The announcement of a pact to acquire CI Holdings by Clear System Recycling (OTC: CLSR) was overshadowed by reports of the latter’s CEO, Mark Ghiglieri, being a convicted criminal. The share price of Clear System spiraled down to touch a low of $2.65 in the first two hours of trading.
Even though Canada-based Clear System is profiled as a company assisting hospitals to implement waste reduction programs, seeking alpha accuses that Clear system is a publicly traded shell company without any proper business domain. Clear system went public on July 12, 2011, with 2,940,000 outstanding shares that include 2,000,000 restricted shares at $0.005 and 940,000 free trading float shares at $0.05 for $47,000. The company sold 2,000,000 restricted shares to an unknown Min Zou for $120,000. Two months later, Zou resigns with 2,000,000 shares still in his hand and appoints a John Carter as the new CEO/Director.
Two weeks later, on June 13, 2012, Clear System effected a 12.5 to 1 forward stock split. On August 23, 2012, the company announced a merger with Oregon-based Masterpiece Investments Corp, which claims to be a seller of fine arts. The CEO of Masterpiece is Mark Ghiglieri, the gentleman named in the report.
Clear System also stated that, following a successful merger scheduled for September 2012, the company intends to change its name to Masterpiece Investments Corporation and apply for a new stock symbol. Clear System also announced that the merged entity will be headed by Mark Ghigleiri as the CEO. The report points to a 1987 court filing, drawn out from a search of the national archives, referring Mark Ghigleiri as the person sentenced to three years confinement on charges of conspiracy to make counterfeit currency. Also, another court record shows that Mark Ghigleiri was sentenced to 18 months of imprisonment for detonating an explosive near Lake Oswego, Oregon, on December 30, 1992.
The detailed story also explains how Ghiglieri started counterfeiting art and signs using a pseudonym “Marco Selvaggia”. The report also quotes that Masterpiece Investments, with poor documentation, had received funds to the tune of $300,000 from a Houston-based businessman named Albert Fase Kaleta, on whom SEC announced litigation for operating a $10 million Ponzi scheme. Masterpiece Investments is yet to make any kind of financial disclosure. Clear System, on the other hand, has no cash and a negative equity of $24,000. Trading at $5.00, the merged entity is valued at around $400 million. For a company of such a magnitude, the research report says, the net income should be at least in the range of $5 to $10 million a year. Seeking Alpha questions Masterpiece’s need to have a $300,000 loan while being a multi-million dollar company. The report also seeks justification from Masterpiece for the reverse merger and listing in the OTC market, and wonders why Ghiglieri has outstanding tax liens from his other ventures when Masterpiece is so profitable.
Based on the terms of merger, the undisclosed free trading float will be 11,750,000 at a cost of $0.004. The document also refers to a Toronto-based entity named Mercator Associates, LLC as the broker behind the liquidation at over $5.00 per share.
With such a report in the limelight, Clear System’s announcement to enter into a memorandum of understanding to acquire CI Holdings had practically no positive effect on the share price. CI is the holding company for Chiurazzi Internazionale S.r.l., an Italian corporation.
The battered stock momentarily recovered to $4.48 after dipping to a low of $2.65 in the first two hours of trading. However, the undeterred selling until the end of the day resulted in the share price plunging to $3.75, down $2.32 or 38.2% on a volume of 229,569 shares.