Net Command's Dunavant, Hamouth had colourful pasts
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Tuesday Jun 15 1999 Street Wire
by Brent Mudry
While the United States Securities and Exchange Commission is particularly
interested in the "business success and reputation" of Net Command Tech's
president, William Dunavant, the troubled horse shampoo mogul is just the
latest of a string of controversial stock associates of Net Command founder
Rene Hamouth spanning a decade. While the West Vancouver-based stock
promoter has mingled with many notable penny stock figures before, the
personna of Mr. Dunavant marks a colourful chapter in Mr. Hamouth's
Corsaire, renamed Net Command. The SEC issued a 10-day trading halt of Net
Command shares on Friday, freezing the stock at $15 (U.S.), a market
capitalization of $210-million (U.S.). On Monday, Net Command responded by
pledging to cooperate with securities regulators and fully explain its
recent acquisitions and financial affairs.
Mr. Dunavant, based in Fort Lauderdale, Fla., was a colourful addition to
Corsaire when Mr. Hamouth brought him aboard in November. In a recent
regulatory filing, Net Command paints Mr. Dunavant as an entrepreneurial
success story. The well-groomed image began to shed hair on May 5, when
separate stories by reporters Christopher Byron on MSNBC and David Baines in
The Vancouver Sun reminded readers that Forbes magazine labelled Mr.
Dunavant in 1996 as a "persuasive scoundrel who plundered the company."
The company in question was Straight Arrow, Mr. Dunavant's self-acclaimed
biggest success story. In a variation of a classic "bust-out," Mr. Dunavant
took control of the family-run horse shampoo firm in 1989 and expanded the
market to humans, while allegedly milking the company dry. Even Forbes fell
for Mr. Dunavants new pitch of "Mane 'n Tail" in 1994. In a flattering 1994
puff piece, the business magazine noted Tane Harwood, a Houston-based
rodeo-rider-turned-advertising-executive, was excited with her "softer,
thicker, shinier and so much easier to brush" hair. "I've got two bottles of
Mane 'n Tail in my bathroom," Ms. Harwood confessed.
Two years later, Forbes, in an editorial mea culpa, admitted it failed to
"spot the whiff of fakery" and exposed Mr. Dunavant in quite unflattering
terms. "A Pennsylvania court has found Dunavant, 44, guilty of awarding
himself millions in excessive compensation, siphoning off company funds to
cover personal expenses and diverting Straight Arrow assets," stated Forbes
writer Michelle Conlin.
Recent articles by MSNBC on May 5 and Miami Herald reporter James McNair on
June 7 note Mr. Dunavant jumped from horse shampoo to high-tech video
compression technology. At a computer pornography convention in Las Vegas in
1997, the entrepreneur, then the president of Summus Technologies, an
affiliate of Verinet, told a San Francisco Chronicle reporter that Verinet's
software was great for fast porno site downloads. "People want to see it, do
it and get out of a site fast," Mr. Dunavant told the reporter. A year
later, the Mane 'n Hair and porno pitchman hooked up with Mr. Hamouth in
Corsaire.
Mr. Hamouth had built up quite a track record himself in Canadian penny
stock circles, more notable for controversy than success. The Howe Street
stock promoter's official history, as stated in Corsaire's May 25 10KSB
filing, is bereft of significant detail. From "1983 to date, Mr. Hamouth has
acted as a financial consultant to various private and public companies in
both Canada and the United States wherein he provided assistance in raising
capital for these companies. From 1972 to 1982, he was an account executive
for firms which recruited executives for large corporations," states
Corsaire.
Corsaire neglects to name any companies which Mr. Hamouth served as
"financial consultant" or his troubles with Canadian securities regulators.
Mr. Hamouth's troubles date back a decade, to 1989, when he promoted Penway
Explorers, a controversial Alberta Stock Exchange-listed stock, with Robert
Campbell and Rajiv Vohra. After Penway, Mr. Hamouth moved on to play various
roles in a number of Vancouver Stock Exchange-listed companies in 1990 and
1991, including Ber Resources, Burro Creek Minerals and Bellwether
Resources. Questionable stock issuances to a number of Vancouver players,
including Mr. Hamouth, led to unwelcome scrutiny from the VSE. In September,
1990, six months after Mr. Hamouth was named president of Ber, the VSE
halted trading in the company's shares, "pending clarification of share
issuances and acceptability of directors."
Things got worse for Mr. Hamouth in February, 1991, when the British
Columbia Securities Commission temporarily suspended him and Mr. Vohra after
they, along with Mr. Campbell and Brett Bradley Salter, were charged by the
Royal Canadian Mounted Police in Toronto for manipulating shares of Penway.
The RCMP claimed the foursome, operating from Toronto, Montreal and Calgary,
conspired between March 1, 1989, and June 26, 1989, to commit the indictable
offence of defrauding the public by manipulating shares of Penway, alleged
violations of the Criminal Code of Canada.
The Penway associates were acquitted two years later, on Oct. 26, 1993, but
Mr. Hamouth kept active in the interim. In March, 1993, the VSE stated that
trading in Wedgewood "will remain suspended pending clarification of market
activity, share distribution and the involvement of Mr. Rene Hamouth." (By
coincidence, a Vancouver broker, David Norman Gilbert, was later snared by
the VSE for his involvement in Wedgewood, a classic Howe Street rig job, in
1993 and 1994. The VSE fined Mr. Gilbert $231,000 and banned him for life in
March, 1998, for his role in Wedgewood and his handling of several accounts
of Charles Bazarian, one of the best-known fraudsters in the U.S. savings
and loan fiasco, in 1991 and 1992. Mr. Bazarian had just been paroled after
serving three-and-a-half years in jail for bank fraud, conspiracy and
related crimes linked to the collapse of financial institutions in Oklahoma,
California and Florida in the 1980s.)
After enduring the cloud of criminal charges for two-and-a-half years, Mr.
Hamouth, Mr. Campbell and Mr. Vohra were acquitted on Oct. 26, 1993, after a
seven-week trial in Ontario Court's General Division. Mr. Justice Robert
Blair ruled that Crown prosecutor Jay Naster had failed to prove the trio's
attempts to influence Penway's stock price actually constituted stock
manipulation. The Globe and Mail noted the judge described Mr. Hamouth and
his Penway associates as penny stock salesmen whose "stock and trade is
hyperbole." "They were engaged in what was an attempt to promote the Penway
stock, causing its price to rise in the process, to their own profit and
advantage but also to the profit and advantage of those who followed them
into the market to buy the stock," stated Judge Blair in his reasons.
The acquittal was a bitter defeat for Mr. Naster and the court use of a
pioneering computer program, the "Stock Market Analysis for the
Reconstruction of Trades," which produced a matched trade report. Mr. Naster
had argued that Mr. Campbell enlisted Messrs. Hamouth, Vohra and Salter to
buy Penway shares, push up the stock price and then sell the shares to an
offshore mutual fund, according to the Globe. Judge Blair noted that wiretap
evidence showed Mr. Campbell felt he could "account for" 2.03-million shares
of Penway's 2.2-million shares, leaving a razor-thin public float of just
170,000 shares. The judge, however, ruled that the SMART program "does not
reflect the whole picture of what was happening in respect of the stock in
and around that time," as it did not detail the other bid and ask orders in
the market context.
With the Penway acquittal in hand, Mr. Hamouth was reinstated by the BCSC on
Dec. 15, 1993. A month later, Corsaire, then called Acunet, was reorganized,
with Paul Parshall named as president and chief executive. Acunet had been a
dormant shell since 1990, three years after it was incorporated in Delaware.
Mr. Hamouth came on board in March, 1995, when he was elected as president,
changed the company's name to Corsaire Snowboard and began a review of
potential acquisitions.
Mr. Hamouth's early Corsaire prospects did not pan out well. Court filings
note that Corsaire had a pending deal in March, 1996, to vend in two
numbered companies owned by West Vancouver multilevel marketing whiz Samuel
William Kalenuik, 152330 Canada and 540704 Ontario. 152330 Canada held a
one-third interest in Matol Partners, a mineral supplements and nutritional
products multilevel operation. Mr. Kalenuik funnelled his commission income
through 540704 Ontario.
Mr. Kalenuik had been "enormously successful," according to a judge, who
noted the promoter's income rose from $1.05-million in 1989 to a peak of
$5.25-million in 1991. That year, however, Mr. Kalenuik separated from his
wife, and without her help, his income fell to $2.76-million, collapsing
further to $621,000 in 1993 and $116,000 in 1994. It is unclear what
attraction these two numbered companies held for Mr. Hamouth, also of West
Vancouver, and the proposed vend-in soon collapsed.
By August 19, 1996, Corsaire had a new deal in the works, an agreement to
acquire 75 per cent of Mutual Exchange Canada, a Vancouver-based barter
promotion company. The pending deal was revised on Oct. 9, 1996. By
coincidence, this was the same day the SEC announced that Corsaire's former
president, Mr. Parshall, had agreed to a permanent injunction and $257,000
(U.S.) in fines for an innovative penny stock scam. On Oct. 1, Judge Bruce
Jenkins of the U.S. District Court for the District of Utah entered final
judgments against Mr. Parshall and Axiom Security Solutions.
Without admitting any wrongdoing, Mr. Parshall was barred from serving as a
director or officer of a public company and he agreed to pay disgorgement of
$150,000 (U.S.), a civil penalty of $100,000 (U.S.) and interest of $7,600
(U.S.). The SEC alleged that Mr. Parshall set up a new Utah company,
Republic International, to assume the identity of a defunct but
publicly-traded company of the same name. Through his own transfer agent,
TransGlobal Securities, Mr. Parshall issued common shares in the names of
the old shareholders and then sold the newly-created shell to Axiom, a
private company, as a vehicle for taking it public, according to the SEC.
The innovative penny stock promoter also made assorted false regulatory
filings.
On Nov. 14, 1996, five weeks after hearing the unfortunate news about Mr.
Parshall, Mr. Hamouth got more bad news. Mutual Exchange Canada declared
that its sale agreement was no longer valid, citing non-performance of
certain terms and conditions, according to Corsaire. "The position of legal
counsel and the company is that there is no basis for this assertion and the
agreement is still valid," stated Mr. Hamouth in a quarterly filing dated
Feb. 27, 1997. By this time, however, the Vancouver penny stock promoter was
well on his way to setting up a much bigger deal for Corsaire with a rich
cast of Howe Street notables, none of which is detailed in Corsaire's
regulatory filings.
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