Wall Street ‘Safer Place Without Gerova’

March 2, 2011

1gerovaThe Forbes.com investor advocate who helped to expose allegations Bermuda reinsurer Gerova “was likely fraudulent” has applauded the New York Stock Exchange’s decision to suspend trading in the company’s shares — but added the delisting won’t be the last of the bad news for those who have put money into the troubled company.

In January Neil Weinberg, a Forbes senior editor who focusses on corporate crime and business ethics, first raised questions about Gerova’s ties to a $53 million Ponzi scheme shut down by the US Securities & Exchange Commission. Later, he provided widespread exposure for a research report by Dalrymple Financial which described Gerova as “a NYSE-listed shell game”, claiming the Bermuda reinsurer had  allegedly overvalued the assets on its books and engaged in other fraudulent activity.

“Gerova Financial Group looks, for all intents and purposes, like a goner,” said Mr. Weinberg in a commentary yesterday [Mar.1] “If only things were ever so simple in what are truly the bowels of Wall Street.

“When I first raised questions about Gerova’s ties to Ponzi scheme Westmoore Capital in a Jan. 5 post, Gerova was listed on the New York Stock Exchange with a $28 share price and a $750 million market value.

“The bad news about Gerova came out fast and furious in the wake of that story …  That included: allegations by short sellers that it is a ‘shell game’; a ‘Wall Street Journal’ story raising doubts about it ties to Jason Galanis,  whom the Securities and Exchange Commission had fined and banned for five years from serving as an officer or director of a public company; a company announcement that it had hired Kroll to look into short-seller activity; and the decision by two consecutive CEO-designees to bail out.

“On Feb. 23 the NYSE halted trading in Gerova’s stock.  It’s last trading price:  $5.28.  Then came news that its pending mergers with securities firms Seymour Pierce of the UK and Ticonderoga Securities of the US were off …

Mr. Weinberg said with a number of US law firms announcing plans to investigate — and likely sue — Gerova on behalf of the Bermuda company’s clients and shareholders,  ”more bombshells appear inevitable for the unsuspecting who’ve gotten caught in this investor debacle.”

“[And] that’s not the end of Gerova’s legal problems,” said Mr. Weinberg. “Its own former law firm, Katten Muchin Rosenman LLP, also filed suit against it last month in US District Court for the Southern District of New York. Katten claims Gerova stiffed it on legal bills for $189,469.09.

“Technically, the company is still alive although it’s not trading anywhere, according to Thomas Mulligan of Sitrick and Co., which represents Gerova. Personally, I think the investing world would be a safer place if Gerova and those behind it left Wall Street.

“I’m not holding my breath. Just as players with ties to now-shuttered Ponzi scheme Westmoore Capital,  ended up at Gerova, my guess is that they’ll scurry off to other investment-related outfits and continue conducting business as usual.”

Gerova, which is headquartered in Cumberland House on Victoria Street, redomiciled to Bermuda from Cayman last year.

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  1. Googlybda says:

    No it has office space at Cumberland house. In no way can 2,500 sq ft of almost empty office space be called its head office!