SEC halts Custable's Worldwide, a Wolfson graduate
Securities and Exchange Commission
Tue 22 Jul 2003 Street Wire
by Brent Mudry
The United States Securities and Exchange Commission has abruptly halted
trading in Worldwide Holdings Delaware Corp., a penny stock promotion
featuring securities violators Frank J. Custable Jr. and Allen Wolfson in
the past few years, citing concerns about its regulatory filings, including
the identities of its major shareholders. The SEC imposed a 10-day trading
suspension on Worldwide Holdings at the open on Monday, set to expire at
midnight on Aug. 1.
The Worldwide halt comes four months after Mr. Wolfson, a Salt Lake City
promoter, was convicted on March 26 of penny stock fraud charges in an
unrelated criminal trial and Mr. Custable, a Chicago-area tout, was charged
on March 27 in an unrelated SEC civil case promoting seven penny stock
companies, including veteran Howe Street promoter Kenneth (Ken) Liebscher's
ThermoElastic Technologies Inc. (Although ThermoElastic was named as a
defendant in the SEC's suit, there is no allegation of wrongdoing by Mr.
Liebscher or any other company official.)
In its halt notice, the SEC notes it has questions regarding, among other
things, the accuracy of statements made by Worldwide concerning the
identity of its majority shareholder or shareholders, concerning its status
and amount of liabilities, and concerning its annual report for Dec. 31,
2002, filed May 21.
Suburban Capital, Mr. Custable's flagship private company, acquired
51-per-cent control of Worldwide on Dec. 31, according to the company's
10KSB annual report. Worldwide issued 133 million shares, valued at a
deemed $15,000, on Dec. 31 to Gateway Distributors Ltd., which then sold
133.32 million shares to Suburban for $15,000 that same day. (All figures
are in U.S. dollars.)
In recent years, the company has changed names from Jutland Enterprises
Inc., to Treat Enterprises Inc., back to Jutland, then to Professional
Wrestling Alliance Corp., TRSG Corp., and finally to Worldwide Holdings.
According to various SEC filings, Mr. Wolfson took control of the company,
then called Jutland, by the fall of 1999, with about 42.5 million shares,
roughly a 42-per-cent stake, held by his family's companies A-Z
Professional Consultants, Hudson Consulting Group Inc., Oasis International
Hotel & Casino Inc., and his nephew Richard Surber, who served a stint as
Jutland's president and chief executive officer.
While intent-to-file notices show Wolfson nominees usually used U.S.
brokerage Olsen Payne, his son David Wolfson filed to sell 171,000
Worldwide shares through Canadian brokerage Research Capital in October,
2001. In other promotions, Allen Wolfson favoured Vancouver brokerages
Canaccord Capital and Union Securities. Mr. Wolfson's Olsen Payne broker,
Kevin Kirkpatrick, was recently given a permanent injunction against future
securities violations, in the SEC's unrelated prosecution of Mr. Wolfson's
Freedom Surf Inc.
The SEC notes that in its Freedom Surf prosecution, Allen Wolfson, his son
David Wolfson and three other co-defendants all chose to assert their Fifth
Amendment privilege against self-incrimination and refused to testify in
the regulator's investigation.
There is no suggestion that Research Capital, Canaccord, Union or any of
the Howe Street brokerage's employees had any idea anything was amiss in
any Wolfson-related accounts they hosted.
Mr. Wolfson was convicted in late March after a month-long trial of
conspiracy, securities fraud and wire fraud offences arising from his
scheme to manipulate six other penny stocks from early 1999 through July,
2000, resulting in losses to the public of at least $7-million. In this
case, part of Operation Uptick, a massive FBI bust of Mafia-linked penny
stock promoters, Mr. Wolfson bribed numerous U.S. brokers through offshore
wires to a mobbed-up middleman, Michael Grecco, an associate of the Colombo
organized crime family.
Mr. Custable, who took control of Worldwide on Dec. 31, has a "significant
disciplinary history in the securities industry," according to the SEC in
its complaint filed on March 27. In 1994, Mr. Custable and his company F.C.
Financial Corp. were fined $385,000 in an SEC case relating to a fraudulent
offering involving mortgage-backed promissory notes. In 1992, he capped his
career as a broker with a $20,000 fined from the National Association of
Securities Dealers and an industry bar, based on unauthorized trades in
customers' accounts and guaranteeing a return on investments. Mr. Custable
also received various fines and other penalties from state regulators in
his home state of Illinois and adjoining states of Wisconsin and Indiana.
In its recent complaint, the SEC claims Mr. Custable used fronts to receive
large blocks of consultants shares of Gateway, ThermoElastic and Wasatch
Pharmaceuticals through sham Form S-8 filings. The SEC claims that as
recently as Feb. 14, Gateway issued Mr. Custable S-8 shares for purported
consulting work, with the stock and sale proceeds usually immediately
transferred into offshore accounts in Costa Rica.
Although not mentioned in the SEC complaint, Mr. Custable bought 133
million shares of Worldwide Holdings, a control block, from Gateway on Dec.
31, as noted above. Gateway, itself a public company, also featured Wolfson
affiliates as shareholders, according to intent-to-file notices. David
Michael LLC, owned by Mr. Wolfson's son David Michael Wolfson, filed to
sell 152,000 shares of Gateway in April, 2002, while Hudson Consulting, a
Wolfson group company, filed to sell 136,000 shares in November, 2001, both
through Olsen Payne.
Worldwide had a few share registry hiccups in recent months, according to
its annual report. The company notes that since Dec. 31, 800 million shares
were issued to Kevin Gallagher. "New management indicates the 800,000,000
shares of stock were issued in error. New management changed stock transfer
agents May 13," states Worldwide. (The filing refers to Mr. Custable's
Suburban as "new management.") Three days later, the new transfer agent
received and cancelled the 800-million-share certificate, but a further one
million shares were short and unaccounted for.
The annual report also notes that as of May 1, the shareholders list shows
that the 133.32 million shares transferred by Gateway to Suburban effective
Dec. 31 were still in the name of Gateway. "Suburban acknowledges receipt
of the stock from Gateway. Suburban, which is New management, indicates it
is holding the stock without making a name change, pending determination of
whom it will be reissued to."
Worldwide's annual report notes that as of May 15, these apparent
discrepancies regarding ownership, ownership control and potential claims
against ownerhip had not been corrected or resolved.
The SEC is now eager to find out the true identity of Worldwide's majority
shareholder or shareholders.
bmudry@stockwatch.com
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