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May 02, 2006 at 08:00 PM
MUNDELEIN, Ill. (HedgeWorld.com)–”Any wrongdoers will be taken to the mat,” said the chairman and chief executive of Circle Group Holdings Inc., Gregory J. Halpern, in a salvo issued in a statement Monday (April 17). “We’ve come to fight and we believe that by joining forces with John O’Quinn, his team of lawyers and A-list experts, we will prevail.”
The answer to the question, “prevail against whom?” isn’t clear. Circle Group makes Z-Trim, a zero-calorie fat replacement. It has retained Attorney O’Quinn, of O’Quinn, Laminack & Pirtle, a Houston firm, to perform due diligence to determine if its stock has been manipulated by naked short selling or other means. Mr. Halpern seems, then, to have joined the circle of corporate executives ascribing a disappointing stock price to naked shorts and fails-to-deliver.
What seems unusual about this claim is that the stock price hasn’t been falling. In March, Circle Group (AMEX: CXN) completed a private placement of unregistered common stock, resulting in gross proceeds of more than $5 million. Since that time, its stock price has risen, from approximately $1.25 to $1.62. But in the bigger picture, Mr. Halpern may still be feeling the sting of the first three quarters of 2004, when the stock price fell steadily from a high of $10 to a low of below $1.
At the bottom of that long slide, in October 2004, Mr. Halpern put out a statement saying that there had been “a coordinated business assassination campaign by bloggers and chat room posters using the power of the Internet to harass and damage the Company.”
A year later, an article in Forbes about the alleged dangers of the blogosphere invoked that stock price slide, as the typical result of what Forbes’ writer Daniel Lyons called “an online lynch mob spouting liberty but spewing lies, libel and invective.” Mr. Lyons attributed the loss of 90 percent of stock value to anonymous posts in Yahoo! chat rooms that questioned the Circle Group’s relationship with a crucial business partner, Nestl?.
Three Texas Law Firms
Although Mr. O’Quinn is best known for his participation in the successful anti-tobacco litigation of the 1990s, he has become prominent more recently as part of the movement to expose what he and others regard as a massive labyrinthine conspiracy to privilege short sellers at the expense of entrepreneurs and their investors.
