C3D's Rene Hamouth adds Stockwatch to libel claims
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Monday Feb 21 2000 Street Wire
See (U:CFMD) Street Wire
WRIT COMPLAINS OF ASSOCIATIONS WITH VSE AND FELLOW PROMOTER GARRATT
by Stockwatch Business Reporter
Lawyer Barry Fraser of McCarthy Tetrault appears to have given up sending
huffy letters to Stockwatch threatening legal action without follow-up
writs. After several threats on behalf of other clients, Mr. Fraser has sued
Stockwatch for libel on behalf of controversial Vancouver promoter Rene
Hamouth, without his usual letter of warning. Stockwatch has not yet been
served with the writ, but rather than wait for Mr. Fraser to make his way
across the street to our office we went and fetched it ourselves.
The writ, dated Feb. 16, names Stockwatch publisher Canjex Publishing Ltd.
and reporter Brent Mudry as defendants. It seeks unspecified general
damages, aggravated damages, punitive damages, and special costs stemming
from a Jan. 7, 2000, article about OTC Bulletin Board company Constellation
3D, Inc., or C3D for short.
The article noted C3D -- then $98 (U.S.), but which closed on Friday at a
post-3:1-split $54 (all dollars U.S.), up $1-15/16 -- revealed that one of
its promoters was Mr. Hamouth. It described him as being known to Canadian
regulators and as well known as his C3D co-promoter, fellow crab-related
enthusiast Phil Garratt, known to Canadian securities regulators for such
companies as Cycomm International Inc. and Sonatel Telecommunications Corp.
These featured two non-existent electronic gadgets, and a ropeless,
floatless self-propelled crab trap that never even recorded a trapped crab.
(Not at issue in the writ, but interesting, is that Mr. Hamouth shares Mr.
Garratt's fondness for crustaceans with 10 feet; Mr. Hamouth's Corsaire Inc.
featured a Mexican crab plant as its one-time prime asset.)
C3D closed on Friday at $54 on 49,700 shares, the equivalent of $162
presplit. The 3:1 split took place on Jan. 18. The company has gone through
four symbols in the past two months owing to a standard eligibility review
and a name change on Jan. 14 to Constellation 3D from C3D Inc. C3D traded
under the symbol "CDDD" until Dec. 22, as "CDDDE" until Jan. 14, as "CFMDE"
for a single day, Jan. 18, and as "CFMD" starting Jan. 19.
Mr. Hamouth complains that the Jan. 7 Stockwatch article ties him with the
former Vancouver Stock Exchange, a one-time haven for scams and frauds. The
statement of claim alleges that the article in question leads a reasonable
person to believe that "the plaintiff, being a promoter of stocks listed on
the Vancouver Stock Exchange, is involved in deceptive and unlawful
activities." It adds, "... the plaintiff, by reason of his controversial
history, promotes or is likely to promote the stock of companies involved
(in) fraudulent and unscrupulous business transactions."
The suit marks an apparent change in position by Mr. Hamouth and his lawyer.
Six months earlier, in August, 1999, Mr. Hamouth sued Vancouver Sun
publisher Southam Inc. and Sun business writer David Baines for libel over a
pair of articles published in May and June, 1999. The complaint at that time
was that Mr. Baines said Mr. Hamouth had been expelled from the VSE. While
the Baines suit complains about characterizing him as having been kicked off
the VSE, the current suit complains that he was being tied in with the VSE.
Southam and Mr. Baines deny the allegations and say they will fight the
matter in court.
The Stockwatch article noted that on Nov. 3, with C3D at $18.69, Stockwatch
revealed that expatriate Australian Mr. Garratt and his Cycomm associate,
Clair Calvert, a former Vancouver broker, were two of C3D's key financiers
and initial promoters. The article detailed that Mr. Garratt's group of
offshore associates bought 3.12 million shares at 12-1/2 cents last
spring -- the company's entire free-trading float. It is not known how many
of these shares Mr. Garratt's group still holds, but the original $250,000
interest reached a peak paper value of more than $300-million. Mr. Hamouth's
involvement was disclosed by C3D on Dec. 27 in a 113-page filing with the
U.S. Securities and Exchange Commission.
Mr. Hamouth's statement of claim calls defamatory not only his being tied to
the VSE, but also to his association with Mr. Garratt. The writ says
comments in the article can be taken to mean that Mr. Garratt "lacks
integrity and has a history of outrageous promotions and, as a consequence,
is a controversial Vancouver stock promoter ... in addition, Garratt is
suspected by Canadian securities regulators of having engaged in or being
likely to engage in wrongful and unlawful conduct ... the plaintiff, by
virtue of his association with Garratt, lacks integrity and has engaged in
or is likely to engage in wrongful and unlawful conduct."
The writ also takes exception to comments about Mr. Hamouth's Net Command
Tech, formerly named Corsaire Snowboard and Corsair, which the SEC abruptly
halted in June, 1999, at $30. According to the writ, these comments could be
taken to mean that "the plaintiff was involved in wrongful and unlawful
activities and, as a result of these activities, was responsible for the SEC
halting trading of Net Command," and that "the halting of trading of Net
Command by the SEC marked the high point in the plaintiff's career as a
stock promoter."
Further, Mr. Hamouth calls libellous comments about Net Command partner
Roger Dunavant, referred to in the article as "the former peddler of horse
shampoo and purveyor of Internet pornography." The writ claims other
comments imply Mr. Dunavant and Mr. Hamouth are partners. It also contends
that readers could understand from the article that Mr. Dunavant "travels
from place to place selling horse shampoo and Internet pornography and
therefore is involved in distasteful and corrupt activities." It further
complains that "the plaintiff, by virtue of his association with Roger
Dunavant, is not a serious or legitimate business person and is or is likely
to (be) involved in distasteful and corrupt activities."
The statement of claim calls defamatory the comment, "The current promotion
of C3D, so soon after the Net Command fiasco, has greatly enhanced Mr.
Hamouth's reputation as a Howe Street legend." The writ says this may be
taken as meaning that "Howe Street is the location of the Vancouver Stock
Exchange and, as such, is a centre for fraudulent and unscrupulous business
transactions (and that) the plaintiff is legendary for his promotion of
companies listed on the Vancouver Stock Exchange which are involved in
fraudulent and unscrupulous business transactions." He also contends that
the article implied that "the plaintiff's involvement in Net Command was a
complete or humiliating failure," and that Mr. Hamouth "is responsible for
the failure of Net Command."
Also found defamatory were comments to the effect that C3D is Mr. Hamouth's
biggest success story and that regulators have in the past indicated an
interest in the promoter. The writ says this may be taken as meaning that
regulators suspect Mr. Hamouth of being involved in "wrongful and unlawful
activities."
Mr. Hamouth was also aggrieved by comments in the article that it was not
known how closely the British Columbia Securities Commission followed the
company's activities. The writ says this may be taken as meaning that the
BCSC "suspects that the plaintiff in promoting C3D has engaged in or is
likely to engage in wrongful and unlawful activity," and the commission "is
monitoring the trading of shares of C3D."
Mr. Hamouth's final complaint stems from comments that C3D recently agreed
to issue $16-million in convertible debentures to Winnburn Advisory, based
in Nevis in the West Indies. The article pointed out that in the Dec. 24
agreement, Mr. Hamouth served as signatory for Winnburn. The article
mentioned that the offshore company used a Swiss address care of David
Craven and a post-office box at the Geneva airport. The article mentioned
that years earlier, another Geneva postbox was a favourite mail drop for the
backers of Mr. Garratt's Cycomm.
According to the writ, the comments could be taken to mean that "the
plaintiff is using Winnburn Advisory, Swiss nominees and airport postboxes
to conceal his beneficial ownership in C3D," and, "the plaintiff, through
Winnburn Advisory and in collusion with others, is involved in wrongful and
unlawful activity."
The writ says statements in the Jan. 7 article concerning Mr. Hamouth were
"malicious, irresponsible and untrue, and were designed to damage and
discredit the Plaintiff's reputation and character and were published by the
defendants knowing the statement to be untrue or recklessly not caring
whether the statements were true or false."
The Jan. 7 article was one of a series of apparently unflattering articles
about Mr. Hamouth in Stockwatch that were written by Mr. Mudry dating back
more than six months. An earlier one, on June 15, 1999, headlined "Net
Command's Dunavant, Hamouth had colourful pasts," was not cited in the writ.
In it, Stockwatch explores Corsaire's May 25, 1999, 10KSB filing, in which
he is described as having been a "financial consultant" since 1983. The
documents neglects, however, to name any companies which he served in that
role, or his troubles with Canadian securities regulators.
The June 15 article said Mr. Hamouth's problems date back 10 years, to 1989,
when he promoted Penway Explorers, a controversial Alberta Stock
Exchange-listed stock, with Robert Campbell and Rajiv Vohra. This previous
article said that after Penway, Mr. Hamouth moved on to play various roles
in a number of VSE 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 an 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."
The June, 1999, article said things got worse for Mr. Hamouth in February,
1991, when the BCSC temporarily suspended him and Mr. Vohra after they,
along with Mr. Campbell and Brett Bradley Salter, were charged by the RCMP
in Toronto for manipulating shares of Penway, alleged violations of the
Criminal Code of Canada. The previous article noted that the Penway
associates were acquitted two years later, in October, 1993, and that Mr.
Hamouth was active during this time. 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."
(Readers wishing more information about Mr. Hamouth's companies can refer to
past Street Wires. They are under C3D (CFMD, CDDD and CDDDE) Nov. 3, 1999,
Jan. 7, 2000, and Jan. 19, 2000. Also see Corsair and Net Command (NCDR)
June 11, 1999, June 15, 1999, and Aug. 10, 1999.)
(c) Copyright 2002 Canjex Publishing Ltd. canada-stockwatch.com
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