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Business Observer Friday, Nov. 7, 2003 15 years ago

Rise and Fall

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A Tampa company's venture into Internet kiosks at shopping malls failed during the dot-com bust. An Ohio mall operator wants at least $4 million in unpaid rent.

Rise and Fall

A Tampa company's venture into Internet kiosks at shopping malls failed during the dot-com bust. An Ohio mall operator wants at least $4 million in unpaid rent.

By David R. Corder

Associate Editor

Little noticed publicly then, GenesisIntermedia Inc. emerged five years ago as a Tampa-based company that ran a telemarketing business and operated Internet kiosks in shopping malls throughout the nation. It experienced success in mid-1998 by raising about $17 million in an initial public offering, though much of the publicity then centered on the company's operations in Van Nuys, Calif.

By the end of its first full year, however, the company reported a net loss of about $8.3 million. The next year net losses amounted to about $33.5 million. Net losses totaled $119 million for just the nine months ended in September 2001.

Originally issued at $8.50 each, shares in GenesisIntermedia sold for as low as $1.67 in September 1999 - the result of a stock split - and as high as $25 each on June 29, 2001. Three months later shares fell to pennies.

Claiming stock manipulation, shareholders responded in October 2001 with a federal class action complaint in California against the company; Ramy El-Batrawi, its former president and CEO; and Douglas E. Jacobson, the former chief financial officer and a long-time Tampa certified public accountant.

Allegations of stock manipulation culminated last month in a federal civil complaint the U.S. Securities and Exchange Commission filed against New Jersey stockbroker Kenneth Peter D'Angelo individually and as president of RBF International Inc. The SEC filed the complaint the same day D'Angelo pleaded guilty to federal criminal charges that he hyped GenesisIntermedia shares in a manipulation scheme in cooperation with El-Batrawi and officials of Ultimate Holdings Ltd., a Bermuda-based majority shareholder controlled by Saudi Arabian arms dealer Adnan Khashoggi.

"The commission alleges that the scheme, which occurred between September 1999 and September 2001, resulted in the misappropriation of more than $130 million, the collapse of three broker-dealers, and the largest bailout in the history of the Securities Investor Protection Corp.," according to the SEC.

Meanwhile, creditors still seek compensation on money purportedly owed by Genesis-Intermedia and its affiliated companies.

Attorneys for Glimcher Properties LP recently focused their efforts in Tampa on GenesisIntermedia doing business as Centerlinq Inc. The Columbus, Ohio-based mall operator retained Tampa attorney Brian M. Ross to recover at least $4 million in rent on the Internet kiosks that Centerlinq leased in 21 Glimcher malls throughout the nation. Ross would not talk publicly about the lawsuit filed late last month in Tampa civil court on Glimcher's behalf against Centerlinq.

However, state corporate records list Centerlinq as a Florida corporation with main offices in Beverly Hills, Calif. But those records also list Jacobson as its president, with offices in Tampa.

In a telephone interview from Beverly Hills, Jacobson says he met El-Batrawi through mutual business acquaintances, agreed to work in 1998 as GenesisIntermedia's CFO and moved to California to work on the company's IPO. He says he's closing down operations there and plans to establish a Tampa practice.

"(El-Batrawi) was referred to me to keep his books in Tampa," says Jacobson, who didn't want his name used in an article about GenesisIntermedia, Centerlinq or El-Batrawi. "Years ago I was hired to keep the books."

Because of California's tax structure, Jacobson says, El-Batrawi picked Florida to incorporate Centerlinq in a move to take advantage of the state's lenient corporate tax policies. They picked Tampa as an operating address because of Jacobson's links to the region. Besides GenesisIntermedia and Centerlinq, Jacobson also agreed to serve as a director on the following Tampa-based companies controlled by El-Batrawi: Jet Vacations International, Genesis Properties Inc., Genesis Diversified Investments Inc., Mentoring Institute Inc. and Sentient Inc.

Following the class action complaint, El-Batrawi resigned as president and CEO of GenesisIntermedia and Centerlinq. About five months later, Jacobson filed an updated annual report for Centerlinq with the Florida secretary of state. That annual report and another filed in May this year listed him as the company's president. "The (company's) attorney put my name in by default as the last man standing," Jacobson offers as an explanation.

In response to the class action lawsuit, Jacobson says he doesn't recall even receiving a summons to appear or to disclose evidence for discovery purposes. The lawsuit is still active, though a California judge transferred the action to the Western District of Minnesota, where related litigation exists. Jacobson thinks he was included in the class action not for what he knows but because of his title as CFO. "I've never been served," he says.

The trustee in a related Minnesota bankruptcy filing apparently did not consider Jacobson material enough to include him in a $335 million claim on behalf of the estate of MJK Clearing Inc., one of the three broker-dealers that fell victim to the stock manipulation scheme. The civil complaint in the bankruptcy case listed GenesisIntermedia, El-Batrawi, Khashoggi, D'Angelo and several other individuals and companies as co-defendants.

In his role as CFO, Jacobson prepared all financial analyses of GenesisIntermedia's financial growth and external reporting, according to SEC documents. In exchange, he earned in 2000 a base salary of $119,768, a $30,000 one-time bonus and $13,178 in other compensation. The company also granted him 150,000 in stock options that totaled about 825,000 exercisable and unexercisable shares that in 1999 were valued at about $2.2 million. He did not exercise the options, however.

As GenesisIntermedia unraveled as a company, Beverly Hills attorney Michel S. Tamer took control as its chief executive officer. He worked with Jacobson to dissolve Centerlinq, though it still exists as an active Florida corporation. He considers Jacobson just an accountant left holding the books on a troubled corporation.

"I was not a director or officer at the time, but my understanding is he just kept the books for the company," Tamer says of Jacobson's role in GenesisIntermedia and its affiliated companies.

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