Where is the SEC?

During a nationally televised speech on Feb. 26, President Bush said, “… if you lie, cheat or steal, that if you defraud a shareholder or an employee, there is going to be certain consequences.”

Numerous irregularities in the activities and reporting by publicly traded Golf Entertainment Inc. of Springdale, now called Sienna Broadcasting Corp., were first outlined by the Northwest Arkansas Business Journal and Arkansas Business in August.

The Arkansas Securities Department quickly began an investigation that resulted in a cease-and-desist order preventing the trading of Golf/Sienna stock in Arkansas. But as of March 27, there had been no action by the U.S. Securities and Exchange Commission, and some finance professionals have speculated that the amount of money involved in the sub-penny stock company was too small for the SEC to bother with.

Arkansas Attorney General Mike Beebe said “unfortunately, that’s probably true” that even a public company could avoid raising federal eyebrows by staying low-key. He also said securities fraud committed by a public company in Arkansas would likely fall under the federal purview, but that his office has some means to defend the public from deceptive activities. (See story, p. 20).

A spokesman at the SEC’s public affairs office in Washington, D.C., said agency policy forbids “confirming or denying the existence of an investigation into any company.” Spencer Barasch, the SEC field agent in Fort Worth whose district includes Arkansas, echoed the spokesman’s statement.

The initial stories revealed that Golf/Sienna:

• Falsely denied a material relationship with the Genesis Trust;

n Was the defendant in a lawsuit filed by the Genesis Trust that was apparently drawn up by Golf/Sienna’s in-house lawyer, John Dodge, and delivered to another lawyer, Robert Hardwicke, who became attorney of record for Genesis.

• Quickly settled the lawsuit for 15 million shares of stock, tripling the number of shares outstanding, but waited months to inform the SEC or potential shareholders of the change in control of the company.

• Claimed television broadcasting assets worth $1.028 million, which it supposedly bought at auction from Genesis, but insiders had actually made a

deal to buy the equipment for less than $300,000.

By contrast, the SEC last year ordered a trading suspension and filed civil fraud charges in May 2002 against Pinnacle Business Management Inc. of Clearwater, Fla., on the basis of a single press release that allegedly misrepresented the company’s chances of being listed on the American Stock Exchange and that falsely stated that a company consultant had said the shares would trade at an initial value of $4 per share. Those fraud charges remain unresolved.

To read the cover story related to this issue, click here.