=== Ladies and gentlemen, before reading on you should be over 18, sober
and have an ability to suspend disbelief. As long as we have been involved
with Waaco, even counting the time he claimed to have been captured by a
space alien and forced into a romance with Princess Di, we have never ever
had an occasion to relate something quite so bizarre as the chronology of
events you are about to read.
As many of you know, back in December, when GIFS came into 'play', and we
received what we then thought was a rather unbelievable post from 'Mr. Smart
Investor', who later turned out to be a real person by the name of Jeff
Silverman who has since joined our Waaco Stock Exchange (WSE) and Pick
Evaluation Team (PET), that he was 'trying to buy the float', the stock
REALLY took off shortly after 'Mr. Smart Investor' received support from a
Mr. Tod Pauley, who posted under the i.d. tigre@dataplusnet.com, who posted
that he, too, was trying to buy as much of the stock as he could get his
hands on. Shortly after that post, Mr. Pauley also joined our WSE and
PET (he is no longer on any of our lists, but the reasons for that will
unfold below).
Now, however, certain things have come to light which would indicate that
Mr. Pauley may not, in fact, have been buying ANY stock. Last week, Mr.
Pauley wrote your moderator the following:
Return-Path: Tigre@dataplusnet.com
Date: Fri, 04 Apr 1997 06:38:00 -0600
From: "D. Tod Pauly" <Tigre@dataplusnet.com>
Organization: Wisconsin Concrete Products
To: StreetLevel <nymg@pipeline.com>
Subject: GIFS
References: <1.5.4.16.19970404062907.2cf7b030@pop.pipeline.com>
Good morning Gayle,
I want to privately give you a heads up on what may occur shortly with
GIFS, and will later follow through with more complete information for
forwarding to all of our members as we are required to do.
Until I have further verification from a former SEC Commisioner, it
serves no purpose for publication.
I discarded your phone number, will you please send it to me again?
I will call you later this morning if we can have a private
conversation.
Thanks,
dtp
==== I sent him my phone number and he called me Friday night. As many of
you know, although GIFS was being covered in the WSE in December, shortly
afterwards it applied for and became an Elite Corporate Member of the
Investors Research Institute. In my dual role of Director of Programs for
IRI, it is incumbent upon me to consider any potential situations where a
Member might be failing to adhere to the strict guidelines for disclosure
and accessibility, and after some thought, I decided that this situation
pre-dated that relationship, and I had a pre-existing responsibility to
update the Forum on any matters relating to Mr. Pauley's original posts.
It was in that role that I fielded the call but it was in my dual role
related to IRI that I subsequently asked a third party to assist me in
assessing the allegations. I wanted to be sure no conflicts existed, or if
they did, they could be disclosed, as I am doing now.
The littany of 'severe problems' Mr. Pauley described re: GIFS, and his
purposes for their impending 'disclosure' are described below in a letter
which I provided to the CEO of GIFS at the company's request after events
unfolded which indicated that the matters discussed were, at best, a mixed
bag of innuendo and unsubstantiated conclusions, and at worst --- and this
is where it gets REALLY bizarre --- information which knowingly or
unknowingly came from the CEO's briefcase brazenly stolen from his
automobile (!). Likely story, huh? Well, not according to the police
report filed January 14 ... we'll let the letter to Mohamed speak for itself
from here:
*****
April 9, 1997
Mr. Mohamed Zayed
CEO
Genesis International Financial Services, Inc.
735 Broad Street, Suite 1001
Chattanooga, TN 37402
Dear Mr. Zayed:
This is to relay to you, per your request, my general recollections re: a
telephone call I received last Friday, April 4, 1997, from Mr. Tod Pauley,
who has described himself to me as a general contractor in Wisconsin, and
whose e-mail address is Tigre@dataplusnet.com.
As general background, Mr. Pauley called me because I am the on-line
moderator for The Waaco Kid's Forum, a private e-mail interactive forum
comprised of almost 10,000 investors in small cap stocks.
In December, 1996, when a Mr. Jeff Silverman e-mailed our forum privately
that because of his due diligence on Genesis (known to our forum as 'GIFS'
for its stock symbol), that he was 'trying to buy the float', which after
verification I agreed to post at the time with his name withheld (under the
pen name of 'Mr. Smart Investor), this information met with some skepticism.
Later, Mr. Silverman identified himself, and his activities became
publicly-acknowledged. However, at the time, due to the skepticism, the
stock price did not advance significantly
Within a short period, however, Mr. Tod Pauley e-mailed our group that not
only was Mr. Silverman 'buying up the float', but so was Mr. Pauley, who he
said, as a contractor with a knowledge of the business of GIFS, could assure
everyone that based on his own diligence, the company's business plans and
activities were such that he agreed with Mr. Silverman that it was
significantly undervalued and enjoyed bright future prospects. Mr.
Pauley's posts provided enhanced credibility, and there ensued a large
volume of buyers, which pushed the stock price short-term to 3-1/4, close to
its annual high of 3-1/2.
Following those posts, Mr. Pauley became a participant in both the Waaco
Stock Exchange (WSE) and the Pick Evaluation Team (PET), where he became
privy to all of the more extensive discussions and interchanges that most of
the co-editors and subscribers to the Forum have not opted to join. From
time to time, when we audited participation, Mr. Pauley would be questioned
about his involvement since he was not actively participating to the extent
required for continued listing. For short periods, he
would comment and participate and then he would 'lurk', and drop from active
visibility until prompted again. He has now been removed, of course, from
all of our lists.
As you know, due to the simultaneous activities of individuals who appear to
be illegally shorting the stock, to gain some advantage for pre-GIFS shares
which the company does not accept as valid, the stock price has since
drifted back.
Mr. Pauley informed me in the conversation that he had been in contact with
GIFS and was claiming that he lost $70,000 on trades during that period
because unknown to him, despite his professed 'diligence', he was claiming
the company is poorly managed and that its reported earnings have no
substance. He said he had 'offered' to 'settle privately' with GIFS, but
was now preparing a class action suit alleging 46 instances of wrongful
actions.
He described some of his 'findings'. I did not take notes, but I am a
trained journalist, and have been able to reconstruct much of the
conversation. Please note that these are his assertions and allegations,
and by repeating them I am in no way subscribing to them. According to Mr.
Pauley, and described here to the best of my recollection:
'1. The Miller Mountain Mine unit is a fraud, and the $70,000 reportedly
allocated to road clearing has not resulted in roadwork, and no 'permits'
have been issued for that.
'2. The transaction for the oil reserves on the ranch property acquired is
suspect, because Mr. Gary Emory, then an employee of the company, would not
have given it up for $400k when it was to be listed for a value of more than
$1m.
'3. Mr. Emory is gone from the company and has 'turned himself in' on a
warrant to the FBI. Mr. Zayed is described as having been too trusting of
Mr. Emory, and that Mr. Emory may be the cause of many of the problems being
asserted.
'4. Boxes of materials were carted from GIFS' offices to the FBI.
'5. GIFS has no income-producing units, and its earnings thus have no basis.
'6. GIFS has no hope of getting a NASCAR sanction for its PaceCar property
in development.
'7. GIFS lists income from its CRIC unit, yet has only three bonds which
would not substantiate the income listed.
'8. GIFS shows abnormal revenues from its 'consulting' division, yet this is
a start-up and the company doesn't have sufficient manpower to achieve this.
'9. GIFS is able to stay afloat only because everytime Mr. Zayed and his
associate, Mr. Michael Rehtorik, return from South America they bring back
'briefcases full of money'.
Subsequent to this conversation, I called a professional advisor for our
organization and asked him to look into these allegations and assertions
because due to the relationship I personally have with GIFS through its
participation in an arm's length membership association which another entity
that I consult with administers, I wanted to have a third-party conduct the
follow-up and diligence. That party reported back that after a short
inquiry, he believed that the assertions and allegations of Mr. Pauley held
no basis, and that he believed Mr. Pauley may have been attempting to, in
his words, 'extort' monies from GIFS to head off his threat of a lawsuit
which this third-party felt had no basis.
Following that conversation, I received a phone call Sunday night, April 6,
from Mr. Rehtorik, to see if I had any further questions, and to inquire
into my conversation with Mr. Pauley so he could receive a first-hand
report, as part of his own diligence on behalf of your company.
After I described the matters above, Mr. Rehtorik revealed to me that your
company had kept silent on some related instances in the hopes that
eventually a 'connection' might surface. He said that in January, certain
individuals who participated in another on-line forum had approached you for
the purpose of conducting a site visit to your company, and that Mr. Pauley
was stated to have been part of that delegation. The plan was scuttled
after they ascertained that you and Mr. Rehtorik would be out of the office
until January 14. Mr. Rehtorik said that during that period, when these
individuals knew you were travelling, that both your home and your office
were broken into but that no valuables had been taken.
Then he stated that on the evening of January 14, 1997, upon your return on
a date known to Mr. Pauley and his 'delegation', you and Mr. Rehtorik
stopped on the way from the airport at the Outback Steakhouse for dinner,
and while you were having dinner, your automobile was burglarized and your
briefcase containing corporate documents containing bits and pieces of
information that could inaccurately lead one to conclusions reached by Mr.
Pauley was stolen. He also said that your briefcase contained over $10,000,
matching the 'suggestion' that you return from out of town with 'briefcases
full of cash'.
Since these were obviously bizarre turns of events, I asked Mr. Rehtorik if
he would verify this account with a copy of a police report. On Monday
morning, April 7, I received a fax copy of the Report identified as Case
97-005785 for the investigation by Officer John Gregory, Badge Number
0784CH. It described the contents precisely as related to me by Mr.
Rehtorik, and it stated that the crime scene had been photographed and
videotaped, and that fingerprints had been found and archived for possible
future matches should a suspect be found.
Subsequently, I talked to unrelated associates of yours who quickly verified
to me that while it might be unusual for some people to carry $10,000 in
cash plus valuable coins and jewelry, they had seen you open your brief case
on several occasions and had observed cash and valuables in amounts which
fit your claim, validating this anamoly to be normal for you.
At this point, I e-mailed a couple of other individuals who had archived Mr.
Pauley's back posts, and it came to light that Mr. Silverman, who had
first-hand knowledge of the blocks of stock being purchased during the
period that both he and Mr. Pauley claimed to be buying, had at the time
'doubted' those purchases. He could see his blocks, but he could not see
others.
Based on this additional diligence which I conducted, I e-mailed Mr. Pauley
and told him that we needed to report back to our forum whether or not we
had received substantiation that any of Mr. Pauley's claims were accurate,
including but not limited to the fact as to whether he was ever a shareholder.
As it turns out, you also faxed to me a copy of letters from your attorney
to Mr. Pauley's attorney seeking similar verification.
To date, Mr. Pauley has not responded to my request, and I understand you
have also received no verification that he has ever been a shareholder.
Since that time, I understand that you have acquired or are in the process
of acquiring an affidavit from an individual with 144 stock who heard from
Mr. Pauley in the company of a group of the suspected 'shorters' of your
stock. In my e-mail to Mr. Pauley, I noticed him that some of what he
stated seemed to have been available only from documents which were
contained in a briefcase connected to a felonious act, and suggested that he
contact law enforcement officials to properly inform them of the source of
the documents noted.
As stated, we have removed Mr. Pauley from our lists, and subject to an
explanation from him which we have requested but not received, have to
conclude that his activities as a part of the forum and as stated to the
forum may not have been accurately portrayed.
We do not, however, mean to draw any conclusions regarding a connection
between Mr. Pauley and any felonious activity, and in fact, we stated that
for now we regard him as a possible unwitting recipient of documents which
he did not know may have been obtained under such questionable
circumstances. While your investigation or the investigation of law
enforcement officials may ultimately find otherwise, I want to make clear
that we do not in any way, shape or form, conclude that Mr. Pauley was a
direct or indirect party to a criminal activity. My purpose here is to
simply describe the conversations and the chronlogies in which they occurred.
We are uncomfortable that Mr. Pauley has not responded to our requests for
clarification, explanation or confirmation but do not see his failure to do
that as an indictment or as an affirmative acknowledgment on his part of
anything. It is his right not to respond. We have an interest in
providing our forum with the truth, and that is our journalistic
responsbility, but we have no authority to require anyone to forego their
Constitutional rights, nor do we want to draw any conclusions from a failure
to respond.
Very sincerely,
Gayle Essary
Moderator - The Waaco Kid's Forum
*****
=== The only matter above which seemed to have a thread of truth is the fact
that Mr. Emory and the Company parted company sometime back. Because he is
still on paid leave, and has not officially relinquished any of his
positions, there has been no announcement. The company indicates it is
also concerned about employee confidentiality and does not wish to undermine
the still-delicate negotiations which will establish the terms of his
departure. And neither do we. However, the company said it did contact
Mr. Emory about the allegations above, as a matter of diligence, and Mr.
Emory said he has 'not' been arrested by the FBI. The company also said in
the normal course of diligence in its type of business, it did recently
provide the FBI with a folder of documents related to an asset not listed on
its balance sheets, and is itself interested in the FBI's conclusions.
Obviously, this is not a matter that will impact revenues or earnings, and
thus is an internal matter. This 'information', however, would have been
known only to a person who had access to documents obtained from the stolen
briefcase.
*****
=== Now, if you're still with us, and haven't fainted from this turn of
events, I want to assure you that I gave Mr. Pauley the entire week to
respond to the information I had obtained, and to respond to pointed
questions about whether he ever held shares:
*****
Return-Path: nymg@pipeline.com
Date: Mon, 7 Apr 1997 15:10:27 -0400 (EDT)
X-Sender: nymg@pop.pipeline.com
To: tigre@dataplusnet.com
From: StreetLevel <nymg@pipeline.com>
Subject: TOD - WHAT GIVES?!!!
Tod, as I assumed you would expect I might, I felt it incumbent on me to
contact GIFS executives to inquire into various matters you were telling me
Friday.
Imagine my surprise then in the course of a routine discussion about this
Friday night with GIFS that it came out that a couple of the items you
described to me were represented as having been in only one location ... and
that was in a briefcase belonging to Mohamed which was left in an automobile
upon his return from a trip for which you knew his schedule. While he was
away, there were also break-ins in the office of Genesis and in his
residence, but I immediately focused on the automobile breaking and entering
because it was also revealed that Mohamed had a 'briefcase full of money'.
His travel documents indicated he had returned during that trip from South
America.
As it turns out, there was $10,500 in cash, $15,000 in cashier checks, a
$23,000 diamond necklace belonging to his wife, $3,000 in coins, and several
corporate documents which you described to me in our conversation.
I was obviously flabbergasted, and in rethinking this through, I remembered
you said your information came from 'outside' sources. I am giving you a
bit of a heads-up because I don't know if you realized at the time that you
were describing information and circumstances from which the knowledge could
have come only from someone directly involved in this breaking and entering
... which is probably an interstate crime at this point?
Obviously it was important to me to know whether or not the company was
being forthcoming on this matter, and so I asked for --- and received --- a
copy of the police report that was made on January 14, 1997. It describes
exactly what I was told. Until this conversation with the company, where I
repeated what you told me, they did not suspect corporate espionage.
I told them I was certain that you were unaware that these documents and
information came from a felonious action, and I wanted to give you a bit of
a heads-up here so you can consider breaking your connections with whomever
was your source.
I have also spoken with other individuals who have known Mohamed for years
and they have independently told me it was not at all unusual for him to be
carrying cash, coins in large denominations around in his briefcase. And
in any event, I would not consider $10,000 to be a 'briefcase full of
money'. They also deny several other factors, which I have seen in a
letter they forwarded to your attorney. These are material denials ... I
do not think they can say these things without jeopardizing their positions
in a public company if they are untrue.
They are also aware that you knew their travel schedule during that period
because of your purported effort to go to Chattanooga with Caroline Bogart
and her husband, a fact which certainly puts them in the ring of suspicion
as well.
The Case Number is 97-005785 and the reporting officer was John Gregory,
Badge Number 0784CH. I give you this information because it may be that you
will want to have your attorney contact Mr. Gregory directly and voluntarily
disclose how you came into this information and documents, so you can avoid
being possibly considered an accessory after the fact.
At this point, I feel you may have been a victim as well, as part of the
campaign by short-sellers who have certainly gone now to bizarre lengths.
However, it is my understanding that you have never verified that you were a
holder of GIFS at any time, despite the efforts of GIFS' attorney to have
you prove that for them to even consider your 'claim'. For me to continue
to recognize you as a victim instead of a conspirator, however, I would need
to ask you to fax to me some proof that you have ever held GIFS.
I hope you understand that in the interim, until I receive that from you, we
have had to remove your name and i.d. from our distributions. I look
forward to something that would unlink you to anyone who would perpetuate an
outright theft to gain access to these documents and conclusions.
You claim to have been doing this on your own. I took that with a grain of
salt, and assume under the circumstances, you will not want to continue to
claim that.
I certainly did not relish being put in the middle of this ... and
especially if what you were doing was designed somehow to set me up. I
have looked at the archives of the posts that were being made in December
and it is clear that many people were buying GIFS because of YOUR
representations that you were matching Silverman buy-by-buy in trying to
'buy up the float'. It would be very distressful if you can not send me
proof that you were actually buying anything at that time, and I would need
to disclose this inconsistency to the Forum.
Also, the police report indicates that the crime scene was videotaped and
photographed, and fingerprints were obtained and sent to the crime lab. I
have the police report. This is not something made up by GIFS. At this
point, the preponderance of proof is on the side of GIFS with respect to
everything you alleged. Sorry.
*****
=== I gave Tod 48 hours and then reminded him:
Return-Path: nymg@pipeline.com
Date: Wed, 9 Apr 1997 03:51:02 -0400 (EDT)
X-Sender: nymg@pop.pipeline.com
From: StreetLevel <nymg@pipeline.com>
Subject: QUESTION
We have an obligation to let our Forum know whether you bought any shares of
GIFS.
If we don't receive some proof of that assertion by Wednesday we are going
to have to consider that you did not buy shares when you said you did.
*****
At this point, I asked Mark Rutheiser, who moderates the GIFS SAC, if he
could check his archives for any posts related to that period of time. Mark
asked for, and I faxed to him a copy of the police report so that he would
have that for his diligence. We both agreed that if he provided it to any
other party or parties the information relative to the location of Mr.
Zayed's residence and any other information such as his automobile
identification would be blacked out. Mark provided me with the following,
and don't go away because while nothing can top the above, it stays interesting:
*****
>Date: Thu, 02 Jan 1997 15:31:10 -0500
>To: JMAZ05A@prodigy.com
>From: "Caroline Bogart" <bogart@inc-net.com>
>Subject: On site meeting and your response
>Cc: "D. Tod Pauly" <Tigre@dataplusnet.com>, wbd@vic.com,
> investor.relations.genesis@juno.com, markruth@dcn.davis.ca.us
>
>Dear Mohamed,
>
>Thank you so much for your quick reply.
>
>I know that Tod is waiting on some information he was promised, having to do
>with the balance sheet queries he made. Would you be able to help speed that
>information to him along?
>
>Diana has called your office a few times, but has been unable to secure an
>appointment. At this point, Tod and Diana would like to visit you at the
>same time. I'll let the three of you make the arrangements.
>
>Again, thank you for the speedy reply,
>
>
>Caroline
>
>cc:
>Mark Rutheiser
>Diana Dress
>Tod Pauly
>Ken Todd
>
****
>Date: Tue, 07 Jan 1997 21:08:44 -0500
>To: markruth@dcn.davis.ca.us
>From: "Caroline Bogart" <bogart@inc-net.com>
>Subject: Re: January 7 meeting with shareholders cancellation
>
>At 07:30 AM 1/7/97 -0800, you wrote:
>>What happened?
>>
>>Mark
>>
>>>Dear Mohamed and Mike,
>>>
>>>
>>>I am more than a little displeased with such short cancellation notice of
>>>the January 7 shareholders' meeting.
>>>
>>>Note that Diana was about to drive two hours, and Tod about to board a
>>>plane. This lack of respect for their time and money borders on the
>>>inexcusable.
>>>
>>>When Mike doesn't answer his pager, and even Gary Emery cannot get ahold of
>>>you, I get concerned that the entire Genesis enterprise rests solely in the
>>>hands of two people.
>>>
>>>This scenario is not good for business.
>>>
>>>Why wasn't Tod Pauly given a confirmed meeting time? Why couldn't the office
>>>contact either one of you?
>>>
>>>I'm not happy about how my friends were treated. I expect better in the
>future.
>>>
>>>I want to see this meeting happen, given that Diana and Tod are still
>>>willing. If the situation deteriorates from here, I see no alternative but
>>>to share my thoughts with a larger group than this small circle of email
>>>recipients.
>>>>
>>>Sincerely,
>>>
>>>
>>>Caroline Bogart
>>>
>Ken Todd called Diana and Tod at the last minute and cancelled. I don't know
>much more than that.
>
>See ya round the virtual campfire,
>
>Caroline
>
*****
>To: JMAZ05A@prodigy.com (SELF MOHAMED K ZAYED), mrehtorik.genesis@juno.com
>From: "Caroline Bogart" <bogart@inc-net.com>
>Subject: Re: Internet Message
>Cc: wbd@vic.com, "D. Tod Pauly" <Tigre@dataplusnet.com>,
> markruth@dcn.davis.ca.us, investor.relations.genesis@juno.com
>
>
>Dear Mohamed and Mike,
>
>Well I could just kick myself for not having the facts straight before
>chewing you out. There was a whole lot of "assuming" going on, and I got the
>story wrong.
>
>Fact is, the meeting was never confirmed. I flew off the handle when I
>should have just asked what was going on. I really feel ridiculous, because
>when I went back and read my own archived mail, it was right there for me to
>see. Maybe it was wishful thinking?
>
>I hope you'll both accept my apology.
>
>I hear from the SI grapevine that we are to expect many news releases soon.
>I don't think you can hold everyone's hands and make money at the same time.
>And ultimately, you know which we'd all prefer.
>
>So good for you for sticking to your guns. Next time I hear something I
>don't like, I'll double check. Hope you're having some fun along with your
>business.
>
>
>Sincerely,
>
>
>Caroline Bogart
>
>cc:
>Tod Pauly
>Diana Dress
>Mark Rutheiser
>Ken Todd
>
=== Whatever the purpose may have been for these notes, the result is that
through this exchange, these parties learned of Mr. Zayed's travel plans,
and it was during the period that he was out of town and upon his immediate
return that the break-in(s) occurred. We have asked for verification of
only the one because that's where the 'smoking gun' documents described to
me in the conversation were located, and it was the obvious connection to
the suggestion that Mohamed returns from out of town with 'briefcases' or
'suitcases' full of cash.
Now, the story doesn't end here. As it turns out, the company has
received direct information from a 144 shareholder (I believe one of the
ones who turned in IMXS shares in exchange) that he and other 144
shareholders have been contacted directly by a combine of individuals (then
working together!) who include Mr. Pauley, possibly Ms. Bogart (not fully
confirmed), and definitely Mr. Thomas DiStefano, a Florida investment
counselor who has a substantial amount of stock from the pre-AIFS and
pre-GIFS days when the company had the symbol 'SMUG'. It is this stock
which the company is refusing to recognize, and which is believed to have
been floated around to various market makers, in the process creating a
'rolling short' positon of some 900k shares in a 2.8m legitimate float.
Since our response to Pauley, the 'shorts' have seemed to become desperate.
After all, there is the matter of the break-in and the heated-up
investigation. There have been indications that the parties have started to
separate and have begun initiating contacts designed to salvage something
from all this and possibly disassociate from others involved. You may
have noted some unusual trading patterns that heated up from the time of my
initial letter to Pauley through yesterday. What has to be kept in mind is
that this is not the 'usual' 'short' situation, where market-makers have
'naked' shorts and unlimited pockets to enforce their shorts. This is a (or
was) a combine of individual shorters rolling their positions between
marketmakers, and even through Merrill Lynch in Canada (which tried to push
through one 400k bloc earlier in the year before the company warned them
these were contested shares). These individuals do not have unlimited
resources, and now that these activities are coming to light, it may become
more unlikely they can rustle up confederates. Any catalyst could break
the situation open, it is thought. Such catalysts may occur, we
understand, sometime next week.
One of the things the shorts desperately want to do is to 'derail' the
company's sale of its CRIC unit, and one way to do that would be to try to
poison the position of the BDO auditor. The completion of the sale of the
CRIC unit, if sold at the prices given, will validate the critical value
given on the balance sheets to the Mexican CDs and it will clear the way for
a Big Six auditor to verify the company's earnings for the remaining units
shortly afterwards. Today a mysterious post appeared on the SI thread
whereby 'Tonto' was looking not for the Lone Ranger, but the BDO foreign
subsidiary which |
