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Air America and the SEC

Brian Maloney has the investigative report for today, and does a great job of covering Nova M, and all the possible issues of "fraudulent conveyance" involved in the formation of this new company. Specifically, however, I'd like to take a look at one of the things Brian said in particular:

Disclosing Air America's future plans to a room full of rabid supporters might seem smart, especially if it brings potential investors to what inside sources say is an effort to raise $5 million to fund the new company.

Was such a public disclosure legal, however? Since Nova M Radio's offering is set up as a private placement, there have been no indicated or available US Securities and Exchange Commission filings.

Could the speech be considered an indirect attempt to solicit investors, in a way that would trigger required SEC disclosures?

As it so happens, I have a... uh... very close relationship with a securities lawyer who worked for several years at the SEC before going private. I ran these sentences by her, in an email that said:

Can you give me a five minute rundown of the regulations that govern disclosure of private offerings? For instance, if someone in charge of a company that is set up as a private placement, and therefore has no filings with the SEC, were to discuss plans for the formation of that company in a very public forum, what are the possible repercussions? Does it hinge on the extent to which that person could be said to have solicited investments for that company?

To which she responded (capitalizaiton and punctuation cleaned up because this was emailed from a Blackberry):

It's hard to give you a rundown in five minutes especially from (current location edited), but the short answer to your question is: Yes, it is possible someone could blow their private offering exemption if they talk with specificity about their company in a public forum (on the internet or get quoted in the press) to the point where they could be said to have made a public offering of their securities.  The remedy would be that their investors could sue for rescission of their investments or the SEC could sue them for violations of Section 5; although, if the investors are all sophisticated and there are no other legal violations this provision is almost never enforced in this context.
So, I translate that roughly as - yes, it's technically illegal, but unless the other investors raise a stink about it, almost never prosecuted. Yet more activity from the Drobnys that skates right on the borderline of legal and illegal, and wanders squarely into the territory of slimy.
I don't want to belabor the point that Brian has already hammered home with great efficiency, but this Nova M maneuver is the most Enron-esque move we've seen from the Drobnys and their Air America partners, yet. Switch the name "Drobny" with "Fastow" and you've got something straight out of Conspiracy of Fools. Will Al Franken condemn this shell game maneuvering?

August 18, 2005 in Air America |

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» INSIDE AIR AMERICA: AN INVESTIGATIVE BLOG REPORT from Michelle Malkin
Part II is up at The Radio Equalizer. Brian Maloney and I take a close look at the financial plans of Sheldon and Anita Drobny, the deep-pocketed, far left Illinois Democrat couple who dreamed up Air America and have been... [Read More]

Tracked on August 18, 2005 at 02:51 PM

» Quick Shots: Camp Cindy Update from Decision '08
Cindy Sheehan has left Crawford to be with her ailing mother, who has had a stroke. In all sincerity, best wishes and here’s hoping her mother recovers quickly and fully. Earlier today, Leon H had the story of an eye-opening conversation betwe... [Read More]

Tracked on August 18, 2005 at 05:26 PM

» Air America/2 from The Right Nation
Radio Equalizer and Michelle Malkin keep on hitting hard on the Air America scandal. And this time, thanks to the last developments of their (outstanding) investigative job, they accomplished to breach the wall built by mainstream media to protect Al... [Read More]

Tracked on August 19, 2005 at 08:16 AM

» What if Air America Had Folded? from The Larsonian
What if the Air America Radio network had folded immediately after the 2004 election? Would that have made it nothing but an in-kind donation to the Kerry campaign? [Read More]

Tracked on August 21, 2005 at 07:04 AM

Comments

The financial backers of AAR took the chance that Kerry would win the election. If Kerry had won, AAR would never suffer from shortage of funds again, thanks to the mysterious working of the power, influence, and accounting practices of the widely disparate bureaucracies and kleptocracies of the US Federal government.

Since Kerry lost, it's been scrap, scrape by, and gouge, just to stay on the air. This wasn't supposed to happen. The backers feel like they're in an alternate reality, the one where Mr. Spock has a goatee. This is bad.

Posted by: legion | August 19, 2005 at 07:59 AM

Legion - every media form is a function of ad dollars, trust me. There is no conspiracy or agenda beyond that. Liberal talk radio just does not work - there is no monolithic issue that interests people on the left (aside from dislike of W) to the point where they tune in every day. Conervative radio is fuled by anger and indignation in many cases, providing listeners with a release for their frustration. Gay marriage, immigration issues - that drives calls and ratings. It's compelling to those in the market for it. But debating the minute details of Social Security reform...that's boring. I'd rather listen to sports-talk radio and find out why the Eagles sucked last night.

FOR SOFT TACO...

***1896 Iraq casulaties***

Battle of Borodino resulted in 74,000 casualties in one day, can it be said the - compared to this battle - D-Day was not really a big deal?

Posted by: Your Best Pal, Moochzilla | September 13, 2005 at 09:41 AM

hello, i'm spamilka

Posted by: hello | November 08, 2007 at 09:55 PM

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