SEC targets Turbodyne, fines founder Halimi $50,000 (U.S.)
Securities and Exchange Commission *SEC
Fri 25 Jan 2002 Street Wire
Also (U:TRBD)
Also (U:*SEC)
by Brent Mudry
Edward Halimi, the founder and former chairman of Turbodyne Technologies,
has been fined $50,000 by the United States Securities and Exchange
Commission for issuing a string of bogus or misleading press releases and
public filings which boosted Turbodyne shares from $2 in March, 1998, to
$17 that August. (All figures are in U.S. dollars.) The SEC has filed and
settled a civil complaint alleging securities fraud and reporting
violations against Turbodyne and Mr. Halimi.
The SEC prosecution marks an almost impossible feat for VSE graduate
Turbodyne: adding disrepute to the OTC Bulletin Board. In a civil complaint
filed Jan. 24 in United States District Court for the Central District of
California, Western Division, the SEC claims that most of Turbodyne's press
releases in 1998 and 1999 were either bogus, misstated or inflated.
In a settlement finalized Thursday, Mr. Halimi, 57, of Santa Barbara,
Calif., agreed to pay a $50,000 fine and promised to do his best to refrain
from future securities violations. The disgraced Turbodyne promoter,
however, declined to admit or deny he ever did anything wrong.
While Turbodyne and Mr. Halimi have endured negative press coverage in
Vancouver dating back almost to the company's birth close to a decade ago,
the SEC fine is a serious black eye for Mr. Halimi, who founded the company
in 1993. Mr. Halimi served as Turbodyne's president and chief executive
officer from October, 1993, to March, 1998. The California businessman and
master of bogus press releases also served as Turbodyne's chairman from the
company's inception until he was finally given the boot on Oct. 8, 1999.
"Between December 18, 1997, and October 1, 1999, Turbodyne issued numerous
false and misleading press releases regarding purported business contracts
it had with various companies, including Detroit Diesel Corporation,
Astoria International, M.A.N. Nutzfahzuege, TransBusiness Group and Grand
Technologies," state SEC attorneys Sandra Harris, Lisa Gok and Marc Blau of
Los Angeles in the complaint. "Halimi assisted in drafting, reviewing and
approving all of these press releases."
During this period, Turbodyne also filed a Form S-1 registration statement
and a Form 10-K annual report which repeated a number of these
misstatements. The SEC claims these dubious press releases and false public
filings had a significant effect on Turbodyne shares, boosting the stock
price from $2 to $17 a share over a six-month period in 1998.
"However, more than three years later, Turbodyne has recorded virtually no
revenue from these publicly announced orders, and it has shipped only a
handful of the thousands of units it had previously announced would be sold
in its press releases," state Ms. Harris, Ms. Gok and Mr. Blau in the court
filing.
The SEC claims that from 1997 until late 1999, Turbodyne issued a series of
materially false and misleading press releases relating to its projected
sales and purported agreements with distributors, original equipment
manufacturers and others. The regulator also notes the company also
conducted a private placement of several million shares during this period.
The first wave of dubious disclosures relates to Turbodyne's deals with
Detroit Diesel.
In a Dec. 18, 1997, press release, Turbodyne announced an "exclusive supply
agreement" with Detroit Diesel. Turbodyne claimed Detroit Diesel had agreed
to "exclusively market Turbodyne's Turbopac as part of Detroit Diesel's
rebuild retrofit kit."
In a March 18, 1998, release, Turbodyne claimed it had received what it
called an "initial production purchase order" from Detroit Diesel, with an
approximate value of this initial order in the range of $450,000 to
$500,000. Turbodyne also stated its estimated first year sales level was
about 1,250 kits.
The SEC notes the market reacted positively to this bit of vintage
Turbodyne puffery. The stock price rose 50 cents to close at $2.94 on this
bogus news, while the trading volume topped 1.7 million shares, nearly
double the average volume for the previous two weeks.
In a third dubious release trumpeting Detroit Diesel, dated April 7, 1998,
Turbodyne claimed its Turbopac had received Environmental Protection
Agency, or EPA, certification under the agency's "Urban Bus
Retrofit/Rebuild Program" as part of a Detroit Diesel emission upgrade kit.
Turbodyne claimed its estimated first year sales under this program would
be a cool $4-million to $5-million.
In a fourth such dubious release, Turbodyne announced on May 4, 1998, that
it had "delivered, ahead of schedule, its first series production shipment
of Turbopac bus kits to Detroit Diesel," and reiterated that its nationwide
program was planned to require at least 1,250 bus kit units that year. To
further hype its deal, in a Form S-1 filed Oct. 1, 1998, Turbodyne boosted
this year-one sales estimate to 1,500 units.
The SEC now claims this string of press releases and the Form S-1 were
misleading at best. "First, the exclusive supply agreement did not obligate
Detroit Diesel to purchase any Turbopacs from Turbodyne; instead it merely
provided Detroit Diesel with an option to submit purchase orders to
Turbodyne, and further provided that if Detroit Diesel did submit orders,
Turbodyne in turn agreed to supply the Turbopacs," states the complaint.
Second, Turbodyne's sales estimate of 1,250 units, boosted to 1,500 units,
was materially misleading. At the time these press releases were issued,
Detroit Diesel had not given a single order to commitment to Turbodyne to
purchase kits in either of these quantities.
After stringing investors along with this gust of Halimi hot air, Turbodyne
finally told the truth on March 3, 1999, when it revealed it had sold just
227 units to Detroit Diesel in 1998, a small fraction of its much touted
sales estimates. In total, Turbodyne only sold 250 of its much vaunted
Turbopacs to Detroit Diesel, generating revenue of a mere $522,000.
These Detroit Diesel claims were but a small few of the lies, misstatements
and gross exaggerations Mr. Halimi and Turbodyne pawned off on the
unsuspecting public over a period of years.
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