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AIM listed oil stock Sefton Resources (LSE:SER) is suing me for libel – it wants to shut me up. As this process drags on I shall under disclosure rules be asking for an awful lot of documents and emails as, I imagine will Brokerman Dan who is also being sued by Sefton and its uber-expensive City lawyers Pinsent Masons. But to save Sefton some time later, there are some matters relating to its pipeline assets in Leavenworth County Kansas which its paid for cheerleaders at Hardman, Edison, etc. have flagged as having exciting upside about which I ask the questions now. It goes without saying that these assets are – despite what Hardman, Edison tell you – essentially worthless and here is why.
Back in the late 1980s Sefton’s chairman, Hawaii mansion dwelling Jim Ellerton, floated a company called Powerhouse Resources on the USM. It also had a US listing. It subsequently changed its name to Com-Tek. One of its key assets was…. er a pipeline system in Leavenworth County Kansas. Jim quit Powerhouse in March 1994. It eventually went bust in 2009 but since it failed to file any SEC returns for 14 years before that it is hard to know exactly what went on for its last 15 years.
What we do know is that the pipeline assets were in 1996 put into a new subsidiary Crescent. And Crescent subsequently sold these assets to a firm originally incorporated as Copper Mountain Ventures but which in June 1987 became Monument Resources Inc for $225,000 in cash and 3 million Monument shares which gave it a 39% stake in Monument.
Sadly, Monument, like Powerhouse before it, did not make money from these assets and so on 16th May it signed a sale and purchase agreement to sell these assets to …Sefton Resources. As it happens Monument and Sefton should know each other well since while Monument was based at 2050 South Oneida Street, Suite 106, Denver, Colorado 80222, Sefton’s US office was and is er…. 2050 S. Oneida Street Suite 102 Denver, Colorado 80224.
Jim Ellerton promised news of the deal by the time of the AGM on 16 June 2005. And then at the AGM he stated “we are working towards a closing date of 31st July 2005.” By 7th September (having raised cash via a placing of shares into its Canadian subsidiary) Jim said that due diligence had been completed and closing was expected by 21st September.
On 27th October 2005 Jimbob had bad news. “Sefton Resources, Inc. announces that its negotiations with Monument Resources, for the acquisition of certain assets in East Kansas, have been terminated. Although due diligence had been completed it was not possible to reach agreement on certain details with respect to leases. In the circumstance Sefton has been advised to withdraw from the original deal.”
What Ellerton failed to mention at the time (you need to trawl through the notes in the 2005 accounts filed in mid-2006) was that Sefton paid Monument $300,000 as “liquidated damages” for not going ahead with the deal.
Step forward to 2009 and Monument seems to have gone tits up too. The Leavenworth assets are now held by a company called HDP Inc from Lubbock County Texas. I cannot for the life of me trace this entity. But it then agreed to sell the same assets to Sefton for $215,000 after Sefton had completed its due diligence. You would have thought that by this time Jim would know what questions to ask about these assets.
There do seem to be a few common threads running through this saga of trading assets that never generate cash from one entity to another. And so I have just a few questions for Jim Ellerton since he seems to be one of those threads:
1. Did you have any involvement with the management of Powerhouse/Comtek at any stage after 1994?
2. Did you own shares in Powerhouse/Comtek after 1994?
3. If not that is good. If so – given that Powerhouse owned 39% of Monument, did you declare this to your fellow directors when ponying up $300,000 of Sefton cash to Monument?
4. Why did Sefton pony up $300,000 to Monument at all? Especially since it appears that the assets were purchasable just a couple of years later for a mere $215,000.
5. How much did HDP pay Monument for the Leavenworth assets?
6. Who owned and ran HPD?
7. If these pipelines have never made cash for anyone in 20 years why will it be different this time?
8. When negotiating the deal with Monument and handing over $300,000 of Sefton cash should you not have mentioned that its offices were in the same building from yours, just down the corridor?
9. I am absolutely sure that the answer is no since you are a man of integrity but to reassure your critics please can you make it clear that you had no other personal connection to Monument other than sharing the same communal coffee machine?
That will do for now. Jim you know where to send the answers.
Tom Winnifrith writes for 10 US and UK websites. You can follow his no-holds barred thoughts on twitter @tomwinnifrith or by links on his own website www.TomWinnifrith.com
The premium website where all the best thoughts of Tom appear first is the Nifty Fifty. It is co-produced with infamous bear raider Lucian Miers and with Steve Moore, Tom’s collaborator at t1ps for many years. You can access the Nifty Fifty HERE
Wow.
I’m betting that ‘Jim’ is wishing he never messed with you. Whatever the outcome, his reputation is broken.