Law Enforcement Yet to Move on Golf

Since the compilation of an Aug. 19 exposé on Golf Entertainment Inc., two executives associated with the broadcasting company have resigned. In addition, the penny stock has been evicted from its Springdale headquarters, sued for slander and denied a court hearing to justify a questionable settlement agreement.

But despite a mountain of public records and the company’s own press releases that seem to indicate it was involved in a conspiracy to defraud shareholders, none of Golf’s executives has yet been charged with any wrongdoing.

The apparent improprieties were detailed in an Aug. 19 report by the Northwest Arkansas Business Journal. Several Golf updates may be accessed online at www.arkansasbusiness.com.

Arkansas Securities Commissioner Michael B. Johnson on Aug. 29 ordered a full investigation into Golf, which has also begun “doing business as” Sienna Broadcasting Inc. Bob Balfe, the Benton County prosecutor has also been investigating the company, and U.S. Sen. Tim Hutchinson, R-Arkansas, has asked for a federal inquiry.

In a letter to Harvey L. Pitt, Hutchinson told the Securities and Exchange chairman that Balfe was compiling “credible evidence” of a conspiracy to manipulate stock prices and defraud shareholders.

Federal officials would not confirm the existence of any additional investigation.

Springdale Mayor Jerry Van Hoose said he had not heard of Golf before the Aug. 19 Business Journal story. But whether or not the company is guilty of fraud, Van Hoose said he does not believe the scandal will taint Springale’s image.

Federal officials will not confirm the existence of any additional investigation.

Springdale Mayor Jerry Van Hoose said he had not heard of Golf before the Aug. 19 Business Journal story. But whether or not the company is guilty of fraud, Van Hoose said he does not believe the scandal will taint Springale’s image.

“I don’t think allegations such as these will impact how the business community sees Springdale, Arkansas,” Van Hoose said.

The improprieties were primarily revealed through what appears to be misleading SEC documents.

The company’s biggest concern for now, however, may be a $300,000 payment that Keith O’Neil Smith, executive vice president of Christians Incorporated for Christ Inc., said was due from Golf on Aug. 31. That would conclude a deal for Golf executives to purchase the assets of Springdale’s low-power television station KVAQ-LP, Channels 20/71.

Smith, who is based in Branson, Mo., said on Aug. 28 that Golf officials had recently assured him that financing was in place to close the transaction. But Golf, in its latest quarterly report, said it had “nominal cash on hand” and “no substantial access to cash.”

“It will either be a done deal or an undone deal real soon,” Smith said.

Company in turmoil

Golf, traded over the counter as GECC.OB, lost its CEO and Chairman Tim Brooker on Aug. 22 when he resigned citing a “contractual conflict of interest” with Oral Roberts University in Tulsa. Brooker, who became Golf’s CEO on Jan. 4, has been an assistant professor of history at ORU since August 2001.

Ralph Fagan, ORU’s vice president for academic affairs, apparently met with Brooker regarding the Business Journal article, but a spokesman for Fagan would make no additional comment.

Charlie Rusk, senior trustee of a major Golf shareholder calling itself “The Genesis Trust,” resigned from that post on Aug. 16 after participating in a tape-recorded interview with the Business Journal.

During the interview, Rusk said that John Dodge, corporate counsel for Golf, created the Bentonville-based Genesis Trust.

In a Dec. 31 filing with the SEC and subsequent documents, Golf denied that any “material relationship” between Golf and Genesis exists. Golf claimed in an Aug. 23 SEC filing that the trust is a “nonprofit” 501(c)(3) entity that was formally organized in August 2001.

An extensive search revealed no evidence of Genesis’ incorporation, official business formation or proof of exempt-organization status with the Internal Revenue Service.

Golf received a notice of eviction Aug. 22 from Cypress Investments LLC — the owner of Golf’s 5,378-SF headquarters at 1008 Clayton St. in Springdale. The notice gave Golf five days to vacate the premises for “failure to pay rent.”

Thomas and Robin Lundstrum of Springdale, the principals of Cypress Investments, say Golf is delinquent on $3,300 in rent and $40 in late fees.

The company’s recent quarterly report claimed it had $112,767 in revenue for the quarter ended June 30 and $35,375 in net income.

Golf filed an objection to the eviction suit in Washington County Circuit Court that accused Cypress Investments of misconduct.

The Arkansas Democrat-Gazette reported on Aug. 28 that Jim Bolt, Golf’s vice president and chief financial officer, accused the Lundstrums of posting a “for lease” sign in front of the company’s headquarters before filing an eviction lawsuit.

Robin Lundstrum chairs the Washington County Republican Women’s organization. Tom Lundstrum is a Republican member of the Washington County Election Commission.

The Lundstrums’ attorney, Angela Berkowitz of Springdale, said she is not aware of any counterclaim to the eviction lawsuit actually being filed. She said Cypress Investments is seeking the delinquent rent, attorneys fees and compensation for any damages to the property if that is found to exist.

“To the best of my knowledge, Cypress has acted completely within its rights,” Berkowitz said.

In response to a federal RICO suit Golf has filed in U.S. District Court in Fayetteville, two defendants filed a countersuit Aug. 21, asking at least $400,000 in damages from Golf.

Carla Hohenhouse and Daniel Johanning filed that complaint in U.S. District Court in Savannah, Ga.

They claim Golf threatened and harassed them after they warned potential investors that the company was part of a “pump-and-dump” stock conspiracy. Golf has filed the RICO lawsuit against a group of “John Does” and the publishers of Longandshortreports.com for allegedly engaging in a conspiracy to damage the company’s stock price.

Longandshortreports.com is a Canadian Internet newsletter that analyzes investment opportunities and also published an Aug. 19 exposé on Golf.

On Aug. 27, U.S. District Judge Jimm Larry Hendren in Fayetteville denied a request by Golf for a “fairness” hearing to justify a curious May 6 settlement between itself and The Genesis Trust.

As previously reported, the settlement came only six days after the original complaint was filed and, on its face, appeared to give away control of the company.

Golf asked for the hearing on Aug. 16 after a list of written questions from the Business Journal made it clear that the company’s close relationship with the trust would be called into question.

Hendren’s opinion included the following comments:

“It appears to the court that defendant seeks — without disturbing the court’s May 6, 2002, order or otherwise reopening the closed case — to restructure the posture of the case as it existed before the settlement and final order … Such an effort is clearly inappropriate on its face.”

New boss, old boss

On Aug. 22, Golf’s board apparently elected former company CEO and Chairman Michael F. Daniels to replace Brooker. Daniels, 48, already served on Golf’s board and, according to the filing, his tenure with the company “spans 20 years.”

On Aug. 21, Golf finally attempted to register with the Arkansas Secretary of State’s office.

The company’s status was left “pending” until Golf could provide proof of its incorporation in Delaware.

Delaware’s Division of Corporations recently said that Golf’s corporate charter went void on March 1 for “failure to pay a Delaware franchise tax.”

Golf paid its $161.22 in 2001 taxes, but neglected to file its $99 “renewal and revival of charter” petition to bring the company back into good standing.

But in an Aug. 23 SEC filing, Golf claimed its company charter problems resulted from “data entry errors” by the Delaware Secretary of State’s office and that the matter had been resolved.

Tee’d off

Executives at Golf responded to a list of written questions from the Business Journal after a stated deadline on Aug. 8. John Dodge, Golf’s general counsel, wrote that the company was not given enough time to respond before the story was published.

As previously reported, the written request was the last of several attempts to get Golf’s side of the story — including an in-person visit to the company’s headquarters in Springdale during which Dodge handed the reporter a subpoena for notes and documents in an apparent effort to squelch the story.

Arkansas Business Publishing Group, which owns the Business Journal, has objected to the subpoena, which Golf executives filed as part of their ongoing RICO suit.

Golf used The Morning News of Springdale on Aug. 27 to make unfounded accusations about the Business Journal’s reporting and involvement in an alleged scam to short its stock.

Golf has threatened to sue the Business Journal over its original story. Golf executives have a lengthy history of filing lawsuits.

The Business Journal has had no involvement in a stock scam of any kind. As of Aug. 29, the Business Journal had not been served any notice of a lawsuit.

Dodge did refute some of the allegations described in the Aug. 19 report. He denies that a “material relationship” between Genesis and Golf exists, that Golf misrepresented its finances and that there was anything shady about the Genesis v. Golf lawsuit.