Securities Commissioner Reaffirms Order Against Golf

Golf Entertainment Inc., the embattled Spanish-language TV broadcaster, suffered another setback on Oct. 23 when Arkansas Securities Commissioner Michael B. Johnson reaffirmed his department’s order that the Springdale company stop selling its penny stock in Arkansas.

The order was issued in September after the department determined that Golf had not properly registered the 15 million shares of company stock that it transferred to a related entity called the Genesis Trust in the settlement of a curious lawsuit. Genesis subsequently sold many of the shares to the public.

At a hearing in the Arkansas Securities Department offices, John Dodge, senior vice president and attorney for Golf Entertainment, agreed that the shares had not been registered. But he argued that, having been issued as part of an approved legal settlement, the shares were exempt from registration under federal securities laws dating back to 1933.

Bruce Bokony, chief counsel for the Arkansas Department of Securities, produced a 1996 amendment to the federal securities act that specifically removed shares issued as part of a legal settlement from the list of covered securities that are automatically exempt from state regulation.

Dodge admitted that he was not aware of the amendment and produced no legal argument to refute it other than to say that it “defeats the purpose of the SEC.”

After a brief recess, Johnson ruled that Dodge’s argument was “unpersuasive” and reaffirmed the cease-and-desist order. Dodge, who has threatened to sue the Northwest Arkansas Business Journal and Arkansas Business, declined to comment. Bokony said Golf has the right to appeal the commissioner’s decision to circuit court.

Golf Entertainment has officially moved out of its former corporate headquarters at 1008 Clayton St. in Springdale. Its new business location is unknown.

Cypress Investments Inc., the penny stock’s former landlord, filed an eviction complaint on Aug. 21 against Golf that was to be heard on Oct. 14. But company officers moved out of the facility during the weekend of Oct. 12-13.

Cypress will still seek damages at a Dec. 17 hearing. Robin Lundstrum, who owns Cypress with her husband Tom, said the damages are expected to exceed $10,000. Attorneys’ fees and $3,340 in back rent and late fees are included in that amount.

The original complaint alleges that Golf had not paid rent since July 1. The delinquency was accumulating at a rate of 77 cents per day.

Executives at Golf initially refused to vacate the property. Then on Sept. 9, Golf made a motion to move the case from the state court to federal court in Fayetteville. The company argued that Cypress, through its eviction complaint, had done more than $750,000 worth of damage to the company and its shareholders.

Dodge wrote that federal securities law gave the U.S. District Court jurisdiction and hinted that the matter related to another federal case in which the company is suing a group of alleged stock manipulators.

But on Oct. 10, United States District Judge Jimm Larry Hendren remanded the case back to Washington County Circuit Court.

Attorneys Angela Berkowitz and Thomas Kieklak of Harrington Miller Neihouse & Krug P.A. in Springdale represent Cypress.

Since Aug. 19, when lengthy reports in the Northwest Arkansas Business Journal and Arkansas Business detailed Golf’s questionable business dealings:

• Golf’s stock, which spiked at 30 cents in January, has dipped from 3 cents per share in August to three-tenths of a cent as of Oct. 23. It had traded as low as two-tenths of a cent.

• On Sept. 18 Golf lost its deal to purchase television equipment and low-power TV station KVAQ-LP, Channels 20/71, in Springdale. Golf had since last December broadcast popular Spanish-language programming as an affiliate of the Hispanic Television Network in Fort Worth. The deal fell through when Golf failed to make a $300,000 payment due to the station’s owner, Christians Incorporated for Christ Inc.

Golf also became embroiled in another lawsuit filed against a group of alleged stock manipulators, who have in turn countersued the company.