Wednesday, June 30, 2010

SEC Approves Eight Russian Shell Companies (AMOK.OB)

Better Get The Leg Irons Boys.
These Ain't Regular Criminals,
These is Stockbrokers.
-One of Climateer's favorite Barron's headlines.

Oh happy day.
Long time readers know I have a morbid fascination* with the underbelly of the markets; it's like watching the lions approach the wildebeest at the watering hole, you don't want to see it but you can't look away.

As they say on the nature shows:
"Sadly now, there can be but one outcome"

From the Wall Street Journal:
The SEC's Russian Roulette
IPOs From Ukraine and Russia Were Cleared, With Few Questions Asked
On Jan. 6, 2009, Ukragro Corp. of Zhitomir, Ukraine, made an initial filing with the Securities and Exchange Commission to sell stock to the public. Its sole employee and owner was a 79-year-old massage therapist.
The company had no revenue, $100 in assets and planned to open a string of health spas. Public records on file at the SEC show that the agency asked no questions and the application cleared through the commission eight days later.
Over the past two years, eight other start-ups reviewed by the SEC have been similarly headed by people in Ukraine or Russia, with no revenue or operations and minimal assets. Business plans ranged from renting bicycles in Kiev to selling cars in Siberia. All used the same small Seattle law firm, Dean Law Corp., to help with their initial SEC filings. The SEC cleared them to sell stock, in most cases without asking a single question, according to the public records at the agency.
The SEC declined to comment on its reviews of individual companies. John Nester, a SEC spokesman, said the agency's chairman, Mary Schapiro, has been "aggressively pursuing enforcement actions" and "is changing the direction and culture of the agency." Ms. Schapiro, for example, has formed a new division with broad powers to identify risky market practices, such as the trading of complex derivatives, and is trying to secure more resources.
In an email response to questions, Faiyaz Dean said his law firm's involvement with the companies "ended after our limited engagement of providing a legal opinion for their registration statements. Other than this, we are bound by attorney-client privilege and cannot answer any further questions."
The ease with which these companies—known as corporate "shells" because they didn't yet have operations—sailed through the SEC raises questions among some observers about the agency's ability to police the market for small-company stocks. Given that the shell companies "appeared to have little or no business results or experience," their filings should have been carefully reviewed for evidence of possible fraud, said Joel Seligman, president of the University of Rochester and author of a history of the SEC....

...In a statement, the SEC said it has begun asking new shell companies how they plan to meet federal requirements for preparing audited financial statements. The agency said it also is looking more closely at the role of outside auditors at such companies.

After Ukragro cleared the SEC, the shell company changed its name in September to Windsor Park Forex Inc. before it was acquired in January by Ron Ruskowsky, who became president and controlling shareholder. He changed the company's name again, to Amarok Resources Inc., relocated it to California and refocused its business to prospecting for gold in Nevada and elsewhere. It still hasn't reported revenue and has yet to strike gold but has announced raising $2 million in private stock placements.
Its stock has gone from pennies a share to as high as $2.75 a share, giving the company a market value of nearly $200 million. It currently trades at about $1.30 a share on the OTC Bulletin Board under the symbol AMOK.
Mr. Ruskowsky said he had nothing to do with the company's previous management. He said that in order to bring to market what he views as a promising gold-mining prospect, he purchased the Ukragro shell, which is permissible, without really looking into its past. Since Ukragro had passed through the SEC, Mr. Ruskowsky said he assumed "it should be clean."

Stuart Allen, a retired SEC investigator who still keeps an eye out for suspicious-looking promotions, said that when he read the Ukragro filing, he wondered how a 79-year-old massage therapist in Zhitomir, Maria Yahodka, came to incorporate the company in Nevada, and hire a law firm in Seattle and an accounting firm in Houston. An official at the accounting firm declined to discuss its dealings with Ukragro.

A man who answered the Ukrainian phone number on Ukragro's filing said Ms. Yahodka was unavailable.
Mr. Allen ran the name of the law firm, Dean Law Corp., through public databases. He found that several of the similar small companies also had used the firm recently. Mr. Allen said that as an SEC investigator, when he saw seemingly disparate small companies using the same accountants or lawyers, he would become suspicious that a single stock promoter might secretly control the firms. If that were the case, the companies would be required to disclose such a connection, he said, adding he doesn't know if that is the case with these companies.

In January, as part of Mr. Ruskowsky's purchase of the company, it declared a 60-for-1 stock split, which he said was a way to create more publicly traded shares.
In February, the company announced that it had acquired an interest in a Nevada gold-mining claim via a middleman from a Canadian company run by Mr. Ruskowsky's father. In a Canadian securities filing, the father's company said it had held the claim since 1989 and "has not yet been able to identify any known body of commercial grade mineralization."
'Buy' Call
Earlier this year, a publication called Intelligent Investor Report issued a "buy" recommendation on Amarok, saying the company had "proven gold deposits" and predicting the stock price "could soon be flying past $15 a share!" A small-type disclaimer said the report was a "paid advertising issue" financed with $335,000 spent by an Amarok shareholder. The report's editor and publisher, Jarret Wollstein, said his piece didn't say that any gold deposits were at commercial-grade levels....
There is also an ad for the WSJ Professional Edition:
Editors' Deep Dive: Shell Companies Often Dubious
*Here's a post from May of '08, just one of many examples:
Chameleons on the Pink Sheets
On April 22 I was rambling about Planktos and penny stock deals:
...A classic history would be a Vancouver "junior resource" company in 1979, after the collapse of the oil and gold markets became a solar deal in '81 , an Aloe Vera deal to the yuppies mid '80's, a biotech in '86 ("we're the next Amgen"or "A cure for AIDS"), then on to neutraceuticals or spas, Indian casinos, software, then the great "i", "e-" and ".com" gold rush. Someday I'll get around to checking if some lunatic scammer actually went with "".
The next group of parasites were the "homeland security" companies, then land deals. 
The "resource" scams never went away and became more prominent in 2002 after gold had moved off its $252 bear market low.  
We're in the Green boom (happy Earth day by the way) now, who knows what's next....

Today in EuroInvestor:
...The recently re-named Homeland Security Network, Inc. (Pink Sheets:HYSN), doing business as Global Ecology Corporation (GEC) announced today that it has received their initial order from its soil remediation project in Juarez, Mexico. The total value of the purchase orders, involving several of the partnerships soil-based products, is $2 million with delivery to begin this June....