The Escala situation is making me nervous.

[truthteller]

 

 

http://www.msnbc.msn.com/id/14851357/

 

 

Escala's Spanish Inquisition

As investigations intensify, the auction house severs ties with its parent.

THE MOTLEY FOOL

 

By Rich Duprey

 

Updated: 10:08 a.m. MT Sept 15, 2006

It was hardly surprising the other day when Escala(NASDAQ:ESCL), the U.S.-based stamp supplier of Spanish auction house Afinsa Bienes Tangibles, announced it was delaying the filing of its annual financial report.

 

With the Spanish authorities raiding Afinsa's offices in May and shutting down the investment scheme -- in which the company guaranteed rates of return of 6% to 10% on supposedly rare stamps supplied to it by Escala -- the latter's books must be a mess. While Escala conducts its own ongoing internal investigation, the SEC's investigation is also up and running. Investors are still wondering how far the alleged scam reaches; if it did touch Escala, could Spanish authorities reach across the Atlantic and seize assets to make victims whole?

 

 

While there is yet no proof that Escala was definitively involved, it does seem that investigators are leaning in that direction. Spanish tax authorities believe that certain stock trading transactions by both Escala founder Greg Manning (Escala was previously known as Greg Manning Auctions) and director Gregory Roberts are worthy of further investigation.

 

Roberts is also president of Spectrum Numismatics and A-Mark Precious Metals, a company Escala acquired last year. Spectrum has been at the center of a coin trading scandal with Ohio's Bureau of Worker's Compensation. Coin dealer Thomas Noe has been indicted for allegedly mismanaging $50 million in state funds he received for coin investments, transactions which were handled by Spectrum. He also loaned Greg Manning Auctions $6.5 million, using state funds to set up Spectrum while also investing more than $10 million in Bureau funds in the company. In an off-market purchase, Noe bought 500,000 shares of Greg Manning Auctions at a 36% discount, after which Afinsa made its takeover bid for the company. Noe then sold his shares for a $3 million profit.

 

Afinsa's former president denies that Manning or Roberts ever manipulated the stock for their own benefit, but Spanish authorities seem to think that the transactions of the two say otherwise and "deserve a special attention" by investigators. Plans to corner the stamp markets in Great Britain, Singapore, India, Australia, and elsewhere were thwarted by the raids on Afinsa's offices.

 

The raids impaired Escala's ability to file its annual report on time, though the company announced yesterday that it would be taking huge writedowns in receivables, inventories, and goodwill related to Afinsa, as it is severing all business ties with the company. Afinsa, however, still owns nearly 70% of Escala's stock. In total, Escala says it will take charges of $41.9 million. Of that amount, $2.6 million would be for severance payments, $11.2 million would go toward receivables from Afinsa, $12.5 million for impairing goodwill and intangible assets, and $15.6 million to write down inventories.

 

Before Afinsa took ownership of the company, Greg Manning Auctions never traded for more than $4 a share; it was the seeming potential of worldwide auctions that propelled the stock to as high as $35. Since Spanish authorities raided Afinsa, the stock has once again traded at its historical levels, but should it be found to have participated in the fraud of Spanish investors, there's really only one price this stock could be valued at: zero.

[TomB]

Why would this make you nervous?

[Wihlborg]

Maybe he owns some of their stock.

 

John

[truthteller]

Why would this make you nervous?

 

I got 100 Escala T-shirts I want to sell on ebay. Maybe not a good thing right now.

 

 

 

TRUTH

[Stanley]

Why would this make you nervous?

 

I got 100 Escala T-shirts I want to sell on ebay. Maybe not a good thing right now.

 

 

 

TRUTH

 

Maybe you should wait for there demise to be aired on CNN, then sell them

[chinook]

Are they 100% cotton?

[truthteller]

Are they 100% cotton?

 

 

I just read the labels. Bad sign. 100% artificial materials and color. Definitely a bodybad situation.

 

 

 

 

TRUTH