Don: ACRT <<It looks almost too good to be true at current levels, but I wasn't able to find the booby trap if there is one.>>
Did you miss this tidbit?
>>7/20/02 BARRONS ALPERT: Borrowing trouble
Actrade Financial Technologies shares collapsed to nearly 3 this month, after the company disclosed a sales drop and layoffs. The New York-based trade financier's stock, which hit a high of 40 last year, was at 24 in February when we reported problems with its lending practices.
Founded after Amos Aharoni fled Israeli creditors a decade ago, Actrade claimed its Internet-based lending methods would revolutionize trade financing the way that credit cards had revolutionized consumer purchases. The growing profits reported by Actrade in recent years lifted the Nasdaq-traded shares to the top of many value investors' computer screens.
But a class-action complaint filed Wednesday in Manhattan's federal court alleges that Actrade's profits were inflated by transactions with offshore entities controlled by Actrade affiliates, as well as by domestic deals that were really subterfuges for moving funds between related entities.
In an exceptionally detailed pleading by the Boston law firm Shapiro Haber & Urmy, the stock-fraud suit says Actrade's own loan documents show the company was financing deals in which the buyer and seller had the same address and signature. Citing an unnamed former employee, the complaint says more than $160 million in Actrade financings backed dealings between a parent firm called Pacific Realty Group and Pacific's subsidiaries and affiliates -- ultimately leading to default.
Actrade also paid commissions to a Brazilian firm for facilitating a purchase by a firm controlled by defendant Aharoni, according to the allegations. Financials for another purported customer were sent to Aharoni's New York apartment, suggesting to the plaintiffs that Aharoni controlled that customer, too. Yet another Actrade customer was incorporated in Panama by a lawyer that plaintiffs allege had close connections to Aharoni. And funding for these offshore deals purportedly came from a British Virgin Islands-registered institution whose phone number was that of Aharoni's bankruptcy lawyer in Israel. The questionable foundations of these dealings, says the complaint, "indicate that the cash claimed to be located in offshore financial institutions is nonexistent."
According to an unnamed former employee cited in the complaint, Aharoni had offshore accounts that he used to sell stock. Actrade offered no comment on my inquiries. But in June, the company announced that it was the subject of informal inquiries by the Securities and Exchange Commission and the National Association of Securities Dealers. |
