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EU To Lift British
Beef Ban in Aug.
BRUSSELS, Belgium -- A three-year
ban on British beef imports, imposed after an outbreak of
"mad cow'' disease, is to be lifted Aug. 1, the European
Union's executive body has announced.
Spokesman Gerard Kiely said the
European Commission probably will make the decision official
Wednesday after a veterinary committee from member states gives
its expected approval. EU agriculture ministers voted to lift the
ban last November after British beef was deemed safe, but no date
was initially set.
Britain will be allowed to resume
the vast majority of its exports, with restrictions being lifted
on deboned meat from cattle 6 to 30 months old and with
verifiable origins.
The ban was imposed in March 1996
following an outbreak in Britain of "mad cow'' disease, or
bovine spongiform encephalopathy, and after medical researchers
cited evidence of a link between the disease and the fatal human
brain ailment, Creutzfeldt-Jacob disease.
British beef exports totaled
246,000 metric tons in 1995. The British cattle industry
estimates it has lost $2.37 billion in business during the export
ban.
Portugal is the only other
European country still forbidden to export beef, a ban that was
extended by the EC last week until August 2000. Portugal has
complained that the ban is discriminatory.
The European Commission runs the
day-to-day affairs of the 15-nation union, proposes EU law and
enforces its implementation across Europe.
Investor Interest In Secondaries Growing
NEW YORK - Investors who may be annoyed that their broker cannot get them a piece of the latest hot IPO, or initial public offering, might want to take a look at secondary stock deals.
Long a bit of a backwater in the securities markets, the new interest in large offerings of stock in already public companies is linked to the revival of the small-cap and micro-cap sectors, says money manager Bob Kern.
"Historically, when secondaries were announced, it meant increased supply and (the company's) stock came under pressure," Kern said in an interview. "The secondary was done at a price lower than when the secondary was first announced."
But consider the case of Emulex Corp.. When the Costa Mesa, Calif.-based developer and supplier of products that aid data storage announced a public offering of 2.1 million shares in April, the stock was trading in the 30's. The deal priced the stock at $61 a share. Since then, the stock has climbed above $100. It rose 1-7/8 to 105-1/8 Friday, on a day when the Nasdaq Composite index set yet another record, ending at 2,793.07, up 21.21 points, or 0.77 percent.
A similar pattern was seen in secondary deals for HI/FN Inc., a Los Gatos, Calif.-based semiconductor company, and Realty Information Group Inc., a Bethesda, Md.-based commercial real estate information service provider. Friday, HI/FN gained 1/2 to 69-5/8, compared with the price of the secondary offering at 33. And Realty Information, also up 1/2, was at 46, compared with the price of the secondary at 34-1/2.
Kern argues that one of the reasons fund managers have been cool toward smaller stocks is the difficulty of buying or selling the shares in quantity without affecting the price. But now institutional investors have come to embrace the secondary as a way to buy the stock in size.
When public companies sell more stock in the public market, the deals are sometimes referred to as "follow-on" deals.
Kern believes the turnaround for small stocks in the second quarter could really set the stage for a significant reallocation of funds "down market." Even a modest reallocation could bring big gains in the stocks.
Kern, who has been investing in small stocks for 30 years, runs Kern Capital Management LLC. The company is outside adviser to two mutual funds in the Fremont Funds group.
The Fremont U.S. Micro-Cap Fund was up 31.1 percent in the second quarter of 1999 in the retail component and up 32.8 percent in its institutional component. The Fremont U.S. Small- Cap Fund was up 17.5 percent. The Micro-Cap Fund has about $320 million in assets and the Small-Cap Fund has nearly $20 million.
Data from Lipper Inc., a Reuters company, shows small-cap stock funds up 15.6 percent for the second quarter, micro-cap funds up 22.0 percent, and mid-cap funds up 12.5 percent. Growth funds were up 7.1 percent. Stock funds embracing all categories were up 10.2 percent.
With more than 5,000 micro-cap stocks in the $10 million to $580 million market-capitalization range (share price times shares outstanding) and another 1,000-plus small caps in the $580 million to $2.7 billion market-cap range, Kern concedes it's more expensive to do the research to sort out the good and the bad. And there are bad companies in the lowest tiers that will not be around a year from now, he agrees. By contrast, the 122 large-cap companies with more than $19.3 billion in market capitalization each have grown that big because they have a history of being successful businesses. The breakdown from large caps to microcaps cited by Kern is based on figures from Market Guide Stockquest.
How do Kern and his team find the right small and micro-cap stocks to buy? For one thing, he is passing up the "dot-com" stocks altogether.
"We are investing in the Internet primarily through the 'enablers'," he said, which means companies that have the broadband technologies for faster Internet access or that specialize in such areas as encryption and compression.
A basic strategy at Kern is to avoid "me-too" companies with nothing special, unique or innovative in their product or service. Instead, the focus is on the sectors of technology, health care, consumer products and the broad area of services where the innovation is greatest. Although innovation is also taking place in the financial, energy and transportation sectors, Kern argues that it is at a much lower level and he generally looks for special situations in those areas.
Friday, the Dow Jones industrial average and the S&P 500 index also closed at record highs. The Dow rose 66.81 points, or 0.60 percent, to end at a record 11,193.70. For the holiday-shortened week, the Dow was up 54 points. The S&P 500 index added 8.86 points, or 0.64 percent, to close at a record 1,403.28.
Fugitive Financier
Had 6 Identities
He's a man of many names.
On his birth certificate, he is
Martin Richard Frankel. This identifies the guy accused of
pulling off one of the largest frauds in modern finance, an
operator who built a phantom empire by bilking small insurance
companies out of at least $215 million.
This fellow disappeared in May.
This fellow's name did not. It has appeared in lots of places:
police blotters, court papers, IRS affidavits, FBI most-wanted
list and more than a few newspaper headlines.
Sometimes it appears at the bottom
of a photograph of a man in a button-down white shirt, with pasty
cheeks, a half grin, greasy hair parted on the side and slung
over a high forehead, squinting eyes barely visible behind the
glare of thick, Woody Allen-ish spectacles.
It also appears, in bold
lettering, on an arrest warrant, issued by the U.S. District
Court of Connecticut, dated May 16.
"YOU ARE HEREBY COMMANDED,''
it reads, "to arrest Martin Frankel, aka Michael King, aka
David Rosse (or "Ross''), aka Eric Stevens, aka Steve
Rothschild.'' The document failed to mention at least two other
Frankel aliases: Robert Guyer and Fausto Fausti.
The story of Martin Frankel's many
names, and how he used them, comes from police reports,
regulatory documents, investigators, former investors and
acquaintances.
Ted Bitter, a tool-and-die maker
who hired Frankel as his broker 14 years ago in Toledo, Ohio, is
only surprised that Frankel didn't use more aliases. "He's a
pathological liar,'' Bitter says. "Marty's the kind who
likes his own lies so much, he starts believing them.''
Frankel also liked to borrow
things. Sometimes he borrowed other people's money. Sometimes he
borrowed their names. Sometimes he asked nicely. Sometimes he
didn't bother to ask.
He was wily, with an imagination
fertile enough to dream up a phantom insurance and philanthropic
empire that, investigators say, duped investors from California
to the Caribbean, from New York City to Vatican City.
Yet he wasn't that imaginative
with aliases. Most, if not all, of the names Frankel used belong
to people he had met or learned of through acquaintances.
Beginning in the late 1980s, his
penchant for deception evolved into a pattern and, finally, into
an obsession -- an obsession that created, at last count, six
Martin Frankels.
------
STEVE 'MARTY' ROTHSCHILD
No one ever actually saw this
Steve Marty Rothschild.
He first appeared around 1987 as a
name in Martin Frankel's notebook. Later, he showed up in
business correspondence written by Frankel. Finally, he gained
his own mailing address:
Steve Marty Rothschild
3415 Stanhope Drive
Toledo, Ohio 43606
No one, in fact, knew that Steve
Marty Rothschild existed until a private investigator found an
envelope in Frankel's trash. The PI had been hired by Frankel's
former boss whose wife took up with Frankel.
The real Stephen Rothschild, a
Toledo lawyer, had no clue, either. In 1989, he was hired by a
friend, Ted Bitter, to recoup $65,000 Bitter had entrusted to
Frankel -- a stock investment that had vanished.
"During the course of our
investigation,'' says Rothschild, "we came across some
documents that had the name Rothschild on them. We laughed. It
was typical of what we'd already learned about Frankel.''
Rothschild and Frankel aren't
exactly twins. Frankel stands 6 feet tall, weighed 135 pounds,
"the kid who didn't fit in at school,'' his friends said.
Rothschild is 5 feet 6 inches tall, 200 pounds, outgoing,
assertive.
"I don't think Frankel ever
tried to take over the identities of the people whose names he
used,'' says Rothschild. "Now THAT would have been creepy.''
------
ERIC STEVENS
Eric Stevens came into being
sometime around 1989, after Frankel began romancing his ex-boss's
wife.
This personage was more than just
a name on a business envelope: He came across as an experienced
bond trader eager to employ a novel and lucrative strategy to
improve the returns on insurance company assets.
Eric Stevens didn't dress like a
slick broker. He wore faded jeans, thick glasses, T-shirts. His
hair was unruly. A Bill Gates run amok.
Working out of the home of Martin
Frankel's parents, Stevens set up a bogus trust fund, Thunor
Trust, and teamed up in 1991 with John A. Hackney, a Tennessee
bank executive, to persuade small Southern insurance companies to
wire him money to invest through a company he called Liberty
National Securities, Inc.
Though the two wouldn't meet for
another eight years, Stevens' soft, nonstop telephone patter
about "protecting people's sacred assets'' won over Hackney
and at least seven insurance firms in five Bible Belt states.
They transferred at least $215
million (insurance regulators say it could have been as much as
$350 million) to an impressive sounding address: 82 Wall Street,
Dept. 1105, New York, N.Y. 10005.
It was nothing more than Eric
Stevens' mail drop.
------
ROBERT GUYER
Eric Stevens was given a number of
brief respites from life between 1991 and 1998. During those
breaks, Martin Frankel became Robert Guyer, president of Liberty
National Securities.
None of the insurance companies
that were wiring huge sums of money to Liberty National bothered
to check the Robert Guyer name at the bottom of the company's
correspondence.
Or the Robert Guyer signature on a
September 1998 contract to handle the insurance companies'
portfolios.
And then, in May 1999, a fax
arrived at the Michigan office of the real Robert Guyer, the real
president of the legitimate Liberty National Securities. Guyer
had met Martin Frankel in the 1980s when they had worked at the
same brokerage.
The fax, from several of the
Southern insurance firms, posed an eye-popping question: Where
was the $950 million they had on account at his firm?
John Czarnecki, Guyer's lawyer,
says his client had no knowledge Frankel was doing any of these
things. "He didn't know what they were talking about.''
------
MICHAEL KING
Michael "Mike'' King was born
to the life of royalty.
In 1991, he appeared like a
tornado in the wealthy New York suburb of Greenwich, Conn.,
paying cash for two pieces of prime property: a $3 million
mansion at 889 Lake Ave. and an adjacent $2.6 million house.
The driveway soon bristled with
leased limos, BMWs and Mercedes. Live-in chefs worked around the
clock to accommodate his nocturnal, gourmet tastes. Young women
from places like Switzerland, Russia, Alaska and Asia traipsed in
and out of the Lake Avenue homes at all hours.
King met his ladies by trolling
through Internet personals, calling dating services and placing
personals ads in the Village Voice. He frequented The Vault, a
Manhattan club that caters to sadomasochists. He collected a
riding crop, ropes and sadomasochistic literature and
pornographic videos.
He turned his estate into a
fortress, with armed bodyguards, a 6-foot fence, surveillance
cameras and floodlights. Inside, he built a financial whiz kid's
Xanadu, complete with 80 trading terminals linked to the New York
Stock Exchange, satellite dishes, four computer servers and 25
monitors with sexually explicit messages on screens.
Among King's neighbors the rumors
swirled: His guards were carrying satchels of money and grenades.
He's going to buy more homes on Lake Avenue and connect them with
covered walkways. He's going to replace his windows with
bulletproof glass.
------
DAVID STEVEN ROSSE
David Steven Rosse was not the
partying type. He was quite serious about finance. And he was
not, like Martin Frankel, a Jew. In fact, he aggressively courted
the Roman Catholic Church.
He dazzled church officials by
receiving them at his estate, by paying for tickets on the
Concorde, by offering them rides on his private jet.
Rosse stacked the shelves of his
Lake Avenue library with Catholic literature. He poured over the
life of St. Francis of Assisi, renowned for aiding the poor. He
told people he watched movies about St. Francis all the time.
He promised to donate $50 million
to Catholic charities. When Monsignor Emilio Colagiovanni, who
serves on a board that provides legal counsel to Pope John Paul
II, flew to New York to meet Rosse, the American millionaire
claimed he wanted to set up a charitable foundation inside the
Vatican.
After consulting with Monsignor
Giovanni Battista Re, the Vatican's third-highest official,
Colagiovanni agreed to help Rosse set up a charitable foundation
outside the Vatican, according to news reports.
In 1998, Rosse did so -- in the
British Virgin Islands, a corporate tax haven. The charity's
name? The St. Francis of Assisi Foundation. Among its list of
trustees? Walter Cronkite and Lee Iacocca, whose names were used
without permission. Its legal counsel? Washington power broker
Robert S. Strauss, former U.S. ambassador to the Soviet Union.
Only Strauss acknowledges
participating in "certain transactional matters'' for the
phantom foundation, according a statement by Ernst & Young,
the accounting firm handling the charity's investment. It no
longer does so, it added.
Colagiovanni says he had pledged
to donate $50,000 from his own foundation to help Rosse. Did he
ever send the money? The monsignor isn't telling.
Footnote: Martin Frankel borrowed
the name David Steven Rosse from one of his $10,000-a-month
bodyguards. The real David Rosse is suing Frankel for
"emotional distress'' and using his name without consent.
Rosse could not be reached, and his lawyer did not return
messages left on his answering machine seeking comment.
------
FAUSTO FAUSTI
Fausto Fausti has a bank account
in Switzerland. It's not clear what his nationality is, what
color hair he has, what he does for a living, where he goes on
vacation.
One thing the IRS knows: Fausti is
one rich son-of-a-gun.
In April, a month before
firefighters found piles of documents burning in two fireplaces
in the ransacked and empty mansion at 889 Lake Avenue, the amount
of $3 million was transferred to Fausti's Swiss bank account.
The sender? Martin Frankel, via
the People's Bank in Bridgeport, Conn.
------
Martin Frankel's propensity for
using other people's names most certainly damaged quite a few
insurance companies, embarrassed the Vatican and left U.S.
financial regulators scratching their heads.
It may also have created some
inconvenience for the one individual whose name Frankel (the one
now on the lam) couldn't possibly have used for an alias: a
Greenwich neighbor of Frankel's who has the misfortune of also
being named Martin R. Frankel.
IEA Sees Possible Oil
Shortage
LONDON -- OPEC's cutback in crude
production and a rising demand for gasoline and other refined
products could lead this winter to the biggest oil shortage in
more than a decade, a respected industry survey warned Friday.
But the report by the
International Energy Agency acknowledges that a further spike in
prices, which have almost doubled since December, would probably
tempt oil-producing countries to break ranks and boost output.
"A more plausible scenario is
that, before the end of the year, there will be an 'upward
adjustment' of production,'' the agency said.
Continued economic growth in the
United States and the resurgence of activity in Asia should help
boost global demand for oil by 1.84 percent in the third quarter
of the year and 2.38 percent in the fourth quarter, according to
the Paris-based agency. The IEA is part of the Organization for
Economic Cooperation and Development, a group of the world's most
developed nations.
It predicted slower growth in
world oil supplies as a result of OPEC's discipline so far in
complying with output cuts agreed in March. The result could be a
shortfall of 1.61 million barrels a day in the third quarter.
A shortfall of that magnitude is
"unusual,'' and if current trends continue, it "will
trigger one of the biggest quarterly stock draws (shortfalls) in
history,'' the agency said.
Higher oil prices would push up
the costs of almost all aspects of daily life, from filling up at
the pump to higher shipping costs for groceries and merchandise.
Rising inflation would push up interest rates, which could cool
off economic growth.
The fourth-quarter shortage could
be as large as 3.24 million barrels per day -- a level last seen
during the exceptionally cold winter of 1987.
Barney Gray, an analyst at the
brokerage Williams De Broe, dismissed this forecast as a
"scare story.''
Members of the Organization of the
Petroleum Exporting Countries, who agreed in March to trim output
by 4.32 million barrels per day, would probably start cheating if
prices rose much higher, Gray said.
"OPEC has been very
disciplined since March, with very high compliance. We want it to
stay that way,'' he said.
The price for widely traded West
Texas Intermediate crude has been rallying strongly as evidence
mounts of OPEC's unusual discipline in production, climbing to
19-month highs this week and flirting with $20 a barrel. The gain
in June alone was $2.97 per barrel, the agency noted.
Contracts for August delivery of
West Texas Intermediate rose 23 cents Friday to close at $19.94 a
barrel on the New York Mercantile Exchange, almost twice the Dec.
11, 1998 low of $10.65.
The price of North Sea Brent crude
increased last month by an even heftier $3.24 per barrel. Brent
contracts for August finished trading Friday up 27 cents at
$18.51 per barrel in London.
If prices rise beyond $20 per
barrel, the temptation could become intense for OPEC members to
exceed the quotas of their latest accord, said Mehdi Varzi, an
analyst at the investment bank Dresdner Kleinwort Benson.
Higher prices could also mean that
non-OPEC exporters with higher production costs will once again
find it profitable to pump oil, thereby increasing global
supplies and dampening prices.
"It's not all blue sky for
OPEC. There are dangers in allowing the price to go too high,''
Varzi said.
OPEC's compliance rate with its
targeted output levels was 91 percent in June, up from 88 percent
in May and 82 percent in April, the IEA said.
Saudi Arabia and Iran, OPEC's
biggest producers, cut daily production last month by 40,000
barrels and 50,000 barrels respectively. Nigeria, considered one
of the group's weaker members in terms of compliance, saw output
fall by 30,000 barrels a day due to civil unrest in its oil-rich
coastal areas.
