.Constellation 3D co-founder sues Hamouth of Howe Street
CONSTELLATION 3D INC CDDD
Tuesday July 2 2002 Street Wire
by Brent Mudry
Controversial West Vancouver stock promoter Rene Hamouth faces a $316,000 enforcement action from Lev Zaidenberg, a key founding executive and major shareholder of Constellation 3D Inc., previously known as C3D Inc. (All figures are in U.S. dollars.) In a statement of claim filed Thursday in the Supreme Court of British Columbia, Mr. Zaidenberg claims he won a default judgment against Mr. Hamouth on Feb. 7 in United States District Court for the Southern District of New York.
The allegations in the suit, filed by Vancouver lawyer David Edinger of Heenan Blaikie, have not yet been proven in court and a statement of defence has not yet been filed. The suit describes Mr. Zaidenberg as a businessman, with a legal address care of C3D's headquarters in New York.
The enforcement suit claims Mr. Hamouth executed a $300,000 promissory note in favour of Mr. Zaidenberg on May 2, 2001, to secure $300,000 in funds delivered by the New York executive to the Howe Street penny stock promoter. The current suit makes no mention of what the loan was for, and the only term disclosed is the June 2, 2001, repayment date.
Constellation shares, which traded at $5.15 when the short-term loan was made and $6.04 when it was due a month later, had slumped to 67 cents by Nov. 15, when Mr. Zaidenberg filed a civil suit in New York against Mr. Hamouth. Shares of C3D, by far the most successful promotion Mr. Hamouth has been involved in, peaked at $97.87 on Dec. 30, 1999. The once lofty stock now trades in the nickel range. After starting this year at 86 cents, the stock bottomed out at four cents in late April and closed at six cents on Friday.
By coincidence, that same day its stock peaked, C3D disclosed a $1.6-million investment from "Winburn (sic) Advisory," described as a private investment group. A few days earlier, on Dec. 27, C3D revealed in a regulatory filing that it had agreed to issue $16-million in convertible debentures to Winnburn Advisory, based in the secretive offshore haven of Nevis. In the Dec. 24 agreement, Mr. Hamouth served as signatory for Winnburn, which uses an address at the Geneva airport.
The current suit claims that while Mr. Hamouth was personally served on Dec. 14, the promoter made no legal reply or defence, although his lawyer sent a letter acknowledging the New York suit and indicating that Mr. Hamouth would voluntarily default in responding to it. Mr. Zaidenberg subsequently served a show cause order on Mr. Hamouth on Jan. 28, and after the promoter made no court response, a judge granted default judgment on Feb. 7. The total tally in the default judgment is $316,588, including $16,333 in interest at 8 per cent from June 2, 2001.
Left unexplained is the nature of business dealings between Mr. Hamouth and Mr. Zaidenberg, one of Constellation 3D's three most important executives. As of Dec. 7, Mr. Zaidenberg, Constellation's director of business development, had shared voting over 41 per cent of the company's shares, along with chief executive officer Eugene Levich and senior vice president Leonardo Berezowsky, through a series of trusts in several secretive offshore enclaves.
Constellation 3D Inc.'s biggest shareholder is Constellation 3D Technology Ltd., a British Virgin Islands company 55-per-cent owned by United European Enterprises Ltd. of Nevis, which features Mr. Zaidenberg as president. Constellation Group Investments Inc., another British Virgin Islands company, in turn owns 54.9 per cent of the voting shares of United European.
All the voting shares of Constellation Group Investments are owned by three trusts in Liechtenstein: the Alex-L Foundation, the Lion & Heart Foundation and the Lediligi Foundation. While the trusts' respective sole trustees: Markus Banzer, Hubert Buchel and Criterion Treuunternehmen reg., are claimed to have "beneficial ownership" of the Constellation Group Investments shares, the true beneficiaries of Lion & Heart, Alex-L and Lediligi, respectively, include Mr. Zaidenberg, Mr. Levich, Mr. Berezowsky and members of their families.
In addition to watching its once stellar stock collapse, Constellation 3D also endured several other misfortunes in the past year.
On March 28, 2001, the company's recently retired chairman, former Israeli Brigadier-General Itzhak Yaakov, a respected military scientist who had served as Chief of Defence Research for the country's Ministry of Industry and Trade, was quietly arrested and detained in Israel on an indictment accusing him of passing on dated state secrets. Few details of the bizarre case, which The New York Times describes as "more Kafka than le Carre," have emerged, as the indictment was sealed.
Mr. Yaakov is no small fish to fry. Besides his extensive military and academic credentials, he has served as consultant to the World Bank, the Organization of American States, the governments of Taiwan, Venezuela, Singapore, Peru and Chile, and the Korean Technology Development Corp.
Mr. Yaakov, now 76, ended his distinguished career with the Israeli army in 1973 when he retired, so any state secrets of the country's nuclear program or other defence details he may have leaked are as dated as disco. While Mr. Yaakov has lived as an expatriate in the United States for several decades, he was arrested at Ben-Gurion Airport after checking in for a flight to Istanbul. Four days earlier, he was feted on his 75th birthday at a party near Tel Aviv attended by numerous prominent Israeli political and business figures.
Constellation 3D received even more distressing news more recently. On April 19, the company revealed its $15-million survival financing flopped and placed the blame on Austrian offshore financier Andre Khayyam of TIC Target Invest Consulting LLC, which is domiciled in Nevis and has an office in Switzerland. Constellation claims it sent Mr. Khayyam shares for a $2-million first tranche of the financing, but the cash never arrived as the financier's wiring instructions were a sham.
Making things messier, the shares sent offshore to TIC Target had been pledged by Constellation's biggest shareholder, Constellation 3D Technology, one of the British Virgin Islands companies. "We are obviously very upset by Andre Khayyam's apparent dishonesty, lack of integrity and what we believe may be criminal activity," stated an unidentified Constellation 3D Inc. spokesman in Russia. The company claimed it intended to "appropriate legal authorities in the United States and Europe and local authorities in Austria, Nevis and Switzerland."
"Mr. Khayyam's behavior has put this company on the brink of going out of business; certainly we cannot sit idly by and allow him to get away with this." Perhaps to prove Mr. Khayyam really did exist, Constellation also published numerous phone, fax, cellular and E-mail contacts for him and TIC Target.
Mr. Khayyam fired back a few days later in a muddled press release, denying he failed to fulfill the financing, and blaming the fiasco on everyone else, including an unidentified bank, an unidentified lender, Constellation 3D, and most importantly, trading restrictions on the shares.
"The securities were refused at other broker dealers but TIC thought this was due to a bias against penny stocks, but TIC received notice of the true problem approximately 60 days after certificate receipt with following text message by email from the Securities House to TIC: 'Unfortunately these shares are not DTC-eligible due to the S3 restrictions on the shares.'"
This alleged financing fiasco provided a good smokescreen while Constellation 3D crumbled, amid being delegated to the OTC Bulletin Board and being deserted by a trio of directors, including lawyer and former main spokesman Michael Goldberg.
In early January, 2000, after Stockwatch revealed Mr. Hamouth's involvement with C3D, Mr. Goldberg abruptly turned gruff and tough when asked to explain Mr. Hamouth's role. "There are no more questions for that -- nope," stated Mr. Goldberg, a former federal prosecutor, before quickly hanging up on a reporter.
In a previous article, a more-talkative Mr. Goldberg praised controversial Howe Street promoters Phil Garratt and Clair Calvert, linked by Stockwatch to C3D, and stressed that C3D was a real company. "It is unfair for anyone who thinks this is a bullshit company, excuse my French," stated the prosecutor-turned-penny-stock-spokesman.
bmudry@stockwatch.com
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