Brent Mudry writes a Streetwire column distributed by Canada
Stockwatch. The following, and the next message, are
recent articles:
Tuesday Jun 15 1999
by Brent Mudry
While the United States Securities and Exchange Commission is particularly
interested in the "business success and reputation" of Net Command Tech's
president, William Dunavant, the troubled horse shampoo mogul is just the latest
of a string of controversial stock associates of Net Command founder Rene
Hamouth spanning a decade. While the West Vancouver-based stock promoter
has mingled with many notable penny stock figures before, the personna of Mr.
Dunavant marks a colourful chapter in Mr. Hamouth's Corsaire, renamed Net
Command. The SEC issued a 10-day trading halt of Net Command shares on
Friday, freezing the stock at $15 (U.S.), a market capitalization of $210-million
(U.S.). On Monday, Net Command responded by pledging to cooperate with
securities regulators and fully explain its recent acquisitions and financial affairs.
Mr. Dunavant, based in Fort Lauderdale, Fla., was a colourful addition to
Corsaire when Mr. Hamouth brought him aboard in November. In a recent
regulatory filing, Net Command paints Mr. Dunavant as an entrepreneurial success
story. The well-groomed image began to shed hair on May 5, when separate
stories by reporters Christopher Byron on MSNBC and David Baines in The
Vancouver Sun reminded readers that Forbes magazine labelled Mr. Dunavant in
1996 as a "persuasive scoundrel who plundered the company."
The company in question was Straight Arrow, Mr. Dunavant's self-acclaimed
biggest success story. In a variation of a classic "bust-out," Mr. Dunavant took
control of the family-run horse shampoo firm in 1989 and expanded the market to
humans, while allegedly milking the company dry. Even Forbes fell for Mr.
Dunavants new pitch of "Mane 'n Tail" in 1994. In a flattering 1994 puff piece, the
business magazine noted Tane Harwood, a Houston-based
rodeo-rider-turned-advertising-executive, was excited with her "softer, thicker,
shinier and so much easier to brush" hair. "I've got two bottles of Mane 'n Tail in
my bathroom," Ms. Harwood confessed.
Two years later, Forbes, in an editorial mea culpa, admitted it failed to "spot the
whiff of fakery" and exposed Mr. Dunavant in quite unflattering terms. "A
Pennsylvania court has found Dunavant, 44, guilty of awarding himself millions in
excessive compensation, siphoning off company funds to cover personal expenses
and diverting Straight Arrow assets," stated Forbes writer Michelle Conlin.
Recent articles by MSNBC on May 5 and Miami Herald reporter James McNair
on June 7 note Mr. Dunavant jumped from horse shampoo to high-tech video
compression technology. At a computer pornography convention in Las Vegas in
1997, the entrepreneur, then the president of Summus Technologies, an affiliate of
Verinet, told a San Francisco Chronicle reporter that Verinet's software was great
for fast porno site downloads. "People want to see it, do it and get out of a site
fast," Mr. Dunavant told the reporter. A year later, the Mane 'n Hair and porno
pitchman hooked up with Mr. Hamouth in Corsaire.
Mr. Hamouth had built up quite a track record himself in Canadian penny stock
circles, more notable for controversy than success. The Howe Street stock
promoter's official history, as stated in Corsaire's May 25 10KSB filing, is bereft
of significant detail. From "1983 to date, Mr. Hamouth has acted as a financial
consultant to various private and public companies in both Canada and the United
States wherein he provided assistance in raising capital for these companies. From
1972 to 1982, he was an account executive for firms which recruited executives
for large corporations," states Corsaire.
Corsaire neglects to name any companies which Mr. Hamouth served as "financial
consultant" or his troubles with Canadian securities regulators. Mr. Hamouth's
troubles date back a decade, to 1989, when he promoted Penway Explorers, a
controversial Alberta Stock Exchange-listed stock, with Robert Campbell and
Rajiv Vohra. After Penway, Mr. Hamouth moved on to play various roles in a
number of Vancouver Stock Exchange-listed companies in 1990 and 1991,
including Ber Resources, Burro Creek Minerals and Bellwether Resources.
Questionable stock issuances to a number of Vancouver players, including Mr.
Hamouth, led to unwelcome scrutiny from the VSE. In September, 1990, six
months after Mr. Hamouth was named president of Ber, the VSE halted trading in
the company's shares, "pending clarification of share issuances and acceptability of
directors."
Things got worse for Mr. Hamouth in February, 1991, when the British Columbia
Securities Commission temporarily suspended him and Mr. Vohra after they,
along with Mr. Campbell and Brett Bradley Salter, were charged by the Royal
Canadian Mounted Police in Toronto for manipulating shares of Penway. The
RCMP claimed the foursome, operating from Toronto, Montreal and Calgary,
conspired between March 1, 1989, and June 26, 1989, to commit the indictable
offence of defrauding the public by manipulating shares of Penway, alleged
violations of the Criminal Code of Canada.
The Penway associates were acquitted two years later, on Oct. 26, 1993, but Mr.
Hamouth kept active in the interim. In March, 1993, the VSE stated that trading in
Wedgewood "will remain suspended pending clarification of market activity, share
distribution and the involvement of Mr. Rene Hamouth." (By coincidence, a
Vancouver broker, David Norman Gilbert, was later snared by the VSE for his
involvement in Wedgewood, a classic Howe Street rig job, in 1993 and 1994.
The VSE fined Mr. Gilbert $231,000 and banned him for life in March, 1998, for
his role in Wedgewood and his handling of several accounts of Charles Bazarian,
one of the best-known fraudsters in the U.S. savings and loan fiasco, in 1991 and
1992. Mr. Bazarian had just been paroled after serving three-and-a-half years in
jail for bank fraud, conspiracy and related crimes linked to the collapse of financial
institutions in Oklahoma, California and Florida in the 1980s.)
After enduring the cloud of criminal charges for two-and-a-half years, Mr.
Hamouth, Mr. Campbell and Mr. Vohra were acquitted on Oct. 26, 1993, after a
seven-week trial in Ontario Court's General Division. Mr. Justice Robert Blair
ruled that Crown prosecutor Jay Naster had failed to prove the trio's attempts to
influence Penway's stock price actually constituted stock manipulation. The Globe
and Mail noted the judge described Mr. Hamouth and his Penway associates as
penny stock salesmen whose "stock and trade is hyperbole." "They were engaged
in what was an attempt to promote the Penway stock, causing its price to rise in
the process, to their own profit and advantage but also to the profit and advantage
of those who followed them into the market to buy the stock," stated Judge Blair
in his reasons.
The acquittal was a bitter defeat for Mr. Naster and the court use of a pioneering
computer program, the "Stock Market Analysis for the Reconstruction of Trades,"
which produced a matched trade report. Mr. Naster had argued that Mr.
Campbell enlisted Messrs. Hamouth, Vohra and Salter to buy Penway shares,
push up the stock price and then sell the shares to an offshore mutual fund,
according to the Globe. Judge Blair noted that wiretap evidence showed Mr.
Campbell felt he could "account for" 2.03-million shares of Penway's 2.2-million
shares, leaving a razor-thin public float of just 170,000 shares. The judge,
however, ruled that the SMART program "does not reflect the whole picture of
what was happening in respect of the stock in and around that time," as it did not
detail the other bid and ask orders in the market context.
With the Penway acquittal in hand, Mr. Hamouth was reinstated by the BCSC on
Dec. 15, 1993. A month later, Corsaire, then called Acunet, was reorganized,
with Paul Parshall named as president and chief executive. Acunet had been a
dormant shell since 1990, three years after it was incorporated in Delaware. Mr.
Hamouth came on board in March, 1995, when he was elected as president,
changed the company's name to Corsaire Snowboard and began a review of
potential acquisitions.
Mr. Hamouth's early Corsaire prospects did not pan out well. Court filings note
that Corsaire had a pending deal in March, 1996, to vend in two numbered
companies owned by West Vancouver multilevel marketing whiz Samuel William
Kalenuik, 152330 Canada and 540704 Ontario. 152330 Canada held a
one-third interest in Matol Partners, a mineral supplements and nutritional
products multilevel operation. Mr. Kalenuik funnelled his commission income
through 540704 Ontario.
Mr. Kalenuik had been "enormously successful," according to a judge, who noted
the promoter's income rose from $1.05-million in 1989 to a peak of $5.25-million
in 1991. That year, however, Mr. Kalenuik separated from his wife, and without
her help, his income fell to $2.76-million, collapsing further to $621,000 in 1993
and $116,000 in 1994. It is unclear what attraction these two numbered
companies held for Mr. Hamouth, also of West Vancouver, and the proposed
vend-in soon collapsed.
By August 19, 1996, Corsaire had a new deal in the works, an agreement to
acquire 75 per cent of Mutual Exchange Canada, a Vancouver-based barter
promotion company. The pending deal was revised on Oct. 9, 1996. By
coincidence, this was the same day the SEC announced that Corsaire's former
president, Mr. Parshall, had agreed to a permanent injunction and $257,000
(U.S.) in fines for an innovative penny stock scam. On Oct. 1, Judge Bruce
Jenkins of the U.S. District Court for the District of Utah entered final judgments
against Mr. Parshall and Axiom Security Solutions.
Without admitting any wrongdoing, Mr. Parshall was barred from serving as a
director or officer of a public company and he agreed to pay disgorgement of
$150,000 (U.S.), a civil penalty of $100,000 (U.S.) and interest of $7,600
(U.S.). The SEC alleged that Mr. Parshall set up a new Utah company, Republic
International, to assume the identity of a defunct but publicly-traded company of
the same name. Through his own transfer agent, TransGlobal Securities, Mr.
Parshall issued common shares in the names of the old shareholders and then sold
the newly-created shell to Axiom, a private company, as a vehicle for taking it
public, according to the SEC. The innovative penny stock promoter also made
assorted false regulatory filings.
On Nov. 14, 1996, five weeks after hearing the unfortunate news about Mr.
Parshall, Mr. Hamouth got more bad news. Mutual Exchange Canada declared
that its sale agreement was no longer valid, citing non-performance of certain
terms and conditions, according to Corsaire. "The position of legal counsel and the
company is that there is no basis for this assertion and the agreement is still valid,"
stated Mr. Hamouth in a quarterly filing dated Feb. 27, 1997. By this time,
however, the Vancouver penny stock promoter was well on his way to setting up
a much bigger deal for Corsaire with a rich cast of Howe Street notables, none of
which is detailed in Corsaire's regulatory filings. |
