Saturday, May 7, 2011

SEC sues man who said he wanted to buy American, Kodak

Saturday, May 7, 2011

A man who claimed to be the managing partner of a private equity firm looking to take over Eastman Kodak and American Airlines is actually a convicted felon with a lengthy history of financial fraud, according to the Securities and Exchange Commission.

  • American Airlines aircraft sit at DFW international airport May 2, 2011 in Grapevine, Texas.

    Tony Gutierrez, AP

    American Airlines aircraft sit at DFW international airport May 2, 2011 in Grapevine, Texas.

Tony Gutierrez, AP

American Airlines aircraft sit at DFW international airport May 2, 2011 in Grapevine, Texas.

The agency this week sued Allen Weintraub and his Florida-based company, Sterling Global Holdings, alleging that Weintraub violated the Securities Exchange Act of 1934 by giving the impression he was a serious bidder when, in fact, he had no assets or access to the huge sums of money those deals would require.

In March, Weintraub contacted both Kodak and Dallas-based AMR, parent company of American Airlines, with separate purchase offers. The Kodak offer was for $1.3 billion, which represents roughly a 70% premium over the level where Kodak stock is trading. The shares closed Wednesday at $2.81.

AMR questioned the legitimacy of an offer from a financial unknown, and Kodak at the time said it had never heard of Sterling Global.

"We thoroughly investigated the letter from Sterling Global, believed it to be a hoax and turned the matter over to the SEC," Kodak spokesman David Lanzillo said.

But in subsequent communications with the companies, and in a variety of media interviews, Weintraub insisted he had the financing lined up.

That's not true, the SEC alleged in the 17-page lawsuit filed in U.S. District Court for the Southern District of Florida. According to the SEC, Weintraub in late 2010 and early this year talked to the Aventura, Fla., branches of three large commercial banks, asking for lines of credit of at least $1 billion for major leveraged buyouts. But none of those banks ever entered into any business relationship with Weintraub, according to the SEC.

Weintraub did not return a message seeking comment Wednesday.

In an interview earlier this year, he said Sterling Global was a privately held company that buys distressed firms. Weintraub said he had 15 years' experience in buying distressed companies, though he would not give any specifics and was unfamiliar with some common business terms.

At the time, no record of Sterling could be found in Florida or at any of the locations Sterling said it had around the globe.

The SEC said Weintraub has a sizable rap sheet, with convictions in Florida in 1992, 1998 and 2008 for fraud and grand larceny. The SEC previously sued him in 2002 for alleged false filings by Vector Holdings, of which he was president. Part of the fallout from that was a permanent injunction banning Weintraub from acting as an officer or director of a publicly held company.

The latest SEC lawsuit seeks a court order banning Weintraub and Sterling Global — of which he allegedly is the sole employee — from any further portrayal of themselves as serious and legitimate bidders for Kodak and American Airlines. It also seeks unspecified civil penalties.

SEC Senior Counsel John Rossetti Jr. declined to comment on what Weintraub's possible motivation might have been for the alleged fraud.

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