Turbodyne Technologies Inc -
Turbodyne takes its time serving papers on Asensio
Turbodyne Technologies Inc
TRBDF
Shares issued 41,305,483
1899-12-30 close $0
Wednesday Dec 23 1998
SHORT SELLER AWAITS TURBODYNE LIBEL SUIT
by Stockwatch Business Reporter
Manuel Asensio, the scrappy New York short seller known for his efforts to drive
down the price of companies he targets, says he still has not been served with
papers relating to Turbodyne Technologies's defamation-and-fraud complaint filed
on Dec. 16 in the Superior Court of California. Turbodyne contends it was libelled
in a series of press releases and postings on Mr. Asensio's Internet website during
August 1998, and that Asensio's short selling violates securities rules. Turbodyne
filed its complaint in Los Angeles.
Mr. Asensio is vague about whether he has seen the 29-page statement of claim,
contending that if he has seen it, "I couldn't tell you I have." He speculates the
reason Turbodyne failed to serve him papers on Dec. 16 was to gain a tactical
public-relations advantage, explaining that without knowing what the complaint
said, he was not in a position to respond adequately to enquiring reporters.
Questions are also raised by the four-and-a-half months it took for Turbodyne to
make and file its complaint. Stockwatch was unable to reach a company
spokesman in Woodland Hills, Ca., for comment. After several tries, someone
identifying himself as the company's chief financial officer referred a reporter to the
company's legal counsel, which failed to return the call. The lawyer handling the
lawsuit for Turbodyne, Pasadena-based Marvin Rudnick, spoke with Stockwatch
but had some questions of his own. "Do you think he's got any legitimate claims?"
Mr. Rudnick asked. "Tell me what you think of Turbodyne. They're new clients."
Mr. Asensio is confident this lawsuit from the former Vancouver Stock
Exchange-listed company will in time be dropped as have many others. "We're
very comfortable with both the law and the fact that we have no liability," he says.
Dennis Seider, Mr. Asensio's Pasadena, Ca. lawyer, declined to comment.
Turbodyne's latest unaudited financials indicate net sales of $9-million for the three
months ending Sept. 30, 1998 and a net loss of $4.2-million. Turbodyne claims to
own, develop, manufacture and sell proprietary automotive turbocharger products
called Turbopac and Dynacharger. The products, it says, "enhance performance
and reduce emissions of internal-combustion engines."
Mr. Asensio, however, claimed in his August reports that the products were little
more than a supercharger driven by an electric motor instead of a belt. He further
stated that in spite of Turbodyne's claims of making deals with 12 different
companies in at least 14 countries, "no manufacturer has every incorporated a
single Turbodyne product in a new engine or vehicle . . . Despite raising and
spending over $55-million in equity capital, Turbodyne has failed to create any
new products."
In addition, the short seller said the wondrous technology was acquired for stock
worth less than $500,000.
Turbodyne wants Mr. Asensio and his Asensio & Company, Inc. to pay no less
than $180-million for what it calls defamatory and disparaging comments he made
about the company starting on Aug. 4. As part of the dollar figure demanded,
Turbodyne charged Asensio with intentional interference in its business, fraud and
unfair competition.
The tally includes losses ascribed to a failed purchase of shares by an unnamed
Fortune 500 company that Turbodyne contends would have resulted in
$50-million in new equity capital. The deal also would have seen this major
corporation participating with Turbodyne in the development and marketing of its
automotive products. Turbodyne claims the deal did not proceed because Mr.
Asensio's comments hit the stock price just as the deal was to be consumated.
"One of the important issues under discussion as of Aug. 3, 1998 was the price
per share that would be paid by the Fortune 500 company for its interest in
Turbodyne," the claim states. Turbodyne calculates the $50-million figure using the
Aug. 3, 1998 closing price of $15.81 per share. Shares in Turbodyne plunged
immediately to a low of $5.62 on Asensio's first report on Aug. 4, reaching a low
of $3.35 on Aug. 31. The price has remained depressed, closing yesterday
(Wednesday) at $4-3/4. The loss to shareholders was calculated at $400-million.
The statement also claims that as of Aug. 3, Turbodyne had more than 700
employees and that Turbodyne turbochargers "were installed and were undergoing
evaluation and testing in municipal transit systems" across the United States and
France, as well as Mexico and Brazil. Further, the products "are being
incorporated into new engines manufactured by (the Germany-based) MAN, one
of the largest diesel-engine manufacturers in the world."
Turbodyne claims to have spent more than $30-million developing, patenting and
marketing its "new and unique" products. At the time of Asensio's attacks,
Turbodyne asserts it held at least six patents, which it listed, with many more
pending.
Turbodyne charged that beginning Aug. 4, Asensio sold short Turbodyne stock
and otherwise profited from short positions, but failed to "sell on the 'uptick'
and/or selling on the 'down tick' in violation of Nasdaq rules." Further, it alleged,
Asensio and his co-conspirators sold naked short positions, meaning the sellers
"neither owned nor had reason to believe they could borrow sufficient shares" to
deliver on their short sales, a purported violation of industry rules.
A VSE company until July 1997, Turbodyne is the former Harry Moll/Leon
Nowek vehicle, Clear View Ventures, control of which shifted to Edward Halimi.
Mr. Halimi is Turbodyne's chairman, while Mr. Nowek is Turbodyne's accountant
and remains a director.
Turbodyne had a chequered history on the VSE -- and remains a story that
appears to be ending no time soon. Its recent visit to the news pages included an
Oct. 16, 1998 statement from the VSE that it fined and permanently banned
Yorkton Securities broker Stan Ross for trading heavily in Turbodyne stock
through two nominee accounts.
Then in November 1998 a lawsuit went to trial in the Supreme Court of British
Columbia alleging Turbodyne founder Mr. Halimi welched on a deal to give
plaintiff Bradley Holt, a Turbodyne financier, options to purchase a whopping
750,000 shares in the company. Mr. Holt, who was seeking $5-million
(Canadian), said the deal was made on May 9, 1995, eight months after the
widely publicized August 1994 disappearance of Mr. Moll's banker and
colleague, Nicolaas Masee. His wife Lisa also went missing. Mr. Holt said the
share payment was promised in lieu of him collecting a salary as the firm's
vice-president of business development, although 100,000 shares were paid to
Mr. Holt separately.
The case was dropped suddenly the third day of sometimes embarrassing
testimony for Mr. Holt in which the Minnesota-based financier admitted he had
virtually no knowledge of Canadian regulatory rules when he signed a letter of
agreement to purchase the Turbodyne shares. Further, he admitted he knew
nothing about the particulars of a subsequent stock option agreement he co-signed
with Turbodyne accountant Nowek. During testimony, Turbodyne lawyer Robert
Breivik revealed that Mr. Holt made over $1-million upon selling 100,000
undisputed shares and yet had only worked 300 hours at the firm.
Mr. Holt's ties with Mr. Moll go back to the former Moll-linked Comac Foods.
Mr. Asensio is in good company when he expresses concerns about Turbodyne's
earnings. On May 10, 1996, the VSE forced Turbodyne to issue a statement to
"clarify" a news release from April 26, 1996 in which the company said it was
proposing to acquire Mexico-based Pacific Baja Light Metals Holding, which
forecast sales for 1996 of $37.2-million and a profit of $5.4-million.
In the clarification, Mr. Nowek confessed that Baja Pacific's forecast was
performed internally by the Mexican company and may not measure up to
generally accepted accounting practices. Mr. Nowek announced closing the
acquisition of Pacific Baja on Sept. 6, 1996 for three million shares and
$12-million.
Reached for comment, VSE surveilance director Angela Huxham would only state
that the exchange's concerns about Turbodyne centred on financial projections
and what she delicately referred to as trading concerns. "Those were our major
concerns with regard to Turbodyne," she says. Asked if that is all she wanted to
say, Ms. Huxham said it was.
Mr. Asensio is no stranger to controversy but he has never been successfully sued
by any of his target companies, which include a strong sell recommendation he
made on U.S.-based telephone-systems provider Diana Corp. on June 4, 1996.
The stock, then around $84, sank to $2 by early 1997. Mr. Asensio's reports
indicated that in spite of Diana's own claims, the company possessed no technical
research or manufacturing capabilities.
Another target was Vancouver-based Crystallex International Corp. Beginning on
March 3, 1998, Mr. Asensio issued a series of reports claiming the company was
a "pump and dump" based on a false legal case in Venezuela surrounding the
Cristinas 4 & 6 concessions. In June 1998, Venezuela's supreme court ruled the
company had no legal standing and no case to bring forward and its price sank
from around $6 to $1 on the news. Crystallex president Marc Oppenheimer
announced with great indignation an action against Asensio after the first of these
reports, but New York law firm Cleary Gottlieb Steen & Hamilton quietly
dropped the matter without filing any papers.
By themselves, Asensio's attacks failed to prompt a long-term drop in the share
price along the lines of Turbodyne or Diana, but his efforts did manage to sent
Crystallex plummeting from $9.25 on March 4 to $6.90 the next day. It had
reached its all-time high of $11.85 on March 2 |
