Net Command hooked by SEC at $15 (U.S.)
NCDR
Shares issued 0 close $
Friday Jun 11 1999 Street Wire
QUESTIONS ABOUND ON DUNAVANT, HAMOUTH AND CORSAIRE
by Brent Mudry
Controversial Howe Street stock promoter Rene Hamouth's highflying bulletin
board promotion, Net Command Tech, has abruptly hit a brick wall a month
after peaking at $30 (U.S.) with a market capitalization of $420-million
(U.S.). The United States Securities and Exchange Commission gave the hook
to Net Command, previously known as Corsaire, on Friday, citing numerous
concerns, including the "business success and reputation" of the company's
equally controversial president and chief executive, William Dunavant.
The SEC halted trading at the open and imposed a 14-day temporary
suspension, set to terminate at midnight on June 24. Net Command shares rose
$1.03 (U.S.) to $15.03 (U.S.) on the OTC Bulletin Board market on Thursday.
The current market capitalization of more than $210-million (U.S.) is up in
the air, based on a reported 14 million shares outstanding.
The SEC's investigation into the affairs of Net Command and its principals
is notably broad, although Mr. Hamouth is not cited directly or indirectly
in the regulator's suspension order and release. "There isn't anything that
we can say at this time," Glen Gordon, the assistant regional director of
the SEC's Southeast Regional Office, told Stockwatch on Friday. The
Miami-based official notes he cannot comment beyond the SEC's public
disclosure, or confirm the existence or extent of the SEC's investigation in
Vancouver.
The SEC states that its temporary trading suspension is based on "questions
that have been raised about the accuracy and adequacy of publicly
disseminated information concerning, among other things, the purported
acquisition by NCT of certain companies' assets and stock and the value of
those assets and stock, a $1.5-million line of credit purportedly secured by
NCT from a European bank, the revenue generated by an American company
purportedly acquired by NCT" and Mr. Dunavant's track record and history.
The SEC also issued an open invitation for any broker-dealer or anyone else
who has any details of Net Command's controversial affairs to call an
investigatory tip line at its Miami regional office.
The SEC cease trade order comes five weeks after Vancouver Sun reporter
David Baines published an unflattering story about Net Command, then known
as Corsaire. Mr. Baines noted the bulletin board promotion, then trading at
$23.63 (U.S.), featured a former Vancouver promoter, Rene Hamouth, who has
been blackballed by the Vancouver Stock Exchange, and U.S. promoter, Mr.
Dunavant, who swindled shareholders in a company that was promoting a horse
shampoo for human use in 1993 and 1994. The Sun noted that Forbes magazine
described Mr. Dunavant as a "persuasive scoundrel."
Not all of Mr. Dunavant's media recognition has been so harsh or blunt. Net
Command claims the "recognized leader in the field of corporate development"
received the Entrepreneur of the Year Award in 1995, presented by INC.
Magazine, Ernst & Young LLP, Holland Knight and Merrill Lynch. The
impressive-sounding award was ostensibly based on Mr. Dunavant's
accomplishments at Straight Arrow, a company he headed from 1989 to 1995.
Mr. Dunavant brought another Straight Arrow senior executive to Net Command,
Gene Carter, who holds the position of vice-president sales and marketing.
Net Command claims Mr. Dunavant is "accredited (sic) with building three
successful companies," including Summus Ltd., which he served as president
in 1996 and 1997, Straight Arrow and Topline, which he founded and served as
chief executive from 1984 to 1996.
Mr. Hamouth was a familiar face on Howe Street, the centre of the Vancouver
Stock Exchange, which now spawns many bulletin board promotions of varying
colours, until he was blackballed by the exchange as it tried to erase the
scam capital image Forbes bestowed on it in 1989. Vancouver regulators took
a particular interest in Bellwether Resources in 1991, a vintage VSE
promotion featuring 70 Picasso lithographs and a licence to market
"Fry-Lite" ovens. Both deals were later scrapped in unfortunate
circumstances.
After some prodding by the VSE, Bellwether admitted that a Dennis Shikitani,
from whom it acquired the Fry-Lite rights , never actually held any such
rights, and it never received all the Picasso lithographs it claimed.
Bellwether also admitted that it engaged in several dubious third-party
stock option agreements. In one, options for 200,000 shares were granted by
company president Robert Knight to Frank Bull and Jim Morgan. The shares,
however, were actually received by Mr. Knight and Mr. Hamouth. "No
consideration was paid to the company until May 2, 1991, after it was
queried by the exchange," admitted Bellwether.
Mr. Hamouth has blossomed from these rather tawdry beginnings, and Corsaire
is his greatest promotion so far. The former Bellwether man resides in West
Vancouver, the tony suburb favoured by scores of Vancouver stock promoters,
and he has prospered in recent years. "He has personally earned in excess of
$360,000 annually in the past three years, and he expects the same level of
income in the coming years," noted a B.C. judge in a case in January. Madam
Justice Linda Loo, however, was less than convinced of Mr. Hamouth's track
record of paying his bills, and ordered him to post $260,000 as security for
costs for the defendants. The judge noted that Mr. Hamouth was disputing his
own former lawyer's $250,000 tab on the case.
The court heard intriguing evidence on how carefully Mr. Hamouth structures
his personal affairs. He is not the beneficial owner of any real property in
B.C. Judge Loo noted that the Howe Street stock promoter is the registered
owner of his house at 530 Thetford Place in West Vancouver, but only in his
capacity as trustee for the Hamouth Family Trust. Mr. Hamouth is the settlor
of the trust, which he funds with his income and assets registered in his
own name. The promoter's two children are the sole beneficiaries and he has
no beneficial interest in the trust. "He is, however, the convenantor on the
$650,000 first mortgage registered against the lands," the judge noted. A
$140,000 second mortage was held by three men: Gary Cadman, Tore Engum and
David Ashby.
The court heard evidence that Mr. Hamouth drives a 1994 Ferarri. In a July
29, 1997, security agreement, he is noted as the base debtor on the luxury
car, but there is no evidence that he is the beneficial owner. Defence
lawyers discovered that the Ferrari was registered with a charge by Messrs.
Cadman, Engum and Ashby, but the promoter told the judge the charge no
longer exists as he paid off the trio in full.
"Hamouth has a history of failing or neglecting to pay legal fees," stated
Judge Loo. On Feb. 18, 1998, the Montreal law firm of Brouilette Charpentier
Fournier obtained a default judgment in the Quebec Superior Court for
$117,098, plus interest and costs, against Corsaire and Mr. Hamouth, jointly
and severally. The court heard that Mr. Hamouth had a default judgment
against him by law firms Trower Burke & Jones in 1992, for $13,000, and
review appointments by Silbernagel & Company in 1993 for $8,200 and Campney
and Murphy in 1996 for its unpaid account. "Hamouth says he has since
settled his accounts with his lawyers," stated the judge. Mr. Hamouth also
told the court that he is challenging Revenue Canada for a $112,000 tax
bill.
The promoter's household finances were equally rocky. In April, 1992, a
judge issued a writ of seizure and sale for $21,250 arrears of family
maintenance in a matrimonial proceeding. The sheriff came away empty-handed.
"To satisfy the writ, the sheriff attempted to seize the furnishings from
Hamouth's residence and was informed that all of his present and future
acquired property were subject to a security agreement as security for his
obligations under a consulting agreement with the Knight Family Trust,"
stated Judge Loo.
The consulting agreement called for Mr. Hamouth to pay the Knight trust
$50,000 and a $7,500 monthly fee. Mr. Knight, Mr. Hamouth's Bellwether
option associate, filed a court affidavit on May 20, 1992, claiming that Mr.
Hamouth failed to pay the $50,000 and was indebted to the trust for $80,000.
"There is no evidence on the current status of any arrears of maintenance,
or of the claim by the Knight Family Trust," stated Judge Loo in January.
After assessing Mr. Hamouth's track record and financial affairs, the B.C.
judge agreed that the promoter should post a substantial deposit as security
for costs in the lawsuit. "It is not argued that Hamouth is impecunious in
the sense of having no money or assets. Instead the argument is that he has
arranged his assets and affairs to put them out of the hands of creditors,
although he continues to use the assets, including the shares of Corsaire,
as if they were his own, and that without a court order, he will not pay,"
stated Judge Loo. The judge noted the Howe Street stock promoter "takes time
to pay his debts, and not without putting up a fight, and has arranged his
affairs so that any assets are put out of the hands of creditors."
While Mr. Hamouth's personal financial affairs may be interesting, the list
of defendants in the lawsuit that he and Corsaire Snowboard filed last year
is especially intriguing. The list features Vancouver stock promoter Shafiq
Nazerali-Walji, also known as Shafiq Nazerali, a Bank of Credit and Commerce
figure, Vancouver property flipper and stock player Nelson Skalbania,
recently convicted of theft from a business partner, and Jean Claude
Hauchecorne, a broker recently banned for life by the VSE for his dealings
with offshore accounts of reputed U.S. mobsters Phil Gurian and Phil Abramo.
Mr. Nazerali's Corsaire group includes such notables as expatriate Vancouver
stock promoter Bobby Miller and Swiss banker Alex Fundulus. Mr. Fundulus is
best known on Howe Street for his bank-sponsored roles in expatriate
Vancouver stock promoter Harry Moll's disastrous Pineridge group of
companies.
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