Creation of Press releases
Klenovic, Bunte and Arata prepared the NVID press releases containing misrepresentations about Microsafe. Bunte drafted the press releases with assistance from Arata, who also reviewed, edited, and wrote sections of the press releases. Klenovic edited, approved, and authored the language in some of the press releases and authorized Bunte to issue all of the press releases on behalf of NVID.
Bunte and Klenovic knew that the Microsafe press releases they prepared were false and misleading. Both Bunte and Klenovic had access to the research reports prepared by ABC Research. Arata also provided Bunte and Klenovic with written and oral reports on the status of the development of Microsafe. In addition, Arata repeatedly warned Bunte and Klenovic that the press releases contained inaccurate and misleading information about Microsafe.
Despite knowing that the press releases were false and misleading, Bunte and Klenovic distributed the press releases to the public through Business Wire, Inc., a company that publishes information and makes it generally available to the public. Many of the false and misleading press releases, including the horse and goat press release and the bee press release, were also posted on the internet. In addition, Bunte and Klenovic provided copies of the press releases to direct investors and to Diana Korpal and other persons who solicited direct investors.
Many of the press releases related to Microsafe, including the horse and bee press releases. were also posted or summarized on the the Internet through the Silicon Investor site, which maintained a bulleton board devoted to discussion of NVID. The NVID bulleton board which can be accessed free of charge by shareholders or anyone else who has access to the internet, logged 638 postings as of December 31, 1996. This number does not account for persons who read what was posted on the bulleton board but did not post on it themselves.
Thus, innumerable persons were exposed to NVID's false and misleading statements about Microsafe, including persons who purchased NVID stock directly from NVID and prospective purchasers who read press releases off the Business WIre or the Internet.
Bunte's Invocation of the Fifth Amendment
Bunte refused to provide any written or oral discovery to the Comission; instead he invoked his Fifth Amendment privilage against self incrimination. During his deposition, Bunte informed the Commission that he wouild vindicate himself at his criminal trial.
NVID's Actions Since the Filing of this Lawsuit
Instead of accepting responsibility for the massive fraud NVID perpetrated on it's shareholders through the actions of Bunte and Klenovic, NVID has argued that it was a victim of the fraud. As a victim of the fraud, NVID claims that it is entitled to all of the proceeds recovered in this action from Bunte and Klenovic, Arata, and any other source. Similarly, NVID has argued that because investors intended to fund business activities, returning all recovered funds fulfills the investors initial desires--to invest in NVID. Consistent with it's belief that it is entitled to any proceeds recovered from the fraud, NVID recently filed a state court lawsuit asking that the courtaward it title to the Bunte and Klenovic homes. Not surprisingly, although both homes were the subject of an asset freeze issued by the Court, NVID notified neither the Court nor the Commission of it's actions.
While NVID has been quite vocal in insisting that it is entitles to the Bunte and Klenovic homes and any other money recovered from the fraud, NVID's current management has been curiously silent about the NIVD press releases published during 1995 and 1996 that falsely portrayed Microsafe. NVID's current management has never issued any public statement that Microsafe in truth, is only an idea in the earliest stages of devlopment and research that needs perhaps years of additional testing before a product, if any, could be produced for sale. Instead, NVID's current management has added to the false and misleading statements bu authorizing Randy Federspill, an NVID investor to post fraudulent information on the internet. For example, on July 15, 1997, after talking to current management, Federspill stated that one formulation of Microsafe was "virtually ready for market" and another was not far off. In fact, as of July 15, 1997, no version of Microsafe had undergone and passed even the preliminary tests necessary to bring a product to market.
Although NVID has claimed that it removed from the company all persons associated with the fraud, Arata remains activley involved with NVID despite considerable evidence that participated in the issuance of the false and misleading press releases, knowingly accepted thousands of dollars in shareholders funds, and then participated in efforts to conceal the transfers. After originally maintaining that he had nothing to do with the Microsafe press releases, Arata ackowledged that he authored some of the fraudulent statements in the horse and goat press releases and provided Bunte with false and misleading claims made in other press releases. Arata also admitted that he may have reviewed the halogen product press release.
Moreover, at the inception of this lawsuit, Arata maintained that Bunte and Klenovic forced him into accepting approximately $371,500 from NVID to buy, decorate and furnish a Sarasota home. Arata now admits that when he accepted this money from NVID to buy a Sarasota home, he knew the money "probably came from investor funds" and that he is not entitled to the majority of this money. Arata also concedes that he voluntarily signed a document falsely stating that he gave NVID consideration in return for the money.
While Arata now admits that he lied about his involvement with the press releases and was mistaken when he adamantly denied signing a document purporting to legitimize the money transfer, Arata continues to maintain that he should retain a March 1997 payment of $25,000 because it was a bonus for developing Microsafe. Klenovic, however has stated that the money was given to reimburse him for renovations done on his Sarasota home. Arata has produced a document to the Commission that substantiates Klenovic's statement as it itemizes $25,000 in home renovations.
Notwithstanding Arata's participation in the issuance of the press releases, his acceptance of $371,500 dollars in what he believed was investors money, and his attempts to conceal his involvement with the fraud, NVID considers Arata the "pivotal" person in the development of Microsafe. Indeed, Arata spends at least 50% of his time working on Microsafe and other NVID-related issues. Interestingly, as of September 8, 1997, NVID president Larson had never thought to ask Arata exactly how much money he recieved from NVID or why Arata will not agree to return the $25,000. When pressed, Larson admitted that NVID's current management supports Arata in his attempt to characterize the $25,000 as a legitmate transfer.
(More later) |
