In an accompanying press release, Fraud Discovery Institute (co-founded by convicted felon turned fraud buster Barry Minkow) compared InterOil's related party transactions to another well known fraud involving Tyco years ago and is asking the Securities and Exchange Commission to investigate the company for possible misconduct. The undisclosed InterOil related party transactions detailed by Lobdell remind me of how the Antar family treated Crazy Eddie as a personal piggy bank, back in my criminal CFO days.
Note: iBusiness Reporting is a division of Fraud Discovery Institute. Both Barry Minkow and William Lobdell have publicly disclosed holding short positions in InterOil securities. I do research for Fraud Discovery on InterOil, but I do not own any securities in InterOil, long or short.
In March 2010, William Lobdell went to a Texas courthouse to examine documents filed in a certain litigation by the original investors of InterOil against CEO Phil Mulacek alleging fraud by him dating as far back as 1997. In his first report, Lobdell found documents backing up allegations by investors of InterOil CEO Phil Mulacek engaging in "self-dealing and secret alliances" to enrich himself and other family members at the expense of InterOil's original investors. Details of Lobdell's follow up reports can be found here and here.
In his first part of a new three part series, William Lobdell describes the lurid details of five shady undisclosed related party transactions involving InterOil insiders and their family members from 2001 to 2004 (full details of Lobdell's report here).
Undisclosed Related Party Transactions
Fraud Discovery's press release summarizes certain related party transactions and reminds us of the infamous Tyco fraud:
...iBusiness Reporting unwinds four InterOil transactions involving the relatives of director Gaylen Byker which include a multi-million-dollar deal with an investment group headed by Byker’s brother and a two-month loan from Byker’s brother that was repaid with what penciled out to be 67.5% annual interest.
The report also includes a $12.3 million investment from a mysterious company based in the Barbados that used the same mailing address and attorney as InterOil Corp.
“The information shows a clear pattern of fraud by InterOil,” said Barry Minkow, co-founder of the Fraud Discovery Institute. “Once or twice might be generously characterized as an honest mistake. But iBusiness Reporting has collected many blatant examples of undisclosed nepotism by InterOil.
“In our opinion, there is no difference between Frank Walsh, who plead guilty to securities fraud, wrongly receiving a $20 million payment from Tyco while serving on the board as an independent director and Gaylen Byker’s self dealing at Interoil.”
Other Troubling Financial Reporting Issues at InterOil
In my June 2009 blog post entitled, "InterOil, John Thomas Financial, and Clarion Finanz: Anatomy of a Stock Market Manipulation Scheme," I detailed how InterOil filed a false report with the Securities and Exchange Commission claiming that the company paid no fees for a private placement $95 million convertible debt offering. However, documents submitted in another court case reveal that Clarion Finanz (a major shareholder of InterOil) had in fact received $5.7 million in fees, contrary to InterOil's SEC filings.
|InterOil CEO Phil Mulacek|
In both of the situations cited above, InterOil told one story to investors in its SEC filings and financial reports and its management told a conflicting story to the courts in sworn statements. If one story is true, the other story simply cannot be true. In each of the cases cited above, InterOil misrepresented or omitted material information in its financial reports to investors, as evidenced by its management's conflicting disclosures to the courts.
Beware of fraud, whenever public company insiders deceptively treat their company's resources as a personal piggy bank at the expense of other shareholders and their company has a consistent pattern of contradictory financial disclosures. Phil Mulacek and his cronies at InterOil remind me more and more of the Antar family, including myself, in the infamous Crazy Eddie fraud.
Sam E. Antar
William K. Wolfrum: InterOil A (unreported) family affair?
I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes for fun and profit and simply because I could.
If it weren't for the efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.
I do research on InterOil for Fraud Discovery Institute. However, I do not own any InterOil securities, short or long.
I am planning to go straight to hell for my unforgivable crimes and I expect to meet InterOil CEO Phil Mulacek there, too.