SEC target Switzer rolls L-Air down the runway
Securities and Exchange Commission *SEC
Wednesday February 19 2003 Street Wire
Also L-Air Holding Inc (U-LAIR) Street Wire
by Brent Mudry
In the latest intriguing U.S. penny stock promotion gearing up for takeoff, Toronto-based L-Air Holding is rolling down the runway for the April launch of its Belgian airline, pushed along by regulatory target-tout John Robert Switzer of Los Angeles, an associate of regulatory target Mark Bergman and disbarred Los Angeles lawyer Regis Possino.
L-Air, also called L.Air, calls itself a French airline, supposedly the first budget carrier which will operate between France, the Caribbean, West Africa and "the American Continent." The concept airline, not yet airbound, misses few chances to describe itself as the next Jet Blue, after Jet Blue Airways, the successful discount upstart serving the U.S. domestic market.
Mr. Switzer confirms he knows Mr. Possino, but denies the former jailed lawyer has any involvement in the L-Air promotion. "Not that I know of," he replied. Mr. Possino and Mr. Bergman are best known as significant players in the recent General Commerce Bank affair, an Austrian-Belgian boiler room scandal featuring fugitive Thai financier Rakesh Saxena, Saudi arms merchant Adnan Khashoggi and a star-studded cast of other colourful characters.
Mr. Switzer, eager for positive press, gave Stockwatch a sneak preview of several big news announcements he is working on with L-Air, including a pending $20-million financing. (All figures are in U.S. dollars.)
The L-Air head tout warns, however, that he will deal harshly with any unflattering coverage. "I won't work in your favour. I will bring a defamatory lawsuit," says Mr. Switzer. "I deal with bad press in a lot of different ways ... I will sic an attorney on you."
Mr. Switzer issued his stern warning after being asked questions about his relationship with Mr. Bergman, a current target of the United States Securities and Exchange Commission in a Toronto deal, and his own time behind bars.
While the Los Angeles tout suggested a reporter had done something criminal by ferreting out his regulatory and corrections history, such records are public.
Mr. Switzer had the misfortune of being targeted by the SEC in October, 1998, when the regulator rounded up 44 Internet touts and touting companies in its first nationwide Internet sweep. The SEC prosecuted him and three other Southern California defendants: Brian Volmer, International Alliance Trading Inc. and Sun Pacific Capital Group Inc. for accepting stock and cash payments for promoting penny stock companies in newspaper advertisements and the Investors Edge Web site.
In a civil complaint filed in United States District Court for the Central District of California, the SEC alleged that Mr. Volmer touted Cetacean Industries Inc., a company which claimed to be a diamond explorer in Brazil, through ads in Investor's Business Daily crafted to look like independent research reports, while Mr. Switzer assisted him in touting several penny stocks, including Juina Mining Corp., which vended in Cetacean's Brazilian assets, on Investors Edge, a Web site run by Mr. Volmer.
The SEC won a $600,000 judgment against Mr. Volmer in court in October, 2000, upheld on appeal last year. The California tout was ordered to pay $296,429, representing both his compensation and trading profits, a civil penalty of the same amount, and interest.
Mr. Switzer got off considerably easier. In a consent settlement finalized in court in February, 2000, he was permanently enjoined from future securities violations. Mr. Switzer skated off without any fine, based on his plea of poverty in his sworn financial statement.
"The Court does, however, note the appropriateness of a civil penalty in this instance. The determination that Switzer is unable to pay a civil penalty is contingent on the truthfulness of the representations in the Financial Statement," stated the final judgment. "The Commission may, at any time following entry of the Final Judgment, petition the Court for a hearing to reconsider the defendant's inability to pay a civil penalty if the Commission obtains information from any source that the Financial Statement was inaccurate in any respect."
Mr. Switzer had a rather unusual mailing address for his court papers -- Centinella State Prison in Imperial, Calif. The penny stock tout was welcomed as a guest of this exclusive gated community, hosted by the California Department of Corrections, on Aug. 13, 1999, after he was sentenced that July 28 to one year and four months for an offence called "disregard for safety."
The prosecution, handled by the District Attorney's Office for Los Angeles County, was a humdinger, related to a DUI, or drinking under the influence, offence which involved evading an officer.
Mr. Switzer confirms the details, and points out that while it was his second impaired driving offence, he has now been sober "for a number of years." "It was my second DUI and I was doing over 150 miles per hour," the penny stock tout told Stockwatch. He notes his high-speed chase, in a Turbo Porsche, took place on I-5, the north-south interstate highway. "The police weren't too impressed."
The promoter, however, claims his days as an outlaw speed demon are long past, and he has done his time, serving seven months in jail. "My background is my background. It is none of your business," he said hopefully.
Mr. Switzer is quite keen to talk up L-Air, one of several stock promotions he is currently working. He notes the company hired him to do investor relations and public relations. He works out of the offices of a company called "Capital Consultants."
"They've done a $20-million private placement which is pretty well closed out," offers the tout.
"There is a bunch of stuff to come out (soon in press releases) ... I do a lot of the writing for them," he told Stockwatch.
According to Mr. Switzer's spiel, L-Air will send its first two charter jets down the runway in April, and both can be operated for 120 hours per week. "They're getting paid about $350,000 for 40 hours" by charter operators, he notes. Assuming some downtime, he says that at two-thirds time capacity, L-Air will be pulling in $1.5-million per week in revenues.
The story takes off from there. L-Air, says Mr. Switzer, has three other planes in the works, with agreements in place with Boeing for reconditioned jets from Singapore Airlines, to be staggered into operation this summer through early fall. "I have seen all the contracts," he says. The only thing holding L-Air back, he says, is getting approval in Belgium for L-Air's transfer of the licence for Belgium Universal Airlines, which should come soon. "We are just waiting for the air operating certificate."
The stock, trading at just 20 cents, sounds like a steal if the spiel pans out. "A correction valuation is somewhere between $4 and $5," says Mr. Switzer. He points out that he is a picky man, and he only gets involved in good deals. "There are too many deals there is no future with. You can only talk about a company so long before you have to perform."
L-Air's captain of the talk waves notes the company has a number of press releases in the works. "There is a lot of stuff going on," he says. L-Air should announce an on-line ticketing promotion in the next couple of weeks as part of what he calls an "on-line marketing push."
Although still just a tiny company, L-Air has come a long way in a short time.
Until last September, the company was based in Vancouver and called Superior Networks Inc., a shell in the stable of Howe Street promoter Robert Rosner. Mr. Rosner sold his control block of 15 million shares to L-Air president Alexander Goldman, who moved the company's headquarters to Toronto. Although Mr. Goldman is described as a French resident, he maintains offices in Toronto.
L-Air features quite a cast. Mr. Switzer says the company is "backed" by Universal Capital Partners. (Other documents suggest Universal Capital has a 36-per-cent stake, although this has not been verified by securities filings yet.)
Besides its current 20-cent stock price, this might be the first indication that L-Air is indeed a low budget operation. In a convenient cost-cutting measure, it and Universal Capital share the same office, suite 3670 at 130 King St. West. This building, the Exchange Tower, is a Bay Street landmark, housing the Toronto Stock Exchange, amongst other tenants.
Despite its grandiose name, Universal Capital Partners is not yet in the top tier of Bay Street firms. At this point, it says it specializes in "unique investor relations situations." "Our boutique size assures that our senior executives are intricately involved in all client relationships," states the company on its Web site.
"We bring a distinct edge to traditional North American investor relations: we include European audiences and investment opportunities. We also stray from convention for our clients looking for methods of going public, by offering our expertise in facilitating reverse mergers."
Besides L-Air, the only other "client" noted on Universal Capital's Web site is Blue Industries Inc., a French-flavoured penny stock promotion which claims to be a "global leader in the field of safe drinking water" through its proprietary technology. Blue also hopes to be a big shaker and mover in the global shrimp market.
Last June the company opened a manufacturing plant in the suburbs of Bangkok to build its proprietary water treatment units for Thai shrimp producers. Less than a month earlier, the ambitious company welcomed a new major shareholder, based in the secretive offshore enclave of Gibraltar. Blue traded 9.75 million of its shares, a 33-per-cent stake, to Advanced for "raw materials" valued at $1.17-million, or 12 cents a share.
L-Air's most exciting development took place on Feb. 5, when it announced a consulting agreement with Geneva Equities Ltd., a Los Angeles company. "Geneva Equities Ltd. will contribute to funding, analyzing, structuring, negotiating and financing business acquisitions, joint ventures, alliances and other desirable projects of great value to the Company and its shareholders," states L-Air.
"In order to facilitate the goals of the company, Geneva Equities Ltd. shall develop and implement a Public Relation program developing investor relations through the use of multi-media technology, with the goal of enhancing market awareness of the Company for the benefit of shareholders."
In an amazing coincidence, a company with Geneva's identical name was incorporated in Nevada on Oct. 5, 2001, showing Mr. Possino as president. (Mr. Switzer confirms he knows Mr. Possino, but denies he has any involvement in L-Air.)
Authorities also know Mr. Possino, who operates out of Santa Monica, Calif., quite well. The disbarred lawyer, active in a number of international penny stock deals in recent years, was a major behind-the-scenes player in the General Commerce affair.
Mr. Possino is one of those colourful characters who suffer misfortune after misfortune, but keep bouncing back in big-league cases. The State Bar of California disbarred him about 17 years ago, just because of his entrepreneurial moonlighting in the marijuana industry, which it called "a crime involving moral turpitude," and a few other youthful indiscretions.
Mr. Possino wasted little time making a name for himself after being admitted to the bar in 1972. A mere four years later, in 1976, he was privately rebuked for wrongfully causing an employee to make a false notarial declaration. This was peanuts, however, compared with his antics in 1975. In November and December of that year, the budding young lawyer attempted to sell some marijuana to undercover Los Angeles police officers, a mere 350 pounds of the weed.
That November, Mr. Possino had offered to sell 1,000 pounds, or half a ton, of pot to the officers, but they suggested they could only handle a smaller amount. During several meetings over the following few weeks, Mr. Possino negotiated the deal, delivered samples of his merchandise, and calculated that his profit on 350 pounds would be about $38,500, which is not bad pay, even for a lawyer. Once Mr. Possino had his buyers on the hook, he sought to up the ante and diversify his merchandise. During the marijuana negotations, he sought to buy some cocaine from the undercover officers.
"He told the officers that he was an attorney and was acting on behalf of several groups who could purchase eight to 10 kilograms of cocaine twice a month at a price of $34,000 per kilo. However, these negotiations ended when one of the undercover officers said he would not be able to obtain any cocaine until Christmas," states a disbarment document filed in the Supreme Court of California.
While these dealings might sound ambitious, this was just the beginning. At one of the meetings, Mr. Possino offered to sell $5-million worth of stolen treasury bills or bearer bonds to the undercover agents. "At a subsequent meeting, the officers brought along an undercover agent of the United States Treasury Department, introducing him as a cousin of one of the undercover narcotics officers and a dealer in stolen securities," states the document.
Although Mr. Possino and the treasury agent negotiated a purchase price of 20 cents on the dollar, the young lawyer never came through with the goods, and later told the agent he had negotiated a better price with another buyer. Through this big-league negotations, Mr. Possino represented himself as an attorney and produced identification as a deputy or former deputy of the Los Angeles District Attorney's office. (He was a former deputy by this time.)
During his subsequent drug trial, Mr. Possino was locked up after he accidentally bumped into a juror at a restaurant and chatted her up, something U.S. judges frown upon. (In Canada, a defendant once slept with a juror, and later, that also was frowned upon.) Mr. Possino was subsequently convicted in 1978 in the drug case, given a one-year term of imprisonment in county jail and put on probation for five years with various conditions. Mr. Possino was later disbarred.
While Mr. Possino was recently replaced as president of Geneva Equities, his aura lingers on. The company's new corporate secretary is Pearl Asencio, who played roles in two promotions linked to Mr. Possino or his associates: Thaon Communications Inc. and Castpro Inc.
In the serendipity of the penny stock world, that brings us back to Mr. Bergman, a close associate of Mr. Possino. Mr. Switzer confirms he previously worked with Mr. Bergman at Pacific Growth Equities. "I can show you my resume," he says.
Mr. Switzer's bio states that he worked as an "institutional research analyst" at Pacific Growth from 1990 to 1993. "Worked as junior analyst for leading small cap telecommunications analyst, Mark Bergman," states the resume.
More recently, in 1998, as an "independent" analyst, Mr. Switzer wrote a glowing research report, for which he was paid, about Conectisys, a penny stock promotion linked to Mr. Possino. At the time of the report, the stock was trading at $3.38, midway in a 52-week range of 90 cents to $5.88. Mr. Switzer gave a target price of $20 to $25 based on projected 2000 earnings per share. At the time, Conectisys had a modest book value of seven cents per share.
According to Mr. Switzer, Mr. Bergman, like Mr. Possino, is not involved with L-Air in any way. This is a good thing as the airline prepares for takeoff; Mr. Bergman carries heavy baggage these days.
Last August, Mr. Bergman was the sole American named by the SEC in its kickoff prosecution of a major international boiler room network. The rest were Canadians, including two Ontario lawyers.
In a civil complaint filed in United States District Court for the District of Columbia, the SEC claims the ring perpetrated a "massive" stock fraud from 1998 to 2000 with Environmental Solutions Worldwide, an OTC Bulletin Board company now based in Telford, Penn., after moving from Markham, a suburb of Toronto. The SEC claims the pump and dump, which featured dubious distributions of millions of shares through European and offshore accounts, ran the stock up from $2 to $7 per share. Two Canadians, Teodisio V. (Ted) Pangia, of Kleinburg, Ont., and New York, and Satbal Singh, of Toronto, allegedly dumped $15-million of Environmental Solutions shares on unsuspecting victims. |
