The Real Story Behind the Atlantic “fueled by hot air” StreetSweeper Article

The attention grabbing article by the “Street Sweeper” self touted as a vigilante site is even more interesting now then it was when it was first released back in October 2009.

The subject article written by Melissa Davis was written without a date. The date and source are the standard practice for any credible news release.  As you will read the absence of a date was and still is no accident.

The article starts out describing the failed acquisition of Hybridyne Power Systems Canada by Atlantic Wind & Solar Inc. (AWSL).  “Pretending to buy us” stated Richard Leverton , Chief Media Relations of Hybridyne, the article read.  These statements contradict court documents filed in West Virginia and Ontario as we will outline below.

Corporate mail server content proves Hybridyne’s Thomas Cleland and Richard Leverton considered the deal closed. Most telling were emails thanking friends and business associates for the compliments and well wishes on the completed Atlantic Hybridyne acquisition.

Even more compelling was statements from AWSL‘s financial auditors San Kan & Associates who are registered with the Securities & Exchange Commission.  In the financial statements they confirmed the transaction by way of standard  procedures including on site field work,  meetings with Thomas Cleland and the rest of the Atlantic management in Toronto and reviewing all documentation related to the acquisition. .

Documents showed not only the transaction being complete, but Cleland of Hybridyne requesting AWSL to pay for their accounting work on Hybridyne’s behalf that was required for the audit.  Also mentioned were emails from the Hybridyne CEO Cleland to Atlantic listing all the items they would like to put out in press releases.  A much different story then the StreetSweeper (http://www.thestreetsweeper.org/pennypincher.html?i=458) would lead one to believe.

With a court order in hand, and one victory already behind them in one of the two cases, Atlantic demonstrated clearly that they fulfilled all obligations under the purchase and sale agreement. Both cash and stock were paid to the venders. In fact court filing show that the Hybridyne CEO and his company were also loaned $300,000 to secure a solar project while he was the CTO of Atlantic.

Prior to this article and corresponding court action, everything was great in the new corporate marriage until just before the subject StreetSweeper article came out.  At the time the Atlantic (AWSL) stock was high flying. Trading over $4.80 on substantial volume.  Like the StreetSweeper, this fact was also upsetting Thomas Cleland the CEO of Hybridyne. 

It seems that seeing volume in stock trading caused Cleland to believe he should be reaping immediate rewards.  In emails to the Atlantic Chairman, Gilles Trahan, Cleland made demands for the shares he was given to have the S.E.C. restrictive legend removed so he could sell.  Despite Trahan explaining that his shares were still restricted Cleland seems to have felt the best course of action was to extort the company into making the shares free trading.  Realizing the Company would not budge (but NOT realizing that it COULD NOT budge) on the issue Cleland made true on his threats to cause public and S.E.C. related problems.

  

The Unravelling of the Acquisition

Emails from Cleland start with claims such as “the transaction was not approved by the CEO”, yes he himself  was the President & CEO.  He took the position that the deal did not close.  Despite 5 million shares being issued and $300,000 changing hands.  This email turned out to be a blessing for Atlantic as they secured a court order to have all 5,000,000 of the shares issued as part of the acquisition canceled, bringing the company’s issued and outstanding share count down significantly.

The article would lead you to believe that Hybridyne was the source of any success for Atlantic This also seems suspect at best.  A couple years later according to news releases Atlantic has secured 20 contracts with the Ontario Power Authority for solar PV projects representing approximately  3 MW’s of utility scale solar farms.  The Company also announced they are awaiting contract award on an additional 20 MW’s of solar projects in Ontario alone.  A number of press releases from Atlantic’s clients and joint venture partners also crossed the wire confirming their decision to partner with AWSL.

Total contracts announced by Hybridyne and their Chief Media relations officer Levington since then is zero.  It seems Atlantic found more success after  walking away from Hybridyne.

The focus of the article then shifts to another company Gilles Trahan, Atlantic’s Chairman  was at the time involved with as Chairman an interim CEO.

Scrutiny shifted to MSE Enviro-Tech (MEVT).  The article described how the CEO of Megola Inc. (MGON) made statements of how disturbed he was with Trahan’s Company MEVT.  He describes how MGON was the supplier of the anti-fire product known as Hartindo.  While describing Trahan’s big house, Jaguar and $26,000 rims  he failed to mention that, as court filings would later show, Gardner orchestrated a exclusive rights-gone-bad sale to MEVT.

Before taking control as interim CEO of MEVT, the company entered into a purchase agreement for the exclusive rights to an anti-fire product referred to an Hartindo.  As part of the agreement MEVT was to pay 6 million shares of MEVT to PCL Limited an offshore company controlled in part by Joel Gardner.  The then CEO of MEVT had been put in place by none other then Joel Gardner.   Not surprisingly given the circumstances a unsecured loan of $500,000 was also made by MEVT to this same off shore entity.

According to his Delaware court action for control, Trahan who was a large shareholder and who had recently loaned the company an additional $200,000, was upset by this transaction. In the company’s minute book, with a forensic trace back through the history of the rights purchase, more irregularities were found. A deal that was once “exclusive” had been modified by Gardner and his hand picked MEVT CEO Michael Robinson. The language in key documents had been changed to call the rights “co-exclusive” with the other “co-exclusive” party to be disclosed.

Even Robinson must have began to feel something was up. Records indicating the he as CEO requested from PCL and Gardner the name of the other entity that had the “co-exclusive“ rights many times over a period of a year. It was not until a letter from legal counsel demanded the information that it come out. The grandfather company with the rights that everyone sought the name was none other then Megola (MGON).  Despite Gardner controlling this company and PCL it seemed for a year that he did not know who had the grandfathered rights until one day he discovered it was his own company. About this time Trahan finally gained control of MEVT.

When confronted by Trahan about this shady transaction Gardner seemed to go on the offensive attacking Trahan and MEVT.

By this time Gardner and his associates had sold most of the 6 million shares of MEVT and the $500,000 cash wired to Gardner seemed to be unrecoverable.

According to correspondents with shareholders who purchased MEVT shares from Gardner, Gardner was a huge supporter of MEVT at the time of the stock sales, citing its exclusivity and the product sales that were lined up.

This continued as Gardner continued to dispose of 6 million shares, selling most but also trading some for a fleet of exotic cars such as a Hummer and a 7 series BMW plus some Ford F1 pick up trucks records indicated

Sales continued and the good times had clearly found Gardner.  At one point Gardner took over 30 members of friends and family to the Dominican Republic on vacation.  This lifestyle was later to catch up to him and is perhaps the cause of his recent tax problems with the Canadian government.

Once the shares were finally all sold by Gardner and his associates, and with Trahan and his lawyers representing MEVT breathing down on him, the story started changing dramatically.   Now MGON and Gardner were claiming the exclusive rights MEVT purchased were “co-exclusive” -  a word I must admit I did not know existed and am still not sure does. Even worse, a few months later Gardner and MGON were stating that MEVT had no rights at all as described in the Davie’s article.

Although the Company and Trahan took Gardner and his company to Delaware courts, the courts seemed to see the difficulty in trying to reverse all the sale transactions that would fall out from a court order to cancel his stock.  Given Gardner and his companies financial position MEVT had little recourse.

According to MGON SEC filings they bought and sold these rights or a version of them to at least 5 parties.  It appears the only significant sales the company has had was the sale of rights to others like MEVT.  Additionally they lost the technology and repurchased similar rights in a few different transactions - the same product from a number of offshore and numbered companies.  This again resulted in more shares issued to dubious companies on and offshore.

Where is Megola now?  MGON has made not one but 2, reverse stock splits.  Each one being 50 for 1.  Meaning if you had 10,000 shares at the beginning you have 4 shares now.  Despite this the stock still trades back under a penny.   The S.E.C. filings are no longer up to date and it is safe to say the company has folded.  Where did all the money go?  It appears that many investors are asking the same question.

Journalism or Tabloid Reporting for Short Sellers?

So why would any reporter write such an article with only quotes from non credible sources?  Looking at the failed-to-deliver reports for AWSL and MEVT just prior to the article it seems some people were selling a lot of shares that they did not own, in fact representing more than half the trading volume on a number of days.  This is known as a short sale.  But this was no normal short.  In a legitimate short sale the selling broker must borrow the underlying shares, prior to entering the sale.  This was in fact a naked short meaning they had only 3 days to deliver the stock they sold. To imagine the serious consequences of having a broker sell stock he or she does not have.  Brokers and regulators can force the seller to go into the market and buy the stock back at ANY price, even if it was much higher, creating tremendous losses for the trader or hedge fund. 

In fact when a stock is continuing to trade higher almost every day (as it was with AWSL), there can be no worse time for this to happen.  The price moving up indicates there are more buyers then sellers.  Given that the selling was approximately half short sales there would be at least 50% less sellers. Timed with an immediate reduction of these short sales and the simultaneous forced market buy-ins of millions of shares this can destroy a small hedge fund that is betting on it going down.  This buy-in situation has been known to created short squeezes pushing small company shares up by 10 times or more. Given the 2 million shares short as reported by Buyins.net  this could mean a loss of tens of millions of dollars.

Let the Manipulation Begin

Then, like a perfectly conducted orchestra, articles came out from the StreetSweeper. and online message board posters stating everything from scam to fraud.  When looking on the main page of the StreeSweeper, the same Melissa Davis who wrote this article is standing beside CNBC’s Jim Cramer from Mad Money and the Street.com (http://www.thestreet.com), ironically as he himself is under public scrutiny for exactly the same thing. 

In this interview on the Wall Street Confidential he confesses to taking short positions in a stock then spreading false rumors and having “bozo news reporters write on it” as he stated.  He further states “what’s important when you’re in that hedge fund mode, is not to do anything remotely truthful, because the truth is so against your view that it’s important to create a new truth, to develop a fiction. And the fiction is developed by almost anybody who is down like 2% to up 6% a year”.  Watch the interview here (http://www.youtube.com/watch?v=gMShFx5rThI).  Sound eerily familiar?  We thought so too.

Kramer was interviewed on John Stewart’s The Daily Show.  Watch the interview and follow up news coverage on Youtube (http://www.youtube.com/watch?v=xLUvP9ycDx0) and on the web.  A simple google search of “Jim Cramer manipulation” can provide some entertaining but depressing  facts.

How many people had to sell stock losing their savings because one or two individuals think it is ok to purposefully manipulate investors into selling so they can make money.  How is this any less corrupt then the Enron management or any other securities violation or crime?  In fact some might argue this is even more destructive to America as it is preying upon the small business and trying to force them to go under.  By driving down the stock and spreading false rumors the Company is unlikely to raise more money to fuel their growth and with more and more people and companies turning to the internet for researching a company to do business with, this also can slow sales dramatically.  Causing not only a reduction of employee hirings but usually mass layoffs.

Voice your concern and sign our online petition and get the SEC to look at this form of manipulation.  Go to http://www.petitiononline.com/mrktrfrm/petition.html

Investigative Journalism or Stock Market Manipulation; A Look at TheStreetSweeper.org

I first became aware of the StreetSweeper.org back in October 2009 after a solar company I was following was attacked in a 3 part series by the site and its writer Melissa Davis.

The first article attacking Atlantic Wind & Solar Inc. (AWSL) which came out the day after the  company’s shares not only hit a record high of $4.84 per share but, the same day also recorded the single largest  short sales of the stock.  Actually representing more then 60% of all the shares traded.  Meaning more then half of the shares sold were ‘phantom shares’.

While short sales are legal if you first borrow the underlying shares before entering the sale, thus ensuring the true balance of supply and demand remains in tact. Meaning you can’t sell more shares then actually exists. The share borrower, if they do it legally, would also pay a small fee to the lender of the shares.

This in contrast was a ‘naked short’.  This is not legal.  In fact what they are doing is selling shares that do not exist, taking money from some legitimate investor and not delivering any shares to the investor.  Selling ‘phantom shares’.

Not only is this illegal but is very risky financially if you cannot buy the shares back or borrow them in time.  As they can be forced to repurchase them at even higher prices.  They are required to deliver the shares within 3 days.  As reported by FINRA  (Financial Industry National Regulation Association) the ‘phantom shares were undeliverable for months.  Meaning day after day they continued to sell shares they did not own dumping more ‘phantom’ shares in the market and thus destroying the true balance of supply and demand.  According to the reported by Buyins.net there was more the 2,100,000 of these shares sold.

While these short sellers were continuing their illegal practice a very dramatic change was about to appear in the public perception of Atlantic Wind & Solar and its management including Chairman, Gilles Trahan.  Up until this point they were the darlings of the internet chat rooms and forums and seemingly every news letter writer were talking favorably about them and their future.

The Dramatic Change

The night before the first article by Davis of TheStreetSweeper, in a wave unlike anything I have ever seen before, a mass mobbing of all internet forums most notably investorshub.com (iHub) and Yahoo Finance were swarmed with new posters all attacking the management and the company.

Every deal was attacked stating they were fictional.  The; what I would call; negative bashers would say they have contacted the companies mentioned in all the press releases and that they were told they have never heard of Atlantic.   Every single positive post was overwhelmingly  attacked as a scam.  Posters would post contact information and links to the S.E.C. and F.B.I. to report this fraud. People who posted anything positive would be attacked as being a co-conspirator and that they too would be reported.

The following morning the infamous StreetSweeper article came out.  The message boards grew even more active and the stock took a nose-dive. I have to admit I was pulled into this and I too was happy I did not invest in this, as there seemed to really be something to this StreetSweeper story.  However shortly after I was alerted to an article on a new form of market manipulation that until this time I did not know existed.  The term was “short and distort”.  Simply I was in total shock of what I read and began investigated this further..

Short & Distort

In the first article I read on the subject, was on Investopedia.  In it the following section jumped out giving me a very sinking feeling in my stomach as it was way too familiar:

“The S&D (short & distort) shysters try to profit by stimulating fear, but this only works if they have credibility. As such, when working online they will often use screen names and email addresses that imply that they are associated with the SEC or the Financial Industry Regulatory Authority (FINRA) (formerly the National Association of Securities Dealers), or that they can regularly spot worthless stocks. Their goal is to convince investors that every proponent of the stock has ties to the company and that the SEC is watching and will halt the stock. S&Ds also intimate that they are looking out for investors' interests.

S&D players clutter message boards, so optimistic information cannot easily be found. "Get out before it all comes crashing down" and "Investors who wish to enter a class action lawsuit can contact…" are typical posts, as are their projections of $0 stock prices and 100% losses. If their strategy is suspected by "longs", they attack the person who has caught them. In other words, the market manipulator will do everything in his or her power to keep buyers out of the stock and keep the price heading south.”  ... to read the full article.”

Incredibly,  not only was this vaguely familiar but this sounded like the handbook  that was used against this very company.  While these tactic still continue to this day, although we have not seen any articles from the Streetsweeper.org since early 2010 the same negative warnings that the stock is going to be halted by the S.E.C., stand up for your rights and sue these scumbag thieves and statements continue to be posted by the same members sometimes as much as 20 times a day by the same person.  I also noticed that all messages on investorshub.com that challenged the bashers and offer rebuttals seemed to be deleted within minutes yet one single basher has made over 10,000 posts.  As a test, I placed a message on the forum highlighting some positive news and challenging some of the naysayers.  Within minutes I received private messages from a couple of the bashes threatening to disclose me and ask me about the sexual acts I performed with the company’s CEO.  Clearly I was mot welcome.  Upon reporting it to the site administration they told me to simply click ignore. 

Although the stock continues to trade and no action has been taken by the S.E.C. or any other regulators. The fact is the manipulators have won, so far.  There efforts have been rewarded.  Scaring off any new buyers they have had tremendous success as the stock trades under $0.40 now.  Although 2 stock dividends have been issued, so each shareholders has 50% more shares then when he started, this is of little consequence to the investors who bought ‘phantom shares’ from the short seller at over $4.00 a share.

The People Behind TheStreetSweeper.org and Now it Gets Interesting

In a January 9, 2012, Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR) issued a press release responding to a StreetSweeper article written about them, and they had this to say about the article and website.

Questcor has been unable to determine the exact nature of StreetSweeper.org, its ownership structure, or its revenue sources. The website, www.thestreetsweeper.org, provides no information on these topics, and standard listings about it are limited and opaque. Based on our examination to date, we believe that the website lists people that it claims are associated with it, one of whom the website and media reports identify as a felon who pled guilty to two conspiracy charges – for securities fraud and money laundering – and who later pled guilty to racketeering charges related to stock manipulation, another of whom has the same name as an individual who, according to media reports, was arrested recently for kidnapping and extortion, and another of whom has the same name as an individual who, according to media reports, has been involved in extensive litigation regarding fraud, defamation, and slander. The exact nature of the relationships between these individuals and StreetSweeper.org is unclear. It is also unclear whether the website’s purpose is journalistic or to further the economic interests of short sellers without regard to accuracy (a practice referred to as “short and distort”).  Read the whole PR.

Calling a Spade a Spade

Redchip.com was a little ore direct with their headline entitled Melissa Davis of StreetSweeper: In Bed with Short Sellers and Convicted Felons.  Read more

Another company striking back at the StreetSweeper is Gold Resources Corp. Read Press Release.

The Destruction of Small  Business in America

How many people had to sell stock losing their savings because one or two individuals think it is ok to purposefully manipulate investors into selling so they can make money?  How is this any less corrupt than the Enron management or any other securities violation or crime?  In fact some might argue this is even more destructive to America as it is preying upon the small business and trying to force them to go under.  By driving down the stock and spreading false rumors the Company is unlikely to raise more money to fuel their growth and with more and more people and companies turning to the internet for researching a company to do business with, this also can slow sales dramatically causing not only a reduction of employee hirings but usually mass layoffs.

Voice your concern and sign the online petition and get the SEC to look at this form of manipulation.  Go to http://www.petitiononline.com/mrktrfrm/petition.html