A bad day for ESCL. Down 19.77 to 12.23.
Spanish Police Make Arrests In Probe of Stamp Companies
Shares of Escala Tumble in Early Trading
DOW JONES NEWSWIRES
May 9, 2006 10:10 a.m.
MADRID -- Spanish police have arrested at least eight people and raided the offices of two leading stamp collection companies as part of a probe into an alleged stamp investment fraud that could affect about 200,000 small investors, police and court officials said Tuesday.
National police officers were raiding offices of Forum Filatelico and the Madrid headquarters of Afinsa Bienes Tangibles, which is the world's No. 3 collectibles firm behind Sotheby's and Christie's and is also the majority owner of Nasdaq-traded Escala Group. Escala was previously known as Greg Manning Auctions, based in New Jersey.
Shares of Escala tumbled in pre-market trading on INET Tuesday, falling 45% to $17.46.
The operation forms part of an investigation launched by the National Court, tax authorities and financial crime prosecutors over an alleged pyramid-type scheme based on overpriced stamps and other collectibles.
The arrests also come after Barron's magazine reported on practices at Afinsa, which operates a "no-lose" stamp-sales program for investors in Spain and Portugal. Many of the investors are retired individuals allocating an average of €150 to €300, according to court officials.
Afinsa guarantees a return of 6% to 10% over a fixed period, with a money-back guarantee when the contracts expire. According to Barron's, some stamp experts have expressed doubts about the value of stamps, which may be worth less than what Afinsa charges for them.
So-called pyramid or Ponzi schemes pay high returns to investors by using the money from newly arrived investors, rather than from revenue generated by any real business.
Court officials said that since Afinsa isn't classified as a financial institution, it had received poor governmental oversight. Afinsa and Forum Filatelico officials couldn't be reached for comment. Afinsa has previously defended the program and denied any wrongdoing.
An armed National Police officer was guarding the back entrance of Afinsa's lush headquarters in an upscale neighborhood in downtown Madrid, while a steady stream of employees were abandoning the building.
Several Forum Filatelico and Afinsa employees, who were outside their respective headquarters in Madrid while National Police officers were searching the premises, said they weren't aware of any improper activities within the company.
online.wsj.com |
