornblower & Weeks report “made exaggerated, unwarranted and misleading statements about American Diversified, including statements that the Company ‘is positioned as a premier provider of communication products and enhanced value-added services…,’ and ‘is positioned to exploit the upside potential of the vast expansion of the Internet.’”
The Company may have jettisoned Hornblower & Weeks, but it is not prepared to concede all of the alleged shortcomings of the research report. According to the Company’s President, Dr. Jerrold R. Hinton, “[t]he NASD may consider those statements as misleading in the context of a report by a brokerage firm, but [American Diversified] believes they are proper and completely justified by the facts.” Dr. Hinton claims that the Company is positioned to take advantage of a growing niche in the telecommunications market because of its proprietary software and service agreements.
The Company did acknowledge that the Hornblower & Weeks report failed to disclose material information about its 2001 year-end results, including going-concern doubts raised by its auditors.
The July 16th press release did not say whether Hornblower & Weeks and its employees would be returning the 20 million shares of American Diversified common stock that they received in consideration for their services, or whether Hornblower & Weeks had been asked to refund any portion of its $30,000 cash fee.
Nor did the press release address the dilemma that confronts American Diversified shareholders, who only recently learned from the Company’s public filings that virtually all of their stock has never been properly authorized. See American Diversified Group, Inc. – Through The Looking Glass.
The Company says it wants to cure that problem by having shareholders swap their stock in American Diversified for properly authorized shares of a newly formed Delaware corporation. That assumes, of course, that the holders of unauthorized stock have the right to vote at all.
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