I found this on another site and thought you LONErs might find it interesting reading. If enough people made enough complaints formal or informal the SEC would have to investigate.
To: Howard C. (2227 )
From: Lee Walsh Wednesday, Jun 23 1999 12:22AM ET
Reply # of 2287
I received this letter tonight in E-mail...I thought it was very interesting.
The sender asked that his name be kept confidential.
Lee
THIS LETTER WAS SENT TO THE SEC ENFORCMENT DIVISION AND 10 NEWSPAPERS AROUND THE COUNTRY.
Please keep my name confidential.
Thank you.
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To Whom it may concern:
I am writing you today to bring to your attention one of the most egregious market manipulation schemes I have ever seen. This manipulation activity is very far reaching and could effect as many as 40 to 50 publicly traded companies and thousands of innocent and unsuspecting investors.
This 'scheme' involves the use of Convertible Debentures and 'naked' short selling to cause a manipulative downward spiral in the shares of publicly traded companies, wherein the Debenture Holders turn in their conversion notices and attempt to use those shares to cover these 'naked' short positions.
This activity results in severe and often unrecoverable damage to the
companies and shareholders that see their stock prices plummet as the normal market forces of supply and demand are manipulated by these Debenture Holders. Such activities cause further damaged to the companies targeted, as their ability to raise additional funding and attract new customers are severely hindered.
The most outrageous, blatantly obvious, and overbearing perpetrators of such 'schemes' include Thomson Kernaghan & Co. Ltd., Mr. Mark Valentine, Mr. Steve Hicks and their various funds, Sovereign Partners, L.P., Canadian Advantage Limited Partnership, Dominion Capital Fund, Ltd. and Atlantis-Capital Fund, Ltd.
The above named parties may have, on numerous occasions, either directly or indirectly conspired to manipulate the shares of publicly traded companies in which Mr. Steve Hicks, Mr. Mark Valentine, and their related funds held Convertible Debentures.
This potentially manipulative activity included the 'naked' short selling of hundreds of thousands of shares through Thomson Kernaghan. & Co. Ltd. Most all of these transactions included the selling of massive amounts of shares 'naked' and without insuring their borrowability. These sales may have been used to artificially depress market value of various companies stocks in which Mr. Valentine and Mr. Hicks owned Converitible Debentures, upon
which these parties would puport to send in their conversion notices and attempt to use those shares to cover the 'naked' short positions. By reviewing the Continuous-Net-Settlement (CNS) records for Thomson Kernaghan & Co. Ltd., at the National Securities Clearing Corporation (NSCC), the true magnitude and depth of these activities can be realized.
In some instances these individuals and their funds have taken 'naked' short positions against 144 shares and then used their sales of 144 stock to cover the existing 'naked' short positions. By viewing (NSCC) CNS records and then comparing them to the the insider trading reports on companies such as DynaGen Inc (OTC BB:DYGN) the true picture of such activities becomes clear.
(See Exhibit - 1 <Insider Report for DYGN> )
biz.yahoo.com
biz.yahoo.com
Recently, several publicly traded companies have come forward and filed suit against the above named parties, charging them with various forms of fraud, manipulation, and misconduct, all relating to possible illegal 'naked' short selling in connection to the companies outstanding Convertible Debentures. Such companies include LifeOne (OTC BB:LONE), Restaurant Team's International, Inc. (OTC BB:RTIN), ConSyGen Inc. (OTC BB: CSGI), and Global Intellicom, Inc. (OTCBB: GBIT)
(See Exhibit - 2 <Company press releases> )
Federal Court Denies All Motions by Defendants In LifeOne Stock Manipulation Lawsuit
dljdirect.com.
RTIN Files Suit in Federal Court Against Canadian Debenture Holders
dljdirect.com.
ConSyGen, Inc. Asserts Claims Against Canadian Debenture Holders
dljdirect.com.
51&trn_key_nmb=PRN981221000396&symbol=CSGI&topic=PRNewsWire_news&selection=a
ll_news_sources
GBIT Alleging Market Manipulation and Illegal Profit Taking
dljdirect.com.
A clear example of these kinds of activities can be seen by viewing the Dec.22nd, 1998 Schedule 13D filed by , Sovereign Partners, L.P.
12-22-1998 SC 13D (>= 5% Acquisition) VITAFORT INTERNATIONAL CORP
sec.gov
In this Schedule 13D filing Sovereign Partners, L.P. acknowledged short selling more than 1 million shares of Vitafort.
According to the filing, Sovereign Partners, L.P. owned convertible
preferred stock in Vitafort. The Schedule 13D further disclosed that Vitafort did not honor two conversion notices, totaling 571,232 shares of common stock, received from Sovereign Partners, L.P.
In Feb. 1999, The National Law Journal, issues surrounding the effects of manipulative 'naked' short selling were discussed.
The National Law Journal (p. B07)
Monday, February 15, 1999
Junk Equity Deals Can Harm Stock
BY ROBERT C. FRIESE AND JAHAN P. RAISSI
test01.ljextra.com
"In some cases, the manipulation of the issuer's common stock is overt. Traders have observed large buy orders immediately countered with several sell orders at prices below the immediately preceding buy order.
"Marking the close"--in which sell orders are placed at the close of the market to create a downtick and a bearish impression--is one technique that has been used. Another technique involves massive short sales in situations in which almost no shares are available for borrowing, suggesting manipulative "naked" short selling.
In some of the more extreme instances, share prices of companies issuing such convertibles have been driven down by more than 90% for brief periods. On the heels of these price collapses, companies are presented with notices of conversion.
As the market price of the issuer's stock collapses, existing
shareholders are hit with the one-two punch of a downward spiraling stock price and large-scale dilution of their holdings. Issuing companies sometimes face the loss of their shares, permanently damaged capital structures and an inability to raise additional financing. " - The National Law Journal
It should be evident that such practices of 'naked' short selling by holders of companies Convertible Debentures are manipulative in nature especially when conversion notices are turned in requesting shares immediately following such activity.
The previously mentioned parties and their related funds have been
continuously partaking in such activities with numerous publicly traded companies. These activities have cause enormous damage to the companies and investors who have seen their stocks fall dramatically.
While there currently are several suits that have arisen from these
circumstances, the SEC MUST step forward and take the initiative to stop this overt form of market manipulation.
These funds and their related parties must be held accountable for the
damages they have inflicted on our equity markets and the small investors who have suffered massive losses due to this obvious manipulation.
I urge you to please review this information and take the necessary steps to insure the security and sanctity of our equity markets and take strong stepsto discourage these kinds of activities in the future.
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