SEC targets tout Curshen, a YBM post-promo alumnus
2003-04-25 20:15 ET - Street Wire
Also Street Wire (C-*OSC) Ontario Securities Commission
by Brent Mudry
The United States Securities and Exchange Commission has launched a pump-and-dump prosecution of Freedom Golf Corp. figures, including self-styled Florida investment banker Jonathan Curshen. Mr. Curshen is best known in Canadian financial circles for his previous role in a bizarre 1998 takeover bid for YBM Magnex International seven months after the Toronto Stock Exchange-listed company collapsed amid U.S.-led revelations it was an apparent money laundering vehicle for respected Russian mobster Semion Mogilevitch.
The SEC announced April 16 that it has filed a civil complaint and launched an injunctive application against promoters Mr. Curshen, 37, of Sarasota, Fla., and Carter Allen Jones, 36, of Highlands Ranch, Colo., Gaylen P. Johnson, 51, of Englewood, Colo., who has served as Freedom Golf's president and chief executive officer since its incorporation in 1996, principal shareholder Timothy J. Miles, 54, of Klamath Falls, Ore. Mr. Jones's company, C. Jones & Co., is the fifth and final defendant.
In its complaint, filed April 11 in United States District Court for the District of Colorado, the SEC claims that from late January through early March in 2000, Mr. Miles paid promoters Mr. Jones and Mr. Curshen to hype Freedom Golf via the Internet, telephone and mail. Mr. Jones allegedly arranged for the dissemination of 25 to 35 million unsolicited spam E-mails that February.
The SEC claims that during the pump-and-dump stock manipulation, Mr. Jones, Mr. Miles and Mr. Curshen all sold shares of Freedom Golf and reaped profits of more than $500,000. (All figures are in U.S. dollars.) The regulator claims the trio violated antifraud provisions of federal securities laws, while Mr. Jones and Mr. Curshen also violated antitouting provisions. The commission seeks permanent injunctions, civil fines, disgorgement and penny stock bars against all the defendants.
The SEC prosecution comes four years after Mr. Curshen gained short-lived media prominence as the supposed backer of an $88-million (Canadian) takeover bid for YBM, purportedly backing a takeover group led by ousted YBM CEO Jacob Bogatin, his business associate Robert Ventresca and former YBM director Ken Davies, a former Howe Street stock promoter.
In a Dec. 11, 1998, Globe and Mail article, reporters Karen Howlett and Paul Waldie noted that bid principals Mr. Bogatin, Mr. Ventresca and Mr. Davies created YBM in 1995 on the former Alberta Stock Exchange, with the company moving to the TSE the following year. News of the takeover bid surfaced the same week that YBM went into receivership. The stock never traded again after it was halted at $14.35 (Canadian) in May, 1998, during a massive raid on its Pennsylvania headquarters by more than 100 federal agents led by the FBI and the Organized Crime Task Force.
(It should be noted that no criminal charges were ever laid or even suggested against Mr. Ventresca and Mr. Davies. Mr. Bogatin was arrested and indicted this week. Mr. Davies told The Globe he was interviewed by four FBI agents in 1997, confirmed he had accounts in the Cayman Islands, and he joked when they flashed they badges. "Oh, I have a plastic one like that at home," Mr. Davies recalled telling the federal agents. "They didn't appreciate that." The promoter also said the FBI interview was "no big deal" and he had a beer with the officers after their chat. Mr. Davies is currently fighting a regulatory prosecution by the Ontario Securities Commission in the YBM case.)
"The company itself, the actual operating company, is a beautiful little operation and it has a phenomenal potential. It truly does," Mr. Davies told The Globe, commenting on his group's planned $88-million (Canadian) takeover bid. "I can assure you one thing, the money that is coming forth is so clean."
The Globe noted the bid group was backed by Southern Assurance, owned by Mr. Curshen, who claimed he had lined up unidentified investors to finance the takeover. "The most money is always made in projects that have the biggest problems," he stated.
The Globe asked Mr. Curshen if he was concerned about YBM's alleged mob ties. "Well, we're not sure on that and everything is going to be subject to lots and lots of due diligence," he replied.
The Globe noted Bryce Dodds Stewart, the lawyer representing the bid group, was furious that the offer was disclosed in a YBM receivership court file. "We are very upset," he stated. "Mr. Davies said Mr. Stewart is involved because they are close friends," stated the newspaper.
(In an unrelated current case, Mr. Stewart, had the misfortune of being dragged into a Vancouver court battle launched by the British Columbia Securities Commission, which seeks arguably privileged records of his targeted client Fortress International, one of two main companies in the unregistered offshore gold-mine investment scheme of Cameron Willard McEwen. Mr. McEwen, a former North Vancouver promoter, was temporarily detained in Australia last month in a court order won by the Australian Securities and Investments Commission.)
Mr. Curshen, the purported YBM bid backer, now finds himself a target of the SEC in the Freedom Golf case.
The SEC claims that associate Mr. Jones's spam E-mails contained false and misleading information concerning the company, in addition to baseless projections for its stock. "During the same period, Freedom Golf president Gaylen Johnson created baseless profit, revenue and expense projections for Freedom Golf that Jones published on his company's Internet Web site, and that Curshen publicized," states the complaint, signed by SEC Miami senior trial counsel Robert Levenson. The regulator notes that Mr. Curshen was a stock promoter who assisted small and microcap companies in raising capital.
The SEC claims Freedom Golf was rigged from its start, dating back to December, 1998, when Mr. Miles incorporated its predecessor shell, Auric Enterprises Inc., in Nevada, with his two daughters and a friend as its officers and directors. Soon after, Mr. Miles orchestrated the sale of large blocks of Auric's shares and warrants to his friends and relatives.
In April, 1999, Mr. Miles caused Auric to file a Form 10-SB with the commission to register its shares. That fall, according to the regulator, Mr. Miles then lined up a registered broker-dealer for quotes. "Miles provided the broker-dealer with documents to submit to the NASD that contained numerous false statements, including, among other things, misstatements regarding Miles's relationships and affiliations with other Auric shareholders, his involvement in the solicitation of the shareholders, and their financial status," states the complaint.
As an example, the SEC notes Mr. Miles gave investors Johnny Wong, Dean Cummings, Paul Spiegler, Fred Quadros and possibly others, false addresses to put on their stock subscription agreements, to avoid registration requirements in California, Ohio and other resident states. Mr. Miles also allegedly created false information showing some investors knew Auric president Robert Hinchey, whom they had never met, to hide his own complete control over Auric, its shareholders and its securities. "Without concealing this information, Miles would never have been able to persuade the NASD to allow Auric to be quoted on the OTC-BB," states the SEC.
With the Auric shell ready to roll, Mr. Miles met with Freedom Golf president Mr. Johnson in October, 1999, to plan a reverse takeover of Freedom, a financially distressed maker of customized golf clubs and equipment.
"In January, 2000, Miles hired Jones and Curshen to promote Freedom Golf. Miles told the two promoters his goal was to increase the company's stock price to $2 per share," states the SEC. "Jones and Curshen then launched a widespread Internet promotional scheme to drive up Freedom Golf's share price."
The Freedom group was apparently uninhibited by reality. In an initial investor report in mid-January, 2000, Mr. Johnson forecast the company's revenues would skyrocket in just three years, from $88,763 in 1999 to $21.9-million by 2002. "He predicted the company's profits would jump in similar gargantuan proportions -- from a loss of $6,101 in 1999 to a gain of $13,500,000 in 2002," states the SEC.
The regulator also claims Mr. Miles, who secretly controlled Freedom Golf, paid tout-promoter Mr. Jones 300,000 warrants and 80,000 shares, although Mr. Jones lied about this on his Web site, claiming he received only 200,000 warrants. "Jones also failed to disclose that he exercised most of the warrants and dumped Freedom Golf stock during the entire period he was promoting the company and recommending its stock to hundreds of retail brokers and the public," states the SEC. Mr. Jones earned almost $205,000 through his share sales in this period.
In spam E-mails arranged by Mr. Jones, Freedom Golf was rated a "strong buy," with a short-term price projection of $4 and a long-term prediction of $8 to $10. While the millions of spams touted bogus deals with Golf USA and PGAgolf.com, and bogus plans for an infomercial campaign on ESPN and The Golf Channel, in reality Freedom Golf was almost insolvent, owing tens of thousands of dollars to such suppliers as Office Depot, Paragon Sports and True Temper Sports.
"In January, 2000, Miles engaged Curshen to promote Freedom Golf. Curshen, using several aliases, including Savior 1999, Savior 2000 and Bid Up, posted dozens of messages touting Freedom Golf on Internet message boards such as Raging Bull and Yahoo! Finance," states the complaint. "Curshen's messages, most of which were posted in February and March, 2000, praised Freedom Golf and recommended that others purchase the stock quickly."
The SEC also claims that on March 22, 2000, Mr. Curshen posted a message directing readers to the false and misleading research report about Freedom Golf on Mr. Jones's Web site that Mr. Johnson had created. "Curshen was in constant contact with Miles, Jones and Johnson about Freedom Golf, and he knew about the company's financial problems," states the regulator.
"He did nothing to verify any of the information in the research report before directing the general public to it. He either knew the information in the report was false, or was reckless in not knowing it by virtue of his knowledge of the company's finances."
The regulator claims Mr. Miles transferred 125,000 shares to Mr. Curshen for his fine services. "Curshen's numerous messages and postings failed to disclose both that Miles was paying him to promote Freedom Golf and that he was selling Freedom Golf stock at the same time he was recommending that others buy it."
The SEC claims Mr. Curshen made almost $127,000 selling Freedom Golf shares during this period.
bmudry@stockwatch.com |
