GIFS LOL->GAYLE ESSARY, ANALYST COMMENTS ON GIFS Genesis Insurance & Financial Services (OTCBB:GIFS).
LMAO "The classic flight to South America, clutching a bag of money, just one step ahead of the authorities."
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The Napeague Letter
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June 1, 1997
Genesis Insurance & Financial Services (OTCBB:GIFS)
In the beginning... In a very real way, "Suspicious Stocks" began when the Chairman of GIFS took off abruptly for Brazil one Saturday night in late April 1997. Yup! The classic flight to South America, clutching a bag of money, just one step ahead of the authorities.
The story was effectively summed up in an SEC Litigation Release on September 24, 1998:
Zayed and Rehtorik devised a scheme to raise the demand and price of Genesis stock by issuing the fraudulent press releases and SEC filings described above. Once the price of the stock had been inflated artificially through their efforts, the SEC alleges that Zayed and Rehtorik sold Genesis stock through nominee accounts, then booked a portion of the proceeds as income to Genesis. The complaint alleges that the nominee accounts sold $1.9 million in Genesis stock. On April 30, 1997, the SEC suspended trading in Genesis’ stock.
Apparently, GIFS former Chairman is still a fugitive being sought by the FBI on 17 counts of wire fraud, money laundering and transporting fraudulently acquired property across state lines.
But...the Internet was still young back in 1997, and the "on-line investing" world was stunned when GIFS was fully revealed as a sham. The excitement continued long after GIFS former Chairman was comfortably seated beneath a palm tree on a Brazilian beach.
My I-net Posting About GIFS...a bit too late to be helpful
Over the last week, I have received a substantial amount of "flak" from various sources as a result of the various "evil internet" articles which have been recently published, largely as the result of GIFS. So I needed to find out more about what was going on, and why......
Some time ago, I had downloaded the GIFS "10-12G" (a form with which I am completely unfamiliar) from EDGAR. However, I had never taken a look at it, so I've spent the last hour and a half staring at this thing, in both horror and amusement...but mostly horror!
After scanning the first dozen pages, with growing amazement, I almost immediately went to the balance sheet and the associated notes. Here I was absolutely stunned! Generally Accepted Accounting Principals (GAAP) demand that assets generally be valued at the lower of market or acquisition cost; however, on this travesty of a balance sheet, assets were being valued at whatever management felt they could get away with.
My favorite here is the corundum; to quote the Form 10-12G from EDGAR, "Appraisal value said corundum at $2,304,000. The corporation paid a fee of $100,000 for the perpetual use of these assets." Under GAAP, these assets should have been valued at $100,000, but GIFS valued them at $2.3 million!
During my reading of the first couple of pages, I found myself making marginal notes such as "This is in a SEC Filing!!!". Frankly, I have never ever before seen, in a filing that was accepted by the SEC, such an overblown and "touty" description of a business, with wild projections unsupported by any pretense of underlying assumptions. Some of the statements appear to be completely untruthful, based on information presented elsewhere in the document.
A wonderful example can be found in the MD&A section for IMAGEX SERVICES, INC., which reads in part, "The Company incurred a loss of $2,045,125 for the year ended December 31, 1995 on two medical diagnostic service centers which have been owned and operated since 1993. The loss is primarily attributable to a substantial reduction in the usage of the Company's equipment due to fewer patients seeking diagnostic services at the Company's centers...."
The reason for "fewer patients" may actually be due to the fact that the Company's basic equipment had been repossessed! To quote a section in this report covering litigation, "The Company is currently in monetary default under the terms of the Settlement, which obligation the Company's president has personally guaranteed. on September 13, 1995 General Electric obtained a money judgment in the amount of $3,699,341.10 and an order allowing General Electric to repossess the leased 1.5 Vectra/Tesla MRI located at the Slocum-Dixon Center and the leased 0.5 Tesla MRI located at the Rome Center." The audit report for this subsidiary includes the statement that "These conditions raise substantial doubt about the Company's ability to continue as a going concern."
These are just a few of the "high points" in this document. I do not plan to waste any more of my time reviewing this document further. Bluntly, I have better things to do with my time.
In summary, my "bullshit alarm" went off like a klaxton within the first two or three minutes of reading the GIFS 10-12G Report. This report is on EDGAR and thus was available to anyone who has the ability to post on this forum......
Did anyone else read it before they invested in GIFS?
Did anyone else think about what they were reading?
Many GIFS investors are busy identifying one entity or another as the culprit, who "led them astray". There is a lot of attention being paid to "Mo's" criminal record, who knew what and when, and to the "evil internet".
But all of the information that each of you needed to determine that this company was worthless was readily available for you to read before you made the investment.
Bob Davis
P.S. The Napeague Letter does not recommend investments. Instead it walks its readers through an analysis process which hopefully provides them with some of the resources with which to do their own evaluation. It is the type of analysis process that each of you failed to follow with GIFS.
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The Napeague Letter Home Page contains links to in-depth Analyses of other undervalued small-cap stocks, detailed descriptions of its analytical methods, the background and philosophy of its editor, and other potentially valuable information.
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NOTICE
This analysis is based on publicly-available information, and is in no way warranted by me as to accuracy or completeness. I do not guarantee to advise you as to any change in this information.
I am not a stockholder in any Company mentioned in The Napeague Letter and I will not purchase, sell or own any of these Company's securities while they are followed by The Napeague Letter. I otherwise have no affiliation with any of these Companies, and I have not been compensated by any of them, or their agents or affiliates, or anyone with either a long or a short position in the Company's stock, in any way whatsoever, and I do not plan to be so compensated at any point in the future.
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GAYLE ESSARY'S HOTTEST STOCK, GIFS Genesis Insurance & Financial Services LMAO!!
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gifs press release
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Mohamed Zayed Sep 24 1996, 12:00 am show options
Newsgroups: misc.invest
From: JMAZ...@prodigy.com (Mohamed Zayed) - Find messages by this author
Date: 1996/09/24
Subject: gifs press release
Reply to Author | Forward | Print | Individual Message | Show original | Report Abuse
GENESIS:
STOCK BUYBACK / GROWING SALES / 100% INCREASES IN EARNINGS
The #1 stock in Waaco's Ten Most Wanted List for its Challenge Series vs.
Traders TV has come through once again.
Genesis Insurance & Financial Services (GIFS) has issued a press release
for Tuesday morning which states:
1. The Board of Directors has authorized a stock Repurchase Plan in an
amount up to 400,000 shares AT MARKET PRICES over the next 90-days.
This
constitutes 1/4th of the float. The company has just under 20m shares
outstanding and 18m are RESTRICTED. The company's decision was 'based
upon
its positive outlook for the coming year and the current undervalued
market
price of GIFS stock.'
2. 2nd & 3rd Quarter earnings estimates have been released.
2nd Q sales will exceed $5,000,000, primarily from the sale of Surety
Products issued by the Congress Re-Insurance Corp. and American Lift Corp.
,
both wholly-owned subsidiary. Gross profit will be in excess of $400,000,
or 2cps.
3rd Q sales will exceed $7,000,000, including consolidated sales and
revenues of all operating divisions, including American Lift and
International Medical Products, all wholly-owned subsidiaries. Gross
profit will be in excess of $600,000, or 3cps.
All operating divisions are profitable and have had sustained growths in
sales, revenues and profits of over 100% per quarter since the 2nd Q 1995.
3. Book value estimates exceed $7 'making GIFS a considerably
undervalued
stock. The company attributes its current stock price to limited
investor
exposure.' The company plans to retain a larger investor relations
firm
to launch a national investors relations campaign during the next two
weeks. It stated it has cancelled its contract, including stock options,
with Paige & Associates, an investor relations firm.
More information on the Genesis Family of Companies or the company's
recently filed Form 10-12g may be obtained from investor relations at
423-266-7544 or via fax at 423-266-7750. The company is located at 735
Broad Street, 10th Floor, James Buiilding, Chattanooga, TN 37402.
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Topic: gifs press release - go to top
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Litigation Release No. 15907 / September 24, 1998
SEC SUES CHATTANOOGA-BASED MICROCAP COMPANY IN FRAUDULENT "PUMP AND DUMP" SCHEME
Securities and Exchange Commission v. Mohamed Khairy Mohamed Zayed, II, Michael W. Rehtorik, and Herbert Woll, C.P.A. (United States District Court, E.D. Tenn., Civil Action No. 1:98CV327, )
The Securities and Exchange Commission announced that today it filed civil fraud charges in the United States District Court for the Eastern District of Tennessee against two former officers and the former accountant of Genesis International Financial Services, Inc. for their roles in an illegal "pump and dump" scheme involving Genesis’ stock. Mohamed Khairy Mohamed Zayed, II, age 35, formerly resided in Ringgold, Georgia. Zayed, who was indicted by a federal grand jury in 1997 and charged with fraudulently operating a bonding and insurance business, is now a fugitive. Michael W. Rehtorik, age 40, resides in West Chester, Pennsylvania. Herbert Woll, age 77, resides in Marietta, Georgia. The Commission previously suspended trading in Genesis’ stock.
In its complaint, the SEC alleges that Zayed, Rehtorik and Woll engaged in securities fraud in the promotion and sale of the Genesis stock by using fraudulent financial statements and press releases calculated to deceive prospective investors. According to the SEC's complaint:
* Zayed, Rehtorik and Woll prepared and filed with the SEC in 1996 two Form 10 registration statements which falsely claimed that Genesis had total assets in excess of $138 million, including certain "Certificates of Deposit" with a claimed value of more than $100 million.
* Woll misrepresented himself as an "independent" auditor in the financial statements contained in the Form 10 registration statements Genesis filed with the SEC.
* Zayed and Rehtorik failed to disclose in at least one Form 10 registration statement Rehtorik’s recent securities laws violations and civil injunctive history, as required under the federal securities laws.
* Zayed and Rehtorik issued a series of press releases from February to April, 1997, misrepresenting that Genesis was going to sell its subsidiary, Congress Re-insurance Corporation, for $117 million to an international purchasing syndicate.
The SEC’s lawsuit further charges that Zayed and Rehtorik devised a scheme to raise the demand and price of Genesis stock by issuing the fraudulent press releases and SEC filings described above. Once the price of the stock had been inflated artificially through their efforts, the SEC alleges that Zayed and Rehtorik sold Genesis stock through nominee accounts, then booked a portion of the proceeds as income to Genesis. The complaint alleges that the nominee accounts sold $1.9 million in Genesis stock. On April 30, 1997, the SEC suspended trading in Genesis’ stock.
The SEC seeks in its lawsuit permanent injunctions and civil money penalties against Zayed, Rehtorik, and Woll, and disgorgement of Zayed and Rehtorik’s ill-gotten profits. The complaint alleged that Zayed, Rehtorik and Woll violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and rule 10b-5 thereunder.
The SEC thanks the Tennessee Department of Insurance and Commerce, Federal Bureau of Investigation, and the United States Attorney’s Office for the Eastern District of Tennessee for the substantial assistance they provided in connection with the investigation leading to this action.
This enforcement action is one of several cases filed today in an effort to address abuses in the microcap market. It is also part of the Commission's four-pronged approach to minimizing microcap fraud: enforcement, inspections, investor education and regulation. For more information about the SEC's response to microcap fraud, visit the SEC's Microcap Fraud Information Center at sec.gov.
sec.gov
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