SEC charges Heart Tronics Inc., formerly Signalife Inc., alleging “brazen series of frauds”

The Securities and Exchange Commission has brought fraud chargesagainst Heart Tronics Inc. (Pink Sheets: HRTT.PK), its co-chief executives and the husband of its majority shareholder, alleging that the company falsified sales, issued misleading press releases and committed numerous other violations.

The company, previously known as Signalife Inc. and Recom Management Systems Inc., was featured in a Sharesleuth investigation in 2008. That story presented evidence suggesting that Mitchell J. Stein, a California attorney, secretly controlled the company, and that it had engaged in market manipulation with the help of consultants who got millions of dollars in stock.
The SEC said in its complaint that Stein did indeed control the company, even though he was not listed as an officer or director. The agency also alleged that he used a collection of trusts to sell at least $5.8 million in stock owned by his wife, Tracey Hampton-Stein, without publicly disclosing those sales.
The company’s shares formerly traded on the American Stock Exchange.
Another of the defendants in the SEC case is Willie Gault, a former professional football player and Olympic gold medalist. Gault was co-chief executive of Heart Tronics, which purported to make heart-monitoring devices that could detect irregularities and help prevent heart attacks.
The Justice Department, meanwhile, announced that Stein was arrested at Los Angeles International Airport over the weekend in connection with what it described as a “multi-million dollar market manipulation fraud scheme.” Those charges include mail fraud, wire fraud, securities fraud, money laundering and conspiracy to obstruct justice.
The SEC’s complaint alleged that Stein and an associate, Martin B. Carter, engaged in an elaborate scheme to fool investors — and even the company’s executives — into believing that it had legitimate orders for millions of dollars worth of the heart monitoring devices.
Those schemes included creating fictitious companies, with fax numbers that went to Carter’s house, and even sending Carter to Japan to mail a letter from one of the companies so it would appear that the company was actually based in that country, as Stein had claimed.
The SEC also alleged that Stein caused the company to pay $600,000 in cash and $1.47 million in stock to Carter under a sham consulting contract. According to the complaint, Carter kicked back most of that cash and most of the proceeds from the sale of those shares to Stein.
Earlier this year, the California Attorney General’s office filed a complaint against Stein, allegeing that he and others participated in an unrelated scheme to deceive desperate homeowners into paying thousands of dollars each to join dubious class-action suits against mortgage lenders.
According to the complaint, the lawyers and telemarketers involved in the scheme led the homeowners to believe that the suits would halt foreclosures on their homes, reduce their loan balances, bring them financial settlements and possibly eliminate their mortgages entirely.

Canadian judge forces DeepCapture.com to pull content

A Canadian judge has ordered DeepCapture.com, a U.S.-based “anti-naked shorting” web site, off the Internet after a penny stock promoter accused the site of defamation.
Altaf Nazerali, a stock promoter in Victoria, British Columbia, claimed in a lawsuit that the site, edited by former Columbia Journalism Review columnist Mark Mitchell, falsely portrayed him as “a criminal, arms dealer, drug dealer, terrorist, Baud artist, gangster, mobster, member of the mafia, dishonest, dangerous and not to be trusted.” 
The defendants in the case also included Patrick Byrne, the chief executive of Overstock.com (Nasdaq: OSTK), and High Plains Investments LLC, a fund that Byrne controls. Nazerali alleged in his suit that Byrne owns Deep Capture LLC, the company behind DeepCapture.com.
 
Nazerali filed suit in Canada on Oct. 19 and an injunction was issued the same day, according to The Province. Nazerali also named Google Inc., as a defendant, for indexing and linking to the site, as well as GoDaddy.com, the site’s registrar.
Deepcapture.com’s content has been offline since the injunction was issued.
While DeepCapture.com is registered to a proxy, on an archived version of the site Byrne lists himself as a Deep Capture reporter and the source of its funding. The site described itself as “a new approach to journalism” and claimed that “that powerful actors have been able to influence or take control of not just the regulators, but also law enforcement, elected officials, national media, and the intellectual establishment. It is our mission to expose this ‘deep capture.’”
Since 2005, Byrne has been complaining that a hidden cabal of hedge funds, brokerages and other financial firms have been systematically seeking to undermine companies — including Overstock — through illegal “naked shorting” of their shares. Byrne contends that journalists, regulators and others have been co-opted by the group. 
 
It’s unclear if an injunction also was issued against Google, named in the suit because it indexed and linked deepcapture.com. Searches on Google.com for “Altaf Nazerali” and “Ali Nazerali” still returns links to Deep Capture’s story.
On an investor’s forum, a post attributed to Byrne said: “Gosh, I go off-line for a few days of R&R and look what happens. It looks like Ali Nazerali wants to go a few rounds. Happy to oblige.” 
Nazerali is no stranger to controversy. He or his investment funds have been involved in a number of public companies that have drawn scrutiny from news organizations and regulators.

California attorney general alleges that lawyers and telemarketers defrauded desperate homeowners





The California Attorney General’s office has
filed a complaint against Mitchell J. Stein — who was featured in a Sharesleuth
investigation
in 2008 — alleging that he and others participated in a scheme to deceive desperate homeowners into paying thousands of dollars each to join dubious lawsuits against their mortgage lenders.



According to the complaint, the lawyers and telemarketers involved in the scheme led the homeowners to believe that the suits would halt foreclosures on their homes, reduce their loan balances, bring them financial settlements, and possibly eliminate their mortgages entirely.



Authorities say the ring solicited homeowners in 17 states and persuaded at least 2,500 of them to pay as much as $10,000 each to join suits, some of which were never filed.


Stein, a Californa-based lawyer, was involved in the creation and development of Recom Managed Systems Inc., a medical device company that went public through a reverse merger. It later changed its name to Signalife Inc., and is currently known as Heart Tronics Inc. (Pink Sheets: HRTT.PK).


The attorney general’s office said in a press release that all of defendants had their assets seized and were enjoined from continuing their activities.

Research report alleges that Sino-Forest Corp. overstated assets, revenues

Muddy Waters LLC said in a research report that Sino-Forest Corp., a Canadian company with extensive timber holdings in China, has substantially overstated the amount of forest land it controls, as well as the amount of wood it has been harvesting.

Trading in the Mississauga, Ontario-based companys stock (TSX: TRE.TO) was halted by the Toronto Stock Exchange after the shares plunged 20 percent in less than 30 minutes. 

Muddy Waters said in its 33-page report that the land purchases that Sino-Forest has reported in China did not square with government records, and appear to be overstated by as much as $900 million. The report also included photographs of apartment buildings and other nondescript structures at the addresses listed for some of Sino-Forest’s major customers and financial partners.

Unlike other Chinese businesses that trade on North American exchanges, Sino-Forest has attracted some large, savvy investors, includging Paulson & Co., which has more than $30 billion in assets under management.

 

Kandi Technologies responds to Sharesleuth story

Kandi Technologies Corp. said in a letter to shareholders that it stands by the revenue figures in its Securities and Exchange Commission filings. However, the Chinese maker of electric cars, go-karts and other vehicles acknowledged discrepancies in charts in those SEC filings that compared 2009 and 2010 unit sales for all of its product lines. It attributed the errors to “new accounting employees.”

Kandi did not directly address the question of how and where it sold the roughly 3,700 electric cars that it reported selling over the past two years. Sharesleuth’s investigation found that dealers in the United States — the company’s primary market — sold well under 1,000 of the vehicles..

Kandi said in its letter that it sells its vehicles to Chinese export agents, distributors and other middlemen, and that it had no knoweldge of — or relationship with — the dealers that market those vehicles to retail customers.

“To the best of our knowledge, these distributors through their dealer networks distribute our vehicles throughout the world,” the company said.

 

Two more Chinese reverse-merger stocks get trading halts

The AMEX has halted trading in the shares of NIVS IntelliMedia Technology Group Inc (AMEX: NIV) and China Intelligent Lighting & Electronics Inc. (AMEX: CIL).

NYSE Regulation Inc., which operates the exchange, said it was seeking additional information from both companies.

“NYSE Regulation is evaluationg both the need for certain public disclosure, as well as the overall suitability for the continued listing of the Company’s common stock. In this regard, NYSE Regulation is in the process of requesting additional information from the Company in connection with such assessment,” the organization said in each of the halt orders.

According to Securities and Exchange Commission filings, the chief executive of NIVS IntelliMedia, Tianfu Li, is the brother of the chief executive of China Intelligent Lighting, Xuemei Li.


 

Hedge fund issues second report on China Shen Zhou Mining

Absaroka Capital Management LLC issued a follow up report on China Shen Zhou Mining & Resources Inc. (AMEX: SHZ), pointing out what it said were material misstatements or errors in the company’s Securities and Exchange Commission fiilings. The report, written as a letter to shareholders, also said that an analysis of the company’s financial statements using a forensic auditing tool raised additional concerns.

China Shen Zhou Mining issued a rebuttal March 10 to the original report. It disclosed in a subsequent SEC filing that its chief financial officer had resigned, making him the fourth CFO to leave that position in three years. Despite the negative reports, China Shen Zhou Mining’s shares have been rallying, along with shares of other Chinese minerals producers.

New Oriental Energy delisted from Nasdaq

Three days after the Nasdaq exchange halted trading in its shares, New Oriental Energy & Chemical Corp has been delisted. The company’s stock now is traded on the Pink Sheets under the symbol NOEC.PK. New Oriental Energy was one of the Chinese companies covered in a recent Sharesleuth report about the undisclosed role that certain promoters and financiers played in a series of reverse mergers.

Shares of China Integrated Energy plunge after research report

Shares of China Integrated Energy Inc. (Nasdaq: CBEH) lost more than a third of their value in the wake of a research report alleging that the company was fabricating revenue and earnings, and that it had transferred tens of millions in cash to the son of its chief executive through questionable acquisitions.

 

The 44-page report and a shorter follow-up were posted by someone who used the alias Sinclair Upton and claimed to be an investment manager.

 

China Integrated Energy has yet to respond to the allegations. It filed its audited annual report with the Securities and Exchange Commission on Wednesday.

 

Sharesleuth previously raised questions about China Integrated Energy in 2008, when it was known as China Bio Energy Group Holding Co. It was one of four Chinese companies that went public through reverse mergers with shells controlled by a group that included Martin A. Sumichrast, a former brokerage executive whose publicly traded firm, Global Capital Securities Corp., was delisted by Nasdaq because of its ties to people with serious criminal or regulator histories.

Report raises questions about China Shen Zhou Mining

Absaroka Capital Management LLC published a research report Tuesday claiming that China Shen Zhou Mining & Resource Corp.(AMEX: SHZ) is “fraudulently misrepresenting its business and thus is massively overvalued by the market at this time.” Among other things, the hedge fund asserted that China Shen Zhou’s management has exaggerated the size of key mines, and that it will be impossible for the company to meet its financial projections for fiscal 2011.