atc, page-5

Advantage in being exploited

* MARGIN CALL
Michael West
* March 10, 2007

TWO and a bit years ago, a 33-year old trader was packed off to prison for embezzling $16 million from AMP: for obtaining financial advantage by deception and market manipulation of shares in Advantage Telecommunications to be precise.
The young trader, Upal Anthony, fell upon the mercy of the court, pleaded guilty to 16 counts of the above and copped two years and nine months non-parole sweet. He shed 22 kilos and knocked over a Masters of Applied Finance degree on the inside. On May 22, he will have served his debt to society. The ankle bracelet will come off and he can go back to work. There is no banning order against him.

What remains a mystery is how Anthony, a naive and high-living screen jockey at the time, managed to manipulate the market in Advantage Telecommunications all on his own.

Shares in AdvanTel, previously known as Nugold, shot from 7c to 70c in 2000 as dotcom punters embraced the story of a "cutting-edge global telco giant in the making".

Upal Anthony bought the story too, slotting $7 million worth of AMP money into the stock, followed by another $3 million for a placement, then $6 million in desperation to prop it up as things went awry and large licks of mooted global revenue failed to materialise.

Now AdvanTel is poised to arise majestically - like the butterfly from the chrysalis - as a prospective gold explorer called Consolidated Global Investments. A float is slated for next month.

From phones to gold

ADVANTEL changed its name to Consolidated Global Investments, let's call it CGI, in June 2004. CGI was to have been an international telecommunications "investment company".

Instead, dear investors, we the public are now being invited to share in an exciting opportunity to invest in a new gold explorer, CGI. Let's take a peek at the prospectus then to see what a magnificent investment we have on offer.

CGI is raising $1.2 million via the issue of six million 20c shares for a market value at listing of ... bit hard to work this out with all the options ... roughly $23 million.

And how encouraging it is to see continuity of management, as former AdvanTel chairman John Palermo will be chairman of CGI, and company secretary, and he has cut himself in for more than half the issued capital. Very nice work indeed.

John is also chairman and company secretary of Pelican Resources (gold and nickel), Gladiator (uranium) and he brings considerable expertise in advanced biotechnology as chairman and company secretary of PharmaNet (miracles).

Being both chairman and company secretary in all these companies avails John of the governance synergy of signing the cheques and casting the deciding vote on the board. It is a seamless solution.

According to "Mr A", an analyst familiar with the Palermian modus operandi, there is considerable scope to securitise and float John's registered offices income. For Pelican, CGI, Gladiator, PharmaNet and Golden West, and others before them, all have one thing in common: they pay rent to John's registered office at Level 1, 284, Oxford Street, Leedeerville, Western Australia.

"There is definitely potential for a Leedeerville Property Trust," Mr A confided to The Australian yesterday. "It would certainly generate more revenue for shareholders than the minerals exploration activities," he noted.

We asked Mr A if there were any corporate governance issues to be considered given that John controlled all these companies which not only paid him rent but from which he derived income through continuous share issuance, options issuance, directors fees and consultancy agreements, inter alia.

Mr A quoted from the CGI notice of annual general meeting: "In recognising the need for the highest standards of corporate behaviour and accountability, the directors of CGI support the principles of corporate governance".

Back-door listing

CGI - nee AdvanTel, nee Nugold - is something of a textbook WA backdoor listing. Gold-to-dotcom-back-to-gold tracks the quintessential operational footsteps of many a peer, although a nickel boom opportunity may have been wasted in 2003.

In the CGI memorandum of meeting of December 2005, John awarded himself 30 million "post consolidation shares" and 30 million options.

CGI owed a debt of $377,062, probably from its AdvanTel days, to a John-related entity "in respect of services provided to the company by those entities".

In order to achieve the reconstruction of CGI, John Palermo needed to get BNP out of the picture. BNP, you see, had bought Cogent from AMP and Cogent was the vehicle housing the disastrous trades from Upal Anthony.

"John appears to have conducted a selective buy-back of $16 million shares for around $40,000," said Mr A. "Not one of BNP's better ROIs."

Once BNP had been taken care of, John had a 1-for-20 share consolidation, converted his debt to equity and now CGI is to refloat next month with John set to be worth roughly $13 million if the shares list at their 20c par.

Thanks to his fully diluted interest in 64 per cent of CGI stock on float day, John can only be admired for turning around AdvanTel and transforming it into a top-notch money spinner for interests associated with himself.

And you never know, the extravagant $90,000 from float proceeds earmarked to be splashed about on mining tenements does lend a bit of intrigue to the story.

What happens if they find something in the ground, you know, mineralisation or gold or something?