Get a Call yet?->GenesisIntermedia Facing FBI Probe, Reports $120 Mln Net Loss
By David Evans
Van Nuys, California, Nov. 19 (Bloomberg) --GenesisIntermedia Inc., a telemarketing company 75 percent controlled by Saudi arms dealer Adnan Khashoggi, indicated in a regulatory filing that the Federal Bureau of Investigation is conducting a criminal investigation of the company.
The announcement also said the Securities and Exchange Commission, which had been investigating possible manipulation of Genesis shares, has expanded its probe to whether the company made improper payments and falsified its reported assets and liabilities.
The company announced in the quarterly filing with the SEC that its loss from continuing operations widened to $103.3 million, or $4.45 a share in third quarter, from $1.1 million, or 6 cents in the year-earlier period.
The company said in the filing the FBI has interviewed two former employees of the company, the first indication of a criminal probe. It gave no details.
Genesis also provided more detail about the SEC investigation of the company, which it said began on Aug. 10. It said the agency is probing possible ``schemes to conceal payments from the company to stock promoters'' as well as possible falsification of the company's assets and liabilities and possible stock manipulation.
Genesis said in the filing it plans to sell its 80,000 square- foot headquarters building in Van Nuys, California, to raise cash. On Sept. 30, Genesis' negative net worth widened to $26.4 million, from $15 million on March 31. The company had $323,731 in cash and $4.6 million of accounts payable.
Loss Widens
The company's loss, including discontinued operations, widened to $119.7 million, or $5.16 a share, from $4.2 million, or 23 cents. This included the discontinued operations of its Car Rental Direct unit, sold in August, and the closure of its Centerlinq unit in September, which operated Internet kiosks in 33 U.S. shopping malls.
Sales declined to $10.8 million from $13.5 million in the year-earlier period.
Chief Executive Stephen Weber, who replaced founder Ramy El- Batrawi on Oct. 8, couldn't be reached for comment.
Most of the loss was attributed to 5.5 million warrants, valued at $89.1 million, given to investor Carl Icahn in exchange for a ``conditional commitment'' to lend $100 million. No money was lent, and Icahn, who owns the Stratosphere casino in Las Vegas, said he lost more than $300,000 from his dealings with Genesis.
``Today, practically speaking, the warrants are worthless,'' said Icahn in an interview. ``We lost about $300,000 on the investment.''
Icahn spent $673,200 to buy 60,000 shares on Sept. 20 at $11.22, after getting $275,000 from Genesis for his conditional loan commitment.
Shutdown Costs
Closing Centerlinq will cost $18.8 million, Genesis said. In August, the company said the kiosks averaged 3.2 million consumer visits per month. Their locations included the Beverly Center and Santa Monica Place malls in Southern California.
Trading in Genesis shares on the Nasdaq Stock Market was halted Sept. 25. The shares were at $5.90.
The company said six shareholders have sued the company and its officers since the halt, alleging securities fraud and breach of the directors' fiduciary duties. Genesis said it believes it has an insurance policy that covers some of the potential liability by its officers and directors
``Because the insurers have denied coverage for these claims, the company recently commenced a lawsuit against them,'' Genesis said in its 10-Q filed today.
The company had a market value of about $137 million when it last traded. |
