Gerova Shares Plunge On NYSE

Shares in Bermuda-based Gerova have plunged in value after revelations the US Securities & Exchanges Commission had “serious doubts” about the worth of assets controlled by a money management firm the local insurer purchased last year.

On the New York Stock Exchange, shares in Gerova closed at $21 yesterday [Feb.1] — down from a 52-week high of $92.50 recorded last June.

Gerova, based out of Cumberland House on Victoria Street, was recently described as “a blank cheque operation” by the “Wall Street Journal”. The business and financial newspaper went on to say the firm has “gobbled up loans and insurance assets” in a spree of acquisitions since being launched in 2007.

Earlier this month it was revealed the SEC had questioned the net asset value of  New York firm Stillwater Capital Partners. Gerova purchased the money management company’s assets last year.

Additionally, a report by research and investment firm Dalrymple Finance concluded other Gerova assets were likely overvalued — a claim which prompted the Bermuda domiciled firm to hire global security consultants Kroll to probe what it said was a “disinformation campaign” aimed at driving down its share value.

A May 2010 company spreadsheet independently reviewed by “The Wall Street Journal” determined Gerova’s real-estate holdings are worth 41 percent less than the stated book value of $274 million. The analysis covered more than 30 investments, among them a high-rise condominium in West Palm Beach, Florida and 253 homes in Ohio.

Jack Doueck, a Gerova director, told the newspaper the document was an informal estimate that was “rife with errors.” The book values were out of date, and “there is no $112 million discrepancy,” he said. And as a “foreign private issuer” based in Bermuda, Gerova is required to disclose results only annually, Mr. Doueck added. The annual report for 2010 is due by June.

Gerova’s decision to hire Jason Galanis to manage its Gerova Advisors LLC unit has also caused controversy in recent weeks.  Mr. Galanis — once known as the “New King of Porn” for his work with Penthouse’s on-line ventures — had been accused of accounting fraud leading to a five-year SEC ban from serving as an officer or director of public companies.

Earlier this month both Gerova and Mr. Galanis were named in a $50 million lawsuit filed in Atlanta by investors who claim the firm has engaged in “breach of contract… fraud, damages pursuant to Federal RICO [Rackeeter Influenced & Corrupt Organisation] and OCGA [Official Code of Georgia Annotated] statutes , intentional infliction of emotional distress and libel.”

Originally based in Cayman, Gerova received Bermuda Monetary Authority approval to operate on the island last June. In December the firm announced it intended to purchase British investment bank Seymour-Pierce Holdings and would take up that company’s name subject to UK an US regulatory approval.

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