When we first looked at Richard Rappaport’s Westpark Capital, a Los Angeles based bucket shop specializing in Chinese reverse-merger garbage, here, it was in connection with superstar Director, CFO, and Audit Chair Gene Michael Bennett. Gene has been involved in two of Rappaport’s deals, CAEI and KUN. Since that post, one of the deals, CAEI, has changed its name and ticker once again, and is now China CGame Inc. (CCGM). But that is small potatoes, the real news is that the Westpark collection of motley reverse mergers has begun to collapse in earnest. (Hat tip to The Traveller’s blog)
In just the last week, trading in several Westpark deals (affectionately called WRASPs by Rappaport and WrASPS at BuyersStrike!) were halted. First, there is China Century Dragon Media (CDM) formerly a shell called SRKP 25, Inc., which was halted on the 21st of March. On the 28th of March, CDM issued a statement announcing the following:
The resignation of the auditors, MaloneBailey LLP (“MB“) due to discrepancies noted on customer confirmations and the auditor’s inability to directly verify the Company’s bank records.
MB‘s belief that these irregularities may be an indication that the accounting records have been falsified, which would constitute an illegal act. The discrepancies could indicate a material error in previously issued financial statements. MB stated that it is unable to rely on management’s representations. MB can no longer support its opinions related to the financial statements as of December 31, 2009 and 2008.
If that was not enough, the statement continues:
On March 23, 2011, the Company received notification from NYSE Amex LLC (“Amex”) of its intention to delist the Company’s common stock pursuant to Section 1009(d) of the Amex Company Guide based on a determination that it is necessary and appropriate for the protection of investors to initiate immediate delisting proceedings.
But wait, there’s more:
The Company was also recently notified by the staff of the U.S. Securities and Exchange Commission (“SEC”) that it has initiated a formal, nonpublic investigation into whether the Company had made material misstatements or omissions concerning its financial statements, including cash accounts and accounts receivable.
On March 24, 2011, the SEC served the Company a subpoena for documents relating to the matters under review by the SEC.
The 10K will, of course, be late, and, naturally, there is now another Very Special Committee to investigate these matters:
The Board of Directors of the Company has formed a Special Investigation Committee consisting of independent members of the Board of Directors to launch an investigation with respect to the concerns of MB.
Yes, a Very Special Committee made up of the same Directors who could not tell that CDM was a scam from birth.
Another Westpark deal to be halted was NIVS IntelliMedia Technology Group, Inc. (NIV). Formerly a shell, controlled by Rappaport, known as SRKP 19, Inc., NIV is one of the many pieces of Chinese trash touted by the shills at Redchip Review. On March 23rd, NIV filed an 8K stating:
On March 23, 2011, Malone Bailey provided a letter to the Audit Committee, advising that it had encountered issues and concerns that, in Malone Bailey’s view, required additional information and procedures, including the initiation of an independent investigation, in order to verify the accuracy of certain transactions and balances recorded on the Company’s financial statements and records for the year ended December 31, 2010.
Malone Bailey based its resignation on what it characterized illegal acts involving the Company’s accounting records and bank statements and discrepancies in accounts receivable. Malone Bailey further advised the Company that, as a result of the issues identified in performing its audit of the Company’s financial statements for the fiscal year ended December 31, 2010, it is unable to rely on management’s representations as they relate to previously issued financial statements and it could no longer support its audit opinion dated March 24, 2010.
NIV was halted on the 24th of March. On the 28th of March, the company issued a statement singing a now familiar tune: The 10K will be late. Yet another Very Special Committee has been formed.
A third Westpark deal, China Intelligent Lighting (CIL), formerly a Rappaport shell called SRKP 22, Inc. was also halted on the 24th of March. As of yet there is no 8K filing, nor a 10K, nor an NT-10K, nor a statement from the company. Anyone willing to lay odds that yet another Very Special Committee will be formed, and that auditors Malone Bailey will drop CIL like a poison hot potato?
Now what about the remaining stocks in the Rappaport stable? Two of note are ZST Digital Networks (ZSTN), formerly known as SRKP 18, Inc and Highpower International (HPJ) fka SRKP 11, Inc.
On the 23rd of March, in the middle of the trading halt party, ZSTN got a new CFO, Henry Ngan, whose most recent work experience was being the CFO of fellow Rappaport vehicle HPJ! Before Henry went to HPJ, he worked at a small, but not scandal-free, shop that has touted plenty of Chinese junk, Brean Murray Carret.
Brean, for those readers not familiar, was a small shop in New York that burst onto the Chinese Reverse Merger scene in 2007 or so. It merged with Carret and in doing so Hassan Nemazee, a prominent contributor to the Democratic Party, became Co-Chair of Brean Murray Carret. Nemazee, though politically connected, was arrested in 2009 on a fraud charge which was covered extensively by the New York papers. You can read about the scandal here in an excellent article from The New York Observer. Nemazee is currently serving a 12 year prison term.
You can look up Henry’s CRD (34588167)at FINRA’s Broker Check site, here. His CRD is uninteresting except for one oddity. According to the CRD, Henry worked at Brean Murray until October 2008. But in the HPJ proxy filing, his bio states:
Henry Ngan has served as the Chief Financial Officer of the Company since February 2009. Prior to joining the Company, Mr. Ngan had served as Vice President and Senior Equity Analyst at Brean Murray Carret & Co. in New York City since July 2008. Prior to that, Mr. Ngan served as an Equity Research Analyst at Buckingham Research Group in New York from June 2004 to January 2008 and at Robotti & Company from October 2002 until June 2004.
So how long was his tenure at Brean Murray? Four months or seven months? What happened at Brean, and what happened during the missing months?
Ngan replaced Dr. John Fan Chen as CFO at ZSTN. Like Ngan, Chen also worked at Brean Murray at the same time. Chen‘s CRD number is 4863081. Check him out at BrokerCheck too. Before Brean, Chen spent a few months at another Chinese reverse-merger shop, Global Hunter Securities, the now-former home of Ping Luo (Read about her here and here). One item that is not in John’s offical bio, but is on Chen‘s CRD, is this gem:
MUNICIPAL COURT HARBOR JUDICIAL DISTRICT, ORANGE COUNTY, CA. DOCKET CASE NUMBER 97HM03801
Dr. John stole a textbook in 1997. He did 20 hours of community service.
HPJ, on the 28th of March reported “earnings” but still has yet to file its 10K. It will be interesting to see if, and how, these remaining Westpark deals survive.