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  • pg 1
									   PIRATES OF THE
          Brian Vodicka
(Retired attorney, CPA, Professor
 McCombs School of Business)
 1996: Dynamic Imaging Inc.
• Dr. Edward Godik - Inventor
• Webb Turner - Chairman
• Spencer Trask & Co. - Investors
    • True seed money
• Barry Wren - President
• Phil Thomas - CEO (1997/1998)
1999: DOBI Medical Systems
• Formed by Thomas & Clark
• Purchases patents from Dynamic
• Webb Turner - Board of Directors
• Hire Sterling to raise money
    1999: Change of Control
• Clark replaces Turner as majority
  controlling owner
  – New money is more valuable than old
  – New money will always want control
  – This is a typical “squeeze out”
     1999-2003: DOBI Events
• Sterling Financial is engaged to sell DOBI‟s private
   – Garcia - Owner/CEO; Korybut - President
       • Raised money on road shows (Europe, Middle
         East, Central and South America)
• Korybut - Board of Directors of DOBI
• Dr. William Li - Board of Directors
   – Harvard Medical School
   – Medical expert on underlying technology of
• Dr. David Cherish - Medical Advisory Board
   – Scripps Institute of La Jolla
   – Medical expert on angiogenesis
• Robert Machinist - Chairman
   – Bank of N.Y., Wall Street power player
                  Lions Gate
• Canadian corporation formed by Keith Ebert -
  April 2001.
  – $2,450 contributed capital
  – 40 shareholders
     • All Canadian - Vancouver
  – Outside jurisdiction of U.S.
  – Foreign “offshore” - Regulation S
• 2002/2003: Desmond Smith
  – Oil and gas exploration company
     • 2% oil lease and small royal check
• Typical Merger        • Reverse Merger

    Public Company           Public Company

      Private Company       Private Company
        Shell Corporation
• A paper company
• Insignificant operations
• Main component of underground
• Mainly based in offshore tax havens
• Front companies or mailbox companies
    Who uses Shell Companies?
• Multinational U.S. public companies
    – Avoid tax section 482
• Hedge funds
    – Avoid disclosure laws
    – Avoid trading/margin limits
    – Outside law enforcements effective jurisdiction
•   Tax dodgers
•   CIA
•   Organized Crime
•   BIG Money / Sovereign Wealth Funds
•   Terrorists
       Going Public Through a
          Reverse Merger
• “Perceived” Benefits     • Disadvantages
   – Cost                    – Liquidity of shares is
   – Less scrutiny by            • No underwriter to back
     army of                       company
     lawyers/CPA‟s           – Cost of compliance
                                 • Reporting/filing
   – Shares have a stock           requirements under 34
     market to trade in            Act
                             – Legal cost
       • Share liquidity
                                 • Sarbanes Oxley issues
                             – NO NEW MONEY TO
              Clean Shell
• Should contain no liabilities:
  – Existing
  – Contingent
  – Potential
• Should contain no left-over shares in
  the hands of previous owners
  – Almost impossible to achieve
Mechanics of DOBI Reverse Merger

                     Name Change:
    Lions Gate       DOBI Medical

      DOBI           DOBI Medical
    Acquisition        Systems
      Corp              private

 Why go through this 3 step dance?
Legal Requirements of Merger
• Board of Directors of Parent (Public)
  Company (Lions Gate) approve
• Board of Directors of Private Company (DOBI
  Medical Systems) approve
• Notice to shareholders of DOBI
• DOBI shareholders vote
• File 8-K and 14-C Notices
• Dissenters rights
  – Shareholders have right to not participate and to
    tender shares
     • Fairness Opinion
Florida‟s 16th Congressional District
  DOBI 2003 Form 10K, Note
    11: “Reverse Merger”
• December 9, 2003: Company merged into
  Lions Gate
  – Lions Gate: 8,461,532 shares outstanding
• Simultaneous to Merger:
  – Two-tranche private financing
     • First tranche: $5.5M
         – Issued 5.5M shares common stock
         – 2.75M three-year warrants to purchase common stock with
           exercise price $1.54/sh

• Question: Who are these new shareholders?
 Reverse Merger: Lions Gate
         and DOBI
• December 9, 2003
• Total Shares : 35,537,712
  – Lions Gate: 8,461,538
  – DOBI Medical: 29,076,174 unregistered
    • 18,250,778 to insiders
       – Unregistered
       – Restricted for 2 years - Rule 144
    • 10,825,396 to outside shareholders
       – Unregistered
 DOBI 2003 Form 10K, Note
 11: “Reverse Merger” (cont.)
• In connection with Private Placement,
  Company incurred cash transaction expense:
  –   $1,020,000
  –   $750,000 escrowed “IR/PR” efforts
  –   $270,000
  –   $423,000 legal/accounting
  –   $420,000 Verus Support Services consulting fees
  –   $2,883,000 Total (52%)
       • Plus 3,770,000 warrants
• What type of money is this called?
      DOBI Stock Price 2003
                                High   Low

First Quarter                   $.10   $.00
Second Quarter                   .05    .02
Third Quarter                    .20    .05
Fourth Quarter (10/01 - 12/8)    .85    .20
Fourth Quarter (12/9 - 12/31)   3.90   1.25
  Private Placement Memorandum
• Why go through another PPM in March
  – Just had PPM in Dec 2003 (5.5M)
  – DOBI bleeding money
  – Constant problem in start ups
    • Need financing to stay afloat
              PPM Realities
• Purpose: To raise money in Reg. D “private
• Who reads them?
  – Lawyers
• Who writes them?
  – Lawyers
• Legal Effect: Protect the company via
• Analogy: Landlord-Tenant leases
• Investors: Caveat Emptor “Buyer Beware”
  As an Investor, What do you do?

• Hire CPA or lawyer
• Cost: Prohibitive
• In the end: you rely on the broker
  – Conflict of interest
• What will broker tell you?
• What two words do you run away
     Investor‟s Due Diligence
• Read every word of PPM and all public filings
• Financial Statements tell you:
  – Burn rate
  – Executive compensation
     • “Skin in the game”
  – Money spent to date
  – Previous share prices
• Have to go outside Financial Statements
• Caution: Even DOBI‟s quarterly filings were
  not “current”
    DOBI‟s Timeline of Corporate Events:
•   March 5:   PPM, raise money
•   May 11:    European C.E. mark renewed certification
•   June 8:    FDA agreement at clinical trials
•   June 24:   UTL sales agreement, 40 members, India
•   July 7:    Mrs. Hearst joins Business Advisory Board
•   July 15:   Biotech signs sales distribution agreement
•   Aug 1:     Rising star article
•   Aug 11:    Spelman article
•   Sep 16:    Clinical paper 98% sensitivity/63% specificity
•   Sep 27:    SEC approves DOBI‟s registration statement
•   Nov 9:     DOBI expands distribution network to Canada,
               Italy and Russia
• Nov 17:      Research stock, report
• Dec 6:       Rising star stocks newsletter
• Dec 22:      Complete 20 patient scans, close on second
               tranche, shipped 10 “revenue producing”
               productions level systems
DOBI‟s Stock Price in 2004
   Cost Comparison of Stock
Rising Star - August   $451,779

Spellman - August      $23,500

Researchstocks.com -   $2,500
Rising Star - December $12,000
                DOBI‟s 2005 Timeline
• Jan 6:        Expand distribution network to Greece and
• Jan 20:       DOBI achieves product shipment guidance
• Feb 5:        Garvey v. Arkoosh/Dio Med Holdings decided
                defrauded investors can not pursue damages
• Feb 9:        8-K Director resignation, confidentiality, boiler plate
                confidentiality agreement
•   March 30:   Completes new $10.5M private placement
•   April 15:   T.R.O. against Vodicka to keep mouth shut
•   June 15:    “Not releasing version 2.0”
•   July 11:    New York judges rules shareholders/directors can:
                » Use confidential info to pursue securities fraud civil actions
                » Submit info to SEC
                » Submit info to Dept. of Labor, Occupational Safety and
• July 15:      Shareholders file suit
       8-K: June 15, 2005
• “We have recently completed internal
  testing of our 2.0 ComfortView™
  reading software and have determined
  that the results did not meet our
  expectations. Therefore, we will not be
  releasing version 2.0 of our
  ComfortScan system as expected by
  the end of June 2005.”
    8-K Shareholder Lawsuit
• Shareholders alleged securities fraud
  for fraudulent misrepresentations and
  the execution of a pump and dump
  stock manipulation scheme by Verus
     DOBI‟s Significant Events
•   April     2006
     – Federal judge denies DOBI‟s motion to dismiss
       under F.R.C.P. 9(b)
•   May 2, 2006: 8-K
     – CEO and founder, Phil Thomas resigns
•   May 30, 2006: 8-K
     – SEC subpoenas DOBI‟s officers and directors
     – SEC announces formal investigation
•   June 19, 2006: 8-K
     – DOBI furloughs all of its officers and employees
        • Can‟t make payroll
•   August 1, 2006: Schedule 13D
     – Marc Belzberg files 13D ownership reports
       WASHINGTON, D.C. 20549

            SCHEDULE 13D/A

            (Amendment No. 1)

 Under the Securities Exchange Act of 1934*
      DOBI Medical International, Inc.
             (Name of Issuer)

 Common Stock, par value $.0001 per share
      (Title of Class of Securities)

               256058 10 8
             (CUSIP Number)

              Marc Belzberg
        Winton Capital Holdings Ltd.
             PO Box 802 WB
              Grand Cayman
             Cayman Islands
          Why did DIOMED Fail?
• Same group of people, same scheme
• Federal Judge: did not meet the PSLRA
     – Fail to plead with specificity
•   15 U.S.C. 78u-4 (b)(2) Required state of mind - “In any private action arising
    under this chapter in which the plaintiff may recover money damages only on
    proof that the defendant acted with a particular state of mind, the complaint
    shall, with respect to each act or omission alleged to violate this chapter, state
    with particularity facts giving rise to a strong inference that the defendant acted
    with the required state of mind.

• PSLRA kept defrauded investors OUT of the
  judicial system
  Private Securities Litigation
     Reform Act (PSLPA)
• Passed in 1995 over Clinton‟s veto
• Attempt to shut down class action securities
  fraud lawsuits by defrauded investors
• Civil parties are main deterrent against fraud
• Sponsored by Chris Cox
  – Bush appointment-Chair SEC “protect investors”
  – Defendant in the 136 multimillion dollar securities
    First Pension Ponzi Scheme in Orange County;
  – William Cooper,Robert Lindley,Valerie Jensen
    convicted of mail fraud - August 1994
  – “The Cox guarding the henhouse”
            Chris Cox and First Pension
• 1984-85: Cox works on two separate cases for 1st Pension
• 1986: Cox goes to White House
• 1988, 1990: Cox accepts donations from Cooper [Cooper also
  donates some $44,000 to Bush Sr., Wilson, Deukmajian]
• 1990: Deukmajian appoints Francisco Firmat to Superior Court
• 1994: April 1st Pension scandal breaks, declares bankruptcy
• September Cooper is convicted, Cox implicated in scandal
• 1995: February Associated Press links Cox to Cooper*
• March Cox introduces Securities Litigation Reform Act in House
• September Cox returns Cooper‟s donations AFTER they are publicly
  demanded by bilked investors, so does Wilson who also has political
  ambitions December Clinton‟s veto of Securities Litigation Reform
  Act overridden
             Chris Cox and First Pension
                    Timeline pt. 2
•   1996: February Firmat** first hears case against Cox and considers for
    4 months, including two denials of motions to dismiss (note that Firmat
    is long term donor to Republican Party)
•   June Cox‟s case finally dismissed by Firmat 2000 July Coopers &
    Lybrand (1st Pension‟s auditor) found liable by a jury
•   Mendoza and Latham & Watkins had earlier settled with plaintiffs
•   2002: July 21 LA Times article blames Securities Litigation Reform Act
    for “providing safe harbor for fraud”
•   2002: May and September Cox gives Mendoza campaign $125,000 (in
    the form of donations and loans), this being an extraordinary kind of
    support provided by Cox for a state candidate
•   *Cox and Cooper are connected by two different cases on which the
    former worked for the latter, three separate campaign donations over
    two years, and a fundraiser for Cox held at Cooper‟s Villa Park home.
    Cooper was also a prominent member of the OC Lincoln Club through
    which he and Cox would have had numerous opportunities for other
      Poison Pill Provisions of
• Heightened pleading requirements for securities
  fraud under FRCP (9)b
• Safe Harbor:
   – Forward looking statements
       • Sheltered from liability
• Discovery stayed
   – Investors have to marshal their proof without the
     benefit of discovering the truth
• Limitations on Damages
   – Proportionate liability as opposed to joint and
• Eliminated RICO with securities fraud, both civil and
   PSLRA Pleading Requirements

• Federal Rule Civil Procedure (9)b
• Scienter:
  – Intent to deceive
  – Have to show evidence that fraudster knew
    he was acting with intent
• Evidence is before Discovery
              PLSRA Pleading
              Who What Where   When Why How

Defendant 1

Defendant 2

Defendant 3
            David Esseks
• Business Week April 23, 2008 “The
  FEDS‟ Subprime Suspect”
  – David Esseks, former Assistant US
    Attorney, Securities and Commodities Task
    Force in the Southern District of New York
  – You have to have a smoking gun email
 How do you obtain “smoking
  gun” evidence prior to the
    Discovery process?
• Thief leaves a note at the front door on
  his way out the door confessing to his
• Insider whistleblower
    Why did DOBI have a different outcome than
•   Shareholders had inside info to connect the dots of Verus‟s scheme
•   Smoking guns:
     – Phil Thomas, CEO, June 14, 2005
         • “In spite of tremendous efforts (we) have yet to produce a product
            that performs on a consistent basis to acceptable levels”
     – Webb Turner, Director, Dec 2004
         • “The pump and dump we entered into with our eyes wide open
            Oct-Dec 2003”
     – John Gardner, VP of R&D, Feb 7, 2003:
         • “Our rhetoric is not the reality of our systems performance. It is
            very important to have rhetoric and reality match”
     – Brian Vodicka, Oct 7, 2004
         • At first board meeting, learned machine failed its initial test
     – Phil Thomas, CEO, Oct 8, 2004
         • “Verus has been major cause of the Company‟s recent stock price
         • “The alleged mailing of the „Rising Star‟ article and the $750,000 of
            shareholder funds spent on foolish and irresponsible „IR/PR‟
            activities in the first 9 months by Verus and its affiliates”
Two different pump and dump stock
  DOBI‟s Plausible Deniability
• Cautionary statements in DOBI‟s press
  – Designed to fit within the Safe Harbor of forward
    looking statements under the PSLRA
• Could/should/would/expect in front of every
• The appearance of a commercially
  distributable product when DOBI did not have
  a working machine
  The Universe of Information
                   Company Press

Filings with SEC                   Inside Information
           Stock Newsletters
• What accounted for the difference in cost between
  Rising Star August and Rising Star December?
   – Same article
      • Answer: Payoffs to Verus people
• How do you legally pay people off?
   – Answer: Consulting agreements
• DOBI‟s special account: Strategic Initiatives, Inc
   – Verus affiliate formed solely to pump DOBI stock
• Who was on the board of Rising Star?
  – David Clarke
    Section 17(b) of 1934 Act
• “It shall be unlawful for any person, by the use of any
  means or instruments of transportation or
  communication in interstate commerce or by the use
  of the mails, to publish, give publicity to, or circulate
  any notice, circular, advertisement, newspaper article
  letter, investment service, or communication which,
  though not purporting to offer a security for sale,
  describes such security for consideration received or
  to be received, directly or indirectly, from an issuer,
  underwriter, or dealer, without fully disclosing the
  receipt, whether past or prospective, of such
  considerations and the amount thereof”. 15 U.S.C.
  Section 77q(b)
                   Fine Print
•   Press Announcement: Cautionary Language
•   Rising Star
•   Spelman - (“Independent” investment research)
•   Researchstock.com
•   Rising Star

“The information contained herein was obtained from
  sources, which we consider reliable, but we have not
  independently verified such information and thus do
  not guarantee that it is accurate or complete.”
   Stock Newsletter Analysis

• DioMed Decision
     • “proper disclaimers”
     • Federal Judge Stearns: “any reasonable investor told
       that publisher was paid $700,000, $100,000, or even
       $50,000 to tout a stock would give the analyst
       recommendation that provided grain of salt regardless of
       source of funds”
• The most important info is the FINE PRINT
• Unless you pay for the research you must be
  very suspect because whoever did pay for
  the research has an agenda.
  Congressionally Mandated
   Statutory Licenses to Lie
• Section 17b:
  – As long as have disclaimers and truthfully
    disclose compensation to Publisher
• Safe Harbor:
  – PSLRA: forward looking statements
 How Much Money did Verus
4th Qtr 2003      3.90/.00025        15,600%

1st Qtr 2004      3.30/.00025        13,200%

2nd Qtr 2004      3.00/.00025        12,000%

3rd Qtr 2004      2.74/.00025        10,960%

4th Qtr 2004      1.06/.00025        4,240%

  See how much money you can make in the OTC:BB?
  DOBI‟s Truthful Timeline
         (With benefit of inside information)

• Feb, 2003: “Our rhetoric is not the reality of our systems
  performance. It is very important to have rhetoric and
  reality match”
• Aug, 2003: DOBI desperate for money. Sterling
  introduces DOBI to Verus. Verus arranges “an
  investment” in DOBI conditioned upon machine-working
  and $750,000 for “IR\PR” advertising campaign.
• Sept, 2003: Verus learns DOBI‟s machine does not work.
  So Verus re-trades their deal with DOBI to cram-down
  Clark‟s ownership by demanding a reverse stock split.
• Oct-Dec, 2003: DOBI‟s board of directors agree to
  Verus‟s pump and dump scheme. In exchange for Verus‟s
  $5.5m “new investment” in DOBI. Plan “spring” private
       DOBI‟s Truthful Timeline
               (With benefit of inside information)
•   March 5:     PPM, raise money
•   May 11:      European C.E. mark renewed certification
•   May:         DOBI and strategic initiatives engage stock newsletter
•   June:        UTL agrees to purchase ten machines for $30,000 each.
                 DOBI arranges to pay UTL $30,000 each (wash sale)
•   June 8:      FDA agreement at clinical trials
•   June 24:     UTL sales agreement, 40 members, India
•   July 7:      Mrs. Hearst joins business advisory
•   July 15:     Biotech signs sales distribution agreement
•   Aug 1:       Rising star article
•   Aug 11:      Spelman article
•   Aug:         Verus dumps large blocks of DOBI shares.
•   Sep 16:      Clinical paper 98% sensitivity/63% specificity
        DOBI‟s Truthful Timeline
              (With benefit of inside information)
•   Sep 27:     SEC approves DOBI‟s registration statement
•   Oct 6:      Dennis O‟Connor, V.P. Sales DOBI tells Vodicka “We
                don‟t have a machine to sell.”
•   Oct 7:      Vodicka‟s first Board meeting: machine fails its initial
•   Nov 9:      DOBI expands distribution network to Canada,
                Italy and Russia
•   Nov 17:     Researchstock.com report
•   Dec:        DOBI certifies it has met the milestones which included
                20 acceptable scans for its FDA study.
•   Dec :                 FDA breast cancer scans were “certified” by Ricardo Riv
                Who is Ricardo Rivas???
•   Dec 6:      Rising star stocks newsletter
       DOBI‟s Truthful Timeline
                (With benefit of inside information)
•   Dec:          Verus dumps large blocks of shares.
•   Dec:          Vodicka request audit committee to appoint outside
                  legal counsel for audit committee: Failed.
•   Dec 22:       Complete 20 patient scans, close on second
                  tranche, shipped 10 “revenue producing”
                  productions level systems
•   March 30:     Completes new $10.5M private placement
•   April 15:     T.R.O. against Vodicka to keep mouth shut
•   June 14:      “In spite of tremendous efforts (we) have yet to produce
                  a product that performs on a consistent basis to acceptable
•   June 15:      “Not releasing version 2.0”
    Welcome to the World of
       Hidden Agendas
• Who owned the total market (public float) of
  DOBI‟s 8,461,538 shares?
  – Verus
• Where do you see Verus listed on Sec. 13D
  – You don‟t
• Should Verus be listed in disclosure?
  – Yes
     • 8,461,538/37,537,712 = 22.54%, which is > 5%.
           17 C.F.R. 240.10b-5
     "Employment of Manipulative and Deceptive Practices"

It shall be unlawful for any person, directly or indirectly, by the use
    of any means or instrumentality of interstate commerce, or of the
    mails or of any facility of any national securities exchange,
     – (a) To employ any device, scheme, or artifice to defraud,
     – (b) To make any untrue statement of a material fact or to
        omit to state a material fact necessary in order to make the
        statements made, in the light of the circumstances under
        which they were made, not misleading, or
     – (c) To engage in any act, practice, or course of business
        which operates or would operate as a fraud or deceit upon
        any person,
     in connection with the purchase or sale of any security.
Hidden Agendas: Who, What, Why?
• Thomas - Keep company afloat
  – Paid approx. $400,000 salary+bonus
     • “DOBI is just a fund raising entity”-Turner quote
• Clarke - Keep DOBI afloat until he could sell
  his shares and get out
  – “restricted for 2 years post merger
• Verus - Execute pump and dump scheme
  – Make 4240%-15,600% off a penny stock.
• Sterling - Millions of dollars in fees
• Dr. Li - Inside payoffs to the Angiogenesis
           Foundation, his controlled affiliate
• David Cherish - Inside payoff via consulting
  What should the Lawyer for
  DioMed have Done? How
   could he have gotten his
     client‟s money back?
• File in New Jersey State Court
Benefits of State Securities Laws
 Over Federal Securities Laws
•   Fewer elements to prove: No scienter
•   Don‟t have F.R.C.P. 9(b)
•   Don‟t have PSLRA
•   Aiding and abetting:
    – Federal: No for civil fraud (private parties)
    – SEC/Govt.; yes, if you can get them to act
    – State: Expressly Yes
 Downside of State Securities
• Have to get Lawyer
• Usually $5M
  – Hard to do in one state
• Economics of trial litigation
  DOBI‟s Plausible Deniability
• “Developmental Stage Co.” Stamp
  – See all financials
  – See opening Investment Considerations
     • “We are a developmental stage company with
       insignificant revenue to date.”
  – Audit opinion ”Going concern” exception so CPA‟s
    are off the hook
• Verus executed “IR/PR” campaign from
  Vancouver B.C. (offshore)
• PPM disclaimed everything
• Cautionary statements in all press releases
• Rats jumping off ship
  – William Li, resigned
  – Brad Baker, resigned
• What HUGE rats jumped off-ship?
Biggest Rats to Jump off Ship
 –    U.S. Specialty Insurance Company v.
   Sterling Financial Group of
   Companies,Charles Garcia & Alexis
 – Dobi Medical et. al. v. North River
   Insurance Company and Crum & Forster
   Insurance Group
       How Lucky Were Shareholders
            to re-coup Losses
• Lucky to get someone on the board
• Lucky that your director paid attention and asked
• Lucky that your director kept file copies
• Lucky Vodicka said “No” to pay-off
• Lucky Vodicka won in NY State court
• Lucky to find contingency lawyers
• Lucky shareholders banded together
• Lucky they passed a federal judge‟s “smell test”
• Lucky E&O insurance carriers contributed to pot
 Catch 22 of Securities Litigation
• Have to prove fraud to win
• If proven, the E&O carriers have exclusions in
  their policies for fraud
• Shareholders must thread a needle to prove
  their case without busting the E&O coverage
• Use control person liability theories under
  Section 20(a)
    What Happened to DOBI and
     Verus‟s SEC Investigation

• May 30, 2006:     SEC announces formal
• June 31, 2006:    Versailles Restaurant and Bakery,
                    Miami, Florida

• Feb. 13, 2007:    Dearborn, Michigan

• July 5,   2007:   SEC closes its investigation with no action
 United States Securities and
   Exchange Commission
• What is the real purpose of the S.E.C.?
    Is it a law enforcement agency?
  – Is it a political governmental agency?
  – Is it a “collection agency”?
• Harken Energy
  – James Stewart, Den of Thieves
      • Winner Pulitzer Prize
  – Russ Baker, Family of Secrets
  – Daniel Bateman, former Branch Chief, Market and Financial Data
    Analysis, Division of Market Regulation, SEC
  – Craig Unger, House of Bush, House of Saud: The Secret
    Relationship Between the World's Two Most Powerful
                         New York Times
        “Federal Cases of Stock Fraud Drop Sharply”
                           Eric Licht blau - Decmeber 25, 2008

•   Federal officials are bringing far fewer prosecutions as a result of fraudulent stock schemes
    than they did eight years ago, according to new data, raising further questions about
    whether the Bush administration has been too lax in policing Wall Street.

•   Legal and financial experts say that a loosening of enforcement measures, cutbacks in
    staffing at the Securities and Exchange Commission, and a shift in resources toward
    terrorism at the F.B.I. have combined to make the federal government something of a paper
    tiger in investigating securities crimes.

•   Federal officials are on pace this year to bring the fewest prosecutions for securities fraud
    since at least 1991, according to the data, compiled by a Syracuse University research
    group using Justice Department figures.

•   At the S.E.C., agency investigations that led to Justice Department prosecutions for
    securities fraud dropped from 69 in 2000 to just 9 in 2007, a decline of 87 percent, the data
Dallas Symphony
Mort Meyerson
           Main Lesson
• Unless your name is on this sheet of
  paper, you have no business anywhere
  near this Company, or any other Penny
  stock, Pink-Sheet stock or Amex stock.
   How do you have an
Economic System if you can‟t
     Trust Anybody?
• We rely on the Courts
  – Ex: McDonald‟s hamburger
    •   Don‟t expect to get a mouthful of razor blades.
    •   How have the Courts been trending?
    •   StoneRidge & Central Bank decisions
    •   5th Circuit

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