Eagletech CEO: Stock deregistration to be appealed
South Florida Business Journal - 3:51 PM EDT Thursday
by John T. Fakler
Eagletech Communications, which has attempted to turn its regulatory woes into a forum against naked short selling, has lost its fight to remain a publicly traded company.
The Securities and Exchange Commission, Wednesday, ruled the Fort Lauderdale-based company failed to file required financial reports since 2001, and that Eagletech's securities will be deregistered.
Eagletech Chief Executive Officer Rod Young said Thursday he would "definitely" exercise his right to appeal the SEC order in front of a U.S. court of appeals.
"There are a lot of doors opening for me right now, and I plan to walk through them," he said.
The agency had issued a deregistration order last year. However, Eagletech had appealed the move, blaming its failure to file financial reports on alleged criminal conduct by third parties.
Eagletech is one of several small companies represented by a legal consortium led by Texas class action lawyer John O'Quinn. They generally claim short sellers, through failures to timely deliver stock to close out securities transactions, have illegally depressed their stocks.
Short sellers typically borrow shares to sell them, hoping they later will be able to replace the shares with stock bought at a lower price. Trading without a borrowing agreement is called naked short selling. It's illegal for most investors, but legal for firms that make markets in stocks and bring liquidity to the market.
So far, O'Quinn and his corporate clients have come up short with most cases thrown out of court, though several still linger.
Eagletech acknowledged its failure to file required financial reports, but argued two separate manipulations, including alleged naked short selling, led to financial difficulties and its failure to file.
In an opinion issued Wednesday, the SEC noted although Eagletech blames others for its financial crisis, "alleged criminal activity does not alter the fact of Eagletech's failure to file its quarterly and annual reports or its present inability to cure these deficiencies."
In its opinion the SEC also rebuked Eagletech's claim a deregistration of its stock would constitute unconstitutional "taking of property."
Eagletech had argued that Regulation SHO, a short selling rule adopted by the SEC early last year, deprived its shareholders of property, violating the Fifth Amendment of the U.S. Constitution, when it excluded earlier failure to deliver stock from stricter settlement rules. |
