GenesisIntermedia Chief Exec Resigns
Ramy El-Batrawi resigned Monday as chief executive of GenesisIntermedia Inc. amid investigations by the Securities and Exchange Commission and Nasdaq into trading of the telemarketing company’s shares by Saudi arms dealer Adnan Khashoggi and others.
The Van Nuys-based company also has fired 60 employees, or 15% of its 397 workers, since August, said Vice President Robert Bleckman.
Nasdaq is probing trading in the company’s shares by Khashoggi’s Ultimate Holdings, an investment company based in Bermuda, and the SEC has launched a formal investigation, the company said. Ultimate controls 75% of GenesisIntermedia.
Stephen A. Weber, a director, was named interim chief executive of GenesisIntermedia.
The Nasdaq Stock Market halted the stock Sept. 25, the same day the shares played a role in the largest failure of a U.S. brokerage in at least 30 years.
MJK Clearing Inc. was seized by the Securities Investors Protection Corp. after Native Nations Securities Inc. defaulted on a $60-million payment due to MJK. Native Nations had received the money in exchange for lending 7.2 million shares of GenesisIntermedia to MJK.
The default placed MJK in violation of the Securities and Exchange Commission’s minimum net capital requirements, and forced it to halt operations.
Stock can be loaned between securities firms, but it would be unusual for the bulk of a company’s stock to be loaned in a single transaction. Khashoggi’s Ultimate Holdings is the only entity that controlled as many as 7.2 million shares of GenesisIntermedia.
Native Nations, of Jersey City, N.J., defaulted on what it owed MJK after GenesisIntermedia’s shares plunged 65% in the seven trading days following the terrorist attacks on New York and the Pentagon.
MJK, which cleared accounts for 175,000 customers with $10 billion in assets, was liquidated last week.
The Securities Investors Protection Corp. said the failure of MJK has so far cost the agency about $42 million.
Native Nations said the money it received from MJK is missing. The firm said a rogue employee falsified documents to conceal the identity of the source of the GenesisIntermedia shares.
Khashoggi is wanted by police in Thailand on suspicion of loan fraud in connection with the collapse of the Bangkok Bank of Commerce in May 1996, according to the Economic Crime Division of that nation’s police.
The losses don’t end with Native Nations and MJK. That’s because MJK re-loaned the GenesisIntermedia stock to additional firms, receiving back a total of $125 million, which it forwarded to Native Nations, according to Matthew Kyler, vice president of Stockwalk Group, MJK Clearing’s parent before it was taken over by SIPC.
GenesisIntermedia, which had a market value of about $137 million when it last traded Sept 25 at $5.90, had a negative net worth of $9.3 million as of June 30.
