Is this the same John Coutris???
Bethany Anderson MN1
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Mon, 16 Apr 07 5:33 PM
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PUBLIC STOCK : ARTEC, DEEP ROCK 0&G, NATIONAL STORM, CONSOLIDATED SPORTS MEDIA – What do these pink sheet stocks have in common?…spam campaigns : Replies
Bone of Contention: Accusations Fly in Failure of Company
By Bethany Anderson MN1 Investigates
Editors Note: Market News First has been following the failure of an interconnected group of Pink Sheet companies in an investigation spanning several months. Over the next few days and weeks, the results of that investigation will be featured in a series called Bone of Contention.
DALLAS (March 30, 2007) – It’s a big mess that entangles several Pink Sheet companies and well-known players in the market, with accusations flying on both sides of what has now become a very contentious, very heated showdown that will ultimately be settled in more than one courtroom.
The companies Artec, Deep Rock Oil & Gas, National Storm Management and Consolidated Sports Media Group all have several things in common – the same transfer agents, business consultants, lawyers, investors – and one other thing: Spam fax campaigns on their behalf.
And, in one way or another, those spam fax campaigns garnered unwanted attention for the companies, either by the SEC or, in the case of Consolidated Sports, a lawsuit from Nascar for a particular spam fax touting the company’s “Racetrack Girls Go Nutz” video with a liberal sprinkling of the Nascar name throughout the fax.
In the case of National Storm Management and Consolidated Sports, the companies have in turned sued their lawyers, claiming they were the ones writing and authorizing the spam.
Consolidated Sports, in fact, has named everyone from its transfer agents to its lawyers to a brokerage firm to even some so-called “bag holders” – people who still have positions in Consolidated Sports even though the company is now defunct, accusing them all of partaking in ways large and small in a “pump and dump” scam.
(In the interest of full disclosure, MN1 CEO Joshua Lankford was a partner of the brokerage firm named in the suit, Barron Moore. Lankford is named separately in the suit as well.)
One shareholder that was also named in Consolidated’s suit, Jason Freeman, has fired back. Freeman, who owns Routh Stock Transfer, who helped incorporate Artec, Consolidated Sports and National Storm, filed a shareholder’s derivative lawsuit this month accusing Consolidated Sports and its principals of scheming to defraud shareholders.
The suit names Scott Schepper, John Eckerd, Joseph Zrinyi, Arturo Molinares, Wheels Off Production, Racetrack Television, and Consolidated Sports Media.
“By the malfeasance and unconscionable conduct of its management, CSMG appears to be a victim of an elaborate Ponzi Scheme to raise money to support and protect John Eckerd from his Plaintiffs and creditors, entirely to the detriment of CSMG,” the suit reads. “As a result of being used as a virtual money funnel for Eckerd and his cronies, CSMG has been entirely denuded of its assets and essentially any tangible existence other than the papers on file with the Nevada Secretary of State.”
The suit then outlines the alleged scheme. “Eckerd needed money to satisfy investors who were disgruntled with his past misrepresentations regarding the profitability of various video productions,” the suit says. “Far exceeding his talent for producing marketable videos, was Eckerd’s skill at getting people to invest millions of dollars in them as well as his long chain of successive business failures.”
The suit says that Schepper, Consolidated Sports president, was a pawn enlisted by Eckerd even though he had little business experience, especially with a publicly-traded company.
“Schepper was essentially installed by Eckerd as the person with the ultimate fiduciary duty to the company, but he was in fact solely answerable to and loyal to Eckerd,” the suit said. “To this day, Schepper provides a transparent and all but confessed veil to Eckerd’s own self-serving interests.”
Eckerd is the president of Wheels Off Productions and manager of Racetrack TV as well as several other businesses, “and for all practical purposes the sole control person for CSMG.”
“Not surprisingly, each of these entities is essentially a failed business venture whose charters have either been forfeited, or whose operations have essentially ceased due to insolvency,” the suit said. “The full dossier of failed and/or dissolved Eckerd entities is long and not yet fully known; however, all of the above named entities have no viable financial existence due to being exhausted of their resources by Eckerd.”
The suit also alleges that Schepper’s own testimony in a deposition revealed much about the set up for Consolidated Sports. Eckerd and Schepper shared an office where Eckerd handled his business, and all mail was handed over to Eckerd, including Consolidated Sports’ bills, which were paid by Eckerd. The two shared staff, and when Consolidated Sports’ phones were disconnected and all calls were through Eckerd until phone service was turned back on.
“Eckerd himself subsequently testified that he exerted control and management over CSMG with the consent of Schepper, alone or in complicity with others,” the suit said. “Curiously, however, Eckerd appears nowhere in any public filing as a control person in CSMG.”
The suit says that Eckerd used Consolidated Sports to incorporate many of his failed businesses, helping him to deflect much of the liability from creditors. The suit says that because of this, at least six different legal actions have been filed against parts of the company, including the aforementioned Nascar suit; a temporary restraining order against Wheels Off on behalf of Texas Motor Speedway; a suit in Dallas County Court where a receiver was appointed by the court taking over Consolidated Sports assets; a suit naming Consolidated, Wheels Off and Eckerd for “breach of contract, possession of collateral, accounting;” and a suit by a company called Investor Relations claiming Consolidated failed to deliver purchased shares.
“Eckerd’s guise is to make videos for sale to the general public,” the suit said, calling Eckerd’s projects “second-rate.” “He is frequently accompanied by a common cast of characters including Scott Schepper, Joseph Zrinyi, Arturo Molinares, his own brother, James Eckerd, and others, whose involvement will be further investigated as this case progresses, but who seem to accept or convey back money, assets, control, powers, and/or ownership interests in the entities and projects for no consideration and for seemingly no good reason.”
The “Racetrack Girls Go Nutz” project was an attempt to duplicate the Girls Gone Wild success, only on the Nascar scene. While filming, the crews were kicked off at least two racetracks, including Texas Motor Speedway, who sought and obtained a TRO against Wheels Off to prevent the company from holding a promotional party within walking distance of the track.
“Eckerd admits that the party was to double as a fundraiser, but that it was a disappointment with respect to raising capital,” the suit says. “In fact, Eckerd stated that some of his investors were so upset with the financial disappointment of the party that, for whatever reason, Eckerd turned over his limited partnership in Wheels Off to Zrinyi. Nonetheless, the promotional website footage was finalized, as was the first installment of the RTGGN, during 2003 which was copyrighted and produced that year.”
The suit goes on to allege that without disclosing his work to Consolidated Sports investors, Eckerd actively sought capital contributions and sold royalty interests to individuals for about two percent net revenue for every $25,000 investment during the 2003-2004 timeframe. “Eckerd also sold a 4½ percent gross revenue royalty interest to Acme Enterprises, L.L.C. (“Acme”) in October 2003,” the suit says. “It was understood by Acme that Eckerd already had approximately 500 hours of footage ready to be finalized and to be released on a monthly basis.”
Acme also loaned $150,000, secured by the assets of Wheels Off, which included the footage for “Racetrack Girls Go Nutz” and footage for another Eckerd venture, North American Minority Race Fans, that allegedly highlighted rampant racism on the Nascar circuit. Acme has since filed suit against Wheels Off and Eckerd, alleging breach of contract and possession of collateral. Wheels Off is also prevented from disposing of its assets.
“Upon information and belief, in furtherance of his NAMRF video, Eckerd planned to extort the sum of approximately $20,000,000.00 to $30,000,000.00 from NASCAR as hush money to prevent the release of the would-be full-length film portraying events allegedly motivated by racism at NASCR events,” the suit accuses. “Not to be outdone by his long and sordid history of investor fraud, Eckerd devolved to actually fabricating scenes of racial protest to obtain footage.”
Eckerd fabricated the scenes, the suit says, by hiring protestors and bussing them to picket sites, even hiring from temporary agencies.
“Some of the picketers were drawn from temp agencies, having no idea that they were being hired to be complicit in such a fraud, but were simply asked to sign whatever authorizations or consents were placed in front of them as they were being handed their issued protest signs,” the suit said.
Even though the first “Racetrack Girls Go Nutz” video was complete, Eckerd and Schepper apparently, the suit said, felt the need to raise more capital.
“Eckerd met with John Coutris who then, like others before him and since, helped Eckerd to raise money completely oblivious to Eckerd’s fraudulent intent,” the suit said. “Eventually several of Coutris’ business associates provided approximately $500,000.00 to CSMG, making the total inflow of money to CSMG approximately $864,000 in just a few short months.”
Coutris was instrumental in founding Consolidated Sports, the suit said, and Eckerd then installed Schepper as president. In the months following the company’s formation, the suit claims the company quickly ran through the capital it had acquired.
“Money was invested in CSMG and then Schepper and Eckerd promptly funneled to Wheels Off, Racetrack TV, Eckerd, Schepper, Zrinyi, Conner, and many others,” the suit said. “Eckerd even went so far as to use his own entities as vendors and a very large portion of CSMG’s funds went to pay either Eckerd entity sham vendors, or to reconcile old debts with old vendors and investors for prior Eckerd projects.”
Indeed, bank records obtained by Market News First show payments to several individuals, as well as money going to various Eckerd entities. The suit alleges that Consolidated Sports’ bank account was used frequently to pay Eckerd’s debts.
About 15 people received payments from Consolidated Sports, including accused steroids dealer Michael Hill. In a March 2005, article in the Dallas Morning News where Hill insisted he was not selling steroids to high school students, Hill had been actively seeking investors in Racetrack Girls Go Nutz. Although it is unclear how successful Hill was in his stock promotion, at least two people in the article – including a relative – said they turned him down.
“I don’t need any more Michael investments,” the relative said.
“Scott Schepper, chief executive officer of Consolidated Sports Media Group Inc. of Addison, distributor of the video, said in a telephone interview that Mr. Hill was ‘at one time’ involved with the racetrack video,” the Dallas Morning News article said. “He said Mr. Hill isn't employed by or affiliated with his company. Some of Mr. Hill's family members and friends said he earns plenty of money working with a video production company and has no need to deal steroids.”
The suit accuses Schepper, Eckerd, Zrinyi and Molinares of breach of fiduciary duty, statutory fraud, violation of NRS 78.138, breach of contract regarding promissory notes between Wheels Off and Consolidated Sports, civil conspiracy, unjust enrichment, and conversion of Consolidated Sports assets for personal gain. It also accuses Wheels Off of breach of contract.
Freeman is asking the court to appoint a receiver to oversee the remainder of Consolidated Sports’ assets “on the grounds that CSMG is insolvent, has abandoned its business, and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets.” He is also requesting general damages, court costs, and attorney’s fees.
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