Gerova Financial Group, Ltd., the Bermuda-based diversified financial services company, said today [Jan. 18] it has retained the services of Kroll, the leading global intelligence and risk analysis firm, to investigate possible market manipulation and collusion aimed at driving down the price of Gerova’s stock.
Gerova intends to make public the findings of the investigation.
Registered in Cayman and operating out of Cumberland House on Victoria Street, Gerova is an international reinsurance and financial services company, with operating insurance subsidiaries in Bermuda, Barbados, and Ireland.
At issue is a January 10 document circulated by Dalrymple Financial LLC, which purports to be an “independent” and “impartial” investment advisory firm but is “merely a vehicle for a disinformation campaign orchestrated by Keith Dalrymple, a sometime securities analyst with a questionable regulatory background”, according to Gerova. Other than the Gerova document, no other “reports” are available on the Dalrymple website.
The Dalrymple report attacked the firm as “likely fraudulent”, while a blog on financial website “Forbes” claimed Gerova has “close ties” with a $53 million international ponzi scheme.
“The Dalrymple document, printed and laid out to resemble a report by a reputable securities firm but offering no address or phone number and published on a website in Bulgaria with an anonymous owner, is replete with materially false information and reaches a series of speculative and unsupported conclusions aimed at damaging Gerova in the marketplace by driving down its stock price,” said a company spokesman.
“Dalrymple’s claims that the company has acquired overvalued assets are not true,” said a Gerova spokesman. “On page 18 of the 19-page document, the author finally reveals his motive, disclosing that the firm has a short position in Gerova stock — meaning it profits if the shares fall in value. The short interest in Gerova stock more than doubled during the first half of December.
“Short selling is legal and can be a useful check on stock market excess, but if undertaken in tandem with the coordinated dissemination of false information it crosses the line into market manipulation.”
One of Kroll’s tasks in its investigation will be to discover whether Dalrymple acted in concert with others “to concoct or spread the falsehoods” contained in the document, said the company. Gerova said it is already in possession of documentation regarding the participation of other parties in the dissemination of false and misleading information, including at least one convicted felon in the US currently on Federal supervised release stemming from a conviction for multi-million dollar bank fraud.
Dalrymple Finance LLC is managed by husband and wife team, Keith and Victoria Dalrymple. According to biographical information on the Dalrymple website, which is hosted in Eastern Europe, Keith Dalrymple was previously research director at New York Global Securities, Inc.
For two years in 2005 to 2007, coinciding with Mr. Dalrymple’semployment, securities regulators at FINRA — the largest the largest independent regulator for all securities firms doing business in the United States – investigated New York Global Securities finding the brokerage firm responsible for various securities violations, including violations in connection with equity research published by New York Global Securities.
FINRA regulators brought charges that, “(the) research reports violated National Association of Securities Dealers (NASD) conduct rule 2711 governing the content and disclosures required for equity research reports, and NASD conduct rule 2210(D) governing content standard for communicating with the public. The firm failed to disclose its actual, material conflicts of interest as required by NASD Rule 2711(H)(1)(C) and the reports also violated other sections of NASD’s research report rules.”
FINRA imposed a fine of $45,000 and ordered a six month suspension of the company in the publication of any further research. Keith Dalrymple no longer holds any securities licenses.
“Gerova is committed to full transparency in its financial reporting and takes seriously its obligations to provide accurate and timely information to the public and its shareholders,” said a company spokesman. “Gerova is current in its reporting obligations, including those of the New York Stock Exchange and the Securities and Exchange Commission (SEC).”
Gerova’s next financial report, due in June for the 12-month period ending December 31, 2010, is in the process of being prepared. The annual report will be Gerova’s first full-year results after having converted from a non-operating cash shell to an operating company in January 2010.
Gerova intends to file this report in a timely manner and anticipates disclosures will be comprehensive. Furthermore, Gerova intends to file financial reports quarterly subsequent to its proposed acquisition of the two institutional investment banking firms previously disclosed.