Quick reply to 'Innocent Bystander'

This humble blog has been name-checked on the iii.co.uk board by a poster called 'innocent bystander'. He hasn't got a high opinion of it, or me, but everyone is entitled to his/her own viewpoint. But I'm afraid to say old fruit you've got this one almost 100% wrong.

In fact, his letter is full of things taken out of context, outright lies and curios omissions of his own personal involvement.

Ohh. Bold claims. However you fail to say what these "lies" are in my fully referenced post. Care to expand? Where are these "lies"?

Incidentally I'm not David Falt, But seeing as you want to drag up the bank Hapoalim case again, I'm delighted to assist - seeing as it highlights the underhand, deceitful and manipulative way Mr Mooers has acted. Incidentally the court documents for the case are available online from the US courts system.

I wrote this is March 2009 to another poster, called John, who -like you- had got the wrong end of the stick. It still stands:

"Lets look at the facts AGAIN but this time in chronological order.

Fact 1: Roger Branton issued the shares to Falt and four other people around March 29, 2005. They were real, valid shares. Not forgeries. Not bogus. Branton signed them. He and Rick authorized them. Hapoalim confirm this. Hapoalim confirm Falt's name on the certificates, along with the other names. Hapoalim confirm Branton's signiture on the certificates. xG LLC was the name on the certificates. There were no restrictions as to the disposal of these shares. None of the parties involved now dispute this. John - the whole point of shares (as I tried to explain yesterday) is that you can sell them, Falt and the others was perfectly entitled to sell them when they saw fit. I trust you are with me up to this point.


Fact 2: A few days later in April 2005 Falt deposits the shares at the Bank of New York. They accept the shares as legal, binding, Kosher.

Fact 3: Sometime later that year Falt leaves xG. It's pointless to argue with you about exactly who left who. I maintain, through multiple excellent sources, that Falt resigned because he was disgusted about the way xG were handling themselves. You are free to believe what they pay you to. That's your job after all. I imagine that harsh words were said on both sides. Around that time he also leaves ACH. Falt was now obviously a threat to both of them as he knew where the skeletons were buried.

Fact 4: October 2005 - Falt sells some of the shares. Not the whole amount, just some of them. The Bank of New York say it's a legal transaction. Hapoalim, who end up on the other side of the trade, agree.

Fact 5: Hapoalim, try to get the certificate split to complete the sale. Inexplicably xG refuse. The initial reason they give is the shares don't exist - which was just silly, two banks had confirmed they do, and then there was the awkward fact of Branton's signature on the paperwork.... When they acknowledged that the shares did exist their next lie was to say they were issued against a promissory note. Then they lie again and say that they are now called xG Inc so the shares aren't valid. Then that simply the shares are 'Null and Void' These guys are squirming, but the elephant in the room' throughout all the shenanigans is the certificates with Falts name and Brantons' signature...And ain't it strange that every other director who've all been GIVEN shares in xG have had their share certificated honored...

Fact 6: 1 January 2006 - BOTH the Bank of New York AND Bank Hapoalim write to XG Technology to pressure them about the certificates. Both these institutions are siding with Falt. Both agree that as far as they can see he is the abused party. Legal threats are made from the banks to xG, whose response is to return legal threats, not at the banks, but at Falt.

Fact 7: Lawyers earn money all through most of 2006.

Fact 8: 9 November 2006 xG Change [Edit: finally - despite them saying months before that they already had...]from LLC to Inc. They do not inform Hapoalim, despite the ongoing legal process. Presumably this is because they already said to Hapoalim that they are already called Inc. Hapoalim find out from their inquiries they've made about these xG people. They've also found out that they are planning to list.


Fact 9: 13 November 2006 The letter is sent that I've posted here. Let's remind ourselves what it says because you obviously haven't read it properly John:

*"We have attempted to obtain clarification but he has not been cooperative...We have made inquiries in the United States. These inquiries have raised serious doubts about xG Technology LLC itself and the individuals that stand behind it. It is very difficult to form a definite opinion but we have serious doubts that xG Technology LLC and the technology it claims to own are what they purported to be." They then say they've spoken to the broker and the Nomad about their position with the certificate. The letter is co-signed by the CEO and Head of Controls.*



The reason they've spoken to the Broker and Nomad is simple. They want these shares recognized in the new company. And by the looks of it both seem to agree that Hapoalim had got a point because the IPO is shelved. Yes, this IPO you harp on about just turned out to be an "Introduction" to the market. (Don't bother to argue - it's on the LSE website, as "Not IPO XG TECHNOLOGY INC - Introduction"). They shelved it for two reasons: 1) lack of mugs willing to buy, and 2) the nomad was unwilling to accept later share dilution once these shares were converted. ZERO pounds was raised during this 'Non-IPO'. They changed their IPO into a 'convertable bond' so that the guys who had bought in at pennies in the pound via ACH and Wahlman could get their shares. But I'm digressing...

Fact 10: 26 January 2007 Bank Hapoalim sues xG Inc for breach of fiduciary duty. The breach was that they i) failed to inform Hapoalim on the name change from XG Technology LLC to XG Technology Inc, and ii) failed to inform them of the introduction of the company on AIM, and iii) they didn't list the David Fält shares in the register. Hapoalim say:

*"The company and specifically Mooers and Branton have betrayed their trust, breached their Fiduciary duty, withheld the information required and behaved disgracefully and deliberately and willingly infringed the Bank and the applicants' rights".*



Fact 11: The Judge had to decide, not if the certificates were valid - they were - but if by outrageously not including them in the register did a member of a Limited Liability Company owe a fiduciary duty to a party (Hapoalim) who wasn't in the LLC. The judgment is paraphrased here (www.abanet.org/buslaw/newsletter/0071/materials/pp2.pdf) "In a Florida
case interpreting Delaware law, the Court considered whether LLC managers owed a duty to parties that were not formally designated as LLC members. Under Del. Code Ann. Tit. 6, § 18-1101(c) a LLC may owe a fiduciary duty to “another person that is a party to or otherwise bound by a LLC agreement.” Plaintiffs needed to prove whether the assignee of a LLC member’s securities assumed member status in the LLC. The Court held that the allegations failed to allege that the LLC managers owed the assignee a fiduciary duty and therefore failed to state a claim of breach of fiduciary duty."

So the judgment was *NOT* that the certificates weren't valid. *Not* that Falt/Hapoalim/BNY had done anything wrong, but simply on the legal point that LLC members didn't owe fiduciary duty to non LLC members. But stench of fraud around Rick and Roger got really bad that day. The issue wasn't resolved. These share certificates are still out there.

Ding. Ding. Round one over.

Fact 12: Now we are back to the present day, the bell has just struck for round two. It's still unresolved. BUT, if Falt is - as the Swiss Police have determined - innocent, then who is Guilty? There must be these still outstanding share certificates somewhere, along with that sale through two banks. These issues haven't gone away. I can't speculate about the future but it's logical to suggest that if the guilty one isn't Falt, or Hapoalim, then the only people left in the frame are Rick and Roger. I'm sure the next few months will be interesting for us all."

Now Innocent Bystander continues:

He somehow links Palmi Sigmarsson and Marc Dannenberg together through Guardian Holdings and make that suspicious. What’s the link? Guardian Holdings is owned by 300 different shareholders, not Palmi alone, and he had left Guardian Holdings long before Marc Dannenberg apparently sold these shares in Guardian Holding. Again, where is the crime (and link)?

Now that's very interesting. 300 shareholders. Just how do you know that? It shows you are more closely involved than you admit to. The crimes (plural please) are simple: 1) The shares were restricted shares - that were sold for HALF the market rate, by an unregulated stock promoter rather than legal channels, 2) whilst these restricted shares were meant to be under the 'lock-up' period, 3) to multiple US citizens in contravention of their Reg 'S' status.

Now, If you have some FACTS which show me to be wrong - please post them. Please include links to references as I have done. You can email me: john.prescott.dpm at gmail.com, you can post here - whatever you like, but please put up or shut up.