Litigation

False disclosures to the SEC by Interoil (NYSE:IOC)

By Tracy Coenen

Last week, white collar crime fighter Sam Antar reported on interesting false disclosures to the Securities and Exchange Commission by Interoil (NYSE:IOC). The situation is amusing, to say the least, and here’s the heart of it…

Interoil has a history of lots of stock and debt offerings. In May 2008, the company did a $95 million debt offering. They were paying finder’s fees for getting the money for them, but didn’t seem to want to completely disclose the fees. Form D filed with the SEC on May 28, 2008 did not disclose any fees or commissions paid in connection with this offering. The truth was, however, that the company was paying such fees and simply chose to not disclose them.

How do we know? A few of the players in this deal decided to get into a legal battle with one another over the fees…. and in order to fight over the fees, they had to spill the beans that the fees were paid by Interoil in the first place.

In a January 2009 affidavit filed by Interoil employee Neil Dolinsky, it was revealed that in April 2008, Interoil agreed to pay Clarion Finanz a $5.7 million fee (paid with the issuance of securities to Clarion) for helping raise part of the $95 million. Around the same time, Clarion entered into an agreement with Carey International, who helped secure some of the money for Interoil… $20 million, to be exact.

Interoil issued some of the common shares due as finders fees, and some of the shares were issued to Clarion, while others were issued directly to Carey Internation and John Thomas Financial (another player in securing some of the money).

Later in the year, William Ziegler, the man who forked over the $20 million started a lawsuit which claimed he was owed a portion fo the fees paid by Interoil. Thus is was revealed that Interoil paid finders fees, even though they filed a false Form D with the SEC, disclosing no finders fees.

To top it all off, Wayne Kaufman of John Thomas Financial went on CNBC to tout Interoil as a ?favorite? stock, but lied about his company’s financial involvement with IOC. Disclosures showed no financial interst in IOC, but obviously the company was paid a finders fee in the form of IOC stock… an obvious conflict of interest in promoting the stock on CNBC.

Relevant links:
Neil Dolinksy affidavit – http://whitecollarfraud.com/files/35302671.pdf
Wayne Kaufman on CNBC – http://www.cnbc.com/id/15840232?video=1105892699&play=1

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Full post as published by The FRAUDfiles Blog on June 23, 2009 (boomark / email).