SEC: Felon concocted AMR buyout hoax
South Florida Business Journal - by Kevin Gale
Date: Wednesday, May 4, 2011, 1:23pm EDT
Kevin Gale Editor
Email: kgale@bizjournals.com
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Allen Weintraub was up to some of his old tricks when he proclaimed he wanted to buy out Eastman Kodak and the parent of American Airlines, the SEC says.
As a result, the convicted felon from Aventura faces a new complaint in U.S. District Court in Miami.
The complaint, filed Tuesday, said on March 19 the owner of Sterling Global, which wasn't even registered as an active Florida corporation, e-mailed a written tender offer to Eastman Kodak Co. (NYSE: EK) for all its stock at a price of $1.3 billion.
On March 29, Weintraub e-mailed AMR Corp. (NYSE: AMR), the parent of American Airlines, about a $3.25 billion buyout, the SEC says.
Both offers represented almost a 50 percent premium over the companies’ closing prices at the time.
The SEC also said Weintraub contacted a lot of newspapers and other media, which is why the laughable offers got attention.
Weintraub didn't contact me, but word spread. My reaction: Who is this Weintraub character?
With help from some tips, I noted in a March 30 blog that SEC records showed Allen E. Weintraub in 2003 was permanently restrained from acting as a director or officer of a public company. This followed shenanigans at Vector Holdings Corp. and Florida Stock Transfer Inc.
To me, there was a remote possibility that there were two Weintraubs – or someone using his name as a stooge – but the SEC complaint says it's the same guy.
Weintraub is on probation for fraud and is under an injunction to not violate the antifraud provisions of federal securities laws, the SEC complaint says.
Weintraub filed for personal bankruptcy in April 2007, and has not paid a $1.05 million judgment to the SEC, the complaint says.
Nonetheless, the SEC complaint says: "Mr. Weintraub falsely claimed that he had bank agreements in place to obtain the approximately $4.5 billion in financing that the tender offers would require."
From mid-December through February, Weintraub visited the branches of three large banks in Aventura about his desire to obtain billions of dollars in financing to take an unnamed public aviation company private.
"Since the banks’ local branch offices typically did not handle the type of financing Weintraub was seeking (which would generally be handled by the banks’ investment banking units), the local bank personnel initially tried to determine what Weintraub was requesting and whether other units of their respective banks might be able to address Weintraub’s requests," the SEC says.
The complaint does not say whether widespread laughter ensued.
Weintraub told a lot of people, including institutional shareholders, about his idea, the SEC says.
"Minutes before he emailed the bogus tender offer letter to Kodak, Weintraub emailed it to various reporters at Dow Jones, Bloomberg, and the Democrat and Chronicle, a daily newspaper serving Rochester, New York, where Kodak is headquartered," the SEC says.
A Democrat and Chronicle blog discussed an e-mail exchange in which Weintraub reportedly explained that he has “been buying distressed companies for the past 15 years,” the complaint notes. "Weintraub also reportedly stated that he has had dealings in the 'hotel and casino area' and has bought assets of “large bankrupt companies such as GM and Chrysler.”
Despite the widespread skepticism, Weintraub was persistent in his follow-up, the SEC says.
"On March 29, 2011, Weintraub emailed Kodak’s CEO and public affairs director asking, “where are we on the offer presented back to you on March 18th? Stuck [sic] is sinking, I am still willing to buy at the terms presented. Call, so we can discuss. AW,” the complaint says.
On the evening of March 29, Weintraub had a conversation with a reporter from The Dallas Morning News about AMR.
According to a published transcript of that conversation, when asked about the status of the Kodak tender offer, Weintraub stated that he and Kodak were in “discussions.”
On April 26, Weintraub again emailed Kodak stating that “[o]ur offer is still open for an amicable transaction.”
Kodak has not had any discussions with Weintraub and has not responded to his offer, the complaint says.
According to documents that Weintraub produced to the SEC’s staff, he e-mailed the AMR tender offer letter for “immediate release” to TV stations and newspapers in Texas, plus the Telemundo and CNBC networks.
All of this sounds ridiculous, but the SEC says the felon's actions and resulting media coverage had an impact.
"On March 29, 2011, AMR’s stock price closed at $6.58, down $0.09 (1.3%) from the prior day’s close. On March 30, 2011, AMR stock price closed up $0.27 (4.1%) to settle at a price of $6.85, and on March 31, 2011, the stock price closed down $0.39 (5.6%) to a price of $6.46. The trading volume in AMR’s stock rose from approximately 5 million shares on March 29 to approximately 31.5 million shares on March 30. The lack of any other AMR or airline industry news indicates that the March 30 price and volume movement were affected by the media coverage of Sterling Global’s AMR tender offer that occurred in the late afternoon of March 29," the complaint says.
I'm trying to find out whether Weintraub has an attorney yet.
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