OT, KIS will love this report:
(I was alerted to this company back in March, when following BCST, because of a news item of an internet related deal between them and the World Wrestling Federation)
When I did some Edgar research, the whole thing smelled bad.
Synopsis of this news item. Company Chairman and another person charged with screwing investors, by issuing millions of shares of stock at a deep discount for "Foreign Sales" under Reg S. They then scarfed the shares up themselves, through an off-shore corporation and resold them to the US public for a tremendous gain. I've been curious of this Reg S deal for some time as it involves float creepage, dilution and fraud. I'm suspicous that some larger more respected companies are involved in this as well.
Symbol(s) UTDL & Date
+DJ Chmn Of Grand Havana, Utd Leisure Charged In Stk Scheme
Story 4639 (AQQA, DLRTD, PUFF, UTDL, UTDLW, I/ENT, I/POL, I/REC, I/REQ...)
(MORE) DOW JONES NEWS 05-21-99
03:33 PM
Story 5252 =DJ Grand Havana Chmn -2: Chgs Concern Foreign Stock Sales
By Michael Rapoport
NEW YORK (Dow Jones)--The chairman of Grand Havana Enterprises Inc. (PUFF) and United Leisure Corp. (UTDL) was indicted Friday on charges that he conspired with executives of Stratton Oakmont Inc. to profit from improper foreign sales of unregistered stock.
Harry Shuster, 64, of Beverly Hills, Calif., was charged with conspiracy and securities fraud, the U.S. Attorney's office in Brooklyn, N.Y., said.
Prosecutors say Shuster worked with Jordan Belfort, Stratton's ex-chairman, and Daniel Porush, its ex-president and chief executive, in manipulating unregistered stock of Dollar Time Group Inc. (DLRTD) and Aquanatural Co. (AQQA), two small companies that Belfort and Porush controlled.
They allegedly issued millions of discounted Dollar Time and Aquanatural shares under the Securities and Exchange Commission's Regulation S, which allows companies to issue and sell unregistered stock at a substantial discount to foreign investors. But Belfort, Porush and Shuster bought the shares themselves, hiding the fact that as U.S. citizens they weren't allowed shares themselves, hiding the fact that as U.S. citizens they weren't allowed to do so, according to the government.
They then resold the stock to unwitting investors in the U.S. who paid full market price or more, prosecutors said, with the conspirators pocketing the difference - millions of dollars in illicit profits.
Shuster controlled Plus One Finance, an offshore company through which he used funds held in a Swiss bank account to buy Dollar Time and Aquanatural shares, prosecutors said. Proceeds from the scheme were laundered through Plus One so that Shuster and others could conceal the fact that they were U.S. citizens and weren't entitled to buy the stock, the government alleges.
Shuster also used Plus One Finance to promote other fraudulent securities investments, in United Leisure and Grand Havana and in securities underwritten by Stratton Oakmont, the government said.
Shuster appeared before a U.S. magistrate Friday afternoon and is being released on a $1.5 million personal recognizance bond. His attorney couldn't immediately be reached for comment.
If convicted, Shuster could face a maximum of 20 years in prison and fines of up to $10 million.
Assistant U.S. Attorney Joel M. Cohen said the charges against Shuster are the first to come out of the alleged Regulation S scheme since Belfort and Porush were indicted on related charges last year. More people will be charged in the months to come, he said.
Belfort and Porush had been scheduled to go to trial next month, but that has now been put off until September, Cohen said. Attorneys for both men couldn't immediately be reached.
Regulators say Stratton Oakmont, a now-defunct Lake Success, N.Y.,
penny-stock brokerage firm, defrauded investors out of tens of millions of dollars. It ceased operations in 1996 and has been barred from the securities industry; it is currently being liquidated.
Critics of Regulation S have alleged it can be a haven for stock fraud. Last year, the SEC toughened regulations by approving new rules that extend the period that purchasers of Reg S stock must wait before reselling their shares.
Alan Cohen, Shuster's attorney, said his client is "completely innocent of these charges."
Cohen said Shuster is resigning from his positions at both Grand Havana and United Leisure to devote his full efforts to his defense. The charges themselves are "wholly unrelated" to either Grand Havana or United Leisure, the attorney noted. |
