WestPark Capital's RTO Deals
posted by The Traveller on Saturday, March 26, 2011

WestPark Capital's CEO, Richard Rappaport invented a mechanism he called WRASP, in which a company becomes publicly traded through a reverse merger and trades directly on a senior exchange (NYSE, Amex, or Nasdaq), avoiding the OTCBB completely. Rappaport praises his invention, stating that it has "generally proven to be less costly, less time consuming, involves less risk and even less dilution of ownership than a traditional IPO or a reverse merger. ... The 'WRASP' generally possesses superior liquidity, valuation and institutional coverage, combining the benefits of an IPO and Reverse Merger."

In the past two years, WestPark completed five such WRASP deals. A sixth, China Wesen Recycling Technology, is currently in the IPO pipeline.
  • March 2009 - NIVS IntelliMedia Technology (NIV, NYSE Amex)
  • October 2009 - ZST Digital Networks (ZSTN, Nasdaq)
  • January 2010 - China Electric Motor (CELM, Nasdaq)
  • June 2010 - China Intelligent Lighting & Electronics (CIL, NYSE Amex)
  • February 2011 - China Century Dragon Media (CDM, NYSE Amex)
Now the New York Stock Exchange has halted trading in three of those five stocks last week. CDM was halted on March 21, at market open, and both NIV and CIL were halted on March 24 at 9:51am. NYSE Regulation issued a press release about the CDM halt, stating that it "is evaluating both the need for certain public disclosure, as well as the overall suitability for continued listing of the Company’s common stock." The company was requested to provide additional information to NYSE Amex on or before March 24, 2011, and while the company announced that it intends to fully cooperate with the regulators, the trading halt is still in place this weekend.

NYSE issued a similar press release for the NIV trading halt. But here we have since learned a lot more details about what happened. In an 8-K Filing late Friday, it was revealed that Malone Bailey submitted its resignation as the Company's independent auditor. The firm based its resignation on what it characterized illegal acts involving the Company's accounting records and bank statements and discrepancies in accounts receivable. And if we look at MaloneBailey's resignation letter in detail, we can see that this is likely another case of accounting fraud:
In our resignation letter dated March 24, 2011, MaloneBailey cited that MaloneBailey found accounting fraud and irregularities in forging accounting records and bank statements during 2010 NIVS audit. On March 21 with email and On March 22, 2011, MaloneBailey, LLP, informed Charles Mo, NIVS independent board member and the chairman of the audit committee about "significant difficulties encountered during the 2010 audit." During the conversation, MaloneBailey, LLP informed Mr. Mo that two other public companies audits were conducted at the NIVS accounting department location. These two companies are located in Beijing and Guangzhou. However, their books and records were shipped to NIVS accounting department and MaloneBailey conducted the audits of these two public companies at NIVS accounting department. NIVS accounting personnel were involved in coordinating the two audits. MaloneBailey found accounting fraud and irregularities in these two audits. After the discovery, we encountered difficulties with management trying to limit our scope of the NIVS audit.
NIV and China Intelligent Lighting (CIL) have a lot in common. They share the same facilities, same auditor, and there are many connections within senior management (founders, directors). It is reasonable to assume at this point that the trading halt for CIL was imposed for related issues.

Which brings us back to WestPark Capital and Richard Rappaport. It might just be coincidence that 60% of the firm's "WRASP"-IPOs were halted within three days, but I wouldn't bet the farm on this. In fact, I would be very careful with the two remaining stocks, CELM and ZSTN, until we learn more details. The latest of WestPark's deals just became a public company last month, and should CDM's situation be similar to that of NIV, it will fall back directly to WestPark and the quality of its pre-IPO due diligence process. The firm has been in trouble already last year, when FINRA fined WestPark to pay $400,000 for failing to supervise brokers with histories of disciplinary actions (a matter of general securities fraud), and suspended its former Chief Compliance Officer and Chief Operations Officer for several months.

Here is a list of all reverse merger deals of the past few years, involving shells owned by WestPark Capital / Richard Rappaport:
  • Asia Time (ATYM.PK, SRKP 9 Inc.), delisted from NYSE Amex on April 23, 2009
  • China Century Dragon Media (CDM, SRKP 25 Inc.)
  • China Electric Motor (CELM, SRKP 21 Inc.)
  • China Intelligent Lighting & Electronics (CIL, SRKP 22 Inc.)
  • China Shenghuo Pharmaceutical (KUN, SRKP 8 Inc.)
  • China Wesen Recycling Technology (SRKP 23 Inc.), pre-IPO
  • Feigeda Electronic Technology (SRKP 20 Inc.), not yet listed
  • Highpower International (HPJ, SRKP 11 Inc.)
  • NIVS IntelliMedia Technology (NIV, SRKP 19 Inc.)
  • Yinlips Technology (SRKP 17 Inc.), unlisted, applied for NYSE Amex listing on June 16, 2009
  • ZST Digital Networks (ZSTN, SRKP 18 Inc.)

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16 Comments:

At March 27, 2011 11:10 pm , OpenID buyersstrike said...

Nice write-up on the recent Westpark halts. Was going to do a Weekend Update post, but found yours first. Have written before on Westpark, here:

https://buyersstrike.wordpress.com/2011/02/23/we-didnt-forget-you-gene-michael-bennett-cagc/

Rappaport has quite a few shells, a few feature super-director Gene Michael Bennett, and most seem to include a member of the family behind the powerful LA Gear / Sketchers sneaker empires as a huge owner!

 
At March 28, 2011 7:20 am , Blogger Chickenpookie said...

More great info, thanks!

 
At March 31, 2011 9:22 pm , Anonymous Mahalo Bitches said...

China Electric Motor (CELM) has been halted today for accounting fraud. This is the 5th Westpark Capital deal to go bust this month. What does this mean to China Wesen Recyclers? They tried to sell me some private placement stock back in Dec at $2.25. I still have the documents to the deal. They filed the S1 recently and also use MaloneBailey.

The question is, how did you expect to retain 16-25% equity in these deals post-merger? Rappaport & Westpark own so much equity in the deals they underwrite. Are the Chinese that desperate to give up so much just to go public? The Chinese don't care because they knew they were running frauds. It doesn't matter if Rappaport & Westpark got 50% equity, they don't care. Because they got the money. They got the private placement money and the IPO money. I estimate that Rick Rappaport's personal wealth got body slammed into the ground this week, adding up all his equity in the other deals BEFORE they got halted and delisted, he was worth about north of $65 million. Today, 3/31/11, he's probably down to less than $15 million and going south. The amount of lawsuits heading his way is gonna be the shitstorm of all time.

ZSTN looks like the only 'legitimate' Westpark stock still trading..and quite frankly, I wonder why it isn't selling down hard.

I knew Rick Rappaport since 1990 when he used to be the syndicate manager for HJ Meyers in Beverly Hills, that place was a small firm and known to be an aggressive underwriter. It was on North Camden Drive in Beverly Hills right kiddie corner from all the fancy shops. I was a just a kid back then, barely out of high school at 17 years old and interested in stocks. I got licensed on my 18th birthday and got a job working at a very sleepy regional brokerage firm that did no deals so I always looked to find special trading ideas from other firms. They were my favorite bankers because they always pushed the envelope on high risk deals. Hank "Bud" Meyers was the owner and Rick just ran syndicate. He was a cool guy, kind of a short, skinny guy with blond hair and I used sell his merchandise at my firm from time to time when we were able to get clearance/approval. Then something funny happened, they merged with an east coast boiler room shop called Thomas James & Assoc, that's really when HJ Meyers became a bucket shop. One of my other buddies who worked there told me that they were gonna get shut down by the feds. That James Villa, the new president of the combined company would plead guilty and shut down HJ Meyers and go away.

I spoke to Rick Rappaport and asked him what happened to Hank "Bud" Meyers and he told me that he was now in his 60's and cold calling for business to which Rappaport said was "sad". If you wiki search HJ Meyers, you can see the entry in there. Yours truely did that. I also wrote about Anergen, you guys don't know about that..but it was one crazy deal.

 
At April 02, 2011 9:39 am , Blogger The Traveller said...

It surprises me too that ZSTN is still holding up relatively well. It's the only surviving WestPark stock, and even without the WestPark connection there are many items in their filings that are hard to believe. Who knows, maybe small MaloneBailey is doing a better job after all than BDO China (ZSTN's auditor).

The China Wesen Recycling IPO is probably not going to happen. The company filed a Form NT 10-K last night, stating that the annual report will be indefinitely delayed (just like CELM, CDM, NIV and CIL). The company "is not able to provide a reasonable estimate as to such filing at this time, which will not occur within the fifteenth calendar day after the prescribed due date for such report."

Good for you that you passed on the December shares.

 
At April 03, 2011 1:31 am , Anonymous Anonymous said...

What about HPJ? A Westpark deal as well?

 
At April 05, 2011 12:59 am , Anonymous Anonymous said...

Mahalo, Mahalo Bitches. Rappaport is not likely holding this crap. Under 10% no filings reqd. While I hope he stayed in, he's likely out of most of the older molt but I agree exactly with your topline $65 million personal rip. It was my number before you confirmed my thinking. SICK. 9 deals at 6-8 million each personal. He pays his mob out of a seperate pot of stock. I know they gone because they usually file as resellers on the PO following the PIPE.

Look you dont pay this A-wad underwriter 30-45% of your company if you're operating legitimate biz, and westpark knows it! It's the underwriter's job to run Due Diligence and make an honest representation of the business at hand- not to sell fake silver coins, as it were, and hide behind "Risk" disclosures. That's fraud. plain and simple. Jail and restitution.

All westpark equity position cost westpark $1000-500O total. TOTAL! FOR 40% OF A COMPANY? HOW'S THAT WORK? READ THE FILINGS LAST TO FIRST. WHAT A RACKETT! Scan the filings on this blog that TC linked. But it looks like a RICO scam.

Google the usual players- each time the same SCHWARTZBERG DEBBIE AKA LAGear/SKX (what's her/her husbands gig here? why do they get 5% of every PO?). POLETTI THOMAS J- the lawyer. JANINE FRISCO another lawyer. DEPRIMIO KEVIN, PINTSOPOULOS ANTHONY C, employees of weatpark, among others. Take any of these deals run the SEC filings last to first-. All the same all wrong. Every deal same players. Same IR firm, same outside board members, same IR firm, same PIPE investors, same seed Form 10 investors. WTF?

But don't forget Rappaport. He owns 100% of Westpark (schwartzenberg share undisclosed?) and each deal nets Westpaek plus Rappaport 17-20% cleared equity stake. Other employees ride outside with their own per stakes- also free. Remember the shares cost essentially notning via the SEC Form 10 shells (SKRP is their names followed by a number)

You cant take 25-40% of a deal and use the "risks" section as a safe harbor NINE PLUS TIMES! R.I.C.O. was made for these guys. Anyone associated with these "deals": Securities lawyers, underwriters, the coffee guy. H Meyers might have been insensitive at time's but he wasn't a thief and he certainly wasn't a rackateer.

Weatpark's got some 'splaynin to do. Jail and restitution seems to be in order.

 
At April 06, 2011 12:31 am , Anonymous Beverly Hills Boiler Room said...

ZSTN starting to fall apart--the wheels are falling of this bus!! Wondering what the mood is like over at Westpark these days. I tried calling over there and it's an answering machine for the main number--sounds really odd. Wouldn't you have a secretary answer the phones?..especially in a time like this?..or maybe not.

Also wondering if FINRA is investigating this situation. There appears to be many shareholders who got nailed in these stocks. Especially in this new China Wesen Recyclers..will it go public? Or is that also under suspicion of fraudulent numbers? All of these deals appear to be extremely dubious and if you think about it, I would say Westpark Capital's future is also very limited since they have been pushing China.

Will the lawsuits begin to hit Westpark Capital too? Noticed all their Chinese issuers are getting inundated with lawsuits left and right. Doubt if they will be successful in getting anything out of those people since there is no assets state-side and US law has no jurisdiction in China. That leaves the auditors, MaloneBailey..and WESTPARK CAPITAL.

 
At April 07, 2011 5:38 am , Anonymous Anonymous said...

ZSTNs BDO China is not BDO Hong Kong but another BDO which is highly respected. They are a FIE not a VIE and have been audited by the SAIC prior to using the RTO shell as a public vehicle to enter the marketplace rather than going through the OTCBB and waiting infinitum ad-nauseum until uplisting to the major excahnges. Since foreign direct industries ARE allowed within the cable and GPS products industry in China they are the only viable FIE in Westpark Capitals Group. Their SAIC and SEC filings are coming out May 15ish in their 8K which should match with additional explanations pertaining to any items which might not normally match between the SAIC and SEC reports. Theyll exceed quarterly expectations as they have been doing in prior quarters and annually.

 
At April 09, 2011 10:47 pm , Anonymous Anonymous said...

Out of the 5 companies that WestPark Capital recently brought public due to their WRASP (possesses superior liquidity, valuation and institutional coverage, combining the benefits of an IPO and Reverse Merger) including:

March 2009 - NIVS IntelliMedia Technology (NIV, NYSE Amex)
October 2009 - ZST Digital Networks (ZSTN, Nasdaq)
January 2010 - China Electric Motor (CELM, Nasdaq)
June 2010 - China Intelligent Lighting & Electronics (CIL, NYSE Amex)
February 2011 - China Century Dragon Media (CDM, NYSE Amex)

ZST Digital Networks is the only Chinese company in the group which is a FIE and required to be audited by the SAIC prior to going public.
They are WestPark Capitals very successful, highly awarded WRASP client.

ZST Digital Networks has exceeded analysts expectations since its very beginning and has huge revenue and growth potential both in their cable desktop and GPS products and services division. They have been given many awards including the prestigious top 150 of Forbes "China Best SME" list.
Their matching 2011 Chinese SAIC and SEC filings will prove their value in the marketplace. We give ZSTN a strong buy with a price target of $14.

 
At April 13, 2011 6:19 pm , Anonymous Anonymous said...

Westpark bunch of pussies

http://wpcapital.com/PDF/WestPark_Capital_Clarifies_WRASP_Misconceptions.pdf

"A few of the Chinese companies that have effected IPOs using our WRASP transaction have
become the subject of SEC inquiries and trading halts due to issues surrounding their audits. But to make any inference whatsoever that these developments are in any way related to the WRASP
model is unsupported by the facts"

-A FEW??? Let's try this again..90% of your deals gone Westpark..how could you say "a few"??? retards..tell it like it is.

The only way to do this was to not try to rape these guys for so much equity--of course I'd want to commit fraud after giving away 24% of my company to some American I don't know. It's no wonder the Chinese scammers turned to their old ways..no choice but to scam.
I'd do the same and laugh all the way to the bank. Westpark thought they were the shit by scamming so much equity out of these Chinese scammers, but the tables are turned and pretty quickly.

 
At April 14, 2011 6:39 pm , Anonymous Anonymous said...

Its true that alot of Chinese small-cap companies that happen to be WRASPS have failed of their own accord. But let me make this clear. A company uses the WRASP shell to go public. After that, Westpark has nothing to do with the integrity and truthfulness and honesty of the company. Yes its a method small-cap companies go public. But after the companies are in teh marketplace, its up to the company to make their name good. Not Wetpark. Their job is over. I dont disagree that mnay of the Chinese small-caps have accounting inrregularities, bu that has nothing to do with Westpark. Any of those small-caps could of gone the normal OTCBB to US exchange IPO route. Lets call it the way it is...

 
At April 16, 2011 5:59 pm , Anonymous Anonymous said...

I hope Rappaport is prepared to spend some years behind bars.

 
At April 22, 2011 5:27 am , Anonymous Anonymous said...

The April 9th Poster here has his foot in his mouth. ZSTN COLLAPSED like the fraud that it is today! HAHAHAAHA!

ZST Digital Stock Gaps Down On Today's Open (ZSTN)

NEW YORK (TheStreet) -- Shares of ZST Digital Networks (Nasdaq:ZSTN) were gapping down Thursday morning with an open price 38.8% lower than Wednesday's closing price. The stock closed at $4.36 Wednesday and opened today's trading at $2.67.

The average volume for ZST Digital has been 170,200 shares per day over the past 30 days. ZST Digital has a market cap of $54.1 million and is part of the technology sector and telecommunications industry. Shares are down 32.4% year to date as of the close of trading on Wednesday.

 
At April 22, 2011 5:30 am , Anonymous Anonymous said...

EVERY SINGLE WESTPARK CAPITAL DEAL IS A FRAUD, NOT TRADING, NO LONGER TRADING, ACCUSED OF FRAUD AND FALLING APART OR DELISTED ALREADY.

WESTPARK CAPITAL RIP

February 2011 China Century Dragon Media, Inc. IPO

January 2011 Feigeda Electronics Technology, Inc. Private Placement

December 2010 China Wesen Recycling Technology, Inc. Private Placement

June 2010 China Intelligent Lighting and Electronics, Inc. IPO

April 2010 NIVS Intellimedia Technology Group, Inc. Secondary

April 2010 China Century Dragon Media, Inc. Private Placement

January 2010 China Intelligent Lighting and Electronics, Inc. Private Placement

January 2010 China Electric Motor, Inc. Private Placement

October 2009 China Electric Motor, Inc. Private Placement

October 2009 ZST Digital Networks, Inc. Private Placement

May 2009 ZST Digital Networks, Inc. Private Placement

March 2009 NIVS Intellimedia Technology Group, Inc. IPO

October 2008 Yinlips Digital Technology, Inc. Private Placement

August 2008 NIVS Intellimedia Technology Group, Inc. Private Placement

June 2008 Hong Kong Highpower Technology, Inc. Private Placement

February 2008 Asia Time Corporation. Private Placement

November 2007 Hong Kong Highpower Technology, Inc. Private Placement

September 2007 China Architectural Engineering, Inc. Private Placement

June 2007 China Shenghuo Pharmaceutical Holdings, Inc. Private Placement

February 2007 Asia Time Corporation Private Placement

October 2006 China Architectural Engineering, Inc. Private Placement

August 2006 China Shenghuo Pharmaceutical Holdings, Inc. Private Placement

 
At April 28, 2011 7:52 am , Anonymous Anonymous said...

ReverseMergersChina.com see link below-great site for China stock scams

www.ReverseMergersChina.com

www.ReverseMergersChina.com

 
At March 23, 2012 6:02 am , Anonymous John Ballsmoke said...

Westpark Capital is a fraud just like all the China frauds, that company should be shut down yet I hear they just had a lawsuit tied in with China Intelligent Lighting dismissed. What a world we live in, eh?

 

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