Gerova Unit’s Assets Questioned By SEC
Forbes today [Jan.25] reports the US Securities & Exchange Commission expressed “serious doubts” about the asset values of a money management firm purchased by Bermuda-based reinsurer Gerova last year.
The value of Stillwater Capital Partners’ assets are of vital importance to Gerova, says the financial and business news outlet.
“The $541 million value for Stillwater’s assets cited equaled 98% of Gerova’s market value as of Monday’s (New York Stock Exchange) close,” reports Forbes investor advocate Neil Weinberg. “Gerova stated in its annual report that under the terms of its acquisition agreement it was to obtain audited valuations of Stillwater’s assets by March 31, 2010.
“Such audited figures have not yet been released. Gerova recently told Forbes that it obtained such figures late last year and will release them by this coming June. As a foreign issuer, Gerova is required to release financial statements only on an annual basis.”
Operating out of Cumberland House on Victoria Street, Gerova’s stock has a volatile history and the company has been the subject of media and investor controversy recently.
“Two weeks ago Forbes published a story raising questions about Gerova’s affiliations with other parties,” said Mr. Weinberg. “Separately, Gerova was accused of being a ‘shell game’ in a report by Dalrymple Finance LLC, a firm claiming to be shorting its stock. Gerova announced on January 18 that it has hired Kroll to investigate short sellers.”
Mr. Weinberg said Gerova has admitted to Forbes that Jason Galanis — described as “Porn’s New King” and accused of accountancy fraud by the Securities & Exchange Commission for his involvement with Penthouse’s on-line ventures – runs one of its wholly owned subsidiaries.
“Galanis, was previously active in the online pornography billing business and was accused by the SEC of falsifying the financials of Penthouse International,” he said. “In 2007 he was fined $60,000 and forbidden by the SEC from acting as an officer or director of a public company for five years.
“Galanis did not admit or deny wrongdoing. His father Peter served several years in prison for a Ponzi scheme and his brother received an 11-year sentence on drug charges. New York Stock Exchange marketing material obtained by Forbes indicates that last year the exchange made a presentation to Galanis seeking new business with Gerova. The NYSE declined to comment.”
Gerova redomiciled from Cayman to Bermuda last August.
How did the BMA come to approve this redomiciliation and issuance of an insurance licence if the subject company’s balance sheet includes asset values that have not been properly vetted (in this case the audited accounts of Stillwater – a money manager with 400 client and reportedly aum of $800m which in now way would equate to an enterprise valuation of $541m)?
Something stinky going on here. Dalrymple Finance may very well profit handsomely from their reported short position at the joint expense of Gerova shareholders and our reputation.
Please note that part of the story is factually untrue. Stillwater assets were independently reviewed and issued a valuation opinion by Houlihan Lokey in December 2009 right before Gerova bought them. The final 2009 year end audit was completed several months later, confirming December 2009 values. In Addition, Stillwater had independent unqualified audits every year since inception.
The SEC conducted a full inquiry and completely cleared Stillwater. Arthur G. Jakoby, an attorney at Herrick, Feinstein representing Stillwater, said in a written statement: “There is no outstanding Wells Notice from the SEC regarding Stillwater. There is currently no formal or informal SEC inquiry into Stillwater. The SEC issued a Wells Notice in June 2010, but six months later notified us in writing that it had closed the matter with no recommendation of enforcement action of any kind.”