CROWN CORPORATION CRUCIFIED!

- Dr.Rivka Meir, President of Lambert Financial Investments, with her husband Dr.Michael Meir, Vice President.

Crown Corporation has been crucified by the market, falling from a high of 975p in December 2003 to a low of 22.5p in February 2005 on thin volume SEE POST 1. Only 1.4m shares or about 2% of the stock has been traded since AIM admission on 31 October 2003, and much of this volume was buys (eg. the 225k that sent CCO up 178% from its opening price of 350p to a high of 975p was virtually all buys). There doesn't seem to be anything behind the drop: no bad news, no profit warnings, no crippling debt, yet this peculiar company (it is nearly 60%-owned by Lambert Financial Investments) has been a veritable crown of thorns for British investors! I spent several weeks investigating CCO, more time than I intended, but I was intrigued and wanted to get to the bottom of it. I hope you take a little time out and enjoy reading this report. I think you'll agree this is about as bizarre a stock as we're ever likely to see on AIM... :-)

03/05/03 The domain name www.crowncorporation.com is registered with register.com by a Dr.Ruben Linder who gives his address as Via Nocc, Gentilino, TI 6925, CH (e-mail: ruben.linder@ticino.com). Linder is listed as the Administrative Contact, Technical Contact, and Zone Contact.

* I presume this is the same Dr. Ruben Linder who is named as a director under the Secretaria de Salud (ie. health department) for the province of Chubut in Argentina? Other than this, my search for info on him has come up blank. However, his wife(?) is Chantal Gilardini Linder (38), a professional coach certified by the International Coach Federation of Switzerland. Her address is:

Via Nocc 20
P.Dante 8
6925 Gentilino
6900 Lugano

See her "Coachticino" website (note Dr.Linder's e-mail provider is ticino.com). Chantal Linder claims experience in banking, project management and team leadership. She specialises in coaching for children, personal coaching, and coaching for small business start-ups. Compare the type of coaching Dr. Rivka Meir has to offer.

04/06/03 Crown Corporation Limited is incorporated in offshore tax haven Bermuda with 12.1m shares (including 100k founder shares) with a nominal value of Euro 0.001 each.

* CCO was incorporated by the enigmatic Dr. Mariusz Rybak (nickname: 'The Baltic Barracuda'), a Polish scientist who emigrated to Canada with his family in the 1980's. He holds the 100k founder shares through his company Crown Management Corporation (CMC). I have been unable to find out anything at all about CMC, but if there's one thing that puts me off Crown, it's the sweeping rights attached to these founder shares (more on which later).

According to CCO's Interim Results to 31/3/04, on 4 Jun 03 'the company entered into a number of contracts in South America.'

For Bermuda taxation see also note 3 in Interim Results.

25/07/03 As Crown begins to seek a market listing, the authorised share capital is increased to Euro 200,100 allowing the issue of up to 188 million more shares.

07/10/03 Pre-Admission Announcement. Lists rules of AIM admission. Gives Crown's address as:

Crown Corporation Limited
Canon's Court
22 Victoria Street, Hamilton, Bermuda, HM 11

Securities to be admitted: 70 million ordinary shares of Euro 0.001, plus 43.89m warrants to subscribe at Euro 7.50 and 43.89 warrants to subscribe at Euro 15.00.

Proposed Directors:
Dr. Mariusz Rybak (52?) - Executive Chairman
Wolfgang Klaus Menzel - Deputy Chairman & Chief Executive Officer
Dr. Jean-Pierre Regli (48?) - Non-Executive Treasurer
Friedrich Kramer (54?) - Non-Executive Director

Shareholders:
Dr. Mariusz Rybak - 29.11% (dir)
Wolfgang Menzel - 29.11% (dir)
Ursula Demagistri - 13.02%
Pierre Demagistri - 12.83%
Pierre Michelutti - 12.72%
Dr. Jean-Pierre Regli - 3.22% (dir)

Capital to be raised on admission: To be confirmed.
Accounting reference date: 31 December
Nomad: Nabarro Wells
Broker: Insinger Townsley

* Canon's Court is a bonafide office block in Hamilton housing many local and international businesses, mostly holding companies with interests in Hong Kong. Seems odd that the nominal value of the ordinary shares is a paltry 0.001 Euro when they floated at 5000 times that amount. Note that the above quoted shareholdings add up to 100.01%.

Biographical details on Rybak are scant. His core interests are hydrobiology and paleolimnology. Between 1982 and 1991, along with wife Izabela and others, he co-authored a number of papers for learned journals such as Acta Hydrobiologica, the Canadian Journal of Botany, and the Journal of Paleolimnology. In Acta Hydrobiologica 24 (1982) and 27 (1985), the Rybak's are cited as belonging to the Academy of Agriculture and Technology, Institute of Hydrobiology and Water Conservation, Poland.

In the early-90's, Mariusz and Izabela Rybak were directors of Ontario-based water and environmental monitoring company, Areco Canada Incorporated, a division of ChemiCorp. In the late-90's, Mariusz, Izabela and Andy Rybak were directors of Intelligent Detection Systems (IDS), which acquired 70% of ChemiCorp in 1999 "for grossly inadequate consideration". I'll look again at these companies later and give some background info on the other directors. I 've found nothing at all on the non-directors/seed investors Michelutti and the Demagistri's. Anyone know their history? I'd pay the nominal value of 10,000 shares just to find out!

10/10/03 to 24/10/03 Following a private placing of 26.01m shares, a total of 18.41m shares are now fully paid (not including the100k founder shares).

* The difference - 7.6m - was to be CEO Menzel's allotment, but he never paid up so his shares were cancelled on 8/1/04. I presume the placing was done with the help of Insinger Townsley, owned by Barry Townsley, who later joins the Board of Crown Oil Corporation as Vice President.

According to an article by Edward Kalfiyan at Lemming Investor, CCO's seed investors held shares worth 278% of their original stake mid-December when the price was £7.50. If Kalifyan is correct the placing price was Euro 3, or approx.£2 a share, with 18.41m (100%) roughly distributed as follows: Rybak (7.6m/41%), The Demagistri's (6.7m/36.5%), Michelutti (3.3m/18%) and Regli (800k/4.5%). Excuse my ignorance if I'm missing something, but how come this placing money (£36.82m fully paid?) wasn't capitalised on the Balance Sheet? Until I read this article, I was under the impression that these early shares had been issued at par.

23/10/03 Shares Magazine article. Crown are 'hoping to raise' up to Euro 300 million to invest in small, troubled US-quoted companies which Crown consider undervalued. They will go hostile if necessary, and have a 'hit list' of 10-25 companies in various sectors that are growing in sales terms, but have too many shareholders and need restructuring. Crown has assembled 'a band of more than a hundred semiretired US-based executives to run the company's investments', an approach descibed by deputy chairman Menzel as "very much hands on." Crown has 'already received commitment for Euro 200 million from a number of significant European institutions', and Menzel predicts that "it will go up by our first trading date." He says not more than 25% of Crown's capital will be invested in any one company. Menzel is described as a 'former private banker' with UBS and Credit Suisse who has joined forces with 'Canadian technology entrepreneur' Mariusz Rybak.

* Not much transparency here. No mention of which 'significant European institutions' are funding this enterprise, or who any of the 100+ semi-retired US executives are.
It seems unlikely, somehow, that Crown could raise over 200 million Euros so soon after incorporation - unless the directors have a pedigree to die for?

Wolfgang Menzel, the multilingual voice of CCO (he speaks six languages), may have been a 'former private banker' with UBS and Credit Suisse, but I've found nothing so far to connect him with either (curiously, there is an 'M.Rybach' who was a financial consultant with Credit Suisse c.2001). As of July 1994, Menzel was Vice President of an obscure institution called EBC Banking Corporation, which appears to have been involved in a $600m financial dispute (not sure if US dollars). In 2000 he was on the board of Westor OnLine Inc. an investment company/broker for small European enterprises, part of the group of Wester Financial Services Companies run by Westor Finance . For more on Westor SEE POST 2

29/10/03 Lambert Financial Investments Ltd (LFI), a group 'of Belgian origin', unveil their $600m investment plan for Buenos Aires at the Alvear Hotel in Buenos Aires, Argentina. Crown Corporation Limited are present as Strategic Consultant, and LFI claims the support of the Argentine government. "We are hoping that the projects come" said Rivka Meir, who refused to name the companies LFI had 'chosen' for the $600m investment, or the rate of interest LFI would charge. The money is available to local industrialists on the condition that it is destined for "projects of national interest". Meir claims that "the 25 top ranking banks worldwide" have put up the investment cash. For further details on the Argentina contracts see entry for 10/12/03

Also on this day, Alberto Camjalli is appointed President of LFI in Latin America.

* It sounds almost as if LFI's motives are genuinely altruistic! During her speech, Rivka Meir pointed out that LFI had collaborated with the Spanish government in the shipment of waste-water treatment plant and field hospitals to catastrophe zones following natural disasters in Mexico, Guatemala and Honduras. To date, I have not found any evidence of LFI's involvement/presence in these countries.

LFI is a Delaware-incorporated company. Delaware is America's favourite tax haven. Incorporation is a cheap and simple process, and you can run your Delaware-incorporated company from your home office anywhere in the world. Nothing wrong with that - incorporation should be a simple process - but a system like Delaware's makes life easier for both reputable businessmen and swindlers alike.

30/10/03 This Is London publishes an article entitled 'Crown No Jewel' by Patrick Lay. One day before Crown's AIM listing with an Euro 200m placing (£140m), Fleet Street editor Lay complains that 'there is nothing simple about the organization.' As he points out:

'Crown Corporation is a Bermuda registered company (for tax reasons), owned entirely by European investors - no shares have been sold to UK holders. It will invest in Canadian and US undervalued public companies - there is a lot more transparency in those countries than in Europe - and yet it will have a quote on the London AIM market in sterling, although the shares are denominated in Euros.'

Menzel told Lay that Crown picked the AIM market so that 'European shareholders would find a level of liquidity to enable share dealing.' Crown has 100-150 part-time specialists seeking target companies or, in Menzel's words, "participating in the game." They have looked at 6000 small and mid-cap companies over the past four years and have identified up to 25 targets. Menzel anticipates taking control of 7 or 8 target companies in the first year.

Menzel thinks Crown's approach is "unique", but Lay argues that Crown are no different from other venture capital firms. He thinks it it is unrealistic to expect to win over the boards of so many companies in one year. He reckons that a hefty chunk of the placing money could "find its way into the pockets of US lawyers."

* Menzel told Lay that CCO chose AIM because it's the only market in Europe that "hasn't lost its shine". Perhaps what Menzel really means is hinted at by Lay from his inference that the AIM market lacks transparency. By hook or by crook, it is a relatively easy market to get into. Not good news for British investors, as anyone who put money into Crown in 2004 will surely testify! Then again, from my experience, there can't be many AIM investors who have really profited from companies incorporated in Bermuda, the British Virgin Islands, and so on. It seems that generally offshore = trouble, because to get back to shore you have to swim with the sharks!

The 'European shareholders' and 'significant European institutions' Menzel spoke of invested in Crown via LFI, which holds about 60% of Crown acting as nominee. LFI have stated that none of its clients are interested in more than 3% of the share capital. This means there are a minimum of 20 'European' individuals and/or institutions involved. I would be interested to know who they are.

31/10/03(A) AIM Admission Day. A further 43.89m ordinary shares are 'fully paid' as follows:

*41,400,000 issued to nominee holders Lambert Financial Investments (LFI) at Euro 5 per share. In settlement of the subscription debt CCO accepts a 'Certificate of Deposit' dated 12/12/03 and issued by Banco de Brasil for the sum of Euro 275m, with interest at 7.25% per annum maturing on 12 December 2004 (13 months and 13 days after admission day).

*2,890,000 issued to nominee holders Allgemeine Vermogensveraltung Frankfurt AG (AVF). Of these, 650k were issued at Euro 4 in cash, 240k at Euro 5 satisfied by a 'promissary note' of Euro 1.2m due on 6 July 2004, and 1.5m at Euro 5 for holdings in the following three companies:

400,000 shares in Global Advertisement Research Group
1,500,000 shares in Global Consulting AG Ltd.
1,069,000 shares in Winfield Resources Ltd (since sold).

The Global holdings are currently capitalised at c.Euro 7.9m. For more info on these companies SEE POST 3.

* 'A CD [Certificate of Deposit] bears a maturity date, a specified interest rate, and can be issued in any denomination. CD's are generally issued by commercial banks. Technically, a certificate of deposit is a promissary note on which the maker is a bank... Almost all large CD's... are negotiable.' - Investopedia.com

The transaction with LFI is specifically an NCD (Negotiable Certificate of Deposit) with a minimum face value of $100,000, which amount is guaranteed by the issuing bank (Banco de Brasil). According to Investopedia, an NCD 'can usually be sold in a highly liquid secondary market, but they cannot be cashed-in before maturity. Due to their large denomination, NCDs are bought most often by large institutional investors. Institutions often use these as a way to invest in a low-risk, low-interest security.'
On the NCD maturity date, 12 Dec 04, Crown traded at around the 200p mark and was in a clear downward trend, so did LFI (acting as nominee) cough up the Euro 295 million due for its clients 41.4m Crown shares? That works out at Euro 7.12 per share, or more than twice the listed price on 12 Dec 04. Reason enough for LFI to negotiate settlement?

Included in the costs of issuing shares for the float is some 10,940,930 Euros - being 5% commission on the total funds raised at float plus Euro 200,000 in fees -and payable to Crown Management Corporation, which is the sole proprietor of the founder shares and is a company controlled by Mariusz Rybak! That's a hefty rate of commission and well into rip-off territory if you ask me!

31/10/03(B) The LSE welcomes CCO to AIM (excerpts):

'They have a team of analysts, M&A specialists and retired directors at hand to detect and run the publicly-quoted small and medium-sized companies in which it intends to invest.'

"Our primary reason for listing on AIM is to offer potential shareholders a level of liquidity, as well as giving them the security of transparency" - Wolfgang Menzel (my italics).

* And so CCO floats with c.62.31m shares in issue. LFI have apparently made arrangements to pay some 295 million Euros (including interest) for a roughly 70% holding in a company with not much more than a business plan! They must trust Rybak implicitly if they invest knowing that by the rights attached to his founder shares he can wind up the company anytime he likes for any reason and trouser half the net assets! So who is this super-majority shareholder? Are they a 'significant European institution', perhaps affiliated with one or more of the "top 25 European banks"?

According to the Lambert-IMI website, which is about as queer a website as your likely to see for any investment company, Lambert Financial Investments Ltd are 'a leading technology-based multinational headquartered in Barcelona'. LFI was formed by a group of Russian scientists who had emigrated to Israel with high hopes but found little in the way of opportunity (devout Ashkenazi Jews, I take it, who followed the Zionist dream only to discover that life in the Holy Land was not all that it was cracked up to be due to the Sephardim/Ashkenazi divide?) They would find better opportunities in the Americas perhaps?

It has come to my attention that Alberto Camjalli, President of the Latin American division of LFI, has been convicted in the past for writing bad cheques.SOURCE. This was back in 1989, and he served his time (20 months) and paid his debt to society. He even got compensated when the registry of his criminal record was not scrapped after five years. SOURCE. For this and other reasons, I'm surprised that Rybak & Co. have given over $700m worth of contracts to LFI in exchange for a "promissary note" for $350m (since reduced to a fair value of $270m) maturing in May 2005. Of course, the bigger cash question is: have LFI paid the 295 million Euros due on 12 December 2004? If so, why hasn't Crown told its shareholders?

For a closer look at the Lambert/IMI website SEE POST 4 By a lucky fluke, I discovered the word-for-word source of Lambert-IMI's 'History' section, which has been tampered with in such a way that it appears Lambert chief Dr.Abraham Avi-Arad Hochman has a direct genealogical link to Belgian hero Bischoffsheim. Dr. Arad seems to be a respected mathematician with a colourful CV, so why the fake genealogy? It's a mystery to me, and the only thing I can think of is that, like many other unfortunate Jews, Arad's family history records only go back as far as WWII.

10/11/03 RNS. Crown has exchanged multiple contracts worth approx. $633m on completion with Alemarsa S.A., Raymon Cayetano Cordozo Goday and Magar S.A. Kaor S.A. and Lopsin S.A. for the installation of waste management infrastructure ($180m), water treatment infrastructure ($11m), and other construction projects ($442m) located in the Canuelas, Malvinas Argentinas, Tres de Febrero and La Matanza municipalities of Buenos Aires. The construction works are due to commence in July 2004 and comprise 14,000 dwellings, 9 industrial parks, 2 commercial centres, 3 complexes of municipal buildings and 2 hospitals. In addition, 3 waste management and 40 water purification systems are due to be delivered in H2 2004. Lambert Financial Investments 'has been instrumental in opening the Latin American market and securing the contracts for Crown.'

'It is intended that these contracts will be fulfilled largely by companies in which Crown plans to take substantial equity interests', says Menzel, adding that this approach is "unique" and "sets it apart from traditional investment or venture capital firms, because it is an operational company and will be able to generate new business for the companies in which it invests."

Jean-Pierre Regli, Treasurer of Crown and 'a member of its Audit Committee', points out: "Each contract will be backed by bank guarantees or similar arrangements which will provide a significant level of protection against financial failure of counter-parties to the contracts, [thereby underpinning] Crown's ability to borrow against the receipts due under the contracts should it wish to do so."

*As the ADVFN contributor mdchand suggests, winning big contracts and then taking an equity stake in the companies you use to fulfil those contracts is a recipe for corruption. No two ways about it!

There was a Crown Management Corporation back in the 80's who were associated with the 15-block Long Ping housing development in Hong Kong. Could they be linked with Rybak's CMC?

When CCO made this announcement, the wretched residents of the city of La Matanza lived in a maze of filthy 'cinder-block homes wedged together on dirt roads.' They had no sewers, so heavy rain would flood houses and septic tanks, often overflowing into already unhygenic wells. Boiling was the only form of water-treatment, but many people couldn't afford the gas to boil it. Nitrate levels were horrendously high, and waterborne diseases were responsible for 20% of infant deaths. So it is great news that Crown and Lambert have been awarded these contracts, and I imagine the citizens of La Matanza will be very grateful to them if it means they are now receiving safe drinking water - albeit for a few pesos more...

"We want to help, but we come to win" - Rivka Meir, President, Lambert Financial Investments.

Nov 2003 Buenos Aires Herald: 'EU investors to plow $1B into Argentina.' Menzel and Camjalli say their investment in Argentina represents a golden opportunity and they expect "quite a bit more than the market average" in return. Crown is said to have raised over Euro 200 million from "European banks" prior to AIM admission. Camjalli says that talks with a number of companies are progressing well, and that an investment deal has already been signed with the Alemarsa construction company.

Nov 2003 Bloomberg.com: 'Lambert and CC Ltd., a Bermuda based investment fund, said last month they would invest a total of $1 billion in Argentina'.

* ...on the other hand, the directors of Crown and Lambert would have to be pretty inhuman if they were merely pulling off some kind of scam here for personal gain.

I was disturbed to discover that a company named Alemarsa SA, with whom CCO/LFI have a supposed massive contract, was implicated in a multi-million dollar swindle with the voluntary fire service in Argentina. In September 1997, Hector Guillermo Erenu Rivers, son of an ex-army head, along with the fugitive Alexander Daniel Chavez, summoned representatives of various organisations of voluntary firemen to meetings in Cordova. They said they represented Alemarsa S.A., which they claimed was part of the World Bank Group and an investment society "Fins" S.A (perhaps a reference to World Bank Group member International Finance Corp). They managed to swindle millions of dollars in upfront payments from these bodies in exchange for promissary notes for subsidies. At one point they even gave a new fire engine to a group of firemen to obtain the necessary confidence. I have no idea if this Alemarsa S.A is the same company in the CCO RNS.

In mid-2000, Jorge Rodriguez, executive vice president of Alemarsa S.A, claimed the company had been contracted for the 'Altos de Podesta' development involving the construction of 1756 houses in Buenos Aires. The project was expected to take four years or until July 2004 to complete. However, during the CCO/LFI presentation at the Alvear Hotel in October 2003 (see above entry for 29/10/03), Rivka Meir mentioned the deal with a 30-yr old local company Alemarsa, referring to their plan to build 1700 houses in the Altos de Podesta development. So it seems that construction hadn't even started yet! This doesn't bode well for the new contracts.

My search for info on Raymon Cayetano Cordoza Goday and Magar S.A, Kaor S.A and Lopsin S.A has come up blank in every case - I can't find thier websites, no mention beyond CCO announcements, nothing. I've looked at lists and directories of waste management, water-treatment and construction companies in Argentina but to no avail. Neither they or any of these contracts are mentioned in this extensive article from Feb 2004.However, surely they do exist? If I do come up with anything I'll include it in POST 5

13/11/03 RNS. Jean-Pierre Regli, 48, is appointed CFO and Executive Director (previously Treasurer and non-executive). He is described as a Swiss/Italian private banker with 18 years experience in security and asset management. He held various executive positions in Swiss private banks with international operations in Italy and the Middle East. He was the CEO of Lugano-based private bank CIC Soginvest Banca, owned by CIC Paris. He also has his own Lugano-based fiduciary firm, Fiduciare Jean-Pierre Regli, where he manages assets for high net worth individuals and advises international corporations. Speaker of six languages, Regli is given credit for helping CCO acquire the Buenos Aires contracts.

* Until corporate bank accounts could be opened by Crown, their banking arrangements/transactions were done through the client's account of Fiduciarie Jean-Pierre Regli. Surprisingly, given his pedigree, info on Regli is sparse apart from that which has been given by Crown. On 27/03/03, a poster on ezboard.com requested urgent info on him. No-one responded. It seemed as if the poster had reasons to doubt him. However, CIC Banques are a reputable organization, but I've trawled through their archives and found no references to Regli or CIC Soginvest Banca! The services of Regli are provided to Crown via Elar International Corporation (EIC). Again, info on EIC seems to be non-existent, other than that they appear to be a real estate company based or once based at 1101 North Wilmot Road, Suite 225, Tucson, Arizona (presuming this is the same company).

Regli is also into horseracing. His most recent investment was a 90% stake in the Irish colt Grey Swallow,winner of the Irish Derby. Grey Swallow now races in Regli's colours. Does the fact he has his own colours mean he is fairly well-to-do? Maybe so, but he can't be that well off if he needed a loan of 89,000 Euros from Crown in Q1 2004 (see 'Other debtors' note in Interims to 31/03/04). Why did he need that money? To buy a racehorse?

18/11/03 Wolfgang Klaus Menzel resigns as CEO with immediate effect 'due to health reasons.' The mysterious Dr. Rybak takes over until a new CEO is appointed, so Rybak is now Executive Chairman and Chief Executive Officer.

* It is very odd that Menzel should have resigned so soon after the float (never paid for his shares either). I can't help thinking there was some reason behind his departure other than his health. Note that this is Wolfgang Klaus Menzel, not the distinguished professor of microwave technology and IEEE fellow Wolfgang S.Menzel who chaired the recent German Microwave Conference at the University of Ulm (5 - 7 April 2005) and competes in the Robot World Cup! At first I thought it was him. There are also various notable (but not linked imho) Klaus Menzel's out there, ranging from an expert in Construction Technology based in Munich, to the socialist-cum-fascist leader of the National Democratic Party in Germany!

20/11/03 Shares Magazine - Small Company News. Menzel confirms that that Crown are 'set to announce its first investment in a US-listed company in a few weeks'. Menzel says Crown are "speaking intensively" to a US environmental company and expects to confirm taking a friendly 51% stake shortly. Crown are also in discussions 'to take over a US bomb detection company.'

*Needless to say, the proposed transactions never materialised. I presume the US bomb detection company was none other than Scintrex Trace Corporation, the explosives and drug detection specialists once run by Dr. Rybak, who was also Executive Chairman and CEO at the same time! SEE POST 6. Although promised, a replacement for Menzel has never been found, giving Rybak total control of CCO. Was it planned that way?

19/11/03 RNS. Crown engages Northern Securities Inc. a subsidiary of Northern Financial Corporation (TSX: NFC), as financial adviser 'to provide mergers and acquisition and restructuring services.' Crown plans to take stakes in up to 10 small-cap US/Canadian companies for restructuring/turnaround.

'Crown plans to invest in a wide range of industries including electronics, manufacturing, business services, entertainment and media, merchandising, broadcasting, communications, and industrial products... Crown anticipates that it will likely take until 2005 before all of its currently available funds are fully invested.' Crown has cash resources of some $340m Canadian dollars and a market cap of $680m Canadian dollars.

* NFC are described as 'one of the relatively few publicly traded investment banks in the Great White North, and the largest focusing on small-cap companies.' Northern Securities is a Toronto investment bank which offers small caps online trading and 'online public offering' services via e-northern.com ).

2004 sales: $14.5m CAN (net income $0.7m). 1-yr sales growth: 227.6%. Employees: 115 (2003). Net assets at full year to 31/3/04: $11.688m.

Sounds pretty good, until you discover that NFC have been losing money for years and have a huge shareholder's deficit. They've issued about 700 million shares, and the share price has fallen from (Canadian) $1.00 in the year 2000 to a mere $0.02c - a 98% drop, about as bad as Crown!. When this announcement was made, Northern Securities Inc. was under Early Warning with the Investment Dealer's Association (trading was actually suspended until 26 Jan 04). However, it does look like NFC are beginning to turn around following recent acquisitions and tighter cash control. I just think it's odd that Crown should have chosen NFC. I don't understand why they felt they needed NFC since Crown already claimed 100+ of its own semi-retired US executives who had already spent 3 - 4 years analysing some 6000 companies and whittling them down to a maximum 25 for potential investment purposes! As for having all funds fully invested by/in 2005, why has nothing happened? Did these former executives spend up to four years analysing 6000 companies for nought? Was there ever 100 executives?

For more info on NFC SEE POST 8

21/11/03 Daily Telegraph reports a 132.5p surge in CCO share price to 635p, making it the third biggest company on AIM.
22/11/03 Daily Telegraph reports a 102.5p surge in CCO share price to 737.5p (up 80% or 327.5p on the week). 'Traders said Crown is a thinly traded stock.'

* Apparently, the price was pumped up in December 2003 in part due to a stream of broker buys. Did the broker/s (Townsley?) know that Menzel wasn't going to pay for his shares, in which case the market cap was artificially high?

16/12/03 RNS. Crown wins contracts for the provision of security products and services with a total value on completion of US $70m. No further details can be released due to confidentiality agreements. As with the Argentina contracts, Crown plans to use companies in which it intends to take substantial equity interests. Following 9/11 and the threat of terrorism, Rybak sees the security industry as "a high growth sector on a global basis... As such our entrance into this market opens a realm of business opportunities for Crown". Regarding Crown's shortlist of investment targets, Rybak says: "Preliminary negotiations have commenced in relation to a number of these targets."

* Great! Sounds like the US bomb detection company Menzel spoke of will get some of this business? Sadly, there has never been any takeovers or substantial investments (discounting Global) on Crown's part! A few hours after this announcement, Crown was valued at over £600m as its share price reached an all-time high of 975p, yet only 4500 shares were traded on this day and there was almost zero volume in the days following. Very strange because you'd think if this was a scam then the directors and insiders would be cashing in? After this announcement there is no news from Crown for over three months.

09/02/04 In a private Board meeting, a resolution is passed to increase the authorized share capital from Euro 200,100 to Euro 500,100 by the creation of an additional 300,000,000 new common shares.

* Why? Haven't they enough already to draw on if need be? Does Dr. Rybak expect to issue these 300,000,000 shares someday and end up like strategic partner Northern Financial Corporation?

23/03/04 Appointment of Adviser. Moscow University professor Dr. Witali Wilkin becomes Crown's 'Strategic Adviser' for the oil and gas sector. According to Rybak he is "renowned for his expertise", having been adviser to Bridas Energy International Ltd, 'one of the world's leading independent energy companies.' Wilkin was responsible for the design, development and construction of the first European Liquid Gas Terminal in the ferry port near Rostock, Germany. He was formerly President of Wostok Chemical, Gmbh.

* No reason to doubt the above, but I can't find any background info on Wilkin or his connection with either Bridas Energy or the Rostock gas terminal. I can't find anything on Wostok Chemical other than a (previous?) address in Berlin. However, Bridas Energy was formed in 1948 and is indeed a leading independent oil company - it is the second largest oil producer in Argentina.

23/04/04(A) Formation of subsidiary Crown Oil Corporation, a holding company 'for a number of operating businesses within the oil and gas sector, incorporating related exploration, transportation and construction activity on a global basis.' The four man management team are as follows:

*Dr. Marius Rybak, Executive Chairman.
*Barry Townsley, Vice Chairman. Barry was a founder/senior partner of Townsley & Co. and is the current Chairman of Insinger Townsley the stockbroking arm of Insinger de Beaufort, which happens to be Crown's broker.
*Prof. Joseph Benhamou, Non-Executive Director. A Swiss investment banker who has spent his entire career in Geneva. Formerly General Manager of Republic National Bank of New York (Switzerland), he held the same position in Banque Jacob Safra S.A. He is the current Chairman of Banque SCS Alliance S.A. He is also a Chartered Accountant and has a diploma in electronic engineering from Ecole Technique Superieure. Teaches econometrics at Geneva University.
*Dr. Witali Wilkin, Strategic Adviser.

* With the addition of Townsley and Benhamou to the Crown team (all of whom are staunchly left-wing) Crown are beginning to look interesting! Townsley is the multi-millionaire owner of stockbrokers Insinger Townsley. He is a regular donator to the Labour Party and member of Britain-In-Europe, a trustee of the Serpentine Gallery and an avid art collector, a £1.5m sponsor of Stockley Park Open Academy, a Committee member of St.John's Hospice, a film producer (see 'Shiner' starring Michael Caine), an associate of the Royal Marsden Cancer Campaign, and a 'Friend' of both the Hebrew University of Jerusalem, and the Israel Center For Social & Economic Progress' or ICSEP.

Insinger Townsley's 2003 Annual Report quotes the Karl Marx law of financial markets, that any practice or strategy which succeeds eventually fails through its own success, ie. when everyone believes equities must outperform bonds, then it is usually fully, or more than fully, discounted in the price, so that in reality the opposite happens.

For info on Benhamou and the Safras please SEE POST 9.

Must say, judging by their pedigree, I wouldn't expect either of these men to get into bed with a bunch of no-hopers; but I wonder if they realised what they had gotten themselves into, and it remains to be seen what contribution they will make, if any, to Crown's future. We haven't heard a peep from Crown Oil in almost a year.

23/04/04(B) Also announced on this day: non-binding terms agreed for the Euro 225 million acquisition of International Hydrocarbon Trading Ltd (IHT) in a deal involving some cash, some shares and a Certificate of Deposit. IHT is 'a BVI Company' which holds a 49-year lease on a 100-hectare concession in Russia with 'approval to develop a natural resources transhipment terminal and berth structures.'

'Crown Oil is also close to entering into a contract pertaining to the construction of a gas pipeline within Russia.'

* A BVI company? BVI means incorporated in British Virgin Islands. That means only one director and/or shareholder required for incorporation. The process takes only 3 days, and for privacy reasons no names are given in the incorporation document, so for all we know IHT could be a related party or even another Hochman vehicle! For a BVI company the mininum paid in and issued share capital is just 1 share. A BVI company is exempt from tax for 20 years and doesn't need to keep accounts. There are no requirements for AGM's or other public meetings... etc... etc...!!! Thus it is almost impossible to get any information on IHT. I guess Crown had done due diligence and the proposition looked sound, but E225m for what is in essence a bit of land with planning permission? Seems a bit steep! Luckily, Crown didn't go ahead with the acquisition (or was it that IHT decided not to get involved with Crown?). Nothing has come of the proposed gas pipeline either.

28/04/04 Issue of additional 200,000 First Warrants. Also, following Menzel's resignation as CEO in December, the 7,600,000 shares he previously held have been cancelled, reducing the number of issued shares from 70m to 62.4m.
29/04/04 Jean-Pierre Regli pays back Euro 89,000 loan by Crown plus 2.8% interest in full (loan was granted between Dec 03 and Mar 04).
30/04/04 Exercise of 320,000 First Warrants at Euro 7.50 each
25/05/04 Exercise of 25,000 First Warrants at Euro 7.50 each. Number of shares in issue now 62,745,000.

* It seems someone had confidence in Crown to spend Euro 2.4m exercising 320k First Warrants. I presume this is linked with the 320k trade on 21 April (see Post 1), nine days before the warrants were exercised? Anyone have any idea what happened here?

02/06/04 Crown Corporation sells a combined package of the previous contracts announced on 10/11/03 and 16/12/03 for US $350m. The gross profit to Crown is equal to the sale price. The buyer is none other than Lambert Financial Investments, CCO's 'financial partner' in Latin America. The transaction is to be 'satisfied' by the issue of a 'promissary note' by Lambert due 31 May 2005. This is a Related Party Transaction since Lambert owns 59.14% of CCO. The Directors, having consulted NOMAD Nabarro Wells, think the transaction is fair to shareholders. The money, when received, will be invested in Crown Oil Corporation to develop prospects in the FSU (Former Soviet Union). Rybak says that the formation of Crown Oil "reflects our commitment to focusing initially on this sector" and should create "a substantial return to our shareholders" as Crown seeks to "capitalise rapidly on certain opportunities currently under review."

*Cleverly worded. Just because they consult with Nabarro Wells doesn't mean Nabarro Wells thinks its fair. It seems to me that Crown have promised to jump on to one hot-sector bandwagon only to promise to jump on to the next! First, they had identified 10-25 undervalued companies covering a myriad of sectors in the US; then their focus changed to Canadian hi-tech; next it was water treatment and construction in Argentina, and now its oil and gas in Russia. All in the space of a little over six months!

In this report I look at the Lambert-IMI website in some detail and expose its many errors. It isn't easy to believe the Crown story when you know that its future depends on Lambert. It is very easy to doubt Lambert's ability to pay up when you see the fake genealogy of its founder and his fake PhD in International Economics, the false claims on its website, the previous convictions of its President for Latin America. It doesn't help when you discover the weird stuff that Lambert's respective President and Vice President Rivka and Michael Meir are into! For a short biography of the Meirs SEE POST 10

Note 14 in Crown's first Interim statement deals with the sale of the contracts to LFI thus:

'No residual contingent liability to Lambert arises in respect of these assignments. The company is seeking from all other parties related to the contracts release from all the contractual obligations and any other liabilities under these contracts. In the abscence of which the company remains responsible for their performance.'

A promissary note is defined as: 'A written, dated and signed two-party instrument containing an unconditional promise by the maker to pay a definite sum of money to a payee on demand or at a specified future date. The only difference between a promissary note and a bill of exchange is that the maker of the note agrees to pay the payee personally, rather than ordering a third party to do so. When a bank is the maker promising to repay money it has received plus interest, the promissary note is called a certificate of deposit(CD).' - Investopedia


29/06/04 Interim Results to 31 Mar 04.

Highlights:
* "A number of companies made presentations to your Board and its advisers in London. Upon further review, none of these companies met our stringent investment criteria." - Rybak
* "New managers and consultants will be appointed in order to provide the skills and experience necessary to exploit [new] opportunities." - Rybak
* Acquisition of IHT and Russian oil pipeline contracts not yet signed.

* These statements by Dr. Rybak are a huge disappointment considering previous announcements by him and the Board. Did CCO approach the 10-25 companies which over 100 semi-retired, consulting US executives had spent four years identifying? Don't these guys have enough skills and experience without appointing more? What happened to the US environmental company and the US bomb detection company mentioned by Menzel? Did these target companies take one look at Crown and say no way Jose? After all this, it's no surprise that the deal with IHT fell through!

Something else that stinks is the all-encompassing rights attached to the founder shares, which are owned by Rybak's Crown Management Corporation. One of those rights entitles him to an outrageous 0.75% of Crown's Net Asset Value every month as a founder share dividend. Up to 31 March this amounted to a whopping Euro 7.6m, but Rybak waived the dividend for the simple reason that Crown didn't have the cash to pay it! Other thorny accounting issues are discussed in POST 11

A new name associated with Crown crops up in this Interim statement - Lawrence Graham, who holds 100,000 First Warrants. Is this an individual or an institution? If the former, it is most likely the respected author/professor Lawrence S. Graham from the College of Liberal Arts at the Uni. of Texas, a true expert on the economics of Latin America. If the latter, it must be Lawrence Graham, the London commercial law firm which recently merged with the former law firm of Ernst & Young. Having expanded successfully into Monaco/Monte Carlo, Lawrence Graham has forged links with ultra-high net worth individuals. They also have a number of diverse AIM clients ranging from Coffee Republic to Vietnam Opportunity Fund. Not immune to scandal, one of their former partners, the fugitive Michael Fielding, embezzled millions from client accounts and did a runner to Florida in 2001.

19/08/04 RNS. Crown takes a second listing on the all-electronic Xetra exchange (symbol: FG6) via market maker Seydler AG (Frankfurt). Rybak chose the Xetra "to increase our European shareholder base [and] increase the opportunity for investors to take advantage of the growth opportunities available in our industry." Crown also announces its intention to maximise returns to shareholders by issuing dividend payments.

* Crown actually have three listings in Germany whose performances have all mirrored the increasingly depressed share price on AIM. To see how they're doing click on these links:

*XETRA
*FRANKFURT
*BERLIN

These listings may seem pointless, but they have certainly increased liquidity in CCO shares (158 times more volume on Frankfurt than AIM in March 05) and occasionally offer opportunities to make a decent profit. For example, on 24 January there was a wild intraday rally in Germany, and I'm sure at one point you could have bought CCO from AIM at around 60p and sold them on the Frankfurt exchange literally minutes later for the Euro equivalent of around 80p! For more on the German listings see POST 12

24/08/04 CCO Appoints IFC Metropol as Financial Adviser in Russia 'to both advise on and facilitate [Crown Oil's] Merger and Acquisitions activities... at a crucial stage in Crown's development when it is reviewing several exciting opportunities within Russia [with] the potential for high growth'. Rybak looks forward to "extending our footprint in the Russian market" as Crown opens two new offices in Moscow and St.Petersburg. IFC Metropol knows the Russian investment market well and will help Crown Oil identify undervalued assets or companies, undertake due diligence, and advise throughout negotiations. Mikhail Slipenchuk, CEO of IFC Metropol, looks forward to "a highly capital-productive partnership with Crown" and "a long term affiliation."
* Up to a point, I have to concede that this sounds promising. Metropol appear to be a class act. On 29 Mar 2005 they cut a deal with two leading Chinese mining companies to develop the Ozermoye polymetallic ore deposit in the Republic of Buryatia, which is 'one of the world's largest deposits in terms of zinc reserves'. They have been very active in the O+G sector recently and seem to be the right fit for Crown. See also POST 13

30/09/04Interim Results to 30 Jun 04.

Highlights
*after deducting 'anticipated costs' on the disposal of the Argentina contracts, Crown book a profit of Euro 222,284,000 on turnover of Euro 223,473,000.
*EPS 3.43 Euros
*Shareholder's funds up more than 100% to Euro 423,115,000 (31/3: 205,780,000)
*FSU now "major focus of our investment strategy and I anticipate developments in this area in the coming months." - Rybak
*negotiations with IHT not progressing well and "it currently seems unlikely that Crown Oil will proceed with the proposed development." However, Crown are looking at other opportunities and "I anticipate that at least one of these opportunities will come to fruition before... 31 December." - Rybak
*the maturity date for the Euro 1,200,000 'promissary note' from AVF has been extended from 6 Jul 04 to 10 Dec 04.

* Crown's financial statements use the historical cost accounting method. I am no accountant, but the way I see it there's something not right about booking profits from Argentina as revenue when the money (if it does come) will not be received until the middle of the next financial year, and when you don't know for certain the ultimate costs of disposal of the contracts or any contingent liabilities. Then again, the works were scheduled to begin July 2004. If they did, Crown would have had to sort it all out by then.

Other than that, these would appear to be a cracking set of results, especially for Rybak, since he is entitled to claim 0.75% of the Net Assets as a founder share divvy every month! They also cover up nicely the increase in creditors (thanks to Rybak's CMC), questionable related party transactions etc. Despite the dissapointing update on IHT, they set the stage for an even better Full Year (to "31 December"). It does not matter that the opportunity which Rybak anticipated in the FSU never materialised, because the money due from LFI for their shares is booked at the subscription price of Euro 207m, not the Euro 295m anticipated from the 'Certificate of Deposit'. So I won't be the least surprised if the difference of Euro 88m appears in the Full Year results as new shareholder's funds!

The extension of the maturity date for the AVF promissary note of Euro 1.2m is a cause for concern. Were AVF so strapped for cash that they couldn't fulfil their promise to pay a mere Euro 1.2m? Whatever, this doesn't bode well for the other promissary note on which Crown's immediate future depends! We learn from these results for the first time (it was not in the RNS announcing the contracts) that the $350m 'Promissary Note' is 'supported by a guarantee from Capital Merchant Bank, Sau Paulo, Brazil'. However, the note has been discounted to the directors' valuation of its fair value of US $270m, to account for the risks associated with fulfilling the contracts on time, etc.
We also hear for the first time of Dr.Arad's controlling interest in Lambert. In spite of his questionable genealogy, he is probably the most colourful character taking part in this bizarre masquerade. His CV/biography is explored in POST 14 - unluckily for Dr.Arad!

Intimately connected with Dr.Arad is the symbolic matriarch of Lambert Financial Investments - a mystery woman named Hanna Lambert. When he incorporated LFI in Delaware in 1996, it was in memory of his supposed great grandmother Hanna Lambert. She is discussed in POST 15.

For further comment on these Interims including Related Party Transactions see POST 16

Note that Rybak's statement about "other opportunities" by 31 Dec does not necessarily mean opportunities for Crown Oil in FSU, for which only Argentina cash (due from LFI) has been earmarked, not the placing cash (also due from LFI). Could "other opportunities" refer to the forthcoming demerger of Crown Pharma, which has reportedly been funded with US$294m? And is the placing cash now in Crown Pharma's coffers?

15/11/04 RNS. Crown appoints Nabarro Wells as Broker 'with immediate effect'. Nabarro Wells are now broker and nominated adviser.

*On their website, Nabarro Wells make it clear that: 'We act strictly as corporate advisers in order that we have no conflicts of interests... unlike firms who combine the roles of advisers and brokers'. So much for that! There's also a very interesting document available via their website about the benefits of an AIM listing, though I must say their own AIM client list has its fair share of clangers! Nabarro holds 100,000 First Warrants in Crown or about £500k worth; not a great deal of money, but I'm surprised they're interested in Crown at all. They say they 'are not necessarily dissuaded by difficult propositions, which we may regard as opportunities.' Clearly, Crown isn't one of them!

Crown traded at 220p on this day. The share price then took one of its biggest dives to date - hitting a new 135p low on 23 November although a mere 13k shares had been traded in the week since the announcement. So did Crown dump previous broker Insinger Townsley or did Insinger Townsley dump Crown? I can't see that it could be the former, since Barry Townsley is VP of Crown Oil; and if it is the latter, is Barry Townsley still "participating in the game"?

10/12/04 Deadline for 'promissary note' for Euro 1.2m by AVF.
12/12/04 Deadline for 'Certificate of Deposit' for Euro 295m by LFI.

12/12/04 Rybak's Crown Management Corporation, which was 'entitled to consultancy and other fees' under the arrangements made when CCO floated and under the rights attached to the 100k founder shares (held by CMC), has accepted 8,651,118 new 'common shares' to settle Euro25 million of the Euro32m owed to it. That's Euro 2.88 a share, equivalent to 200p compared to a market price on 12 Dec of 112p. However, the high price Rybak paid was based on the average closing price over the previous 90 days. In the official announcement five days later, it states that all the Directors 'other than Dr. Rybak' think the transaction is fair as far as CCO shareholders are concerned!

* Coincidentally, Rybak took 12.12% of the enlarged share capital and the deal was done on 12/12 (13 months and 13 days after AIM admission date). Could this transaction mean that the Negotiable Certificate of Deposit (NCD) due on 12/12 from Banco de Brasil did not materialise? Surely Rybak would have got at least some cash if that all-important money had come in?

The above announcement infers that Rybak thinks he's been hard done by. I don't see why. Even at the current (12/04/05) market cap of c.£20m CMC's 12.12% is valued at nearly £2.5m; Rybak still gets his ridiculous monthly divvy of 0.75% of the net assets; he is entitled to half of everything if he decides to cash in Crown's chips. They'd better not annoy him too much!

CONCLUSIONS: If Crown gets the $350m "promissary note" money from non-registered Capital Merchant Bank (Brazil) when it matures on 31 May 2005 (current estimated fair value $270m) it will be a miracle and Crown should experience a resurrection! Alas, we still don't know if Banco de Brasil paid Crown the Euro 295 million due in December 2004 as consideration for LFI's majority (nominee) shareholding. What would happen if, for whatever reason, that money doesn't come through? Am I right in thinking that their shares would have to be cancelled, and wouldn't it be the case that a false market was created here? Another thing that worries me is the actual terms of both the aforementioned "promissary note" and the "Certificate of Deposit" with Banco de Brasil (ie. an alternative name sometimes used by Banco do Brasil). For example, could there be a hidden "evergreen" clause (aka. auto renewal or auto extension clause) or similar instrument allowing LFI to extend the repayment date?

'A typical letter of credit transaction involves three separate and independent relationships...: (1) an underlying commercial transaction between a buyer and a seller, (2) an agreement between a bank and its customer (the buyer), pursuant to which the bank agrees to issue a letter of credit supporting the buyer's obligations to the credit's beneficiary (the seller), and (3) the bank's resulting engagementto honor drafts or other demands for payment by the beneficiary, on the condition that the demand is accompanied by certain documents presented to the bank in conformity with the terms of the letter of credit.'

For more on these banks see POST 17

Do Rivka and Michael Meir have enough clout in the financial world to raise hundreds of millions? I don't think so, even if top executives from Nike (Argentina) and Coca Cola (Argentina) do give the 'Rivka Method' glorious testimonials! On the other hand, LFI are 'controlled' by Dr. Abraham Avi Arad Hochman, who may have the contacts to pull off such deals, I don't know. I do know he has a fake PhD in 'International Economics'. I suspect the middle part of his name is fake. I also know his genealogy is fake. That's the problem. Sometimes I think there's something fake about this whole damn set-up!

"We demonstrate that through rebuilding and rewriting the past, people can change the present." - Rivka Meir

New rules are being implemented that will help prevent AIM investors from having to swim with the sharks; nevertheless it is bad news that a company such as CCO should have chosen AIM as being the most accessible of European markets to conduct its bizarre business. To think that in Dec 03 Crown was the biggest stock on AIM with a market capitalisation of £600m (over a billion if you included the value of the warrants) - it makes me wonder. How could the LSE allow this to happen? How can the biggest company on AIM turn into the biggest dog on AIM in little over a year, and for no apparent reason?

Finally, apologies for the very lengthy header, but Crown is a complicated affair and needs some explanation! This BB is intended merely as a reference companion to 'The Crown' BB, on which some punters had complained Crown was so complicated they couldn't make head or tail of it. Neither could I, so I resolved to find out what I can and post my findings here. I'm still uncertain about a lot of things, so I'll keep a hard copy at hand, on which I may make occasional notes for editing purposes should anything else come to light. Hope you have enjoyed this little tome. Cheers. jd

"If you wish to be a success in the world, promise everything, deliver nothing." - Napoleon Bonaparte