Arms Dealer Holds a 33% Stake in Self-Help Marketer
Saudi financier and arms merchant Adnan Khashoggi amassed a 33% stake in GenesisIntermedia.com Inc. through an offshore holding company last year as the self-help marketing company’s shares gained 195%.
Khashoggi’s role as president of Ultimate Holdings Ltd. of Bermuda was disclosed for the first time Wednesday in an amended Securities and Exchange Commission filing concerning its stake.
The 65-year-old Saudi citizen, who claimed in the 1970s to be the richest man in the world, is known for his role in helping to finance the sale of arms by the U.S. government in the 1985 Iran-Contra affair.
Ultimate owns 2,138,634 Genesis shares, according to the filing, which said the company’s principal business is investing in technology and telecommunications companies.
Van Nuys-based Genesis sells videotapes on love, diet and finance and operates kiosks providing free Internet access in more than 20 shopping malls. The company last week offered to buy Fashionmall.com Inc., which markets apparel and beauty products over the Internet, for $49.1 million.
Ultimate began buying Genesis stock in February, according to Ultimate’s prior filings. Genesis, which lost $16.7 million in the first three quarters of 2000, said in its earnings report that it has received $30.9 million of loans from Ultimate since November 1999.
Ramy El-Batrawi, chief executive of Genesis, said he was surprised to hear that Khashoggi’s name was on the SEC filing.
“It’s strange that it came out,” said El-Batrawi in a telephone interview. “He wanted a low profile.”
El-Batrawi said he has known Khashoggi for 15 years and worked with him on deals between 1988 and 1993.
Ultimate’s first Genesis purchase was 1,600 shares for $16.50 a share Feb. 24. The next day, Genesis soared 70% after Courtney Smith, president of Courtney Smith & Co. of New York, recommended it on CNBC.
Smith repeated his recommendation in four more television appearances on the CNN and CNN-FN networks.
Smith wasn’t immediately available for comment.
Khashoggi is wanted by police in Thailand on suspicion of loan fraud in connection with the collapse of Bangkok Bank of Commerce in May 1996, according to the Economic Crime Division of that nation’s police.
Khashoggi’s principal occupation was listed as director and president of Ultimate in its amended 13-D filed Wednesday. The document said his principal office was at Alnasar Trading Industries in Saudi Arabia.
Khashoggi wasn’t immediately available for comment.
U.S. securities laws didn’t require the disclosure of Khashoggi’s involvement with Genesis, said Alan Bromberg, law professor at Southern Methodist University.
“That’s a piece of information investors would be interested in knowing, but there’s no express disclosure requirement,” he said.
Last week, Genesis offered to pay $2 in cash and 0.29 share for each share of Fashionmall. That’s about $7 a share. Fashionmall closed Friday at $2.78, off 22 cents, on Nasdaq.
Genesis said it has already purchased a 7% stake in the New York-based online clothing retailer. Fashionmall had $27 million of cash Sept. 30, or about $3.60 a share.
El-Batrawi said Khashoggi supports the proposed acquisition.
For the first nine months of 2000, Genesis lost $2.90 per share on sales of $32.2 million. Its net worth Sept. 30 was $4.7 million. The market value of its 6.5 million outstanding shares is more than $110 million.
Genesis fell 13 cents to close at $17.06 on Nasdaq.
