Huiwen Liu is part owner of a natural food store in the Vancouver suburbs. The business has only a few employees and is sandwiched between a sex shop and a clinic for drug addicts.

According to Securities and Exchange Commission filings, Liu also is sole shareholder  of an offshore investment company that got 10.1 percent of China Fire & Security Group Inc. (Nasdaq: CFSG) when it went public through a reverse merger in 2006.

That offshore company, Worldtime Investment Advisors Ltd., notified the SEC on Dec. 4 that it planned to sell 600,000 of its 2.58 million China Fire shares, for estimated proceeds of $9.6 million.

The business address listed for Liu in Worldtime’s initial disclosure form corresponded to her food store. The unlikely scenario of a shop owner in Canada holding more than $30 million of stock in a little-known Chinese manufacturer, through an investment company in the British Virgin Islands, was just one of the reasons that Sharesleuth decided to take a closer look. The quintupling of China Fire & Security’s share price in the 12 months following the reverse merger also got our attention. So did the company’s murky ownership and the mounting casualties among other “hot” Chinese stocks that have gained listings on U.S. exchanges through reverse mergers.

Sharesleuth’s investigation turned up questions about transparency and disclosure at China Fire, which has headquarters in Beijing and makes fire detection and protection systems for steel mills, oil refineries and other industrial customers. For starters, we found that Huiwen Liu is the sister-in-law of China Fire’s chief executive officer, Bin “Brian’’ Lin – a fact not mentioned in any SEC filing.

Continue reading "China Fire & Security Group Inc." »

Posted by Chris Carey at 08:52 PM | Permalink | Comments (4) | TrackBacks (0)

Xethanol Corp. is trying to unload a former pharmaceutical plant in Georgia that had been the centerpiece of its plan to turn wood chips, paper pulp and other organic waste into ethanol.

The Augusta Chronicle reported last week that Xethanol (AMEX: XNL) told workers who have been tending the property that it was for sale. When Xethanol and a joint venture partner bought the idled plant in August 2006, they said it would be retrofitted to produce 50 million gallons of ethanol a year, and would employ as many as 100 people.

In the wake of the news, the Chronicle’s business editor wrote this column, which we thought our readers might be interested in seeing.

We believe the information that Sharesleuth uncovers about companies like Xethanol is important not only to investors, but to the communities those companies involve in their ventures. They, too, must assess the risks.

Xethanol reported in a Securities and Exchange Commission filing in November that it had sold its mothballed ethanol plant in Hopkinton, Iowa for $500,000. It once billed that plant as its “research and development testbed.’’

The company also disclosed that it had sold 47 acres of undeveloped land in Blairstown, Iowa, the home of its only operating ethanol plant. And Xethanol said that it was talking to a potential buyer for its property in Spring Hope, N.C. The company had said it would convert the former fiberboard plant there into a facility that would produce 35 million gallons of ethanol a year.

Posted by Chris Carey at 06:39 PM | Permalink | Comments (1) | TrackBacks (0)

Orthopedic Development Corp.’s president said in an affidavit in a federal court case in North Carolina that he had never engaged in business in that state, had not gone there to recruit a sales executive or “otherwise traveled there.’’

But Sharesleuth.com, which posted an investigative report on ODC on June 8, has copies of e-mails that appear to disprove those assertions.

James Doulgeris, who heads ODC, submitted the affidavit last week in connection with a motion to dismiss the case in North Carolina or halt it pending the outcome of a related case in Florida. The suit in North Carolina was brought by Dan Grayson, who was hired in November as vice president of sales for ODC's spine stabilization product and was fired in May.

The e-mails exchanged last summer between Doulgeris and Grayson include messages from Doulgeris that provide details of his travels to North Carolina for business meetings. Those details include flight numbers and times, and the names and locations of the hotels in which he stayed.

The e-mails show that Doulgeris traveled from Tampa to Charlotte last July 6, with marketing materials and instrument samples for Grayson, who at the time ran his own medical device distributorship.

Grayson became a distributor for ODC’s spine-stabilization product, called TruFUSE, the following week.

Continue reading "Orthopedic Development Corp. update" »

Posted by Chris Carey at 07:23 PM | Permalink | Comments (0) | TrackBacks (0)

Orthopedic Development Corp. says its new spinal implant procedure can reduce or eliminate pain for many of the millions who suffer from chronic back problems.

The approach is simple and potentially lucrative. ODC’s system uses small pieces of specially shaped cadaver bone to help stabilize the spine. The Clearwater, Fla.-based company says in its promotional material that its TruFUSE procedure gives patients a middle option between physical therapy and major fusion surgery.

It even says its minimally invasive procedure can be performed on an outpatient basis, saving money and time. But former insiders tell Sharesleuth that ODC has encountered design and performance problems with TruFUSE. They add that documents given to investors in a recent stock placement overstated the number of patients who have been treated using the procedure, and may have overstated the results.

“I believe the company misled investors to raise money to market a product whose function and benefits had not been validated through clinical studies,’’ said Dan Grayson, who was in charge of TruFUSE sales from early November until early May.

Because the TruFUSE procedure relies on human body parts instead of mechanical devices, the Food and Drug Administration does not require clinical trials or regulatory approval. That means the company is responsible for ensuring that the treatment works.

As with any medical device that requires surgery, understanding the risks and monitoring the results is critical to the health and safety of the patients.

Sharesleuth examined some of the documents given to patients and investors and found contradictions in the company’s story. We thought it was important to disseminate this information so that patients considering this operation would have more information available to them, as would people considering making an investment in the company.

(Disclosure: No one at Sharesleuth, including majority member Mark Cuban, has any financial interest or business relationship with ODC or anyone mentioned in this report.)

Continue reading "Orthopedic Development Corp." »

Posted by Chris Carey at 07:02 PM | Permalink | Comments (1) | TrackBacks (0)

by Christopher Carey

Two more companies that recently announced technology deals with UTEK Corp. have been identified as vehicles for securities fraud, this time in a federal criminal case in New Jersey.

The case involves a stock manipulation scheme that began in the 1990s and cost investors more than $15 million. Eight defendants have pleaded guilty and a ninth was found guilty by a jury.

A plea agreement signed by one of the defendants says that prosecutors would not initiate further charges regarding his admitted participation in securities and wire frauds involving the shares of some 30 additional companies.

The companies include Avalon Oil and Gas Inc., which last month completed its third technology transfer with UTEK, and ChampionLyte Holdings Inc., now called Cargo Connection Logistics Holdings Inc. It did a technology deal with UTEK in December.

The court filing did not allege any wrongdoing by Avalon (OTCBB: AOGN) or Cargo Connection (OTCBB: CRGO).

But Sharesleuth.com found the document in the course of its own investigation into Avalon, Cargo Connection and other companies with ties to a common network of executives, directors, consultants and promoters.

A closer look at that network revealed at least three people who did prison time in connection with previous fraud schemes and three others who either settled civil fraud charges with the Securities and Exchange Commission or were found guilty by a jury.

The network also included several more people who previously were suspended or barred by the National Association of Securities Dealers for violating brokerage industry rules.

Companies linked to the network have done numerous deals with Cornell Capital Partners LP, one of the top hedge funds providing PIPE (Private Investment in Public Equity) financing to penny stock companies.

Continue reading "Connecting the Companies" »

Posted by Chris Carey at 09:23 PM | Permalink | Comments (1) | TrackBacks (0)