Ct Moves To Liquidate
Genesis' Assets; CEO Still At
Large
By REBECCA BUCKMAN
Dow Jones Newswires
NEW YORK -- Adding a new wrinkle to the complex
legal drama surrounding Genesis International
Financial Services Inc. (GIFS), a Tennessee judge
has granted a state agency's request to liquidate the
assets of the company and permanently bar it from
conducting business.
On Thursday, the Davidson County, Tenn., judge
also granted the state's request to liquidate the
assets of Genesis Chairman Mohamed Khairy
Mohamed Zayed II, who did not attend the hearing.
Zayed was indicted by a federal grand jury on 17
criminal counts last week but hasn't been arrested
because authorities don't know where he is.
Zayed, who recently told reporters he was
conducting business in South America, is being
sought by the Federal Bureau of Investigation and is
still considered a fugitive, said Gary S. Humble, the
assistant U.S. attorney bringing the criminal charges
against Zayed.
The government alleges that Zayed ran an insurance
scam through Genesis' main subsidiary, Congress
Re-Insurance Corp. Inc. He has been charged with
wire fraud, money laundering and transporting
stolen property across state lines.
''We've got to find him first,'' Humble said of Zayed,
who has maintained that his company ran legitimate
businesses. ''We don't try people in absentia.''
A lawyer for Zayed, Paul Jennings, argued against
the liquidation order and the permanent injunction in
court Thursday but didn't prevail. Jennings, who isn't
representing Zayed against the criminal charges
handed up last week, couldn't be reached for
comment.
Overall, however, Zayed's and Genesis' troubles
appear to be expanding.
Humble said his office, the Tennessee Department
of Commerce and Insurance, the FBI, the Internal
Revenue Service and the Securities and Exchange
Commission are now coordinating their
investigations into the company, which some
consider a cautionary tale for investors attracted to
little-followed penny stocks.
The saga began in late April, when the state
insurance department shut down Genesis and took
over its Chattanooga, Tenn., headquarters.
Regulators alleged that Congress was selling
insurance and surety bonds without a license.
A later report by a state-appointed conservator said
Genesis had questionable assets and almost no
income other than cash generated by the sale of its
stock. The company's stock was popular with
investors who read about it on the Internet, although
shares never traded higher than 7 1/4.
The stock has been priced at 51 cents a share since
the SEC halted trading April 30 to investigate the
company's assets and its planned sale of its
Congress Re unit to a group of foreign investors.
Although regulators have since lifted the formal
suspension, no firms have resumed making markets
in the stock. Several investors who lost money
investing in the company now are considering a
lawsuit.
On Friday, the U.S. Attorney's Office in Chattanooga
unsealed the grand jury indictment, which authorities
say stems from a separate FBI and IRS probe of
Genesis, Congress Re and Zayed.
That investigation is continuing, Humble said, ''and if
further charges are warranted, they can be
presented to the grand jury.'' |
