2) $2,139,122 was advanced to Plasticon by the CEO, James Turek. Advancement to be paid with 10% interest. A conflict of interest, the CEO loans money to his own company at an extremely high interest rate. Essentially, "milking the company for all its worth."
This question can't be answered without knowing the source of the money. Did it come from Turek's life savings pre-Plasticon? If so, 10% interest is quite fair, IMO. If it came from selling PLNI stock, then 10% is exorbitant.
So how can we make an educated guess here? Well... also in the Form 211 is the following:
During 2005, the Company received approximately $6,000,000 of financing from LexReal to primarily fund the above acquisitions and to settle the common stock commitments... LexReal LLC is owned by the Company's majority shareholder.
How exactly can someone in the midst of bankruptcy be the owner of a company that "earned" $6,000,000?!! Could it be that Lexreal's source of income was PLNI stock? The answer apparently lies in this footnote, also in the filing:
1 During the course of 2005 James N. Turek loaned Plasticon International, Inc $5,799,849.12 to execute its business plan and acquire revenue producing businesses. In return for forgiveness of the loan to Plasticon International, Inc, Mr. Turek agreed to accept Series B Preferred Shares with voting rights equal to 7.3 billion common shares’. These voting rights have established James N. Turek as the controlling shareholder for Plasticon International, Inc. The loan to Plasticon International, Inc as well as the issuance of the preferred shares was accomplished through LexReal Company LLC of which Mr. Turek is President and principal shareholder.
Aha! So now we see the pattern: Turek gives his shares to Lexreal. Lexreal dumps the shares, loans the resulting money at 10% interest back to PLNI -- using Turek's name -- then forgives the debt in exchange for more shares, which are dumped again, and so on and so on. As for the tax consequences of this, I'll defer to someone here more qualified than me.
But it gets worse...
2 Due to the Series B Preferred shares being issued as a means of debt forgiveness and the preferred shares having an option to convert into restricted shares, should the controlling shareholder wish to exercise the option, there was therefore a need to increase the authorized shares for Plasticon International, Inc.
So now we know the reason for increasing the O/S was for Turek to be able to convert his preferred to common, launder the shares once gain through Lexreal for cash, lather, rinse, and repeat. Conclusion: Yes, I agree, Turek is "milking the company for all its worth."
- Jeff |
