History of Stockdales

Best Investigative Reporting

Max Frumes, The PIPEs Report

DealFlow Media is proud to announce that DealFlow Media reporter, Max Frumes, and The PIPEs Report, have taken 1st Place for 'Best Investigative Reporting' in the annual editorial awards given by SIPF (Specialized Information Publishers Foundation), a leading organization for specialized information publishers. Max unearthed a scheme that could have cost investors looking to invest in small companies millions of dollars.

The article titled, "PIPEs For Small Investors," (full article below) delves into Winterman Asset Management and its investment vehicle. Max uncovered information connecting Winterman to Malcolm Stockdale who has been linked to companies practicing pyramid schemes. Upon publication of the article TPR was contacted by several investors thankful for the warning of a possible disastrous investment.

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Manager Connected With Past Scams Offers 'Managed PIPE

Account' written by Max Frumes edited by Adam Steinhauer published May 1, 2007


A businessman who has been connected to stock frauds and Ponzi schemes around the world has started a new venture. He's offering to help individual investors buy into the PIPE market.

A firm called Winterman Asset Management put out a press release on April 10 offeringits services as the manager of a "managed PIPE account" based out of Switzerland. An investigation by TPRrevealed that Winterman's founder and chairman Malcolm Stockdale has been connected to numerous companies that have been found by courts and government agencies to have defrauded investors and associates.

Stockdale, in an e-mail exchange with TPR,denied wrongdoing. He described himself as an investor in high-risk businesses and said he has been falsely accused by associates in ventures that failed. "My business, for many years, has been to invest in companies that are either in a start-up phase or in trouble, as is that of thousands of other businessmen," Stockdale wrote.

Winterman claims that it offers individual investors access to PIPE deals, both traditional and structured, and initial public offerings around the world, all through accounts managed in Switzerland. The managed PIPE account requires a minimum investment of as little as £20,000 ($40,037) and accepts a maximum investment of only £1 million, according to the firm.

A representative said that Winterman will manage the funds on a discretionary basis from managed accounts set up with UBS.UBS spokesman Kris Kagel confirmed the bank's relationship with Winterman.
"This situation is essentially a bank account," said Winterman representative David Bradley-Ward. "The benefit of having an account in Switzerland is for tax purposes, where an investor can wrap it with an insurance product, creating a specific account that is managed and dedicated to PIPE transactions and similar equity investments both in the U.S. and Europe."

Small Investors and PIPEs

PIPE investing is growing more popular, and it would make sense for there to be demand from individual investors for access to the PIPE market. Some $30 billion were invested in PIPEs last year that were issued by companies listed on U.S. stock markets. Some hedge funds have achieved outsized returns byinvesting in PIPEs.

A proposition for smaller investors like the one that Winterman is making is possible, although highly improbable, legal experts said.

Steven E. Siesser, with law firm LowensteinSandler's specialty finance group, pointed out that mostcompanies issuing PIPEs would not want an account with anonymous investors intheir deal. Companies would generally prefer dealing with a few institutionalinvestors and perhaps a small number of accredited investors. Includingunaccredited investors in a PIPE would raise a company's disclosureobligations. It would also expose the company's stock to the more volatiletrading patterns of retail investors.

Siesser said, however, that it would be possible for a discretionary account to manage investments for PIPE investors in the U.S. if the individuals were accredited investors.

Steven Skolnick, also with Lowenstein's specialty finance group, said he does not know of any "mainstream" PIPE transactions in the U.S. that have included nonaccredited investors. In the U.S., for an account with non-accredited investors— as opposed to a fund—to participate in a private placement, it would have to have received investment advice from a purchaser's representative, and greater-than-standard disclosure from the issuer. In foreign markets, however, laws vary from country to country. A firm claiming to invest in foreign PIPEs would have to have done the work to know the laws and regulations of each nation.


Winterman's History

Winterman's accounts of its own activities portray a varied recent history. On Oct. 12, Winterman said it had been hired as an adviser to 123ID Inc., a privately held developer of software and technology to identify people by their fingerprints. The Grand Forks, N.D.- based company said it had issued an "offer memorandum" to raise $3 million in financing to expand in the U.S. and Europe. 123ID's president Roger Quint told TPR last week that the company is still working with Winterman. He declined to say if they had succeeded in raising capital.

A press release dated Oct. 13 said that Winterman was launching a multi-manager diversified fund based in the British Virgin Islands, for high net worth individuals to invest for growth. The multi-manager fund, however, never launched, Winterman's Bradley-Ward said.

In the press release, Winterman had listed established firms Northern Trust, The Custom House Group and Horizon Cash Management, as "partners."

"Partners such as The Custom House Group, Northern Trust and Horizon Cash Management offer investors in the fund a solid background of industry expertise, "Winterman director Sara Buzze was quoted as saying in the release.

But representatives of those firms, when contacted by TPR, disputed Winterman's characterization of their relationship.

John O'Connell, a spokesman for Chicago- based Northern Trust, said the asset administrator had no relationship with Winterman, but was only a service provider to Horizon.

Irish-based fund administrator Custom House's chairman, Dermot Butler, said his firm did have a contract to provide services to Winterman. But Custom House wasn't a "partner" of Winterman's, nor did Custom House authorize Winterman's press release, Butler said. Custom House has no current affiliation or association with Winterman, he said.

Horizon Cash Management spokesman Brian Hurley said his firm was hired as cash manager for the Winterman fund. But Horizon resigned its position when the Winterman fund failed to gather enough assets to launch, Hurley said.


Malcolm Stockdale

Winterman's Bradley-Ward blamed "unfounded" rumors on the Internet for Winterman's failure to attract assets. "Even though the fund was demonstrably beyond reproach, unfounded, anonymous allegations on the Web made it very difficult to market," he said. "The fund has been temporarily withdrawn until these issues are solved."

The allegations were connected to Malcolm Stockdale, who was referred to as Winterman's chairman in the press release. "Malcolm started Winterman as a private equity business and concentrates on developing in-house businesses to market," Bradley-Ward said. "He is discussed on some dodgy 'scam'sites. Our lawyers are currently working to have all these untrue accusationsremoved."

TPR contacted Stockdale at a Vancouver, Canada, phone number for Playsonthenet.com, a website for unpublished authors. Stockdale said he had no experience in the PIPE market and that he was just an investor. Bradley-Ward said he has known Stockdale for only 18 months and that Stockdale is only an investor in Winterman. Yet Winterman's original website is registered to Malcolm Stockdale.

Stockdale confirmed to TPR that he was involved with two failed ventures in the U.S., Continua Systems andViper International Holdings. Both were accused of defrauding investors andassociates.

In 1999, a Texas state court in Dallas ruled against Stockdale and Viper International in a civil lawsuit claiming securities fraud andmisrepresentation by selling false stock. The total fine was more than $2million.

Less than a year later, a news report on a Dallas area television station said that Stockdale had started Continua in Waco, Texas, claiming to have the solution to the Y2K computer crisis.

The report, by TV station WFAA in Dallas, described Stockdale presiding over church-revival-like rallies in 1999, where he urged on Continua's commission-paid sales associates. Some of those sales associates later told WFAA that Continua failed to pay them tens of thousands of dollars in commissions, according to a transcript of the station's report. Continua was liquidated in 2001 in a Chapter 7 bankruptcy proceeding.

Stockdale told TPR that he personally paid off all of Continua's liabilities.

"At the final court proceeding, the judge discharged the bankruptcy, as not one single creditor filed a claim or appeared," Stockdale said. "That was because I personally paid off all of the liabilities. I personally lost a substantial amount of money as an investor of that company."

A 2003 report by the New Zealand Commerce Commission associated Stockdale with two alleged pyramid schemes in that country.

One was a company called Net Guard, which described itself as a "technology-driven, international membership organization, focused on becoming a market leader in the design and development of wireless Internet-enabled tracking and location systems," according to the commission. Net Guard allegedly targeted low-income people to become members and charged them about NZ$6,000 ($4,454) each to join.

The other was called Alpha Club and its promotion involved travel services.

"Two people involved in setting up the Net Guard scheme in New Zealand, Malcolm Stockdale and Stuart Baldwin, were also associated with Alpha Club, a pyramid scheme involving the promotion of travel and hotel discounts," the report said.

The New Zealand High Court, following the Commerce Commission's investigation, ruled that the Alpha Club was a fraud and ordered it to distribute NZ$300,000 to members who suffered losses.

Stockdale told TPR did he did not own or work for Alpha Club, and that he was only an investor in Net Guard. Baldwin was only an employee with both Alpha Club and Net Guard, Stockdale said.

Stockdale said that the New Zealand commission never took any action again him, nor did it ever try to contact him or Net Guard.


Tally Ho

When questioned about Winterman's experience in PIPE transactions, Bradley-Ward replied that the firm had advised on a recent PIPE for Tally Ho Ventures, an international wealth management firm that serves mid- to high-net worth individuals and families.

Tally Ho completed a PIPE on April 10 that raised proceeds of $525,000. The company sold 459,982 shares for $1.09 each, to hedge funds managed by New York-based Vision Capital Advisors. Tally Ho shares had closed at $1.01 on April 9 and have since fallen to 83 cents, as of last Thursday. Vision also received a warrant to buy another 500,000 shares for $2 each, filings with the Securities and Exchange Commission show.

Tally Ho CEO Nigel Gregg said, however, that Winterman wasn't involved in the Vision transaction.

Winterman instead helped analyze terms of another prospective transaction with Mercatus & Partners. Tally Ho cancelled a planned PIPE investment by Mercatus on April 9. Gregg said Mercatus didn't provide the funding it had promised. That may have been because Tally Ho's stock had plunged by 50% after they had made the deal, he said. A Mercatus representative declined to comment, citing a confidentiality agreement the firm has with Tally Ho.

Gregg also said that the relationship between Tally Ho and Winterman was more historical than anything else and that Winterman helped Tally Ho in the past, before Gregg started at the company in July 2006. Winterman remains one of Tally Ho's biggest shareholders, according to Ron Stabiner, a public relations consultant to Tally Ho.


Net Guard shuts up shop following Commission investigation  5 July 2002

 Auckland based Net Guard (New Zealand) Limited has closed down following a Commerce Commission investigation. The Commission had received complaints that Net Guard was operating a sophisticated pyramid scheme in breach of section 24 of the Fair Trading Act.

Net Guard, formerly known as World4Vision, described itself on its website as a "technology driven international membership organisation focused on becoming a market leader in the design and development of wireless Internet-enabled tracking and location systems."

The Commission began investigating Net Guard last month after receiving more than 30 complaints and enquiries about the business.

"The Commission had strong concerns about the activities of Net Guard, and considered that it showed the hallmarks of a pyramid scheme," said Commission Chair John Belgrave. "Two of the people who set the scheme up in New Zealand, Malcolm Stockdale and Stuart Baldwin, were associated with Alpha Club, an alleged pyramid scheme the Commission is current taking civil action against."

"The Commission executed a number of search warrants last week with a view to seeking a court injunction to stop the company from trading. It found that more than 60 people had joined Net Guard and that the business had already generated up to half a million dollars in membership fees."

"The Commission received information following a Net Guard meeting on Wednesday night (3 July) that those involved in the management of the company had resigned with immediate effect and that the company was suspending operations in New Zealand. In addition, no further membership meetings have been planned."

Net Guard was conducting presentations at various hotels throughout the Auckland region. Admission to the presentations was available only by invitation from 'agents' of the company. Invited guests were introduced to a scheme where they could earn income by becoming sales agents of security systems and through commissions paid for recruiting new members. Guests who were interested in becoming 'agents' for Net Guard were required to pay a $6,800 membership fee. Upon recruiting another person, they become a 'sales agent' and received a commission of $1,200. Income at any level could only be gained by the recruitment of new agents.

The majority of complaints to the Commission included allegations that Net Guard had not supplied the security products new agents expected to receive on joining and concerns that it may have been a pyramid scheme. Mr Belgrave said the Commission's investigation would continue and enquiries were still being made.

Malcolm Stockdale and Stuart Baldwin left New Zealand last month. The Commission received information that Stockdale and Baldwin have been attempting to set up the scheme in Australia, and that one of the principals had now left for South Africa. The Commission has alerted the relevant enforcement agencies in Australia and South Africa.

"The Commission warns people to be careful if they are approached to join schemes where there are promises made about future earnings and that require people to recruit members to obtain those earnings," added Mr Belgrave.

Net Guard Members are encouraged to contact the Commerce Commission with any relevant information regarding Net Guard on 0800 943 600 during office hours.

Media contact: Deborah Battell, Director, Fair Trading Branch

Phone work (04) 924 3760, home (04) 476 3290, mobile 029 924 3760

Jackie Maitland, Communications Manager

Phone work (04) 924 3708, mobile 029 924 3708