re:ITEX/TERRY NEAL/ZIASUN/ASIA4SALE->More Tales Of The Bizarre And The Strange
Here we go again. Yet another fraudulent stock involving Starnet's auditors, the accounting firm of Jones Jensen and Associates, AKA H.J. Associates.
For those who have not heard of Asia4Sale.com (OTC BB AFSI), it was a spin-off of Ziasun Technologies Inc. (OTC BB ZSUN). The firm of Jones and Jensen were also auditors for Ziasun. You may remember our story, which mentioned Ziasun:
"Beyond the SEC's Reach, Firms Sell Obscure Issues to Foreign Investors"
By John R. Emshwiller and Christopher Cooper
Staff Reporters of The Wall Street Journal
gamblingmagazine.com
You may also remember our story on Sky Jones and fraudulent companies using his artwork as an asset:
"Did the SEC Look the Other Way?"
After the sizzling Fort Worth show, the Securities and Exchange Commission (SEC) made it publicly known that more than a quarter of a billion dollars worth of Sky Jones paintings were in the collections of 125 corporations! Two years later, it became a half a billion dollars in over 200 corporations. Clearly, the charities and corporations loved Sky.
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SHAM BARTER STOCK RIGS HAVE BEEN AROUND SINCE THE BEGINNING OF TIME. Barter Asia regards this as an exciting and potentially profitable initiative.
BUYER BE WARY!!
ASIA 4 SALE COM INC.
Form: 10QSB Filing Date: 11/20/2000
Consistent with this policy of strategic expansion, Barter Asia has also signed a Memorandum of Understanding with Itex Corporation, a Sacramento-based barter services company currently spearheading the development of a global barter exchange consortium. Itex has signed similar M.O.A's with barter exchange companies in Asia, South America, Western Europe, the Middle East and elsewhere. Barter Asia regards this as an exciting and potentially profitable initiative.
[View Filings Information]
SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16305 / SEPTEMBER 28, 1999
ACCOUNTING AND AUDITING ENFORCEMENT RELEASE NO. 1175
SEC V. ITEX CORPORATION, TERRY L. NEAL, MICHAEL T. BAER, GRAHAM H. NORRIS, CYNTHIA PFALTZGRAFF AND JOSEPH M. MORRIS, CIV. NO. 99-1361 (HA) (D. Ore. September 27, 1999)
SEC FILES FRAUD CASE AGAINST ITEX CORPORATION
On September 27, 1999, the Securities and Exchange Commission filed a civil fraud action in the United States District Court for the District of Oregon against Itex Corporation ("Itex"), Terry L. Neal, Michael T. Baer, Graham H. Norris, Cynthia Pfaltzgraff and Joseph M. Morris (Civil Action 99-1361-HA). The Commission's complaint alleges that from at least December 1993 through February 1998, Itex, a company engaged in the barter exchange business and formerly listed on the NASDAQ Small Cap Market, materially inflated its revenues and earnings in financial statements filed with the Commission and in other disclosures made to the investing public. The Complaint alleges that Terry Neal, Itex's founder and control person orchestrated and implemented a broad-ranging fraudulent scheme by making materially false and misleading disclosures about the company's business and by failing to disclose numerous suspect and in many cases sham barter deals between Itex and various mysterious offshore entities related to and/or controlled by Neal. Neal was assisted in the fraud scheme by various people who, at the time, were members of Itex management, specifically, Michael Baer, Graham Norris, Joseph Morris and Cynthia Pfaltzgraff.
The Complaint alleges that the defendants defrauded Itex investors by bartering assets of little or no value and by designating the value of many of Itex's assets and transactions in "trade dollars" rather than their far lower U.S.-dollar fair market values on its financial statements. On the Itex Exchange, members trade goods and services. In lieu of trading (or bartering) such goods and services directly, Exchange members use Itex trade dollars, issued to them by the Itex Exchange. Itex corruptly took advantage of the process, however, by orchestrating numerous bogus barter deals, in which the goods and services exchanged were grossly overvalued, and then reported in Itex public filings as income and/or assets, thus facilitating the fraud.
The Complaint alleges that Itex reported substantial revenue from sham barter transactions as a principal in its own name or through its Swiss-based subsidiary, Associated Reciprocal Traders ("ART"). In fiscal years 1994 through 1997, approximately 56%, 56%, 43% and 60%, respectively, of Itex's reported revenues derived from such barter transactions. Almost all of the Itex barter transactions were suspect inside deals involving Neal himself. The barter deals involved difficult-to-value assets, such as artwork, pre-paid advertising due bills, and worthless stocks in public companies. Some Itex deals involved purely bogus assets such as leases on vacant property, a non-existent stamp collection, and highly-questionable unpatented and undeveloped mineral claims.
The Complaint alleges that without the fabricated barter earnings from Neal's transactions, Itex would have reported losses rather than profits for fiscal years 1994 through 1997. Itex's materially overstated financial condition and results of operation were reported in its financial reports for this period and touted in numerous press releases. Riding this wave of financial misinformation, Itex's stock price rose from $2.25 to $12.50 per share from January 1994 through February 1996.
The Complaint alleges that to cash-in on their fraud, Neal and Baer both sold Itex stock to the market throughout this period, realizing profits of approximately $6.3 million and $1.4 million, respectively. Morris exercised stock options during this period and realized profits of approximately $45,000.
The Complaint also alleges that while Itex managed to inflate its income statement from barter transactions conducted and reported in trade dollars, it needed cash to pay its operating expenses. Since the company had in reality been losing money from fiscal 1995 through the present, it made up the operating shortfall with $11.7 million in proceeds from the sale of its common and preferred stock. To facilitate the fraud, the bulk of the shares, approximately 1.2 million, were initially sold at substantial discounts to offshore entities secretly controlled by Neal, under cover of Regulation S (which allows offshore sales to foreign investors who have no present intention to sell them back into the U.S. market). Neal, however, quickly sold the stock back into the U.S. market, and used the approximately $10.7 million in gross proceeds to, among other things, fund Itex and to enrich himself and his family members. During the same period, Neal received an additional half million shares and/or options from Itex in exchange for services and for certain barter transactions.
The Complaint alleges that the defendants violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as certain reporting, internal controls and record-keeping provisions of the federal securities laws. The Complaint alleges that Itex and Neal violated the securities registration provisions of Section 5 of the Securities Act and that Neal violated Sections 13(d) and 16(a) of the Exchange Act of 1934, and Baer violated Section 13(d), by failing to make filings disclosing their beneficial interest and changes in their interest in the securities of Itex.
The Commission is seeking injunctive relief, civil penalties, disgorgement of Neal, Baer and Morris' ill-gotten gains, and officer and director bars against Neal, Baer and Morris.
sec.gov
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A post from Internet crusader and defender of free speech from Les L. French of JohnDoes.org. ITEX HAD SUED HIM IN A SLAP SUIT TO SILENCE LES L. FRENCH.
LES GOT THE LAST LAUGH AND STARTED HIS OWN SITE TO HELP PEOPLE THAT HAD BEEN SLAPPED BY COMPANIES. JUST READ WHAT LES WAS EXPOSING. A TRULY AMAZING STORY
[ITEX/TVCP] Bear Mating Season, Behr Appraisals, Baer Bribes, and other Bare Facts from The Dark Side of corporate finance.
LesLFrench
Forum Host
Posts: 130
From:Portland, Oregon USA
Registered: Mar 2000
posted 09-03-2000 16:51
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Bear Mating Season, Behr Appraisals, Baer Bribes, and other Bare Facts from The Dark Side of corporate finance
(Stockholders of ITEX have been informed that ITEX intends to sell all of its assets to an unknown entity, MAXX International, which lists entertainment executive Michael Jay Solomon as a director and its chairman, and a collection of dubious assets. Last week it was shown how online stock touter Michael Zwebner, with his "inner circle" of Internet promoters, would be key to promote another Solomon company, Entertainment Internet. This is the fourth in a series of carefully researched articles on The Dark Side of corporate finance. This week: a review of the history of ITEX Corporation's unusual woes, leading up to the present predicament it finds itself within, and new information regarding undisclosed loans received by former CEO Michael Baer. © 2000 by Les L. French)
"I'll make it 'right', if there's any disagreement, just tell me what it will take to make it 'right' stated Terry Neal when confronted at his Oregon home in late 1997 by a gentleman we shall refer to as "Mr. X". Accompanied by two young men of Italian persuasion, X was at Neal's home for the purpose of collecting on X's share of the proceeds from the promised liquidation of over "$6 million worth" of Sky Jones artwork and "pre-paid media due bills". Neal had promised Mr. X that the inventories could be liquidated for about ten cents on the dollar, or about $600,000. Mr. X was to receive 50% of the liquidated proceeds. It was time to collect.
But already four months had transpired since Mr. X, who describes himself as a mining and mineral claims consultant, had sold to Neal a research file on several tracts of government-owned land in Washington State containing deposits of limestone. The research file contained all the information required by Neal to file to establish unpatented mining claims on BLM properties, which could then be appraised at over $6,000,000.
It turns out that X first learned of Terry Leroy Neal and ITEX Corporation on an airplane while returning on a trip from Israel to his Portland home. With time to kill on the plane, he picked up the July 14, 1997, issue of the Oregonian newspaper, which featured a business-section front page article on questionable activities going on at ITEX, and Neal's alleged ties to the company. The article described an ongoing SEC investigation, and referred to questionable assets on the books of the company, such as Sky Jones art and pre-paid media due bills. Mr. X figured he had something that ITEX's accountants needed, so he tried to call ITEX's CEO Graham Norris. Norris never returned the calls, but X did manage to get through to CFO Joe Morris, who reviewed Mr. X's proposal, and ultimately stated that ITEX was not interested in exchanging the artwork and due bills for mining claims.
Persistent, Mr. X then contacted Neal, sensing from the newspaper story that Neal somehow was still involved with the management and accounting practices of ITEX Corporation. Indeed, Mr. Neal gleefully invited Mr. X to meet with him. Neal confided to Mr. X that the questionable assets would not pass Nasdaq or SEC accounting inquiries, calling the Sky Jones artwork and media due bills "six million dollars worth of 'sh*t'".
Both men had agreed that neither the mining claims nor the ownership of the claims should be in Neal's own name. X had mentioned that he could arrange for a "shell" to own and hold the mineral assets, but Neal replied: "That's OK, I have a shell ready to go." Neal then filed the necessary forms with BLM, placing the unpatented mineral claims into the names of his six children and his wife as locators, and then quit claimed the mineral rights to a new shell, called Pacific Mineral Corporation (PMC). Just eight days after the new corporation was formed by Neal, PMC conveyed ownership of the mineral properties over to ITEX Corporation in exchange for the near-worthless assets. In this manner, ITEX thought it could eliminate $6 million in questionable assets from its balance sheet and replace them with appraised mining claims at roughly the same value--all for the meager price of $20,000 in cash and 50% of the proceeds from the Sky Jones collections.
After four months had passed, X still had received no payment from Neal on the supposed liquidation of the merchandise. Reviewing ITEX's SEC quarterly filing, Mr. X soon discovered that Neal, in addition to receiving $20,000 in cash, the artwork, and due bills, Neal also collected an additional sum of 130,000 shares of ITEX common stock. Naturally, X figured at least 50% of those shares belonged to him. The stock of ITEX was trading at about $6 per share at that time. Angered and wary of Neal's failure to return phone calls, X made a trip over to Neal's house accompanied by the two "Guido-types", ready to "make amends" on the delinquent account.
Caught off guard by the visit, Neal invited the gentlemen inside and related that the deal had gone down "as planned", but that Neal had received no compensation from ITEX other than the art and due bills, and that no money had been received from the sale of the artwork. X then replied that he just wanted to be paid and discontinue any further arrangements with Neal, and that he was prepared to pick up 50% of the artwork and the due bills to haul them off, "if for no other reason than to set a bon fire and watch them burn." Stammering and without explanation, Neal confessed that the inventories "were gone" and that he would have to make other arrangements with X. "I'll make it 'right', if there's any disagreement, just tell me what it will take to make it 'right'. I just want to make sure that you feel like the deal has been made 'right'."
Going to a security safe, Neal presented X with a cloth bag, filled with loose diamonds and gemstones. "Here, take any of these stones that you want, whatever you think will make it right," Neal said. X, being somewhat familiar with minerals, was not fooled by the cheap pieces of "glass", and flung the loose stones across the room and all over the shaggy carpet. Horrified, Neal fell to his knees in a desperate attempt to retrieve the stones from the thick carpet. "Now you listen to me," exclaimed X, "I figure you owe me about $300,000, and I want you to pay up now!" When it was over, X walked away with a check for $20,000 cash, drawn on an offshore institution. That was the only payment Mr. X received from Neal, in addition to the original $20,000 that was advanced to Neal by ITEX.
Behr Dolbear Appraisal. If the Sky Jones art and due bills were of "bon fire" quality, one curiously wonders why ITEX, after investing only $20,000 in cash in its mineral claims, would invest another $50,000 in an appraisal, prepared by a highly qualified, internationally recognized geological appraiser, Behr Dolbear & Company?
Back to the main page for more on Starnet's huge problems
article # starnet399
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