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Keith Mazer -- the King of Stock Parking and the Earl of Penny Stock Frauds

Keith Alan Mazer

How he does it 

           This web page sets forth the stock parking scheme of Keith Alan Mazer ("Mazer"), a Denver stock promoter, with respect to the common stock of CleanTech Biofuels, Inc. ("CLTH"). Mazer employed this scheme to reap millions of dollars from unsuspecting investors in a "pump and dump" scheme from 2007 through 2009. CLTH's common stock is registered under the Securities Act of 1934. In 2007, and thereafter, Mazer utilized various artifices to conceal his ownership of more than 20% of the common stock of CLTH, and his control of the trading float.  Mazer knew of the reporting requirements of SEA 13d and the requirements to report such ownership in CLTH's SB-2 registration statement 333-145939, effective January 3, 2008 (the "Registration Statement," and intentionally structured his ownership to evade the reporting and disclosure requirements. Mazer sold the shares into the public markets well into calendar 2009, while the shelf registration statement was effective. These facts are supported by documents and by Mazer's sworn trial testimony in Anahuac Management v. Mazer, case number  2:09-cv-01590-MMD-PAL (the "Trial Transcript" or "TT").

            It seems amazing that Mazer would so brazenly admit his illegal conduct in  Federal court. Stock parking is a crime. Ivan Boesky and Michael Milliken went to prison for stock parking. The only explanation is that he must have thought the statute of limitations expired January 3, 2013, the fifth anniversary of the effective date of the Registration Statement. Mazer is ill advised, since the Registration Statement was a "shelf offering" and the statute does not begin to run until Mazer's sales ended in 2009.

            Mazer was also involved in another pump and dump of Surgline International, Inc., trading under the symbol SGLN. SGLN touted a forecast of $10,000,000 in sales from a contract with a third party. Our investigation uncovered the fact that the touted "contract" never dame to fruition. Meanwhile, press releases and Mazer's posts on the investors hub forum under the handles "jude," "mm107" supported his sales of 545 million shares. Later, when we brought SGLN to the attention of the SEC, trading was halted. SGLN had nominal sales and we believe that all or a substantial portion of its sales were believe were fictitious and were to a Mazer company named Tech Therapy LLC.

           

Currently, Mazer is up to the same tricks with respect to the stock of a company named Praxsyn Corporation, symbol PXYN. The Investors Hub handle "jude" has been changed to "Lighthouse" and the pumping continues, with ownership of hundreds of millions of PXYN shares concealed. The stock price has been pummelled down from a high of $.20 to half a penny. Yes, the same game continues unabated and as usual the SEC is asleep at the wheel. Mazer, Madoff. Same Same.

           

See, for example, our screeds about PXYN and their ilk at http://www.stoppennyscams.org.<\p>

The Definition of Beneficial Ownership

Securities Exchange Act of 1934 ("SEA") Section 13d and Rule 13(d) promulgated thereunder require that ownership of more than 5% of a class of shares be disclosed under certain circumstances. With respect to the CLTH SB-2, 13d disclosure is required for all shareholders, and also selling stockholders in the Registration Statement, pursuant to Regulation SB (now superseded by Regulation SK) Sections  403[1] and 507.[2]

            Regulation SB 403 refers to SEA Rule 13d-3(d)(1) for the determination of "beneficial ownership."[3] In brief, under this Rule, a person has beneficial ownership of a security if he or she has the right to vote or to direct the voting of the securities, or has the power to dispose of or direct the disposition of a security. If a person owns securities in more than one form of ownership (eg, individual or through any entity, his or her beneficial ownership has to be aggregated. Finally, if the "beneficial owner" uses any scheme or arrangement to try to avoid meeting the 5% threshold, he or she is deemed to nevertheless be a beneficial owner. Mazer was the beneficial owner of at least 8,378,667 shares, or 16.7% of the outstanding shares as of the date of the Prospectus, and likely the beneficial owner of  additional shares which brought him to 23% ownership as of the date of the Prospectus--in either case, Mazer had control status, rendering invalid the Registration Statement not only materially misleading with respect to his shares, but also requiring him to sell via Rule 144 notice of sale requirements-which he failed to do.

The CLTH Reverse Merger

            CLTH "went public" through a reverse merger in 2007 with Long Road Entertainment, Inc. Immediately prior to the reverse merger, Long Road converted promissory notes into common stock, as follows (source, Part II, page 88, of Registration Statement) (Exhibit A):

 

Holder

Number of Shares

Brite Star Associates, Inc.

1,777,867

Two Shamrocks, Inc.

1,600,000

Fountain Consulting, Inc.

1,482,000

St. Ives Consulting, Inc.

1,368,000

STL Capital Holdings, Inc.

1,638,933

Duluth Venture Capital Partners

1,500,000

 

            Based on the disclosure in Part II of the Registration Statement, prior to the note conversion, Long Road had 752,096 shares outstanding; an additional 38,623,780 shares were issued in the reverse merger, resulting in 48,742,676 shares outstanding immediately after the reverse merger but before Mazer and others bought more stock via CLTH's convertible debenture offering.

Mazer Owned Shares Thorough Several Entities

            Probably the best way to illustrate that Mazer controlled the float and engaged in stock parking is to take the list of Mazer-controlled Selling Stockholders from the CLTH Registration Statement, add on to it the 1,500,000 free trading shares held by Duluth Venture Capital Partners, and add on to it a column with the percentage of public float held by that person:

Shareholders                           Shares                         Beneficial Ownership %                    Percent of Float

"Mazer entities"

Brite Star Associates, Inc.      1,777,867                                3.65%                                      8%

Fountain Consulting, Inc.       1,482,000                                3.04%                                      7%

St. Ives Consulting, Inc.         1,368,000                                2.81%                                      7%

Duluth Venture Capital          1,500,000                                3.04%                                      7%

Trinity Enterprises, LLC        1,966,667                                3.88%                                      9%

Padstow Estates, Inc.              1,966,667                                3.88%                                      9%

Anahuac Management            1,573,333                                3.13%                                      7%

total Mazer entities:[4]            11,634,534                              23.43%                                   54%

 

            In his direct testimony in the Anahuac case, Mazer admitted his plan to control the free trading shares. His control over these entities can also be traced via documents obtained through court process and public records.

            Mazer owned the shares of Brite Star, Fountain and/or St. Ives. We can look first at Exhibit B (pages 199-209 of the Trial Transcript, or "TT"). Mazer was commissioned with raising money for CLTH on a fee basis, for which he received shares. TT 199:24-200:4. He received these shares through one of his "entities." TT 201:14-19 (Exhibit B). These were offshore companies (TT 202:5-25) in Panama, Costa Rica and the Turks and Caicos. TT 202:5-20. Mazer could not recall in his testimony the name of the entity through which he "invested" but when shown with a list of the selling stockholders, in trial exhibit 6 (Exhibit C, list of selling stockholders in the Registration Statement) he stated that  his shares were "in one of these companies." TT 205:21-23.  According to the footnotes to the selling stockholder table, STL Capital Management and Two Shamrocks, two Missouri companies,  were beneficially owned by an Anthony Cupini. These two corporations, therefore, are not ones holding for Mazer. The remaining corporate selling stockholders who did not receive shares on the basis of a cash investment in the convertible debenture offering are Brite Star Associates (based in Belize, see Exhibit K),  Fountain Consulting or St. Ives Investments (both Panama corporations, Exhibits F and J). [5]  One of these three entities, then, held its shares on behalf of Mazer. Mazer, therefore, admitted that he beneficially owned the shares of CLTH held by one of these three companies. But which one?

            We believe that Fountain, St. Ives and Brite Star are all Mazer front entities, based on analysis of the documents. Since Mazer had a helpful memory problem at trial, lets run down the ties and try to refresh his memory.

            Brite Star is based in Belize (see address in Exhibit K). On October 9, 2009, Brite Star transferred (see Exhibit L) 200,000 shares to Wall Street Capital Funding, a stock promoter against whom the SEC entered judgment for fraudulent promotion of penny stocks (SEC v. Wall Street Capital Funding, 11-cv-20414  (SD FL)). SEC Litigation Release 22125.  Another corporation, Five Sigma Limited, signed a consulting agreement with Wall Street Capital Funding dated October 9, 2009, with respect to the promotion of CLTH. Section 3 of this agreement states that the consideration for this agreement is 200,000 free trading shares of CLTH. This agreement ties to the share transfer from Brite Star to Wall Street Capital Funding reflected in the stock transfer records on the same date (Exhibit L). Notably, the consulting agreement is contained in an email from Galina Lishenko, Mazer's wife, to Mazer. Appended to this document are other documents provided by Mazer that show he was central to this contract, leading to an inference that he was the beneficial owner of Brite Star's securities. 

            Fountain Consulting was also controlled by Mazer. Mazer had the power to direct the proceeds of sale from Fountain's brokerage account,  whose broker was Mohammed Shaygan at Verdmont Capital (see issuance instructions for Fountain shares in Exhibit K). Exhibit M is the deposit of Fountain's CLTH shares in street name at Verdmont Capital, a Panamanian brokerage firm, with a corporate resolution by Crystal Stephenson. She was the Vice-President and Secretary of Fountain (Exhibit F).  On August 27, 2007, Mazer's assistant Roseanne Baack directed Ms. Stephenson to have Mr. Shaygan at Verdmont wire $200,000 from Fountain Consulting to the Turks and Caicos account of a company named Gillette International Limited. Exhibit N. Since Mazer had the power to direct the disposition of Fountain's money, he was the beneficial owner of Fountain and the CLTH shares owned by it.[6]

            St. Ives received its CLTH shares from Fountain in August 2007 (Exhibit E). St. Ives was incorporated by the same Panama law firm as Fountain, Gray & Co. (Exhibit J) and shares officers with Fountain. It has the same incorporation date, officers, and directors as Padstow. It is most likely that whoever owns St. Ives, also owns Padstow and vice versa.

Mazer benefically owned the CLTH Shares of Duluth and Anahuac.  Keith Mazer testified that he also beneficially owned shares titled in the name of Duluth Venture Capital Partners, LLC (one of the parties receiving shares on the pre-merger note conversion) and Anahuac Management, another selling stockholder. Trial Exhibit 23 (Exhibit P) is an email from Mazer to CLTH's general counsel claiming that Mazer was the rightful owner of the CLTH shares owned by them. TT 294:19-295:21. Mazer claims that he "put up the money" for the shares and that they belonged to him.  A similar claim was made by Mazer's lawyers in writing to CLTH. (Exhibit O)

Mazer managed the trading of Duluth's 1,500,000 shares. TT 512:24-25. He also funded the purchase of Duluth's shares. TT 525:2-3.

In his trial testimony Mazer reiterated his position that Duluth's 1,500,000 shares and Anahuac's 1,517,333 shares belonged to him. His position is that although  the shares were the names of these corporations, he was the owner. TT 517:12-15; TT 518:2-7. He testified that he funded the purchase of Anahuac's shares (Exhibit Q, Mazer Affidavit) and that he was entitled to the proceeds from their sale.

Based on his written representations and sworn testimony in Federal Court, it is obvious that Mazer held the power to dispose of the CLTH shares held by Anahuac and Duluth.

Mazer admits that he used this arrangement to evade the disclosure requirements of SEA 13d. TT 519:24-520:10. Mazer falsely says that this arrangement, was okayed by counsel. Regardless, Mazer consciously adopted a set of artifices to evade the disclosure requirements.

In summary, Mazer testified that he beneficially owned the CLTH shares held by either Fountain, St. Ives or Brite Star, the Duluth shares, and the Anahuac shares.

Mazer Beneficially Owned the CLTH Shares of Padstow and Trinity Enterprises.  In addition, Mazer beneficially owned two other holders of CLTH shares: Padstow Estates, Inc. [7] and Trinity Enterprises, LLC. The funds for Padstow's debenture came from the proceeds of sale of Duluth's shares, which Mazer claims were his.  He admits in a sworn affidavit  that he funded the purchase of Padstow's shares. Exhibit Q, paragraphs 9-11. Mazer testified that he does not do business anymore with Padstow's broker Verdmont, since Verdmont does not do business anymore with Americans--such as Mazer--obviously because Verdmont knew it was his account. Exhibit W. Since Padstow had the same officers and directors as St. Ives Consulting (compare Exhibits G and J), we come full circle.

            The $250,000 for Trinity's purchase came from Mazer's offshore account in the Turks and Caicos, in the name of Gillette International. See Exhibit R and page Am0566 of  Gillette Bank Statements (Exhibit S), showing wire exiting that account. Mazer beneficially owns Gillette. TT 230:11-25. Exhibit Tis a letter from Gillette's bank asking for Mazer's passport, to complete the signature file; this letter is evidence that Mazer, at least at one time signed on Gillette's account. Mazer caused the $250,000 to be wired to the lawyer's trust account acquire CLTH shares. TT 235-237. These funds were re-wired at Mazer's request to CLTH, via Mazer's assistant R. Baack. Exhibit U. Exhibit V shows that the $250,000 was sent to CLTH's lawyer as requested.[8]

            We know that the $250,000 that was paid for the CLTH Convertible Debenture was for Trinity, because according to the Registration Statement,  Trinity was the only cash purchaser of Convertible Debentures in the amount of $250,000.

            Taking the share numbers and percentages set forth in the registration statement and the 49,343,680 shares outstanding, and attributing the smallest of the three note shareholders, St. Ives, Mazer's beneficial ownership in the selling stockholder table should have been as follows:

St. Ives                                                1,368,000                                            2.81%

Duluth Venture Capital                      1,500,000                                            3.04%

Anahuac Management                        1,577,333                                            3.13%

Padstow Estates                      1,966,667                                            3.88%

Trinity Enterprises, LLC                    1,966,667                                            3.88%

            subtotals                     8,378,667                                            16.74%

            If Fountain and Brite Star were Mazer entities, the total amount owned exceeds 23% of the outstanding, as stated above. At any rate, Mazer owned more than 5% of the CLTH common stock, in fact more than the "control" threshold of 10%, and he owned  in fact most of the public float.

            Mazer received proceeds from the sale of the CLTH shares which he should disgorge. The only shareholder with a US account in the above table is Duluth; Mazer received about $799,000 from sales of Duluth's CLTH shares. The amounts he received in the offshore accounts is unknown but with the cooperation of the securities authorities in Panama, Costa Rica and the Turks and Caicos, it could be determined. 



[1] 403(b) Security ownership of management. Furnish the following information, as of the most recent practicable date, in substantially the tabular form indicated, as to each class of equity securities of the registrant or any of its parents or subsidiaries other than directors' qualifying shares, beneficially owned by all directors and nominees, naming them, each of the named executive officers as defined in Item 402(a)(2) (§228.402(a)(2)), and directors and executive officers of the registrant as a group, without naming them. Show in column (3) the total number of shares beneficially owned and in column (4) the percent of class so owned. Of the number of shares shown in column (3), indicate, by footnote or otherwise, the amount of shares with respect to which such persons have the right to acquire beneficial ownership as specified in §240.13d––3(d)(1) of this chapter.

[2] 507 If security holders of a small business issuer is offering securities, name each selling security holder, state any position, office, or other material relationship which the selling security holder has had within the past three years with the small business issuer or any of its predecessors or affiliates, and state the amount of securities of the class owned by such security holder before the offering, the amount to be offered for the security holder's account, the amount and (if one percent or more) the percentage of the class to be owned by such security holder after the offering is complete.

Instruction: Responses to this item may be combined with disclosure in response to Item 403.

 

[3] § 240.13d-3 Determination of beneficial owner.

(a) For the purposes of sections 13(d) and 13(g) of the Act a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares:

(1) Voting power which includes the power to vote, or to direct the voting of, such security; and/or,

(2) Investment power which includes the power to dispose, or to direct the disposition of, such security.

(b) Any person who, directly or indirectly, creates or uses a trust, proxy, power of attorney, pooling arrangement or any other contract, arrangement, or device with the purpose of effect of divesting such person of beneficial ownership of a security or preventing the vesting of such beneficial ownership as part of a plan or scheme to evade the reporting requirements of section 13(d) or (g) of the Act shall be deemed for purposes of such sections to be the beneficial owner of such security.

(c) All securities of the same class beneficially owned by a person, regardless of the form which such beneficial ownership takes, shall be aggregated in calculating the number of shares beneficially owned by such person.

(d) Notwithstanding the provisions of paragraphs (a) and (c) of this rule:(1)(i) A person shall be deemed to be the beneficial owner of a security, subject to the provisions of paragraph (b) of this rule, if that person has the right to acquire beneficial ownership of such security, as defined in Rule 13d-3(a) (§ 240.13d-3(a)) within sixty days, including but not limited to any right to acquire: (A) Through the exercise of any option, warrant or right; (B) through the conversion of a security; (C) pursuant to the power to revoke a trust, discretionary account, or similar arrangement; or (D) pursuant to the automatic termination of a trust, discretionary account or similar arrangement; provided, however, any person who acquires a security or power specified in paragraphs (d)(1)(i)(A), (B) or (C), of this section, with the purpose or effect of changing or influencing the control of the issuer, or in connection with or as a participant in any transaction having such purpose or effect, immediately upon such acquisition shall be deemed to be the beneficial owner of the securities which may be acquired through the exercise or conversion of such security or power. Any securities not outstanding which are subject to such options, warrants, rights or conversion privileges shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person but shall not be deemed to be outstanding for the purpose of computing the percentage of the class by any other person.

 

[4] Non-Mazer entities listed as Selling Stockholders are not included in this analysis although they constituted most of the remaining public float.

[5] It should be noted that according to the transfer agent records, originally Fountain Consulting was issued 2,850,000 shares on the note conversion and later split its shares with St. Ives. (Exhibit D  and E) when the share certificate was deposited with Verdmont Capital. This was obviously to break up the ownership into less than 5%, to meet Verdmont's deposit rules. For  Fountain Consulting, Meyvis Sanchez is listed as the control person. Fountain Consulting was incorporated in Panama on November 1, 2006. (Exhibit F). Meyvis Sanchez, a lawyer at Gray & Co., http://www.lawyers-abogados.net/en/common/panama-lawyers-staff-photos.htm,  is the president of Fountain and Juan Montes is the Treasurer. The control person of St. Ives Consulting, incorporated on July 17, 2007,  is listed as a Hector Montes in the Selling Stockholder table of the SB-2. (Exhibit C).

[6] This $200,000 was used by Mazer to purchase the Long Road Entertainment shell; we believe he was reimbursed this money from CLTH.

[7] Padstow Estates was incorporated in Panama on July 17, 2007 by Gray & Co.   (Exhibit G) Padstow shares the same day of incorporation and list of officers as St. Ives. See Exhibit J. It would be very likely that the two corporations are owned by the same person. The CleanTech prospectus claims that Padstow is controlled by one Marissa Simmons. However, Padstow is owned by Keith Mazer. He directed that his sales commissions from Duluth's CLTH shares be paid to fund the $263,833 for the purchase of Padstow’s 1,966,667 shares in April 2008. It seems very likely that Mazer or someone acting with him actually controls Padstow.  The president of Padstow according to the public registry is Marisela Simmons. Plaintiff believes that the name “Marissa”  in the prospectus is probably just a typographical error and that “Marissa” and “Marisela” are the same persons. Interestingly, the vice president and secretary of Padstow is Meyvis Sanchez, who is the president of Fountain Consulting.  It seems highly probably that Marisela/Marissa Simmons is not the real owner or control person of Padstow. Also interesting is that the treasurer of Padstow is one Hector Montes, the control person of St. Ives. Indeed, the stock powers used to deposit St Ives' shares and Padstow's shares of CLTH into street name are signed by the same officers (Exhibits H and I).

[8]A review of Gillette's bank statement shows that it appears to be a clearinghouse for the receipt of funds from numerous offshore accounts, with the proceeds going to World Capital Funding, LLC, wholly owned by Mazer (TT 300:7-10), to buy luxury cars in Denver, and other personal purposes of Mazer.

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