Pelino Withdraws From Gerova Appointment

February 16, 2011

1gerovaJust days after Bermuda-based Gerova announced Dennis L. Pelino’s appointment as the new president and chairman of the troubled firm’s board of directors,  the entrepreneur and founder of Xinhua Finance Ltd. has withdrawn his name from consideration.

The diversified financial services company, which operates out of Cumberland House on Victoria Street, said yesterday [Feb. 15] Mr. Pelino and Gerova 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 that in view of recent “unusual market activity in the ordinary shares” of Gerova Financial Group, the New York Stock Exchange has contacted the company 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 a sweeping shake up of the Bermuda firm’s management and board intended to underscore Gerova was “committed to transparency and consistent communication with our shareholders.”

In recent weeks Gerova’s ties to both  a $53 million Ponzi scheme shut down by the US Securities and Exchange Commission and Wall Street financier Jason Galanis – fined and sanctioned in 2007 for accounting fraud involving his work with Penthouse’s pornography websites — have been lightning rods for controversy.

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

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

Among the key concerns raised by Dalrympe 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.

The “Financial Times” also reported this week that Keith Harris — chief executive of Seymour Pierce, a leading British invesment bank and stockbroker – had postponed his previously announced appointment to serve as chairman and chief executive of Gerova under a merger agreement announced in December.

“The move is part of an overhaul of the board and management at Gerova, a Bermuda-based finance company, which has had to defend itself against allegations that some assets on its books are over-valued,” said the British financial and business newspaper . “Its market value has fallen more than 40 per cent in the past three months. Seymour Pierce declined to comment on Mr Harris’s move, but said the merger remained on track.”

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  1. Boggle says:

    How on earth did this company get past know your customer requirements?