NYSE Suspends Trading In Troubled Gerova

Gerova Financial Group, Ltd., the troubled Bermuda financial services company, announced today [Feb. 24] that the New York Stock Exchange has elected to halt trading pending the firm’s disclosure of additional information involving its operations, management restructuring and business plans.

Gerova Chief Financial Officer Michael Hlavsa said: “After a discussion with the NYSE, we concur that the best decision was to halt the trading of our securities.

“The added time will enable the company to disseminate to the market in an orderly way a comprehensive update on its recent developments and its strategic direction.”

The decision to suspend trading in Gerova is the latest high-profile setback for the Bermuda company which operates out of offices in Cumberland House.

Gerova’s pending merger with  British investment bank Seymour Pierce is now in doubt following revelations the firm had ties to both  a $53 million Ponzi scheme shut down by the US Securities and Exchange Commission and buccaneering Wall Street financier Jason Galanis – fined and sanctioned in 2007 for accounting fraud involving his work with Penthouse’s pornography websites.

And a detailed report by investment firm Dalrymple Finance LLC concluded Gerova — which redomiciled in Bermuda from Cayman last year – was a “shell game.”

Keith Harris [pictured] — chief executive of Seymour Pierce – has already postponed his previously announced appointment to serve as chairman and chief executive of Gerova under a merger agreement announced in December.  The charismatic Mr. Harris is known as “Mr. Football” in British business circles. Deals he’s brokered include selling Chelsea to Roman Abramovich, Aston Villa to Rander Lerner and  recently he was one of the “Red Knights” who attempted to buy Manchester United.

“We believe it is a repository for impaired, illiquid hedge fund assets, which are used for regulatory capital,” said the highly critical Dalyrmple report on Gerova. “We believe Gerova Financial Group is likely fraudulent and the firm’s assets, hence the shares, worth a fraction of the current stated value.”

Just days after Gerova had announced Dennis L. Pelino’s appointment as the new president and chairman of the firm’s board of directors earlier this month in a management shake-up intended to restore market confidence in the beleagured Bermuda company,  the entrepreneur and founder of Xinhua Finance Ltd. withdrew his name from consideration.Gerova said Mr. Pelino and the firm had been unable to reach agreement on the terms of his appointment.

“The company is actively pursuing other qualified candidates for the above positions,” said Gerova. “Pending the appointment of a new chairman and president, Gerova is being managed by Michael Hlavsa, chief financial officer, and the board of directors.”

The company added at the time that in view of recent “unusual market activity in the ordinary shares” of Gerova Financial Group, the New York Stock Exchange has contacted the firm in accordance with its usual practice.

“Although it is the company’s position not to comment on unusual market activities, it has no reason to believe that the above-mentioned event had any relationship to such market activity,” said Gerova.

Mr. Pelino’s aborted appointment was part of an effort on Gerova’s part to demonstrate the company was “committed to transparency and consistent communication with our shareholders.”

Among the key concerns raised by the Dalrympe report were: Gerova’s lack of financial disclosure; impaired and overvalued assets; undisclosed related-party transactions and affiliations; and strong ties to “the investment underworld.”

Gerova has dismissed the Dalyrmple report as “merely a vehicle for a disinformation campaign” against the Bermuda reinsurance and financial services company. The Bermuda company said it had hired international security consultants Kroll to investigate possible market manipulation by Dalyrmple, arguing the damning report was part of a concerted effort to drive down its stock.

But the US Securities & Exchange Commission has also expressed “serious doubts” about the asset values of a money management firm purchased by the Bermuda-based reinsurer.

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