Genesis Drops Suit Against Penny Stock

United States District Judge Jimm Larry Hendren on May 9 approved the dismissal of a suit in which an entity called Genesis Trust claimed in May 2002 that it had been damaged to the tune of $1.678 million by Golf Entertainment Inc.

Golf is a publicly traded Springdale company that’s closely aligned with Genesis. Court documents introduced in March by the Arkansas Securities Department showed that John Dodge, Golf’s general counsel, shared a brokerage account with a Genesis executive from at least May 2001 to February 2002.

In its original May 2002 complaint, Genesis said it did not receive 2.125 million “marketable” shares of Golf as part of its settlement for a previous debenture agreement. Records obtained by state securities regulators, and submitted as part of their motion to intervene in the federal case, included documentation from the American Stock Transfer and Trust Co. that showed Genesis did receive those 2.125 million shares.

Furthermore, court records showed that Genesis trustees began selling those shares in January 2002 and continued to sell them even after pleading in Hendren’s court that the shares had not been received. Bruce Bokony, general counsel for the Arkansas Securities Department, wrote in his motion that all of those shares have now been sold or transferred.

The lawsuit was originally settled in six days after Golf agreed to distribute to the entity 15 million shares of its own stock — a change of corporate control that was not reported to the U.S. Securities and Exchange Commission until July.

The ASD subsequently ordered Golf and Genesis to “cease and desist” trading the settlement shares because they had never been properly registered.

The parties asked that the case be reopened for a fairness hearing on the settlement, at which time the ASD sought to intervene.

Hendren said he does not comment on cases or his rulings.

Teresa Briggs of Farmington, the attorney for Genesis, said on May 13 that her client “has no comment at this time” regarding why it would drop the suit if it had suffered actual damages.

The ASD’s “cease and desist” order remains in affect.