4C Controls (OTC:FOUR)

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Who gets them first SEC or IRS?

As much as Citron has been attempting to avoid OTC Stocks, occasionally one comes along that is so absurd that we can not help commenting on it. Enter 4C Controls. This $400 million company has spun a tale that leaves us with the daunting question:

What is worse about this company: “The Tale or the Truth” ?

The Tale

4C Controls would like Wall Street to believe that they are a “Leading international security and surveillance group”. Based in prestigious Rockefeller Center, their website shows that they offer a host of products including but not limited to:

  • High resolution satellites for earths observation
  • High Perfromance radar for intrusion protection
  • Other proprietary security security products.

These products can be used for airport security and border control.

http://www.4ccontrols.com/

The company is majority owned by Rudana Investment Group. Rudana is a secretive business entity operating out of a Swiss bank that is controlled, as stated to Citron by a company representative by “secretive European and Middle Eastern investors”.

Furthermore, the company’s funding is apparently coming from another entity called Arimathea, which is another secretive company based out of the Isle of Man.

Just yesterday, investors were informed that the company allegedly completed its first round of private financing – a $20 million tranche. We say alleged because the details of the PR mince words carefully – it states it has received “commitment subscriptions” and is “in process” of receiving the funds. One wonders what is the hurry? This funding is coming from Arimathea . In FOUR’s last 10-K they mention that Arimathea has agreed to fund up to $70 million, in alignment with yesterday’s release.

http://www.4ccontrols.com/news/13Aug08.pdf

So, what the company would like us to believe is that there is a major security and satellite company who is using the NASDAQ to validate themselves and raise funds. They are owned by secretive Middle Eastern investors who are funded by Swiss Bank Accounts and unknown entities from the Isle of Man……not a real comforting tale.

Now Lets Us Look at the truth on 4C Controls
  1. As of last filing 4C Controls has $25K in the bank
  2. Company revenues are 0
  3. New York City address is nothing more than a mail drop
  4. The company currently has 0 operating products
  5. Rudana has 3 operating shells (including 4C) that all have this mysterious funding from Arimathea.

The lack of any real business or revenues reveals that their entire website has been designed to deceive potential investors. But we have not yet begun to expose the players.

CEO Olivier De Vergnies?

De Vergnies became the CEO of FOUR on July 1, 2008. His prior employment was a Vice President at Dexia Private Bank, Switzerland. This bank was recently implicated in the outing of a big client list of Julius Baer. That is the famous whistleblower case where the IRS went after UBS. It is the opinion of Citron that De Vergenies expertise in privacy laws was more crucial to this job than his expertise in security products.

http://wikileaks.org/wiki/Bank_Julius_Baer:_Grand_Larceny_via_Grand_Cayman

The Canadian Stock Promoter with cheap stock.

2,259,470 shares at .23 cents

For those of who you follow the world of OTC stocks, it should be as no surprise that one Canadian stock promoter is sitting on a mountain of cheap stock.

According to an SEC form 13D filed by FOUR on 7/28/08, we see the following:

Black Sea Trading acquired 2,259,470 shares of the Company’s common stock on July 2, 2008 in consideration of $505,000. The shares were acquired through the open market.”
Robert Jarva, President, Black Sea Trading, Inc.

This is fraudulent. FOUR did not trade 2,259,470 shares on July 2, it traded 65,500 shares. In fact, it did not trade 2 million shares in all of July 2008. There is only a single day in its entire trading history that FOUR’s stock (actually it was predecessor ticker AMEC) printed that many shares. It was Oct 22, 2007 at 23c. When asked about this transaction, the company representative responded about Black Sea: “They are a long time and long term investor who has bought at market price over the course of time.”

This is not true. The filing said they bought on one day and the company states that he has acquired over time. Either way, Mr. Jarva owns this stock at .23 cents. And either way, his entity Black Sea Trading, is based in the Marshall Islands, which sits in Micronesia. The US Department of the Treasury doesn’t need the geography lesson.

http://www.fincen.gov/news_room/rp/advisory/html/advis20.html
It appears that much like Amirathea, Jarva is also in the other stocks controlled by Rudana. By running Jarva’s name through an SEC database, here is a history of the other stocks this promoter has been involved with and where they are currently trading.

Ticker Recent Price
PRPL .11
EQST .32
CRJI 1.10
BLKC .09
LXES .016
NOVO .08
DSKA .16
TPLM .61
SGNE .08
Conclusion

Has anyone ever heard of the Patriot Act, let alone Securities disclosure laws? So we have secret Middle-Eastern investors organizing a company to put up spy satellites, using the public trading facilities of the Nasdaq to raise money from the public? $70 million in investments from S-8 offshore stock sales propping up a company with a purported $400 million market cap, sloshing through tax havens in the Marshall Islands, the Isle of Man, and Swiss Bank accounts, courtesy of the NASDAQ? Is this even remotely OK ? Fortunately, Citron believes the risk of real security satellites ever being launched by this company is low, but this stock is just as dangerous to any investor who buys into the story.

Cautious investing to all.