Investing 101 - Aug 30, 2004 - Printable Version
- The Berlin Connection: 250 Companies Out (And Counting)
by Mark Faulk It's been over four months since it was first reported that over a hundred US companies had been listed on the Berlin-Bremen Stock Exchange without their permission. That number eventually grew to over 1,000 that were listed by one brokerage firm alone, Berliner Freiverkehr. Although both Berliner Freiverkehr and the Berlin-Bremen Stock Exchange have maintained their innocence throughout the entire uproar, one company after another began the process to have their stocks de-listed from the exchange, claiming that their stocks were being manipulated through the foreign exchange utilizing the arbitrage exemption, a loophole in the NASD rules that critics say allows "naked short selling" though foreign exchanges.
(For those of you who aren't familiar with the naked short selling scandal that has rocked the stock market, you might want to read "Financial Terrorism in America" at http://www.faulkingtruth.com/Articles/Investing101/1001.html , and "The Berlin Connection" at http://www.faulkingtruth.com/Articles/Investing101/1004.html )
Regardless of the true intentions of Berliner Freiverkehr in listing these stocks on the Berlin-Bremen Exchange, the mere fact that the vast majority of the listings occurred at the same time that a similar loophole was closed in Canada was enough of a red flag to send hundreds of American companies scurrying for the exits. In fact, The Faulking Truth recommended that very thing in "A Call To Arms: Firing the First Shots" http://www.faulkingtruth.com/Articles/Commentary/1007.html , when we provided a link to the list of the 1,000 companies that Berliner Freiverkehr had listed on the Berlin-Bremen Stock Exchange.
Over 250 Companies De-Listed (and Counting)
As of August 25, over 250 US companies that had been listed by Berliner Freiverkehr had succeeded in having their shares de-listed from the Berlin- Bremen Stock Exchange. Actually, Berliner Freiverkehr CEO Holger Timm has on more than one occasion attempted to correct the American media's use of the word "de-listing". According to Timm, "Trading foreign shares on the third-tier market segment at the Berlin or any other German exchange is not being regarded as a 'listing', therefore it is incorrect to use the term 'delisting' if a company wants to cease trading." Oddly, in the letter that Berliner Freiverkehr was sending out to companies that requested de-listing, Timm himself says "After considering the above aspects, should you still prefer your stocks not to be traded in Germany we will respect your wish and apply for delisting on the Berlin stock exchange", and uses the phrase "secondary listings on the Berlin stock exchange" when referring to US companies seeking de-listing. So are the US companies "listed" or not? It's just one of the many contradictions that remain to be sorted out in this complicated and confusing situation.
In response to inquiries from The Faulking Truth, Timm said last Wednesday that "we have been asked by 386 firms to cease trading, and by now 251 firms are no longer traded in Berlin. The remaining companies are still in the process to end it's trading or a cessation of trading is not possible because of one of the rules (of the Berlin-Bremen Stock Exchange)."
Who's In Charge?
As it turns out, the process of de-listing apparently isn't as simple for some companies as they were led to believe by Berliner Freiverkehr. According to Eva Klose of the Berlin-Bremen Stock Exchange, any stock that is in compliance on a foreign exchange can be "dual traded" on a German Exchange. Klose said that "the consent of the company is not required. Nor do we need any documents from or regarding the company. The Berlin Stock Exchange only needs an application filed by one of its 'Specialist' (comparable to the 'Specialists' in the US). The 'Specialist' applying for the dual trading is obliged to inform the company about the application filed. He usually applies for dual trading without being contacted by anyone (neither the company nor anyone else) asking for it."
However, for a foreign company to be de-listed from the Berlin-Bremen Stock Exchange, the broker has to apply for de-listing to the Exchange, which then has the final say over which companies are de-listed and which are denied de-listing. According to Timm, "The decision about the cessation of trading is solely taken by the individual exchanges and not by the market specialists. Because of general request the Berlin Bremen Stock Exchange has stated more precisely it's decision-making process on August, 5th. According to the announcement a cessation of trading is not possible in the following cases:
1. the company is traded on another domestic stock exchange
2. trading volume has been seen since commencement of trading on the
Berlin Stock Exchange
3. it is not an OTC-BB security."
In other words, any broker can list any eligible foreign company on the Berlin-Bremen Stock Exchange without the company's permission and without filing any documents from or about the company. The decision to list lies solely on the broker, but the decision to de-list is entirely up to the exchange. And to complicate matters even further, some companies, including Golden Phoenix Minerals (OTCBB: GPXM), have had their shares de-listed by one broker only to be listed again by a different broker.
He Said, She Said (The Berlin Edition)
Even though they were originally listed by the broker (Berliner Freiverkehr), it is the Berlin-Bremen Stock Exchange that has tripped up many companies in their efforts to be de-listed. I asked Timm about a few of the specific companies that have been turned down in their demands to be de-listed:
"It has been reported that dozens of companies have been refused de-listing, including Endevco Inc. (OTCBB:ENDE), ImageWare Systems, Inc. (AMEX:IW), Limelight Media Group (OTCBB:LMMG), IpVoice Communications (OTCBB:IPVO) (now NewMarket Technology Inc, OTCBB:NMKT), Force Protection (OTCBB:FRCP), Cyber Digital Inc. (OTCBB:CYBD), XRAYMEDIA (OTCBB:XRYM) and Action Products International (NASD:APII). The reason cited by the Berlin-Bremen Stock Exchange has been that "there are remarkable trading activities" involving these stocks.
This comment is in direct conflict with your statements to me in late June that "Of the over 850 companies that we have listed since the beginning of February, not one of them has any trading volume." This brings me to my next question:
Which statement was false: Has there been "no trading volume", as you claimed, or has there been "remarkable trading activities", as the Berlin-Bremen Stock Exchange claims?"
Here is his reply: "The current situation regarding the eight companies questioned by
you is as follows: ImageWare is listed on the AMEX and has been trading in Berlin since May, 3rd, 2000. Action Products is listed on NASDAQ and has been trading in Berlin since August, 10th, 1999. Endevco has been trading in Berlin since October, 22nd, 1999 with relevant retail trading volume (e.g. 1,855,440 shares traded in 2004). New Market Technologies has been trading with small volumes in Berlin since November, 24th, 2003. Force Protection and Xraymedia have commenced trading in February and March of this year. Because of the trading activities (trading in Force Protection totalled 40,000 shares and Xraymedia totalled 150,000 this year) the exchange refused the cessation of trading in these stocks.
We do not act as market specialist for Cyber Digital therefore we are not able to comment on this company. Trading in Limelight has been ceased in June, 28th, 2004 as up to that point there were no trading activities."
In response to my questions about the discrepancies in comments concerning the trading volume, Timm said, "I remember my statement in June that I said I can not rule out the possibility that none of the 850 firms have been traded but I said that most of the firms have not been traded. Furthermore I can not say what the exchange understands by 'remarkable trading activities'."
Timm's memory must be failing him. His exact statement in our June interview was "There has been no trading volume through the Berlin-Bremen Stock Exchange." To make absolutely sure I wasn't misunderstanding him, I said, "So you're telling me that there has been no trading on any of the 850 stocks your firm has listed on the Berlin-Bremen Stock Exchange?" His reply was clear: "There is not one company with any trading volume out of 850 companies."
I asked Eva Klose about Timm's statements: "Mr. Timm has said that none of the over 800 companies that they listed had any trading volume, but it has been reported that the Berlin-Bremen Stock Exchange has denied numerous requests for cessation of trading on your exchange because of 'remarkable trading activities'. How do you explain the apparent contradiction in those two statements? Has there been 'remarkable trading activities' in numerous companies (and if so, how many and which companies in particular?), or has there been 'no trading volume' as Mr. Timm said earlier?"
Her response (as was the case in many of her responses) was vague at best: "In most of the shares of the companies which requested cessation of trading there was no turnover, in some cases there was little turnover and only in few cases there were slightly higher turnovers." However, there was no mention of the "remarkable trading activities" that the exchange cited when turning down the de-listing requests of several companies, including Endevco Inc. and ImageWare Systems, Inc.
Shifting The Blame Back To The SEC and NASD
On June 4th, the SEC and NASD met with representatives of the German SEC, the Berlin-Bremen Stock Exchange, and Berliner Freiverkehr with promises to "sort out the situation". According to comments from Timm at the time, "It's a headache, we get twenty letters a day from lawyers trying to de-list companies with no trading volume. Lawyers ask for ten to fifteen thousand dollar retainers from each company - they make a nice living."
As to questions about whether anything concrete has come out of the meetings with the SEC and NASD, Timm shifted the blame back to the SEC and NASD, and away from Germany, "We met the officials once on June 4th, but were not further involved in any talks or meetings. I know that the German exchanges and the German surveillance authorities continue with their talks but I am unaware of the status quo. Particularly, I am unaware of any efforts being made in the US to stop obvious short selling practices. I have got the impression from numerous conversations, that in the meantime many companies understand that Germany is not a place for short selling practices against US companies."
We then posed the same question to Eva Klose at the Berlin-Bremen Stock Exchange: "Holger Timm seems to blame the inaction of US authorities (The SEC and the NASD) on the ongoing naked short selling epidemic. He stated that 'I am unaware of any efforts being made in the US to stop obvious short selling practices.' Would you agree that the responsibility rests with the SEC and the NASD, or do German governing bodies (such as the German SEC and the Berlin-Bremen Stock Exchange) share in the responsibility to investigate and resolve the potential issue of naked short selling utilizing the Berlin Markets?"
Klose, although once again vague in her reply, also deflected responsibility back to the SEC, "We were not informed by the SEC about efforts to correct or to change the existing rules there. In the meantime applications for cessation of trading are made on nearly all German Stock Exchanges. Therefore the German Stock Exchanges will develop a common position to this topic."
Searching For Answers
So, who are the real villains here? Is it the SEC, as critics who have been petitioning for a congressional investigation have been clamoring? Is it the Berlin-Bremen Stock Exchange or Berliner Freiverkehr, as the mass exodus of companies from the German markets would indicate? Is it the attorneys who, as Timm claims, "make a nice living" from the scandal? Is it the short sellers themselves, who reportedly include organized crime syndicates, major drug cartels, and terrorist groups, and who, according to the victimized companies and stockholders, have destroyed the OTC stock market and bilked upwards of a trillion dollars from investors? Is it the companies themselves, who some (including representatives at the SEC, according to Dave Patch in an article entitled "Berlin StockGate Update" at www.investigatethesec.com ) say are ripping off investors through "pump and dump schemes"? Or is the correct answer "all of the above"?
Regardless of who the villains are, one thing is clear: the victims (once again) are the American investors who have invested their hard-earned money in a stock market that has been decimated by one scandal after another. Until Congress decides to conduct a full-scale investigation of everyone involved in this worldwide scandal, this corruption will continue unabated, just as it has for years. And that is the Faulking Truth.
(Editor's note: In an interesting side note, another company was recently listed by Berliner Freiverkehr to be traded on the Berlin-Bremen Stock Exchange. Shares of Google were listed for trading in Berlin in late June, over a month before the company's stock even began trading on the Nasdaq. On June 24, in response to questions from The Faulking Truth concerning the Berlin-Bremen Stock Exchange listing, Cindy Caffrey, VP of Corporate Marketing for Google, said, "We aren't commenting on information related to our S-1 registration statement or plans to go public beyond the information contained within our S-1 document.")
Editor's Note: If you would like to help us spread the word about this scandal, send us an email at info@faulkingtruth.com , asking to be added to our "Stockgate activist list". We will email you only when we have new articles dealing with this issue. Please link the articles everywhere you can, post them on stock message boards, and send them to the appropriate public entities. To enact positive change requires positive action.
In the opinion of the Faulking Truth, the SEC will never adequately address the concerns of investors in this massive fraud. Therefore, we are asking all those concerned to contact your US congressmen and senators, asking that they launch a full-scale investigation into the corruption that has been allowed to flourish for years in the stock market.
Voice your opinion on our message board (you don't have to sign up to post), or post in our guestbook.
Investing 101 Archives:
Financial Terrorism in America (Mark Faulk, Mar 19, 2004)
Pump and Dump or Short and Distort? (Mark Faulk, Apr 18, 2004)
Response From Berliner Freiverkehr and The Berlin-Bremen Stock Exchange (The Faulking Truth, Jun 3, 2004)
The Berlin Connection? SEC and NASD to Meet With German Brokerage Firm Tomorrow (Mark Faulk, Jun 3, 2004)
Is Dateline Losing Credibility Over StockGate Story Delays? (Mark Faulk, Jun 11, 2004)
Who's Looking Out For You? SEC Critics Seeking Investigation (Mark Faulk, Jun 27, 2004)
He Said, She Said: SEC, NASD At Odds Over Status of Proposal (Mark Faulk, Aug 5, 2004)
The Berlin Connection: 250 Companies Out (And Counting) (Mark Faulk, Aug 30, 2004)
Jag Media Case Dismissed by Judge, Citing Filing Deficiencies (Dave Patch, Sep 9, 2004)
A Twelve Step Program to Clean up the OTC Stock Market (Mark Faulk, Sep 14, 2004)
Is Time Running Short in StockGate Scandal? (Mark Faulk, Oct 5, 2004)
Dateline: The Waiting is the Hardest Part (Mark Faulk, Nov 16, 2004)
Death of an Investment Class (Dave Patch, Dec 30, 2004)
Elgindy Trial Illustrates Incompetence at the Federal Levels (Dave Patch, Jan 4, 2005)
The Year of the Investor (Mark Faulk, Jan 5, 2005)
Regulation SHO’s Threshold Lists Leave More Questions than Answers (Dave Patch, Jan 11, 2005)
Feeding the Stock Market Beast (Mark Faulk, Jan 11, 2005)
Economic Corruption US Style (Joel S. Hirschhorn, Feb 27, 2005)
Stockgate Goes to Congress (Mark Faulk, Mar 10, 2005)
The Old Shell Game (Bob O'Brien, Mar 25, 2005)
FINALLY! Dateline to Air Stockgate Segment April 10th (Mark Faulk, Mar 28, 2005)
Dateline Stockgate Update: POSTPONED YET AGAIN! (Mark Faulk, Apr 6, 2005)
Time to Boycott GE, Dateline, and NBC? (Mark Faulk, Apr 6, 2005)
Pink Sheets CEO Calls for Reform in OTC Stock Market (Mark Faulk, May 2, 2005)
National Counterfeit Conspiracy Days, June 6th and 7th! (Mark Faulk, May 15, 2005)
Ninety-Four Trade Days and Counting (Dave Patch, May 25, 2005)
Stockgate: Turning up the Heat (Mark Faulk, May 31, 2005)
Stockgate: Donaldson out......Cox in (Mark Faulk, Jun 2, 2005)
SEC's Donaldson out, Cox in: One Step Forward, Two Steps Back (Mark Faulk, Jun 13, 2005)
President Bush’s Social Security Agenda - Steal your Money the Easy Way (Dave Patch, Jun 17, 2005)
Global Links Corp: The Real Story (Mark Faulk, Jun 26, 2005)
Forget SEC "Regulations".... This is Good Old-Fashioned Fraud (Mark Faulk, Jul 13, 2005)
Common Cause Joins Fight to "Stop Corporate Takeover of the SEC" (Mark Faulk, Jul 22, 2005)
Dateline Stockgate: We're on, we're off, we're on, we're off.....WE'RE ON AGAIN: July 31st!!! (Mark Faulk, Jul 25, 2005)
Dateline to Air Stockgate Segment in 2-Hour Show, Sunday, July 31st (Mark Faulk, Jul 29, 2005)
From Dateline to Overstock....The Plot Thickens (Mark Faulk, Aug 16, 2005)
Congress Sells America Short (Mark Faulk, Sep 20, 2005)
Stockgate: The Big Picture (Mark Faulk, Oct 10, 2005)
Stockgate: Rallying the Troops (Mark Faulk, Oct 16, 2005)
The $10.5 Billion REFCO Smoking Gun? (Bob O'Brien, Oct 23, 2005)
We Definitely Aren't in Kansas Anymore - Fraud Wall Street Style (Bob O'Brien, Nov 3, 2005)
Start Spreading the News: Stockgate Goes Nationwide (Mark Faulk, Nov 8, 2005)
Stockgate: "Can We Talk?" (Mark Faulk, Nov 27, 2005)
It's Money That Matters (Mark Faulk, Dec 11, 2005)
Regulation SHO; Results Leave Questions More than Answers (Dave Patch, Dec 29, 2005)
Faulking Truth Editor to Write CMKX Story (The Faulking Truth, Jan 5, 2006)
It Takes an Army (Mark Faulk, Jan 11, 2006)
The Circle of Greed: The Only Bull in this Stock Market is a Cash Cow (Mark Faulk, Jan 17, 2006)
A Silent Lynch Mob - An Open Letter From Rod Young (Rodney Young, Feb 2, 2006)
The Circle of Greed: A Voice in the Wilderness (Mark Faulk, Feb 13, 2006)
The Circle of Greed: Who Wants to be a Congressman? (Mark Faulk, Feb 26, 2006)
Freedom of the Press? (Mark Faulk, Mar 12, 2006)
The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.” (Mark Faulk, Mar 24, 2006)
Finally...the Truth About Patrick Byrne (An open letter to Colin Kelly, Jr.) (Mark Faulk, Apr 19, 2006)
Faulking Truth recommends abolishing the SEC (Mark Faulk, Apr 27, 2006)
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