We feel as if we hit the trifecta this week. Three companies featured in StockPatrol.com investigative reports were at the center of enforcement proceedings - two administrative actions initiated by the Securities and Exchange Commission and one federal criminal proceeding.
The first action featured the man behind Vector Holdings, Inc. a tiny over-the-counter company that claimed it was about to make a big splash in South Florida’s hotel and hospitality market. The Company proved to be all wet; its principal operating business was a stuffed potato stand at a Florida mall. As we recently reported, on April 12, 2005, a Florida federal court ordered the Company’s former president and sole director, Allen Weintraub, to pay over $1 million for committing securities fraud while at the helm of Vector – now known as Dark Dynamite, Inc. (OTCBB: DDYI). The SEC had alleged, among other things, that Vector had failed to disclose troubling aspects of Weintraub’s past, including multiple felony convictions and unsatisfied personal judgments. See Dark Dynamite, Inc. - Dark Past and Murky Present.
Next up was Infotopia, Inc. – a frequent subject of our reports from 2001 and 2002. Infotopia, which projected multimillion dollar revenues proved to be a bust. After filing, and later amending, a series of unaudited financial reports, Infotopia fell silent, stopped disclosing financial information, and eventually fell into bankruptcy. On April 20, 2005, an Administrative Law Judge revoked the registration of Infotopia’s securities, citing the Company’s failure to file periodic reports. See Infotopia Extinguished.
But the most dramatic news of the week involved individuals involved with a company that was known as Premier Axium ASP when it was first featured on StockPatrol.com in April 2002. See Premier Axium ASP - 25 Million Reasons. A twenty three count indictment has been filed in federal court in Illinois naming, among others, Christine Favara, who served as president of Premium Axium ASP and several of the Company’s later incarnations. Since mid-2002, Premier Axium morphed, successively, into Core Solutions, Inc., Sunshine Ventures, Christine’s Precious Petals, Global Business Markets, and GREM USA – with Ms. Favara at hand and at the helm through July 2003. Although the Company’s name changed repeatedly – as did its business – the bottom line remained the same – the Company had no meaningful assets or revenues.
The criminal complaint centers on the activities of Suburban Capital Corporation and North Coast Investments, Inc., entities that purported to provide financing and consulting services to small publicly traded companies, including Premier Axium. Suburban Capital and North Coast Investments both were controlled by an individual named Frank Custable, Jr.
The indictment alleges that Suburban Capital, North Coast Investments, Custable, Favara, and others (including Custable’s associate, Sara Wetzel) caused Premier Axium and several other obscure companies to issue unregistered stock; enter into bogus consulting agreements; falsely represent the nature, timing and extent of services rendered by consultants; falsely state that shares registered on Form S-8 had been issued in consideration for bona fide services; manipulate the capital structure of the Company to get more shares into the hands of Custable and his cohorts; and conceal Custable’s share ownership by placing stock in the names of other individuals.
These misrepresentations and manipulations allegedly were all part of a complex pump and dump scheme that used misleading spam e-mails to hype the companies and entice potential investors. The indictment charges that, in or about March 2002, spam e-mails were distributed claiming that Premier Axium had “invested millions of dollars in creating its unparalleled proprietary Integrated Services Branch.” In truth, there had been no such investment.
By virtue of these misrepresentations and the attendant misconduct the defendants purportedly obtained at least $3.5 million.
These latest charges should come as no surprise to StockPatrol.com readers. On November 12, 2003, we reported on the problematic relationship between Suburban Capital and the Company, then known as Global Business Markets, Inc. Global claimed at the time that it had been unable to complete a proposed bakery acquisition because of “complications with a consultant, Suburban Capital Corporation of Addison, IL and its related associates, which were initially hired to solidify such transactions.” The Company declined to say whether it was planning to dissolve its consulting contract with Suburban Capital, but indicated that it had retained legal counsel to review “past, present and future transactions.”
In light of the recent indictment, Global’s explanation seems disingenuous. Indeed, on March 27, 2003, seven months before Global issued that statement, the Securities and Exchange Commission had filed suit against Suburban Capital, Custable, Wetzel and others charging them with orchestrating a massive securities fraud scheme. The SEC complaint echoed the charges that would later appear in the Illinois federal indictment. According to the SEC, Custable, a recidivist securities law violator, obtained large positions in penny stock companies and then, using nominees including Wetzel, engaged in unregistered stock offerings. To carry out that scheme, Suburban Capital and Custable purportedly provided consulting services, arranged for Custable’s nominees to receive shares that were improperly registered on Form S-8, and orchestrated a campaign to pump the stock by issuing phony “reports” of the Company. .
As we reported, Suburban Capital had enjoyed a long – and as it turns out – profitable relationship with Global business and its predecessors. In August 22, 2002 the Company, which then was called Core Solutions, filed a Form 8-K stating that “[m]anagement has terminated consulting agreements and has discontinued transacting any and all business with Suburban Capital Corporation, Frank Custable…Ed Miers, Sara Wetzel, …North Coast Investments, Inc., and each of their respective associates and affiliates.” That Form 8-K was signed by the Company’s President at the time, Christine Favara. Edward Miers, one of the individuals whose agreement had been terminated, later became the President of Global Business and remains in charge of the Company in its latest incarnation.
Other consulting agreements reflected the close relationship between Custable’s group and the Company:
• On February 12, 2002, the Company entered into a consulting agreement Sarah Wetzel to provide strategic planning and marketing consulting services in connection with the operations of the business of the Company. As consideration the Company granted and issued Wetzel 65,000,000 options to purchase shares of the Company's common stock at an exercise price of $0.001 per share. These options were subsequently exercised. Wetzel filed a Form 13 D in April 2002 indicating that she was the owner of 42.5 million shares of the Company’s common stock – or 5.1% of the outstanding shares
• On February 26, 2002, the Company issued 600,000,000 shares of its common stock to Global Consulting for consulting services performed. Subsequently, Global transferred these shares to an individual and employee of the Company for past services relating to Global.
Now Favara, Custable and Wetzel are facing a bevy of fraud charges.
Favara, Weintraub and Infotopia – a triple play for law enforcement, but unfortunately three strikes for investors.
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