Re: Chalem & Clean-X Press
[Thanks to jhild]
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From NY Times:
While he was at the brokerage firm, Chalem bought Allen's Acres, a motel in Hampton Bays on Long Island. Shortly thereafter, Clean-X-Press, a San Francisco company that said it was in the dry-cleaning business, issued a news release announcing that it had bought the motel for $2.4 million, and would lease it back to Chalem.
There is no evidence the deal went through. And if the announcement was intended to boost the company's stock price, it failed. The shares, which then traded for about $2, now go for less than a penny. Irate investors have sued, and investigators have been examining both Clean-X-Press and the brokerage firm that promoted it, which has been linked to organized crime.
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Stock firm in S.F. is target of 4 probes
By Edward Iwata
OF THE EXAMINER STAFF
Law enforcement agents and Wall Street regulators are investigating a San Francisco stock brokerage firm, its nationwide web of related companies, and a maze of investment deals that lawsuits claim lost several million dollars for clients.
Global Strategies Group Inc., a small brokerage house in the Financial District, is the target of fast-growing investigations by the Justice Department, the Securities and Exchange Commission, the National Association of Securities Dealers, and the state Department of Corporations, The Examiner has learned.
Agents are investigating allegations that Global and other firms defrauded business people and elderly retirees through bogus loan guarantees and stock market manipulation, according to court and business records, and sources close to the probes.
Well-heeled clients were courted at posh dining spots such as Bank of America's Bankers Club, or during lunch meetings of the Executives Association of San Francisco, a private club.
Investors in California and other states have filed more than a dozen lawsuits seeking to recover their money.
"Our clients are good people who were ripped off by these guys, and they deserve full restitution," said Steve Kipperman, a San Francisco attorney representing a Bay Area retired couple, Stephen and Frances Yee.
Gene Koon, a Los Angeles attorney representing Global / GSG and Berkshire, strongly denied that his clients illegally profited from securities fraud, racketeering, breach of contract and other violations alleged in civil suits.
Key players in the criminal and civil investigations include:
*James Bingham Dean, a charming, well-dressed stockbroker for Global. Dean lives in a Pacific Heights mansion and tools around town in a Mercedes-Benz. He is an Olympic Club member and a Republican Party stalwart who has been photographed with Gov. Wilson and former President George Bush.
*John G. Wright Jr., a graduate of the Wharton School of Business and principal of Berkshire Venture Partners, a related firm in Woodland Hills. Attorney Koon said that Wright and Berkshire -- as the contracting party on the investment deals -- plan to honor all of the financial guarantees made in the investment contracts. "It is Mr. Wright's intention, if he is able, to make good on those obligations," Koon said.
*Jon F. Williams, the 50-year-old president of GSG Financial Inc., Global's parent company in San Francisco. Williams is a veteran stockbroker who has worked at Shearson Lehman Hutton, Prudential, Bear Stearns and Dean Witter.
Regulators started eyeing Global several months ago, after several angry investors sued the brokerage house.
The investigations heated up Aug. 17, when FBI agents and SEC examiners raided the fourth-floor offices of Global / GSG and Berkshire in the Merchants Exchange Building at 465 California St.
Armed with a search warrant, the investigators hauled away boxloads of computers, records, and books. According to those familiar with the case, the computers' hard drives hold records on clients and stock deals that would equal 40 to 50 file cabinets. Investigators will need several months to sort through the documents.
The alleged investment scam worked in two steps, as described by documents and sources:
First, investors allege they were enticed by Dean and others to put $100,000 or more of their retirement money into securities and other investments described as "safe and secure."
The most common investment: loaning money to a promising, private company that had plans to "go public" -- Wall Street jargon for publicly selling shares on the stock market.
Dean allegedly guaranteed his clients they would enjoy a 20 percent to 50 percent return on their investment within three to six months, the lawsuits claim. They would be repaid in cash or stock from the company's rising fortunes. If the company's stock died, the investors' money would be covered by another financially stable company.
"It sounds like a very attractive investment," said San Francisco attorney Barry Tagawa, whose client, Joseph Neitzel, a retired 60-year-old businessman in Suisun, has sued Global / GSG and Berkshire. "Where else can you get a return (on your money) like that?"
In reality, the investments and repayment promises were fraudulent and worthless, the lawsuits and sources allege. Global / GSG and Berkshire failed to warn clients that their money was going to high-risk, speculative deals, they say.
The lawsuits and sources also charge that deals were backed by bogus offshore companies in the British Virgin Islands and elsewhere. The "shell" companies -- Thunder Bay Holdings Ltd., Bayport International Ltd., and First London Capital Ltd. -- had no assets and existed only on paper, they say.
The second step of the alleged scam involved illegal stock market manipulation in the trading of shares of the newly public companies, according to court records and sources. Rapid-fire trading of stocks promoted by Global aroused the attention of other traders, records and sources allege, thus creating an artificial demand for the stocks and driving up share prices.
At the stock's peak, Global-related investors would sell their shares high and make big profits, according to sources and court papers. Unsuspecting investors would be left hanging, lawsuits allege.
One questionable Global deal centered on a San Francisco-based laundromat called Clean-X Press, which owns 12 laundromats and a dry-cleaning plant in the Bay Area, according to court records and sources.
In press releases and private meetings with investors, Clean-X executives vowed to buy 240 laundromats nationwide over the next two years. The sale of half of those stores would generate $5 million a year in profits, they said.
One meeting drew 80 investors to the Bankers Club in the Bank of America building on California Street. But despite the big pitch, some of the savvier investors in the crowd sensed something was wrong. The dog-and-pony show sounded too good to be true, they said.
"All of their business plans should have been implemented by then -- there should have been brick and mortar going up already," said one stock market expert. "But instead, they had all these grandiose projections. Everything sounded too fishy."
Nonetheless, like balloons about to burst, the stock in Clean-X traded at pumped-up values. In March 1995, Clean-X's stock was at 5 and 6. "The (stock prices) were totally unjustified," said an investment expert who followed the companies. A few days later, the share price tumbled to 2, then 1.
Eventually, Global found itself in financial trouble. Several sources say East Coast investors loaned Global hundreds of thousands of dollars. Legal papers now list a new majority owner: Robert Carlin, a New York stockbroker.
The future looks unclear for Global / GSG and Berkshire. The federal raid last month shut down the firms' San Francisco offices. But Global / GSG still has a New York office with more than 100 employees.
Examiner librarians Rebecca David, Kirsten Neilsen and Michael Tuller contributed to this report.
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Here's the broker record on a Robert Carlin that may have been the one mentioned as being associated with the brokerage that was pushing Clean X-Press (CLNX) that announced a purchase of Chalem's motel in Hampton Bays. I believe that Sovereign Equity and Euro-Atlantic were mentioned in the Businessweek article about the MOB on Wall Street.
CRD# 1310868
ROBERT JAMES CARLIN
Employing Firm: OLD DOMINION EQUITIES
Firm CRD Number: 44286
Office of Employment
Address: GLEN ALLEN 23060
Start Date: 09/15/1997
End Date: to present
Positions Held:
PREVIOUS EMPLOYMENT
Employing Firm: WEST AMERICA SECURITIES CORP
Firm CRD Number: 35035
Office of Employment
Address: NEW YORK
Start Date: 02/13/1998
End Date: 06/01/1998
Positions Held:
Employing Firm: GLOBAL STRATEGIES GROUP, INC.
Firm CRD Number: 27414
Office of Employment
Address: NY 10004
Start Date: 04/08/1997
End Date: 04/15/1998
Positions Held:
Employing Firm: EURO-ATLANTIC SECURITIES INC.
Firm CRD Number: 21367
Office of Employment
Address: NEW YORK, New York 10004
Start Date: 10/07/1996
End Date: 04/03/1997
Positions Held:
Employing Firm: SOVEREIGN EQUITY MANAGEMENT CORP.
Firm CRD Number: 20016
Office of Employment
Address: NEW YORK, New York 10004
Start Date: 10/10/1995
End Date: 11/12/1996
Positions Held: OTHER - COMPLIANCE
Employing Firm: THE AGEAN GROUP, INC
Firm CRD Number: 30835
Office of Employment
Address: BOCA RATON 33432
Start Date: 05/15/1995
End Date: 06/23/1995
Positions Held: OTHER - A.E
Employing Firm: D. BLECH & COMPANY, INCORPORATED
Firm CRD Number: 26063
Office of Employment
Address: BOCA RATON 33486
Start Date: 07/07/1994
End Date: 09/25/1994
Positions Held: OTHER - COMPLIANCE
Employing Firm: JOSEPH ROBERTS & CO., INC.
Firm CRD Number: 15971
Office of Employment
Address: BOCA RATON 33432
Start Date: 01/29/1993
End Date: 08/03/1993
Positions Held: OTHER - BRANCH MGR.
Employing Firm: PARK PLACE FINANCIAL
Firm CRD Number:
Office of Employment
Address: BOCA RATON
Start Date: 12/01/1992
End Date: 12/01/1997
Positions Held:
Employing Firm: PARK PLACE INC
Firm CRD Number:
Office of Employment
Address: BOCA RATON
Start Date: 12/01/1992
End Date: 07/01/1994
Positions Held:
Employing Firm: KENT CAPITAL
Firm CRD Number:
Office of Employment
Address: TAMPA
Start Date: 09/01/1992
End Date: 12/01/1992
Positions Held:
Employing Firm: J. W. GANT & ASSOCIATES, INC.
Firm CRD Number: 7963
Office of Employment
Address: BOCA RATON
Start Date: 04/02/1985
End Date: 07/07/1992
Positions Held: OTHER - COMPLIANCE |
