BTW, Dodi Handy was also IR fo Ziasun and Mark Bergman the fake Ph.D also wrote a buy report recomending Ziasun. Like a good old Ziasun family reunion here.:
Beyond the SEC's Reach, Firms Sell Obscure Issues to Foreign Investors
By JOHN R. EMSHWILLER and CHRISTOPHER COOPER
Staff Reporters of THE WALL STREET JOURNAL
8/16/00
The call couldn't have been timed better. Adrian Lawlor, a Dublin computer-systems salesman, and his wife had just received a $17,000 settlement
from a car accident his wife had been in when a broker from International Asset Management in Brussels rang him up. Speaking with an American
accent, the broker told Mr. Lawlor he had just the ticket for entering the red-hot U.S. stock market. "They said they had a wonderful investment opportunity for me," Mr. Lawlor says. Although "absolutely green" when it came to stocks, Mr. Lawlor
decided to sink most of the settlement into the broker's recommendations. That was in 1996, and he was happy for a time and unruffled when his
broker moved from Brussels to Barcelona, Spain. But then he tried to sell some shares of a small-cap issue that had begun to stumble. The broker
said he would make the sale only if Mr. Lawlor agreed to plow the proceeds -- and $10,000 more -- into shares of a tiny California company called
ZiaSun Technologies Inc. A Matter for the Police Mr. Lawlor refused and then complained to Spanish regulators. Though the brokerage was based in Barcelona, Spanish regulators said they had no
jurisdiction because IAM apparently didn't sell to Spaniards. "If you consider this situation a matter of fraud," Spanish regulators wrote, "the normal
procedure is to get in touch with the police." Instead of calling the police, Mr. Lawlor managed to sell some shares "by complaining bitterly to my broker." But still, he hasn't been able to unload
his biggest holding, a stake in a troubled start-up that he bought for $6,000 and that is now worth about $90. He has lost contact with his IAM
broker, who went by the name Steve Young. "An Irish citizen buying U.S. stocks through a dealer based in Spain," Mr. Lawlor says. "The whole experience made me realize how alone I was." Alone in a growing crowd, that is. Nurtured by economic liberalization and the steady rise in U.S. markets over the past decade, legions of
Europeans and Asians have developed a strong appetite for stock investments. Much of the focus is on the U.S.; in just the 12 months ended
March 31, foreigners bought $2.8 trillion worth of U.S. shares, up 65% from the previous 12 months, the U.S. Treasury says. After accounting for
stock sales, net foreign purchases totaled $159.6 billion during the period. About 85% of that was from Europe. Many Affiliates, Many Names But as the global investor base broadens, a big problem has arisen: Investors are often venturing into a gray area that national regulators are
either unable or unwilling to police. And that makes them particularly vulnerable to the likes of International Asset Management. This outfit and its
many affiliates operating under many names throughout Europe and East Asia buy shares in small, obscure U.S. companies, some linked to IAM
through equity or other ties, and then sell the stock to foreigners who often are ill-informed about the companies they are investing in, the
difficulty of trading the stock and their own lack of regulatory protection. IAM officials turned down repeated requests for interviews and have refused to identify the precise location of their
Barcelona offices. In recent years, investors from Athens to Australia have purchased millions of dollars of stock in U.S. companies from IAM and its affiliates. Many,
like Mr. Lawlor, have found themselves unable to sell their shares or even get stock certificates, and nearly all are unable to get help from
regulators. Sudden Disappearance Guy Fletchere-Davies, a 62-year-old carpet manufacturer in Melbourne, Australia, bought ZiaSun and other small U.S. stocks over several years
from the Manila office of Oxford International Management, a brokerage firm with ties to IAM. Mr. Fletchere-Davies says his account was passed
around among several Oxford salespeople and then to a successor firm. Late last year, "suddenly, the phone calls stopped and paperwork dried up,"
he says. The Australian has since embarked on a frantic telephone journey from Manila to Jakarta to Manhattan to the British Virgin Islands in
hopes of learning the fate of the nearly $150,000 that was to be his retirement nest egg. "We don't know who to talk to,'' he says. "We don't know
where to go." Nikolas Morokutti, a 26-year-old owner of a computer business in Innsbruck, Austria, thought he knew where to go when he had trouble getting his
ZiaSun share certificates from IAM. He called the U.S. Securities and Exchange Commission. The agency, he says, told him that it couldn't help
because the shares were issued under Regulation S. These Regulation S stock sales are allowed under a 10-year-old provision of U.S. securities law that is intended to allow American public companies
to raise capital from perienced foreign investors without the onerous registration process required to sell stock in the U.S. Once sold abroad,
Regulation S shares cannot legally be resold to U.S. investors for at least a year; they can, however, be sold to other foreigners during that period. While hundreds of perfectly legal and legitimate S-share transactions occur each year, unscrupulous operators have found a way to exploit
Regulation S to their advantage. The way it often works, a promoter that is at least nominally based outside the U.S. buys large blocks of S shares
from American issuers at deep discounts and then sells them at huge markups to neophyte investors abroad. The SEC doesn't comment on specific cases and won't comment on the current state of Regulation S. Non-U.S. regulators aren't much help either,
though they periodically warn citizens to avoid boiler-room brokers operating outside of their home country. British stock regulators recently noted
a sharp rise in the number of boiler rooms in continental Europe that target English residents. "The firms are not registered here, so it's up to our
counterparts in other nations to regulate them, which is very frustrating," says Sarah Modlock of Britain's Financial Services Authority. A Lot in Common Over the past few years, IAM and related brokerage firms have marketed shares in about a dozen small U.S. companies.
Overseas customers of IAM's offices in Barcelona often receive a monthly publication called "The Capital Growth Report," which mixes glowing
reviews of the small companies in IAM's stable with commentary about well-known companies such as Compaq Corp. Several of the small companies
have held stock in each other, used the same investor-relations firm or employed Jones, Jensen & Co., a Salt Lake City accounting firm, which is
auditor of ZiaSun, a company that looms large in IAM's pitches. In May, the SEC filed administrative charges against the accounting firm's two named partners, R. Gordon Jones and Mark F. Jensen, for "recklessly
violating professional accounting and auditing standards" in an audit of a company unrelated to ZiaSun. Mr. Jensen denies wrongdoing. Mr. Jones
didn't return phone calls. The tale of IAM and its affiliates is deeply entwined with that of ZiaSun, based in Solana Beach, Calif., just north of San Diego, in a modest
ground-floor office suite nestled between a freeway and the sea. An IAM affiliate has an address on the same floor of a Hong Kong office building
as ZiaSun's office in that city, and ZiaSun maintains the Web sites of IAM and of some of its affiliates. ZiaSun has operated under various names since it was founded and went public in 1996, and it has engaged in businesses ranging from motorcycles
to soda dispensers. In news releases, it now bills itself as "a leading Internet technology holding company focused on international investor
education and e-commerce." About 85% of ZiaSun's 1999 revenue came from a business that operates traveling seminars on Internet stock trading
for $2,995 a pop. "You Can Become a Millionaire on Regular Pay," says one seminar flier. In an April 1999 news release, ZiaSun said its 1998 audited earnings totaled $1.15 million, on $3.5 million in revenue. When the company filed
financial results with the SEC last September, the audited 1998 sales had dropped to $2.3 million. In a later SEC filing, ZiaSun again revised
downward its 1998 sales, to $760,529, and cut net income to $769,320. ZiaSun earnings included profits from securities transactions involving
other public companies. Some of ZiaSun's securities holdings include companies that also issue large amounts of Regulation S stock and whose
shares have been sold by IAM and affiliates. ZiaSun officials decline to be interviewed, citing a pending lawsuit filed by ZiaSun in federal court in San Francisco against a group of Internet
critics of the company for allegedly mounting a "cybersmear campaign" against ZiaSun.
In a written statement in response to written questions, ZiaSun officials say they are "fully committed to preserving and developing the
shareholders' equity." More than half of ZiaSun's own 27 million shares outstanding have been sold to foreigners under Regulation S, according to the company's SEC
filings. In two transactions in 1997, ZiaSun sold 15 million shares at 10 cents a share under Regulation S to foreign investors, whose identities didn't
have to be disclosed in public records. At about the same time, investors in Europe and Asia say they received calls from salesmen from IAM and
related brokerages offering ZiaSun stock at $4.50 or more a share. In the U.S. during the same period, ZiaSun, under previous corporate names,
was trading on the Nasdaq Bulletin Board at between $1.25 and $5.50 a share on average daily volume of several thousand shares. Vladimir Kaplan, a Zurich doctor, bought some of those ZiaSun S shares. His Barcelona-based IAM broker, Lynn Briggs, offered ZiaSun at $4.50 a
share on Oct. 7, 1998 -- when the stock was trading in the U.S. for between $2.50 and $4 a share. Unable at the time to independently determine
ZiaSun's stock price, Dr. Kaplan bought nearly 8,000 shares to start, and more over the ensuing weeks. Dr. Kaplan knew his broker as a senior
portfolio manager at IAM and trusted his judgment, especially after Mr. Briggs flew to Zurich to make a personal sales call. What he says he didn't
know: According to SEC filings, Mr. Briggs also was one of ZiaSun's founders. Mr. Briggs couldn't be located for comment. Tapping Overseas Buyers Titan Motorcycle Co., a Phoenix, Ariz., motorcycle manufacturer, is another favorite of IAM brokers. Between 1996 and 1998, Titan issued about
5.3 million shares of Regulations S securities in chunks to unidentified overseas buyers for an average price of $1.32 a share, even as clients such
as Dr. Kaplan were purchasing stock in the company for far more. According to SEC filings, about a third of the company's total shares outstanding
have been sold to foreigners. Titan officials didn't return calls. In a brief written statement, Titan Chief Executive Frank Keery said that all company Regulation S sales "were
conducted precisely as required by law." Titan's "knowledge of subsequent resale activities is essentially nil as these resales take place exclusively
outside the U.S.A.," he added. ZiaSun and Titan have something in common besides IAM. Bryant Cragun, a former president and chief executive of ZiaSun and now a consultant
to the company, describes himself in court documents as "investment adviser and fund-raiser" for ZiaSun, Titan and other small companies whose
shares are sold by IAM and related brokerages. He co-owns four Titan motorcycle dealerships.Several investors say their brokers referred to Mr.
Cragun as a senior official of IAM. Stefan Van Rooyen, a Swiss investor, says he was told by his Barcelona-based broker in June that Mr. Cragun
was IAM's president. A recent SEC filing shows IAM has the same U.S. address as Mr. Cragun, at a gated condominium project in Solana Beach, not
far from ZiaSun's headquarters. In a letter, Mr. Cragun says he was never an IAM officer. He says he leases the condominium in Solana Beach. He acknowledges that between
1991 and 1997, he was chairman of Oxford International, a Philippine brokerage firm that markets many of the stocks IAM touts and that, according
to SEC filings, has bought Regulation S shares in two such companies. Mr. Cragun says the SEC spent five years investigating his role in selling Regulation S shares overseas and "never filed anything against me." An
SEC spokesman declines to comment. An offering statement for an overseas investment fund founded by Mr. Cragun says he has a U.S. securities
broker's license. The National Association of Securities Dealers says its records show that Mr. Cragun hasn't held a license since 1988. Mr. Cragun,
in a written response, says that putting his license status in the present tense was a "typographical error." Mr. Cragun says he sold his interest in Oxford in 1997 to a company headed by William Strong, who shows up as an account
representative on monthly statements received by several IAM customers. Mr. Strong, who says he was merely an IAM consultant, confirms that
he bought Oxford. He says IAM and Oxford are "essentially the same company. They are two different entities in the same arena with the same
people." In an April filing, Titan said it issued 724,638 shares of Regulation S stock early this year to Oxford International in connection with a 1996 loan. As
Oxford's owner, Mr. Strong says he never received any of the stock (doing so could violate Regulation S, since he's an American). Titan officials
didn't respond to questions on this matter. No Outward Signs In Barcelona, IAM has in the past shared offices, telephones and personnel with at least three other brokerage firms --
including one owned for at least a time by Mr. Strong. But the exact location of IAM's current office is a mystery. A phone receptionist provides
only a mailing address. That address leads to a small office building that has no identifying signs and that on three visits during business hours was
locked and dark. Another location, often cited on IAM's correspondence, is an unmarked and rundown suite of offices in an unfashionable part of
town staffed by a woman who appears to run a phone service for dozens of companies. A woman who answered the phone at the firm's Manila
office said all sales operations had ceased. Several investors say their brokers, though hard to locate, have recently been pushing them to exchange stock in ZiaSun and other companies for
shares in a British Virgin Islands-registered mutual fund called the Morgan Fund. Mr. Fletchere-Davies says he agreed to move his money into the
Morgan Fund as an alternative to losing a large chunk of his investment in individual stocks, though he says he has been told he might not be able
to cash out of the fund for at least several months. A Morgan Fund brochure shows that Mr. Cragun, the former ZiaSun executive and former Oxford owner, is one of the fund's two directors. Mr.
Cragun says he set up the fund because buying companies' shares directly "is way too much risk to individual investors." Write to John R. Emshwiller at john.emschwiller@wsj.com and Christopher Cooper at christopher.cooper@wsj.com ---------------------------- ZiaSun Technologies Settles Groundbreaking Lawsuit Over Internet Stock Manipulation SOLANA BEACH, Calif., Oct. 25 /PRNewswire/ -- ZiaSun Technologies, Inc. (Nasdaq: ZSUN - news), along with its former president, Tony Tobin,
and consultant Bryant Cragun, today announced the settlement of two groundbreaking cybersmear lawsuits against four individuals accused of
manipulating ZiaSun's stock by disseminating false statements and ``press releases'' over the Internet. Through this settlement, ZiaSun, Tobin and
Cragun succeeded in stopping a pattern of derogatory statements that harmed the company and drove down stock prices. The lawsuits involved conduct beginning in early 1999. ZiaSun and Tobin learned that an anonymous group of apparent short sellers were using
Internet bulletin boards to post negative statements the company and Tobin concluded were false. ZiaSun and Tobin filed a lawsuit in Seattle
federal court to stop the practices. ZiaSun succeeded in uncovering the identities of these anonymous Internet users and the action was
transferred to federal court in California, where one of the defendants resides. When Cragun, a consultant for ZiaSun, learned that many of the same individuals were making similar statements about him personally, he sued
them in California state court. Cragun's lawsuit accused the defendants of working in conspiracy to manipulate stock prices of several companies
including ZiaSun to enhance their profits on short sales. Both cases made headlines in January 2000 when the federal court in the ZiaSun case issued the nation's first known preliminary injunction against
Internet defamation, and the state court in the Cragun case issued the nation's first known temporary restraining order against Internet market
manipulation. The judge in the Cragun case also ordered defendant Floyd Schneider to post a retraction on the Internet of ``press releases'' he
had issued recommending that ZiaSun investors sell their stock. In earlier interviews and releases, ZiaSun and Cragun made clear they were suing primarily to enjoin the defendants' practices, which they believed
to be unlawful and damaging to markets and investors. In fact, in the state court action, Cragun did not sue for monetary damages, instead asking
the court only to enjoin the defendants' conduct and order them to return to investors their alleged profits from short sales. After the injunctions issued in January, the cases were vigorously litigated. Late this summer, the state court granted a series of motions brought
by Cragun. Cragun had asked the defendants to produce evidence supporting contested statements they had made on the Internet. When they
failed to produce any evidence to support their statements -- instead raising numerous objections -- Cragun asked the court to intervene. After a
series of contested motions, the court overruled the defendants' objections, ordered the defendants to produce all disputed evidence, including
trading records, and issued harsh monetary sanctions of almost $19,000 against the defendants and their attorney. The sanctions were a penalty
for their attempts to conceal evidence or their lack of evidence. At about the same time, ZiaSun filed a motion asking the federal court to find defendant Floyd Schneider in contempt for violating the January
preliminary injunction. Shortly after the discovery and sanctions orders in the state court, and as Schneider was due to defend his alleged
contempt in federal court, the defendants agreed to cease and desist from their actions, broadly agreeing to refrain from publishing, on the
Internet or otherwise, statements about ZiaSun, Cragun, Tobin, and a variety of other related individuals and companies protected under the
settlement agreement. ZiaSun and Cragun very pleased with the defendants' agreement to refrain from such wide-ranging conduct. According to ZiaSun President, Al
Hardman, ``This settlement is a great victory for ZiaSun. The defendants have agreed to far broader restraints than we ever hoped to obtain in
court.'' ZiaSun's attorney, Christopher Howard, labeled the restraint provisions of the agreement as broader than any restraint a court would have
the power to order. ``The defendants have agreed to waive any First Amendment claims they may have regarding the types of statements
covered in the agreement,'' said Howard. ``That's something you can obtain only through an agreement. No court in the country can order a party
to waive First Amendment protection.'' Howard also pointed out that the First Amendment would not afford protection, in or out of court, for the
defendants' alleged market manipulation activities. ``The First Amendment does not protect all speech,'' said Howard, ``and false statements
intended to manipulate the prices of publicly traded stocks have been enjoined by the courts since at least 1934.'' Under the terms of the settlement, the defendants agreed ``to refrain from publishing to any third party, directly, indirectly, or through any third party intermediary, any statement, opinion or other
communication ... about ... Bryant Cragun; ZiaSun Technologies, Inc.; Anthony Tobin; Loraca International, Inc.; Chequemate International, Inc.;
Titan Motorcycles of America, Inc.; Asia4Sale; Online Investors Advantage; Dynatech International, Inc.; any plaintiff or cross-defendant in [either
of the lawsuits]; any member of Bryant Cragun's or Anthony Tobin's family who defendants know or reasonably should know is related to Cragun or
Tobin; any individual or entity who defendants know, reasonably should know, or ever have suggested is related to Bryant Cragun or Anthony
Tobin; any person defendants know or reasonably should know is an officer, director, employee, agent, subsidiary, or shareholder of any of the
companies identified above; or any person defendants know or reasonably should know is an employee, agent, attorney, accountant, heir,
successor, assign, or representative of Bryant Cragun, ZiaSun, or Anthony Tobin.'' The defendants also agreed to cease all postings on any Internet bulletin boards related to any of the companies or individuals protected under the
agreement. The defendants also agreed to waive any First Amendment protection to make such statements, to the extent the First Amendment protects them,
and to submit to jurisdiction of both the federal and state courts to enforce the restraint provisions including by injunctive relief. In fact, as of this
release, Cragun has filed a motion asking the state court to enter judgment against the defendants to enforce the settlement. To accommodate the settlement, the plaintiffs similarly agreed not to post such statements about the defendants, although the plaintiffs had not
engaged in such conduct and none of the defendants had accused them of doing so. Under the settlement agreement, both cases will be dismissed as to the settling defendants and all parties will bear their own attorneys' fees and
expenses. No money will change hands. In a separate but related agreement, Bryant Cragun purchased an assignment from defendant George
Joakimidis of Joakimidis' claims in a cross-complaint. In that cross-complaint, which was filed in state court, Joakimidis claimed to be due payment
on an agreement to purchase certain stock holdings he had liquidated. Cragun purchased an assignment of those claims from Joakimidis for
$60,000. The assignment will give Cragun all rights to pursue whatever value those claims have. According to Cragun, he expects to completely make back the cost of the assignment in short order. ``I always felt that the claims against me in
the cross-complaint were nothing more than a nuisance,'' said Cragun. ``I had nothing whatsoever to do with the transactions described in the
cross- complaint and it was always my opinion that Mr. Joakimidis named me in the cross-complaint only because I had sued him. But it looked like
the claims could have some negotiated value against other parties and it was well worth it to buy the assignment in order to help pave the way for
the kind of broad relief we obtained in the settlement of the real cases.'' Shortly after purchasing the assignment from Joakimidis, Cragun filed suit against PT Dolok Permai dba International Asset Management, one of the
other cross-defendants and a party who Joakimidis alleged to be at the heart of the transaction described in the cross-complaint. According to
Cragun, it appears PT Dolok Permai is the party behind Joakimidis' claims. ``I don't know much about PT Dolok,'' said Cragun, ``although I have
been accused publicly of being part of their operations. Based on Mr. Joakimidis' complaint and the investigation we have done both in the litigation
and in our recent efforts to assist the Wall Street Journal in a related investigation, it looks like PT Dolok is behind the transactions that caused
Joakimidis to sue. I intend to pursue them to recover the full value of the claims I purchased.'' ZiaSun will continue to pursue its claims against two other defendants in the federal case and, according to company president Al Hardman
``ZiaSun will continue to take whatever steps are necessary to protect the interests of its shareholders and will vigorously defend itself against
any further manipulation tactics.'' Cragun previously settled his claims on similar terms with the only other defendant in the state court action. For further information please contact Michelle Cutting, Shareholder Services of ZiaSun Technologies, Inc., 858-350-4060, mcutting@pinmail.com. SOURCE: ZiaSun Technologies, Inc. |
