Remember Concorde America (Pink Sheets: CNDD), the company that was supposedly going to solve Europe's worker shortage? See Concorde America, Inc. - Never Mind. The press releases touting Concorde America raised a host of red flags. The notion that Concorde America, a company that barely existed, was poised to make a mint placing Latin American workers in European countries defied logic, even after the press releases cited the endorsement of a "noted financial advisor," Tom Heysek.
Whether or not Heysek was "noted" was strictly a matter of opinion. There was nothing to indicate he had earned that designation. In any event, Heysek, who purportedly had conducted extensive research on the Company, projected that Concorde America would realize annual revenues of $1 billion by 2006. His report, however, hardly added credibility to the incredible. Even Concorde America seemed embarrassed and disavowed the press releases together with some of their more preposterous representations. Concorde America even denied a relationship with Paul Spreadbury, the individual named as a "contact" on at least one of the bogus press releases.
It seemed that something improper was afoot but what? Now the facts are finally coming to light. On February 14, 2005, the Securities and Exchange Commission filed a complaint in Florida federal court charging that two individuals, Donald E. Oehmke and Bryan Kos, orchestrated a scheme to defraud investors by falsely promoting Concorde America and Absolute Health and Fitness, Inc., another obscure company.
The Complaint, which outlines an elaborate "pump and dump" scheme, also alleges that Concorde America, Absolute Health, Concorde America's President, Hartley Lord, Heysek, Spreadbury, and an individual named Andrew Kline, actively participated in the fraudulent activities.
As the SEC points out, the defendants comprise a motley crew.
• Lord, a resident of Boca Raton, Florida, had consented to a permanent injunction against future violations of the anti-fraud provisions of the securities laws in 1981 and was barred from the brokerage industry in the 1970s.
• Oehmke, had been barred from association with any NASD member brokerage firm in 1991 and fined $150,000 for, among other things, participating in a fraudulent scheme to improperly use customer funds, distributing false sales literature.
• Heysek had been associated with three brokerage firms who terminated his employment for misconduct ranging from unauthorized trading to improper handling of customer funds.
• Kline previously served a five year sentence in a Bolivian jail for a drug offense.
According to the SEC complaint, the scheme began to evolve when Concorde America became public through a reverse-merger with a shell corporation controlled by Oehmke. At around that time, Lord also agreed to sell Oehmke one million shares of Concorde America stock for $1 million.
Using information provided by Kos and Lord, Heysek and Kline prepared reports that included baseless stock price and revenue projections for Concorde America. Although Lord apparently complained that the numbers used by the analysts were "ridiculous," the SEC claims he tacitly approved the contents of the Heysek report and explicitly signed off on the Kline report. Those reports, together with other inflated projections and misleading information about the Company, subsequently appeared on several websites associated with Heysek, Kos and Kline. Those websites, Winning StockPicks.net and US Pennystocks.com, extolled the credentials of Heysek and Kline calling Heysek a "financial guru" and characterizing Kline as a "humanitarian" with a 20 year background in finance, whose experience included " a 5-year stay in South America where he built and administered clinics for poor and indigenous people of the region." They neglected to mention that Heysek had been fired by his brokerage firm employers for improprieties or that Kline's "5-year stay" in South America was spent in a Bolivian jail.
To further the scheme, Kos hired Spreadbury to write press releases and sales scripts for a voicemail campaign promoting Concorde America. As noted in our report on Concorde America, those press releases were filled with misrepresentations. So were the voicemails and tout sheets. By the time Concorde subsequently repudiated the press releases, Kos and Oehmke had dumped their shares.
The Absolute Health scam unfolded in a slightly different fashion but with similar results. When Oehmke and Kos failed to persuade the owner of several health clubs to participate in a reverse-merger, they acted as if the merger had occurred and changed the name of the shell to Absolute Health. They then retained Heysek, Kline and Spreadbury to wage an aggressive promotional campaign, using faxes, websites and tout sheets to spread misleading information and inflated projections. When stock prices rose as a result of the phony hype, Oehmke and Kos dumped their shares.
To accomplish their goals and sell shares, Oehmke and Kos employed a number of offshore companies as their nominees. The SEC lists the following companies used to facilitate the scheme:
• DaSilva SA, an Anguilla corporation formed in June 2004, maintained a brokerage account at Sunstate Equity Trading in Sarasota, Florida. Oehmke, who controlled the account, sold two million Concorde shares through Sunstate Equity at a profit of approximately $1.8 million.
• Vanderlip Holdings, NV, also was incorporated in Anguilla and maintained an account at Sunstate which was controlled by Oehmke. In August 2004, Vanderlip sold two million shares of Concorde America, netting more than $4.3 million in profits.
• Chiang Ze Capital AVV was a Trinidadian corporation which maintained brokerage accounts at Sunstate and Electronic Access Direct, Inc. of Sarasota, Florida. Those accounts, which were controlled by Oehmke and Kos sold a total of one million shares of Concorde America through Sunstate in August 2004, for a profit of almost $1.7 million. The two men also sold 3.5 million shares of Absolute Health for the Chiang Ze Capital accounts, realizing a profit of approximately $5.1 million.
• Ryzcek Investments GMBH was a Trinidadian corporation that had brokerage accounts with Sunstate, Electronic Access, and Newbridge Securities of Ft. Lauderdale, Florida. Oehmke, who held trading authority for each account, transferred over 6 million shares of Absolute Health into the Ryzcek accounts between May and July 2004.
• Barranquilla Holdings SA was an Anguilla corporation with accounts at Sunstate and Newbridge. Oehmke, who had trading authority for the Barranquilla accounts, sold one million shares of Concorde America stock at Newbridge in August 2004, receiving profits of over $5.2 million. He also sold shares of Absolute Health for the Barranquilla account, netting profits of more than $9.5 million.
The SEC is seeking a judgment permanently enjoining the defendants from violation of the federal securities laws; freezing the assets of Oehmke and Kos, recovering funds held overseas by Oehmke and Kos; ordering all defendants to disgorge their profits and pay civil penalties; barring the defendants from participating in penny stock offerings; barring Lord from serving as an officer or director of a public company; and preventing Oehmke and Kos from participating in ant unregistered offering of securities.
And there still is no sign that Concorde has placed a single Latin American employee in Europe.
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