Golf Entertainment Sued, But Law Officials Remain Silent
By Jeffrey Wood
Arkansas Business - 8/26/02
A penny-stock company in Springdale whose principals have a history of filing civil lawsuits last week found itself on the receiving end of a suit filed in a Florida federal court.
But as of Thursday, law enforcement officials in northwest Arkansas were still mum about any action they may take against Golf Entertainment Inc.
The U.S. Attorney’s office in Fort Smith would neither confirm nor deny any investigation into the company, whose stock trades over-the-counter under the symbol GECC.OB. But Benton County Prosecutor Bob Balfe acknowledged last week that his office is involved in an “ongoing” investigation of the company — something that had been revealed in an Aug. 13 letter from U.S. Sen. Tim Hutchinson, R-Ark., to Securities and Exchange Commission Chairman Harvey L. Pitt.
The letter’s existence was first reported in an Aug. 19 report in Arkansas Business and its sister publication, Northwest Arkansas Business Journal.
Because a closely aligned Bentonville entity called the Genesis Trust appears to have orchestrated much of Golf’s financing, Balfe is within his jurisdiction.
However no officials, including the Federal Bureau of Investigation or the Arkansas Securities Department, had taken public action by press time.
The Aug. 19 report detailed a lengthy list of apparent improprieties related to Golf that if proven in court could result in criminal
charges. (Previous reports about Golf are available in the newspapers’ online archives at www.arkansasbusiness.com).
In the days that followed, several additional developments took place:
• On Tuesday, Golf filed a first-quarter report that appeared to contradict earlier claims about its financial position.
In the new document, Golf said it was still seeking a $5 million private placement because it “has nominal cash on hand and has had no substantial access to cash.” It reported revenue of $112,767 for the quarter that ended June 30 and net income of $35,375.
In a June 6 news release, Golf claimed to have obtained $5 million in venture capital funding from O. Bruce Mikell & Associates of Warrior, Ala. Half of that money, according to the June 6 press release, was said to have been placed in escrow immediately.
In the Aug. 19 report, Mikell said he didn’t remember what he had done with the supposed $2.5 million in escrow.
• On Thursday, Golf received a notice of eviction from Cypress Invest-ments LLC, the owner of its 5,378-SF headquarters at 1008 Clayton St. in Springdale. The eviction notice cited “failure to pay rent” since July 1 as the reason for eviction and a past-due amount of $3,300 plus $40 in late fees.
Golf was given five days to vacate the premises.
Thomas and Robin Lundstrum of Springdale, principals of Cypress, have owned the property since 1998.
• On Wednesday, Golf attempted to register with the Arkansas Secretary of State’s office. The company’s status was left “pending” until Golf could provide proof of its incorporation in Delaware.
That might be difficult at present. The state of Delaware's Division of Corporations confirmed that Golf’s corporate charter went void on March 1 for “failure to pay a Delaware franchise tax.” Golf paid its $161.22 in 2001 taxes, but neglected to file its $99 “renewal and revival of charter” petition to bring the company back into good standing.
n Also on Wednesday, the owners of a Savannah, Ga., Internet company called Meridian-Prime filed suit in U.S. District Court seeking at least $400,000 from Golf. The complaint also named as defendants the Genesis Trust, about 25 “John Does” and several Golf officers, including CEO Tim Brooker, general counsel John Dodge and Jim Bolt, Golf’s vice president and chief operating officer.
The suit was filed in Georgia’s southern district by Carla Hohen-house of Richmond Hill, Ga., and Daniel Johanning of Miami, Fla. It accuses Golf’s management of “slander, libel, civil conspiracy” and other charges that the plaintiffs say contributed to the defaming of their good name and reputation.
Cohenhouse and Johanning allege that happened through a variety of mediums — including Golf executives making false claims to the Georgia Bureau of Investigation about the plaintiffs’ being involved in a number of illicit activities.
The suit refers to Golf as a “sham operation” and details what the plaintiffs call “Bolt’s history of filing frivolous lawsuits.”
“I have served [Bolt and Dodge] a bunch of times before for all kinds of matters,” said W. E. Black, a Spring-dale process server hired to present each of the defendants with a federal court summons.
Golf Tees Off
Executives at Golf responded to a list of written questions from the Business Journal after a stated deadline on Aug. 8. John Dodge, Golf’s corporate counsel, wrote that the company was not given enough time to respond before the story was published.
As previously reported, the written request was the last of several attempts to get Golf’s side of the story — including an in-person visit to the company’s headquarters during which Dodge handed a reporter a subpoena for notes and documents in an apparent effort to squelch the story.
Arkansas Business Publishing Group, which owns the Business Journal, Arkansas Business and arkansasbusiness.com, has objected to the subpoena. It was filed as part of a federal RICO suit Golf had filed against a number of “John Does” and the publishers of Longandshort reports.com, a Canadian Internet newsletter that analyzes investment opportunities and which has also published a report questioning Golf Entertainment’s operations.
In his written response, Dodge did address some of the allegations described in the Aug. 19 articles. Among other things, he denied that any material relationship exists between Golf and the Genesis Trust.
Dodge also denied ever claiming that Golf was to receive a $300,000 loan from a Chicago lender, and denied that a legal settlement that gave two-thirds of the company’s stock to Genesis Trust constituted a change of control.
Multiple sources have confirmed that a material relationship does, in fact, exist between Golf and the Genesis Trust. Charles Rusk, former senior trustee for “The Genesis Trust” appeared to confirm as much during a tape-recorded interview when he stated that Dodge — Golf’s corporate counsel — created the supposed trust in the first place.
The funding agreement that Dodge subsequently denied was originally announced by Golf in a company press release on Feb. 1. The release said Golf had a letter of intent with First Metropolitan Mortgage of Bentonville. Until recently, Rusk managed that subsidiary of a legitimate Chicago lender. But Marty Unger, First Metropolitan’s outside legal counsel, said his company was not in the business of commercial lending and described the loan as “non-existent.”
Although Dodge denied that control of Golf had been transferred, the company did settle on May 6 a curious lawsuit filed by the Genesis Trust by issuing to it 15 million unrestricted shares. This brought the number of shares outstanding from between 7 million-9 million, depending on the document filed, to 22 million. The settlement came only six days after the original complaint was filed and was not revealed to the SEC or potential investors until mid-July.
Golf’s Complicated History
Mark Twain once described the game of golf as “a good walk spoiled.”
By comparison “a good business plan spoiled” by a shroud of controversy and apparent impropriety might be used to describe Golf Entertainment Inc. of Springdale.
The penny stock has nothing to do with sports. Golf’s primary operation is television station KVAQ-LP, Channels 20/71, which broadcasts Spanish-language programming as an affiliate of Fort Worth’s national Hispanic Television Network. The company also produces some local programming on Saturday evenings.
Golf, formerly a golf course management firm in Alpharetta, Ga., was inactive for nine months in 2001 before its company shell was apparently purchased in December. The deal was consummated through a series of transactions begun by Golf CEO Tim Brooker and Jim Bolt, the company’s vice president and chief operating officer. (Search the archives at arkansasbusiness.com for details on the shell’s evolution).
At a public auction in December, “The Genesis Trust” supposedly sold $1.028 million in assets consisting of TV broadcasting equipment and “the right to purchase a Federal Communications Commission license” to Golf.
An extensive search revealed no evidence of Genesis’ incorporation, official business formation or proof of exempt-organization status with the Internal Revenue Service.
A sketchy chain of custody of Golf’s assets — which included about four transactions that seemed designed solely to increase book value of the assets — added to the appearance of impropriety.
A very lengthy history of suing public officials and companies also trails in Golf’s wake.
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