History and mystery

(Editor’s note: In the course of our investigations, we come across people whose names pop up frequently in connection with questionable companies, or who always seem to have other issues surrounding them. We think that covering in detail the backgrounds of these people will help make investors smarter. We created Sharesleuth.com to introduce you to some of them, and now we are adding a second page, Sharesleuth.com Matrix, to allow you to track them. Starting with this story, we will add summaries of individuals and companies that appear in Sharesleuth stories to a searchable database that readers can use to learn more about them and to see how what links they might have to others in the database.)

In December 2001, the Nasdaq stock exchange delisted the shares of Global Capital Partners Inc., citing its ties to people with serious criminal or regulatory histories.

Nasdaq investigators concluded that two convicted felons, Regis Possino and Sherman Mazur, had acquired a substantial, undisclosed interest in the company, which operated brokerages in the United States and Europe. Global Capital’s chairman and chief executive, Martin A. Sumichrast, was a direct participant in the financing deal that led to their involvement.

According to Nasdaq’s findings, Sumichrast created a separate entity that bought newly issued shares from Global Capital, using money that ultimately came from companies connected to Possino and Mazur. Global Capital (Pink Sheets: GCPL.PK) later bought millions of dollars of stock in obscure public companies tied to Possino or Mazur. Nasdaq said the brokerage also sold a stake in an online subsidiary to a company headed by one of their associates, another financial felon. In addition, investigators said, Global Capital participated in a dubious $27.5 million divestiture that led it to inflate assets and earnings and to file what it called “materially misleading” financial statements for at least three quarters.

No regulatory charges were filed in connection with the deals. Nor were investors ever told the full reason for the delisting. By appearances, Global Capital’s shares were removed solely for failure to meet the exchange’s minimum share price.

Global Capital gave up its brokerage license in 2002 and faded from view. Since then, Sumichrast has worked as a consultant for other publicly traded companies. He also led an investor group that packaged four U.S. shell companies for reverse mergers with China-based partners. The first of those shells became China Fire & Security Group Inc., which was the subject of a previous Sharesleuth investigation.

A second shell company, International Imaging Systems Inc., was transformed last fall into China Bio Energy Holding Group Co. (OTCBB: CBEH.OB). A third, Forme Capital Inc., combined in March with a Chinese supermarket chain and has changed its name to QKL Stores Inc. (OTCBB: QKLS.OB). The fourth shell, Southern Sauce Co. (SOSA.OB) announced last month that it had completed a reverse merger with a Chinese company that specializes in ceramic valves and other products.

In our report on China Fire, we noted that some of the investors in the shells had previously been connected to stock manipulation schemes. Since then, we have turned up information linking Sumichrast to a succession of white-collar criminals.

Our research also shows that Sumichrast and several of his partners in the shell and reverse-merger deals have a mutual history at other public companies. One of those is in liquidation, and another is facing delisting from the American Stock Exchange. We think that anyone considering investing in China Bio Energy, QKL Stores or the Chinese valve maker should know the backgrounds of the people who have helped create them.

 








Continue reading