A LITTLE INFO ON SEVENOAKS HOLDINGS
Posted on Tue, Aug. 19, 2003
Firm conned in mining deal
BY PATRICK DANNER
pdanner@herald.com
Consolidated Energy's hunt for $95 million to enter the mining business led the Coral Springs company to Ronald J. Goldberg, who held himself out as principal of a 19-year-old Wall Street merchant bank.
In reality, Goldberg is a felon who spent a decade in federal prison before his release last August. He's been convicted three times, including in 1992 in Miami for bank fraud, transportation of stolen securities and attempted escape from prison. While locked up, he was convicted of forging the signature of a U.S. magistrate judge.
Goldberg, 45, was arrested again Thursday, caught in a Manhattan FBI sting. But not before some of Consolidated's stock -- given by the company as collateral for a $95 million line of credit from Goldberg's Global Index -- was sold. The sales caused the thinly traded stock to plummet, the company alleges.
''He's caused a lot of financial damage,'' said David Guthrie, Consolidated's president, in a phone interview.
''If Mr. Goldberg had funded the $95 million or $75 million, we would have been operating and mining coal back in January or February,'' C.J. Douglas, a Consolidated consultant said by phone Monday. ``So we have missed several months of production and revenues.''
Consolidated expects to start mining next month in Warfield, Ky., where it announced it's buying 3,200 acres with an estimated 21 million tons of coal. But that's a far cry from its original plans. It was going to mine an estimated 250 million tons of coal with Goldberg's bank line, Douglas said.
Consolidated turned to Goldberg because the Coral Springs company had no assets of its own. It was incorporated in 1996 in Nevada as Barbecue Capital Corp., a manufacturer of commercial-size barbecues. But the business was a money loser, so the company zeroed in on coal mining.
The company was renamed Consolidated Energy in October, and it moved its headquarters to Coral Springs to be closer to major shareholders and consultants. It has no local employees.
Consolidated was referred to Goldberg by Coral Springs businessman Howard Bernstein. Douglas insisted the company did its homework before entering the deal with Goldberg. It obtained a Dun & Bradstreet report, which tracks credit information, showing Global Index had $1.6 billion in assets and $800 million in revenue, Douglas said. But it never learned of Goldberg's criminal background.
In a phone conversation, Bernstein confirmed he introduced Consolidated to Goldberg. Bernstein also served as the go-between with Goldberg and two other businesses -- including a Daytona Beach time share resort in search of permanent financing.
''I'm sick. He's literally killed me,'' Bernstein said of Goldberg. Bernstein said he is out $2 million in finder's fees for the deals he brought Goldberg.
Consolidated wanted capital to buy the mining assets of Pen Holdings, a company in bankruptcy.
As collateral for the $95 million line of credit from Goldberg's Global Index, Consolidated agreed to put up 500,000 shares that were to be held in escrow by New Mexico lawyer Robert Strumor.
Consolidated alleges in a 26-page lawsuit filed this month in Broward County Circuit Court that Goldberg used the shares as collateral for a $230,000 line of credit from SevenOaks Holdings, a Bahamian company. The suit says Goldberg received $160,000.
Just days later, Consolidated noticed trading volume of its stock started rising while it shares began to plunge. The shares fell from $1.85 to 35 cents in the span of a week in November. The stock closed at 59 cents Monday.
Douglas believes Consolidated's shares were being sold short. In addition, SevenOaks' agreement with Goldberg allowed it to sell the shares used as collateral if they dropped below 75 cents, Consolidated said.
Meanwhile, Global Index failed to come through on the $95 million line of credit. Goldberg offered instead to provide a $75 million line of credit for Consolidated to buy a portion of Pen Holdings' assets out of bankruptcy. Once again, though, Consolidated said Global Index failed to deliver.
Said Scott A. Salomon, Consolidated's lawyer, of Goldberg: ``He could not loan my client $50, let alone $95 million.''
Consolidated said it has since lined up alternative financing to buy reserves in Kentucky. But it still wants its stock back. Its suit against Goldberg, Global Index, Strumor and SevenOaks seeks the return of the shares, plus $5 million in damages.
On Thursday, Consolidated obtained a court order placing a hold on the 500,000 shares. James Xilas -- a Fort Lauderdale resident who was named in the suit because he's alleged to hold a stock certificate for 125,000 shares of the 500,000 in question -- was the only defendant to appear at the hearing.
In opposing Consolidated's motion for placing a hold on the shares, Xilas said he couldn't understand how the company could allege the shares were sold while also claiming the defendants still hold them. He declined to comment after the hearing.
Strumor will contest the allegations in Consolidated's lawsuit, his New Mexico lawyer, James Compton, said by phone. Representatives for SevenOaks couldn't be located for comment.
Goldberg did not return a phone call from The Herald left Tuesday at Global Index's office in New York. He was arrested two days later by the FBI. He is accused of fraudulently promising to obtain collateral for a $30 million loan in return for $134,000 fee. A bail hearing is set for Wednesday.
According to the arrest complaint, Goldberg's probation officer told an FBI agent that Goldberg earns only about $800 a month for bookkeeping work for a small business. |
