Re: 8/19/02 - [GECC] Longandshortreports.com: This Edition Of Profile Uncovers Indications of Fraud At GECC (Part 1 of 2)
LSR PROFILES
Golf Entertainment, Inc.
(OTCBB: GECC)
This Edition Of Profile Uncovers Indications of Fraud At GECC.
For Photos of GECC headquarters and principle players detailed in this story, click here: longandshortreports.com
ALICE IN WONDERLAND
Or
Alicia in el Pais de las Maravillas
--Magic Mushrooms and Hispanic Fishermen
Monday, August 19, 2002
By: Dr. Robert Church, LSR Investigative Journalist
Long and Short Reports had never heard of Golf Entertainment of Springdale, Arkansas (OTCBB-GECC) before June 13, 2002. On that date an alert reader, mindful of our love of OTC madness, alerted us to a PR Newswire announcement by the company of a proposed "criminal and civil action" against message board participants who were posting "false information" about the company. Company CEO Tim Brooker claimed to be requesting the assistance of Federal criminal authorities and the SEC in countering the effects of what he claimed was an organized conspiracy to short the stock of GECC and drive the price down. The company subsequently filed a "Civil RICO" complaint in the Western Arkansas Federal Court alleging an organized conspiracy to manipulate their stock price and seeking the identity of seven "John Does" posting on the Lycos site, Raging Bull. A review of the posts cited as pointing to a conspiracy reveals that they consisted of documented facts obtained from the public domain, albeit expressed in the colorful style typical of message board culture. RB was subsequently served with a subpoena seeking the identities of approximately 90 RB aliases. Lycos declined to respond to the subpoena.
Once alerted, we moved quickly to conduct a preliminary investigation to see if the GECC story warranted follow-up. Speed is imperative when researching the wonderland world of BB companies threatening basher suits. Such companies usually quickly proceed to declare bankruptcy or announce an indictment of management. Attempting to silence critics by threats of legal action rather than refuting them with facts is almost always a sure sign of a company with something-or perhaps a lot-to hide.
LSR contacted Golf officials regarding one of the more contentious message board claims; that company officials and affiliates had a background of major felony conviction and imprisonment. Company spokespersons denied that this was true. When LSR subsequently obtained official confirmation that the criminal background claims were indeed accurate, Golf officials were re-contacted. The officials declined further comment. We decided it was time to jump headfirst down the rabbit hole.
And one of our first discoveries was that the staff of the NW Arkansas Business Journal was following the same story. They agreed to collaborate with LSR's staff. This story, released simultaneously with the NWABJ story published today at arkansasbusiness.com , owes much to their generous assistance, open sharing of information, and intimate knowledge of local players and personalities. LSR also extends its thanks to many anonymous Internet volunteers who provided significant assistance in the research leading to this story.
Our joint investigation has led to the following major findings regarding Golf Entertainment dba Sienna Broadcasting.
* The Company engaged in a series of what seems to be sham asset transactions that served no purpose other than to inflate the value of balance sheet assets.
* Although the company denies a "material relationship" with Genesis Trust, a non-profit trust involved in the asset transactions and the current majority shareholder of Golf stock, there are in fact so many personal and business overlaps between the two as to make them indistinguishable.
* The company announced a "fully subscribed" $5 million stock placement with a non-existent organization.
* Officers and Directors of both the company and of the Genesis trust have a history of multiple felony convictions involving, among other things, mail fraud and wire fraud.
* What appears to be a very friendly "fraud" lawsuit brought by the Genesis Trust against the company resulted in the transfer of fifteen million free trading shares-two thirds of the company's outstanding shares after the transfer- to the Genesis Trust. The suit and its settlement by the company were not announced until months after the fact.
* The company issued multiple press releases that we have found to be significantly at variance with fact.
* Immediately upon settlement of the suit, Genesis hired multiple promoters and appears to have begun disposing of shares on the open market.
* The Company employed an accountant who at the time of his engagement was charged by the SEC with two counts of accounting irregularity, including overvaluing assets obtained through stock purchase agreements. The accountant has subsequently been prohibited from participating in SEC filings.
LSR and NWABJ staffs are apparently not the only parties concerned about the circumstances surrounding Golf Entertainment. LSR has obtained a copy of an August 13, 2002 letter written by US Senator Tim Hutchinson of Arkansas to SEC Chairman Harvey Pitt. In the letter, Senator Hutchinson specifically requests that Chairman Pitt carefully review questions regarding Golf Entertainment submitted to the SEC by Benton County prosecutor Robert Balfe. Senator Hutchinson's staff have verified that the letter in genuine. We are not privy to the questions raised by Prosecutor Balfe, but we would be quite surprised if his concerns and ours do not overlap.
As of the publication of this LSR feature article, GECC has made another futile attempt to silence its critics by filing an amended "RICO" complaint naming this reporter, other staff and principals of LSR, NWABJ editor Jeff Wood, Benton County Prosecutor Robert Balfe, an unnamed, but "corruptly influenced" SEC official, and a variety of other "John Does" as conspirators in a scheme to sell GECC shares short and then profit by driving down the stock price of this deeply and deservedly obscure company. The bizarre allegations of the complaint do not merit a response beyond a statement that discovering the truth and publishing it are the core responsibilities of the North American free press.
Because of the volume of information discovered in this investigation and the complexity of the GECC story, LSR will publish this report in much more detail than usual. We feel that the information is important not only because it reveals the convoluted inner workings of an attempted pump and dump scheme, but also because it shows that public information publicly expressed can play a major role in policing the capital markets. Or, as one waggish message board poster put it: "It illustrates why it is unwise to use four oafs and one dead fish in an attempt to bleed the multitudes." Mirabilis dictu!
Following the March Hare
On April 6, 2001 the Morning News of Northwest Arkansas reported that Multicom Media Group of Springdale, Arkansas had reached an agreement with Missouri officials of Christians Incorporated for Christ to purchase television station K20CT, a low power station in Springdale, Arkansas. Multicom spokesperson Tim Brooker, a former ultra-conservative radio talk show host in Northwest Arkansas, stated to the Morning News that the station's Christian broadcast format would be changed to an all-Spanish language format to reach the rapidly growing Hispanic population in the area. CIFC Vice President Keith O'Neil confirmed that his organization had agreed upon sales terms with Multicom. CIFC transferred operational control of the station to Multicom on a lease basis pending the close of the sale and Federal Communications Commission approval of the license transfer. A subsequent Morning News article identified a James Bolt as a Multicom spokesperson and as managing director of the station. Bolt previously headed Utica Publishing, producing an on line newspaper covering NW Arkansas news and politics.
The announced plan might have produced a successful small business. Census data show that about 24,000 persons in the stations viewer area identified themselves as Hispanic and that the area Hispanic population had grown significantly since the last census. The station planned to produce some local content, but was to serve primarily as a rebroadcaster of the now bankrupt but still operating Hispanic Television Network programming.
There were some significant challenges facing the station. Cox Communications, the dominant local CATV provider, did not and still does not carry the station in its core or premium channel selection. Cox could, if it determined that the Hispanic market demand justified the expense, add the dominant Telemundo Hispanic content channel to its offerings in NW Arkansas. Ozark Wireless, a small regional provider with a subscriber base of 350 persons, does carry the station's programming, but the bulk of the target market would have to receive the signal through an external antenna, limiting the station's market share and its advertising rates.
Multicom, Brooker, and Bolt re-emerged as Golf Entertainment, dba Sienna Broadcasting in a January 8, 2002 8-k filing by Golf, an inactive but fully reporting OTC-BB shell formerly in the business of managing golf courses. No longer content to operate a local station, Brooker-now CEO of Golf-announced plans to acquire multiple existing stations or new broadcast licenses and to become a major producer and broadcaster of Spanish language programming in secondary markets. Over the next several months the company announced additional plans, including hiring a Spanish speaking newscaster for local news reporting and producing specialty series such as "Hispanic Fisherman" (how would the fish know?) and children's programming.
Despite this announcement and subsequent press releases and filings describing Golf as the station owner, FCC freedom of information inquiries reveal that ownership of the station has not changed hands as of this date. The FCC has received neither a notice of a broadcast format change nor an application for license transfer.
Going Twice, Going Once-A Private Public Auction in Wonderland
The January 8-k outlines a series of events of Byzantine complexity leading to the transformation from Multicom to Golf. According to the SEC filing, on December 31, 2001 and subsequent documents Golf acquired-through submission of a "sealed bid"- assets consisting of unspecified broadcast equipment and the right to purchase the license for low power television station KVAQ from The Genesis Trust. The assets and station license purchase were obtained in exchange for 3.75 million restricted shares of Golf stock. Genesis, described as a non-profit tax-exempt community trust, supposedly had acquired the assets through a "public auction" held on December 25 or 26, 2001. The filing makes no mention of Multicom. A search of local news publications finds no notice of a "public auction" of broadcast assets.
Golf Shares were illiquid at the time of the sale with a last recorded sales price of $.04 per share. This share price would value the assets acquired at $150,000.00. Taking a clue from Alice, perhaps, and nibbling on the side of the mushroom that makes you grow, the sales agreement valued the shares at $.27 per share, contingent on the shares of Golf attaining that market price within 30 days of the transaction. This stipulation valued the assets at $1,012,500.00.
Perhaps CEO Brooker, a fundamentalist Christian (think Cotton Mather on steroids) and part time professor of business at Oral Roberts University of Tulsa, Oklahoma has special influence with higher powers. Although Golf's share price did not budge during most of January including a number of days of zero volume, the price miraculously rocketed to $.30 per share in a three-day period in late January on total volume of approximately 300,000 shares. Although the share price just as promptly collapsed, Golf's new auditor booked the assets acquired at $1,012,500 per the agreement.
Christians Incorporated for Christ Vice President Keith O'Neil has a different recollection of events. In interviews with LSR and NWABJ staff O'Neil stated that CIFC had never transferred assets or the right to purchase the station license to the Genesis Trust through auction or by any other means. O'Neil reported that he was approached by Brooker and Bolt in December and told that they wished to re-negotiate the sales agreement and make Golf the purchaser. O'Neil agreed, and a revised sales document was executed in April, 2002 with final payment due in August, 2002. Although O'Neil would not identify the total purchase price-described as substantial- he did state that it was significantly less than one million dollars. O'Neil also denied the existence of a $290,000 Golf note payable to CIFC that was stated in Golf SEC filings as having "no payments due until 2003". O'Neil insisted that the sales agreement required full and final payment in August, 2002.
Who sold what to whom and why? The Genesis Trust could only have acquired the "assets" and station purchase right from Multicom. Did Multicom principals Brooker and Bolt conduct a sham "public auction" to Genesis Trust and then repurchase the assets and license rights as Golf principals? Was this a series of "flips" of property conducted solely to achieve an inflated asset value? We think so.
Genesis Trust "Senior Trustee" Charles Rusk of Rogers Arkansas corroborates this view. Rusk stated in a tape recorded interview that these were "paper transactions" with no assets actually transferred. Rusk, ironically, was formerly in the auction business.
Exactly what is the Genesis Trust and why did they become involved in this transaction? The 8-k states specifically that there is "no material relationship between the Genesis Trust and the registrant" (Golf), implying that the purchase by Golf was an arm's length transaction. As it turns out it was about as arm's length as a joint checking account with a spouse.
Zero Degrees of Separation Between Mi Casa y Su Casa
A search of State incorporation databases and the complete IRS online database of exempt organizations have as yet found no evidence of a corporate existence of the Genesis Trust or of its claimed tax-exempt status. LSR has not yet received a response to a request to the IRS for an copy of an exemption application under the name The Genesis Trust. Perhaps Genesis nibbled the side of the mushroom that makes you very, very small.
The address provided for the Genesis Trust is 2104 S. Walton Blvd, Suite 5, Bentonville, Arkansas, an address shared by Genesis Senior Trustee Charles Rusk's mortgage business. In his recorded interview Rusk reported that attorney John Dodge of Springdale, Arkansas "drew up the papers creating the trust". Mr. Dodge is corporate counsel and Vice President of Golf Entertainment. Dodge also represented the trust in previous litigation against AARO Broadband. Golf's Bolt was party to AARO litigation arising out of his sale of Utica Publishing to AARO.
Genesis Trustee Mel Robinson was personally represented by Dodge as recently as October 2001 in litigation against AARO. A Robinson deposition obtained from public case records also reveals that Robinson's acquaintance with Golf's Bolt was more than casual. Bolt and Robinson were in fact business partners in Bolt's Utica Publishing business. They may have first become acquainted at the El Reno Federal Correctional Facility during overlapping terms of imprisonment for mail and wire fraud charges.
"No Material Relationship?" The information obtained by LSR and NWABJ points to there being no material difference between Golf and Genesis! The Golf SEC filings regarding GECC's relationship to the Trust seem to be, plainly speaking, a lie. Given the additional information obtained by LSR and NWABJ about the principals of Golf Entertainment, that is not surprising.
The Mad Hatter's Tea Party Guests
Officers and Directors of public companies are public figures. As such, questions of their personal character and past behavior are legitimate concerns of potential investors in the company stock. Our investigation has uncovered information about the Golf and Genesis principals that should make potential GECC investors think more than twice before transmitting a GECC buy order to their broker.
Tim Brooker, CEO and Chairman of Golf Entertainment is somewhat unusual among the group of persons associated with Golf or the Genesis trust in that he does not seem to have a criminal record. Brooker does, however, have an interesting and colorful personal history.
According to internet postings and local sources Brooker was formerly active in the Washington County Militia, a self-styled right wing paramilitary group inclined to see UN troops and other sinister threats behind each of the numerous trees of NW Arkansas. Brooker expressed his extreme political and religious views publicly through a now discontinued ratio talk show.
Brooker participated in several lawsuits against Sheriff Andy Lee of Washington County, one alleging improper disposal of county property, another alleging that the Sheriff improperly received a disability pension from his former employer. Both suits were ultimately dismissed. Brooker is also reported to have been involved in a virulently racist public campaign protesting Lee's decision to house predominantly African American state prisoners in Washington County jail facilities.
According to Federal court and Bureau of Prison records James Bolt, COO of Golf Entertainment has a criminal history of conviction for mail and wire fraud and making material false statements to a Federally insured bank. The activities leading to these charges were described in 1985 by the 10th Circuit Court of appeals as involving "an enterprise which included a group of imaginary employees, engaged in developing imaginary products and services, located in various imaginary locations." The court further stated "central to Bolts business operations was the use of fictitious checks drawn by Bolt on a non-existent bank account at the National Bank of Liberia." Bolt was sentenced to forty months imprisonment at the El Reno FCF. During his imprisonment his unending Habeus Corpus petitions filed pro se earned him a nomination as the poster child of those wishing to limit Federal inmate Habeus Corpus rights.
Bolt was released from Federal prison on parole, but was returned to El Reno to serve the remainder of his original sentence following his conviction of Arkansas theft of property charges resulting from his stealing computer equipment from his employer.
While publishing his on-line newspaper Bolt's company also hosted a web site entitled www.theauthorities.com. The site held itself out as a for-hire "dirty tricks" service and included a how to manual for right wing groups to use in harassing their real and perceived enemies through the legal system. Prominent on the site was a page featuring a "Judge Budd Bewee." Bewee was listed as the "wire editor" of Bolt's on-line newspaper and as registered agent for Bolt's Chronicle Media Group. Bewee, who seems to be a fictitious person, is also listed as the registered agent for a defunct Arkansas corporation located at trustee Rusk's address.
Genesis Trustee Melvin Robinson was imprisoned after being convicted of Federal conspiracy, mail, and wire fraud charges resulting from a multi-state scheme to sell phony insurance to trucking companies. His prison term at El Reno overlapped Bolt's term and they subsequently became business partners. Robinson was also arrested in Washington County Arkansas on bad check charges from neighboring Ft. Smith.
Charles Rusk, Senior Genesis Trustee has a number of felony bad check convictions-although for small amounts-and has filed for personal bankruptcy.
On April 8, 2002 Golf filed an 8-k announcing that they had decided on April 5, 2002 to replace their previous auditor and retain James Slayton, C.P.A. of Las Vegas Nevada to conduct their 2001 audit. With speed rivaling that of the Road Runner, Mr. Slayton was able to complete and file his audit-including review of the December asset transfers-by April 15, 2002.
Mr. Slayton had reason to work quickly. In January the SEC charged him with materially misstating the financial reports of a company for whom he served as auditor. In March 2002 the SEC charged him with additional auditing violations concerning another company. Ominously, the March charges included inappropriately valuing Costa Rican assets acquired by a start up company through a stock purchase. In June Mr. Slayton was fined and banned from future SEC work. Golf chose to remain silent about this event even after it was disclosed on public message boards.
John Dodge, Golf Corporate Counsel and Vice President, has no recorded criminal history. However, the concept of conflict of interest seems foreign to him. Dodge has recently represented the Genesis Trust and trustees individually in suits against AARO Broadband. He subsequently defended Golf Entertainment from a securities fraud suit filed by Genesis against Golf. Although the nominal attorney for Genesis in this action was a Richard Hardwicke of Bentonville Arkansas, Genesis Trustee Rusk stated in a recorded interview that Dodge drew up both the suit and the subsequent settlement papers. Mr. Hardwicke declined to comment when asked if he had merely lent his name to the action and settlement.
Michael Daniels of Las Vegas Nevada is a Golf Board member. He previously served as CEO of Golf when it operated as LEC Leasing.
In June 2000, the US Department of Justice released an indictment in conjunction with "Operation Uptick", a multi-year stock fraud investigation involving all five of New York City's organized crime families. LEC leasing was specifically named in the indictment as an organization that had entered into "corrupt agreements" with the indicted organized crime figures during Daniels' tenure as CEO. When contacted by LSR, Daniels denied any knowledge of or involvement with the DOJ indictment, claiming that the FBI had never contacted him and that he heard of the indictments and subsequent convictions of the crime family figures only after the fact.
Stock promoter Scott Wilding, of Pembroke Pines, Florida, hired by Genesis in May 2002, reports that Director Daniels was given 50,000 shares of Golf Entertainment stock as a "finders fee". Daniels also denied this allegation. LSR has in its possession an e-mail from Daniels providing Wilding with his account wire transfer instructions.
Daniels, currently serving as President of Golf's partially owned "leasing division" and the head of its Audit Committee states that he has never met any of the Golf principals or his fellow board members. LEC Leasing's Nevada charter has been revoked.
Director Daniels filed for personal bankruptcy in 2001. Arkansas Real Estate agent Annette Gore, who also serves on the Golf Board, filed personal bankruptcy in August 2002.
In addition to illustrating a pattern of criminality and financial irresponsibility among many key persons involved with Golf, these facts make in unlikely that the FCC could ever approve Golf as a broadcast license holder. FCC regulations prohibit issuing a broadcast license to a company in which significant shareholders or officers have felony histories. As stated in Golf filings, the FCC also considers the "character" of corporate Officers and Board members in making a license grant decision.
A Very Merry Fraud Suit Day To You
Brooker and Bolt seem to have been somewhat casual in their approach to due diligence prior to the transaction leading to their acquisition of Golf Entertainment. Golf's Annual Report filed April 15, 2002 disclosed as a "material subsequent event" that failure to comply with Delaware filing requirements had led to potential Delaware franchise tax liabilities of approximately $300, 000. The company dismissed this liability in the report, stating that the amount it believed it owed was approximately $500
Further disclosed under "legal proceedings" was that the company, through its ownership of improperly dissolved subsidiary LEC Leasing, was subject to sales tax judgments in the States of New Jersey, Oklahoma, and Kentucky. These judgments totaled approximately $225,000 with accruing interest. The company vigorously asserted that it did not believe it owed these taxes, even obtaining an opinion from the former auditors that prior period earnings did not need to be restated to reflect this liability. The company stated that it would vigorously defend itself against such claims. The $185,000 New Jersey liability was listed as a particular concern, however, since its execution would require the company to seek injunctive relief from the attachment of its assets while the liability issue was resolved.
The Genesis Trust did not seem to take these disclosures so lightly. On April 30, 2002 the trust filed a complaint against Golf in the Western District Court of Arkansas alleging that Golf had violated federal anti-fraud provisions by not disclosing these liabilities on December 31, 2001 when the trust accepted a "sealed bid" from Golf for the assets allegedly owned by the trust. (We will leave to the reader's imagination the New Year's Eve sealed bid process)
The trust further alleged that previous reporting deficiencies of Golf resulted in the trust having an impaired title to 1.375 million unrestricted common shares of Golf. The trust disclosed that they had obtained these shares by the conversion of an $85,000 face value convertible debenture that they had agreed to purchase from former Golf CEO Farrell for $150,000. Farrell-presumably the prime offending party through his failure to disclose these liabilities- was not named as party to the complaint, which demanded $1.678 million in actual damages as well as punitive damages. Attorney of record for the Genesis suit was Richard Hardwicke of Bentonville, Arkansas.
While Golf CEO Brooker may have influence with higher powers, Genesis Trustee Robinson seems to have the power of divination. On May 2, 2002, two days after the suit was filed, Robinson signed a document waiving a fairness hearing on a settlement of the suit. A settlement was in fact filed on May 6, 2002 and approved by Judge Larry Hendron. In the settlement Golf awarded The Genesis Trust fifteen million free trading shares in exchange for Genesis vacating their claim on the 3.75 million restricted shares owed them from the December 2001 sale and the trust's other claims for damages. This award approximately tripled the outstanding shares of GECC and made Genesis the effective owner of Golf. Neither the filing of the suit nor its prompt settlement led to a Golf 8-k filing, although most investors would consider this information material to a decision to purchase the company stock.
The discovery of this suit and its settlement terms resolved the issue of a June 2002 inquiry to Golf's Transfer Agent that revealed that Golf had approximately twenty two million shares outstanding rather than the previously reported seven to nine million shares. What remains unresolved is why Golf would so quickly settle a complaint based on Golf Annual Report liabilities that the company asserted were non-existent or grossly overstated. Director Mike Daniels, for example, told LSR staff that the New Jersey issue "could be settled for $15,000."
NWABJ staff asked Genesis Trustee Rusk about his understanding of the complaint. His response was that "John (Dodge) drew up the suit." Genesis attorney of record, Richard Hardwicke declined to comment on his role in the suit and its settlement.
Was the suit simply a sham transaction designed to transfer free trading shares to Genesis and allow their sale into a promotional campaign? If the Trust is truly an IRS tax-exempt organization, was this series of events also intended to avoid taxes on proceeds from the sale of shares? Those questions remain unanswered but in Wonderland you never know what to expect.
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