What was Access 1, and why did they decide to write a glowing report and make such bold predictions for a Company that had no income, no manufacturing operations, and showed just $21,000 in the bank at the end of 1999? An April 28, 2000 article by Bloomberg.com’s David Evans offered some insight. According to the Evans article, Mark Bergman of Access 1 claimed that he received $25,000 and 30,000 shares of Environmental Solutions stock from Teodisio Pangia in exchange for writing the report. And, according to Evans, on March 13, 2000, Pangia filed with the Securities and Exchange Commission a notice of his intention to sell all of his 3,170,975 shares.
Evans noted that, according to Alan Bromberg, a professor of law at Southern Methodist University in Dallas, Texas, and co-author of a noted treatise on securities fraud, “that sequence of events…makes it seem like a ‘classic pump-and-dump’ operation.” This seemed particularly true since the “research report” did not acknowledge that Access 1 had been paid for its services. Columbia University law professor John Coffee added his view that the scenario seemed “consistent with a short-term manipulation of the market for the benefit of a selling insider.”
Investors who relied on the report were in for a few additional shocks. Bergman and Access 1 were public relations consultants – not stock analysts. They were promoting the stock, not analyzing the Company. And, according to Environmental Solutions’ CEO Bengt Odner, that $35 million revenue prediction had no basis in fact. Indeed, the Evans article quotes Mr. Odner as stating that “[t]he projections are wrong…It’s absolutely appalling. I know we’re not going to have production this year.”
Despite Mr. Odner’s remarks, Evans reported that Bergman stood by his projections, insisting that they were based upon information provided to him by – who else – Teodisio Pangia. Pangia, Evans said, claimed that he only provided Bergman with “general” information, and denied paying any fee to Access 1.
Environmental Solutions has yet to realize anything approximating $35 million in annual revenues. For the nine months ended September 30, 2001, the Company’s sales totaled less than $400,000. During the month of November 2001, Environmental Solutions stock has traded at prices between 20 cents and 50 cents.
One thing seems clear, however. Pangia did make a series of Form 144 filings, advising the SEC of plans to sell 1,071,725 shares on March 1, 2000; 1,071,725 shares on May 18, 2000; 506,000 shares on August 25th, 2000; and 708,800 shares on March 1, 2001 – for a total of $5.9 million. Not a bad return when you remember how he obtained those shares in the first place –in exchange for his interest in BBL. The Environmental Solutions public filings suggest that Ball’s principal asset was a Canadian patent for a catalytic converter technology. And what value did the auditors for Environmental Solutions place on that patent? $2,327.
Was there any rationale for the timing of Pangia’s sales? Under Rule 144, an “affiliate” of a public company – and that includes someone who owns 10% of the company’s stock - may sell only a limited number of those shares within any three month period. In March 2000, when Pangia started selling, he owned about 11.3% of the outstanding Environmental Solutions stock (through Tyler Dylan Corp.). That might explain the pause between March and May 2000.
Mr. Pangia may have sold his shares of Environmental Solutions, but that does not mean he has ended his involvement with public companies. In the next part of this series we will explore connections between some of the entities he controls, a couple of old friends (Infotopia and Ives Health Company), and some newer acquaintances - like Grand Enterprises; Capital Advisory Partners; Kilkenny LLC; Finglas LLC; Rathgar LLC; and Monkstown LLC.
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