Carl Icahn sues Philip Falcones Spectrum Brands Inc?

I just wanted to point out Carl Icahn’s relationship to Harbinger Group Inc as I personally have found have been intrigued by the relationship between the two.  For example Icahn’s purchase of 300 million worth of Debt in Falcones LightSquared, as well as a rumor Icahn brewed himself in that he was going to buy Falcone out of his Ferrous Resources stake.

 I found a lawsuit where Areh(Ray) LLC is suing Spectrum Brands Inc           

Areh(Ray) LLC vs. Spectrum Brands Inc

 Dane County Case Number 2012CV002813

Laundering Securities: Harbinger, Spectrum Brands, Tong Lung Metal Industry Co. Ltd, and Stanley Black and Decker

Harbinger Group Inc is nothing but a special purpose vehicle constructed for the purpose of dumping illiquid, unwanted securities held by Falcone which he manipulated higher via complex share schemes, Enron style accounting, and things like payments to Fitch Ratings..  I believe it goes one step further however, and acquisitions such as the Stanley Black and Decker, are actually intended to acquire real and synthetic exposure to certain asset classes for which certain hedge funds are looking to short. 

This is how it was done in 2007 I've come to learn in my research, and I see the exact same thing happening now.  Same lines of business, same corporate structures, same types of mergers and joint ventures, and same corporate emphasis on expanding the balance sheet with debt and equity with no regard for long term survive. The behavior of insiders, patterns in share prices, and the same public misinterpreting the actions of certain hedge funds and their 13F-HR just as we saw 5 years ago.

.

Pay to Play with Fitch Ratings and Harbinger Group Inc.

The ratings analysts over at Fitch must be sniffing glue or on the take, or both.  I don’t see any other plausible explanation for their failure to downgrade this disaster.

What I’d like to do is highlight events, pending litigation, and contingent factors which have been incurred over the last 12 months while Fitch has affirmed its B rating..  When you consider these points together, a credit downgrade seems way overdue.  

From November 2011 until now, Fitch has held Harbinger Group Inc rating at ‘B’.  

If Harbinger Group Inc goes, Spectrum Brands goes

I wanted to point out a couple technicals I’m watching on Spectrum Brands, a company I have written about on this blog in regards to major accounting and business concerns.

We have seen 6 months of higher lows so, watch last months low of 42.75.  What I really is if we break 42.75, hold 40.00, then rally back over 43 for a few days...then the next time we take out that low could be a good time to add some shorts.

Donald Shekels

Analyst for Hire

Philip Falcone’s Private Funds Corporate Structure.

If you thought the light squared structure was complicated, take a look at the structure of his private fund.

Accounting Games: Spectrum Brands and Harbinger Group Inc.

It’s the same game as it was back in 2005-2008 with Falcone and the related parties in Spectrum Brands.  I went back in the fillings and charted the revenue overlayed with net income for the 2nd chart, and the 1st chart is Goodwill and Intangibles.

I’ve written in previous entities about some of the ridiculous accounting gimmicks this concern uses to inflate revenue figures (capital expenditures).  Anyways what I want to display graphically is how it played out back in 2006, 2007, and 2008 where they started writing down the Goodwill and Intangibles they had been tacking on in years prior, then how the game was up in feb 2009 when they filled for bankruptcy and wiped out equity holders.

 Here is a chart I found of the bond ratings I thought was interesting to look at with the previous two.

The mergers and acquisitions I mentioned above which resulted in bogus accounting fluff (but not before insiders sold millions in stock), I figured i'd present a couple of the timelines here.

Harbinger Group, I Smell Smoke.

An interesting word I came across recently used to describe the role of certain hedge fund managers undertaking the tall task of rebuilding structured finance products which have come into expiry: “Revisionary”. 

Repackaging pools of shit, laundering them into the market, and then marking them up as close to outer space as possible before  structuring a short and dumping it all in grandma Millie’s retirement account... sounds like a 5 year revision.

As if there wasn’t enough evidence that shareholders were going to get steamrolled... then comes that EXCO 8k.  Oh My Gawd.  When conflicts of interests are disclosed to this degree, it might as well be a license to steal!

Its starting to look to me like the end is near.  The thing is literally a house of cards, alive only due to luck that its managed to stay beneath the radar under the radar this long.  Although that may have changed as of yesterday,
Harbinger Group's Sum-of-Parts Does Not Add Up seekingalpha.com

I will find some time to write more perhaps this weekend, in the meantime here are some charts and pictures you might find interesting.  There is so much here as far as danger it makes me laugh.

Frontstreet Re...The smell of fish and unreturned emails.

I find it a bit strange I have been unable to get answers in regards to the investment adviser of Fidelity and Guaranty Life's Annuity Plans as well as the creation and capital of Fronstreet Re. Someone should call the Regs.

Unreturned Emails to Frontstreet Re, F and G Life and Harbinger regarding Frontstreet Re:  

John Tweedie at Frontstreet Re

Jean Lemay and Will Rinehimer at Frontstreet Re

Terra at Harbinger

F and G Life (Bounced Back)


A link to Frontstreet Re's website.
http://frontstreetre.com/cgi-bin/index.pl#

Harbinger Group Inc, Spectrum Brands, and Philip Falcone’s next LightSquared

Harbinger Group Inc, Spectrum Brands, and Philip Falcone’s next LightSquared

I really have to say the more I look into this the more it looks to me like Falcone got his hand caught in the cookie jar.  In this report I will highlight some fillings and market assumptions I find to be a problem.  I have put in bold and underlined the relevant points in the paragraphs to save time.

I suggest you read my first write up on HGI, SPB, and F&G first.  

The Bear Case against Philip Falcone, Harbinger Group Inc, and Spectrum Brands

I’ll jump back and forth but a couple highlights scattered within:

• A fully disclosed rigged game; insiders have absolute control, motives counter to shareholders, almost zero fiduciary duty owed to equity holders, players with history of self dealing, and the comical disclosure about destroying documents.
• What could/will start the domino affect and lead to collapse of house of cards.
• Is Falcone to Fidelity and Guaranty Life like Jon Corzine was to MF Global?

Urban Sprawl in China... Pictures

Just had a friend in China, shared some pictures taken from the window of the bullet train from Beijing to Shanghai.  He said these real estate projects were far outside the city and in the middle of nowhere. Quite interesting to see.  Here's a the train route mapped out in Google maps if your interested. Google Maps

CLICK TO ENLARGE PICTURES:

The Bear Case against Philip Falcone, Harbinger Group Inc, and Spectrum Brands

The Bear Case against Philip Falcone, Harbinger Group Inc, and Spectrum Brands 

Three Parts:

1.       Philip Falcone

2.      Harbinger Group Inc (NYSE:HRG)                             

Last                        9.71

Mkt cap                1.36B    

P/E                           -

52 week               2.75 - 10.85

3.      Spectrum Brands Holdings, Inc.(NYSE:SPB)

Last                        47.50

Mkt cap                2.44B

P/E                         275.99

52 week               23.04 - 48.22

Part 1:  Philip Falcone

A Dirty Insiders Playbook + 3 New Equity Targets ($YUM, $SBAC, $SBC)

It is my opinion that that things like Hedge Funds CDS, Mortgaged backed securities, and worthless debt obligations like student loans are actually structured and held corporate balance sheets, unbeknownst to most.  The Banks, Hedge Funds, and Corporate Insiders I believe, work in concert on a mutually beneficial level, for the purpose of rigging the game.

This is how it tends to look;

1.  A group of hedge funds all purchase equity interests in a listed company.

2.  The hedge funds elect new board of directors

3.  The directors replace management with someone of low moral regard who has a fetish for excessive leverage. 

4.  Banks extend a line of credit to the company

5.  Company starts aggressively making asset purchases and entering into agreements (Land/Coal/Trees/Rights, etc), with either third parties or entities controlled by insiders themselves.

US-Listed Chinese Frauds…Connecting the US Hedge Funds and Banks.

Do you think it’s a coincidence that Michael Burry, George Soros, and Passport Capital—all big names from their short bets in the 2007 housing collapse-- all just happen to come across and invest in Focus Media Holdings, while all hell was breaking loose here?  For those not familiar, Focus Media Holdings is accused of being yet another Chinese fraud by Muddy Waters.

Focus Media plunges on Muddy Waters allegations | Reuters Nov 21, 2011

If you have read The Big Short by Michael Lewis, you’ll agree Michael Burry is a very intelligent guy who does his own homework.  He, like myself, actually reads through these obnoxiously long securities fillings (globally) most people ignore.   Burry was also one of the first to actually put on these CDS housing trades; and with billions in exposure and his clients breathing down his neck, do you really think he gave a fuck about a Chinese company making LCDs?

From the Start, Melco Shareholders stood no chance...Now its time to lose

From my Melco Macau Macro Report I included a few things from the fillings which supported my theory that this company never intended to make money for its shareholders; instead it was a tool for money laundering, corporate side deals, and the final garbage dump for the other side of Hedge Fund trades betting against the property prices in China and Hong  Kong.

A few old filings of Las Vegas Sands / China Sands, skeletons in the closet?

I had spent so much time on Melco when really, Las Vegas Sands looks to be an even bigger POS!  If what I suspect here is true, it should be much easier to prove/show than it has been with Melco, that being these publiclly traded casinos are being used as dumpsters for the other side of hedge fund real estate trades and toxic paper no one wants.

A couple fillings which caught my eye in the breif scan of the companies filling:   

Could Steve Wynn be assisting banks in the shorting of $Wynn? Via Trust and corporate structuring, just like Hedge Funds do it? Why not? Illegal?

I just wanted to throw up a few of these corporate structures so you can get familiar with the games I think these guys are playing…I haven’t looked into Las Vegas Sands or Wynn extensively but from what I have come across as well as the cross over with Melco, I feel both are destined for steep declines. 

Steve Wynn and Sheldon Abelson have equity holders interests in mind about as much as Philip Falcone did when he manipulated and dumped Lightbridge & the package of residual housing bets that came with it on teacher pension funds.

If you follow the news about the tiff between Wynn and Kazuo Okada, how about this…they are in cahoots and this was a strategy to loosen up some shares.  Didn’t Wynn lie about getting divorced a couple years back, for the same purpose?

Famous CDO Manager and his Biz in Melco's Subsidiaries...Donald Puglisi with Puglisi & Associates

As you can see from the article below this guy's cup of tea is subprime backed CDO’s.  I find his name, Donald Puglisi, in Melco’s  fillings as far back as 2006; so my question is: how likely is it that this guy wasn’t hired for his Structured Finance expertise?  Take this together with the billion dollar “Project”, distressed debt players Oaktree and Silverpoint capital undertook for Melco, along with investment Banks lending and structuring deals for melco which bear a strikingly resemblance to how CDO’s are financed, ramped up, and managed      
     ***9-6-2012  Update for Muddy Waters (See below)

Busy Building Synthetic China REIT CDO's on the Shanghai and Shenzhen Stock Exchanges

Below is a recent article about the Shanghai and Shenzhen markets—where pledging equity in exchange for loans is HOT! I suspect I’m one of the few outside the investment banking and ISDA crowd who’s figured out….this is exactly how they constructed the US housing short back in 2005-08!  What kinda made me laugh was when I saw that one of the board of directors of Enron is Chairman of one of these property companies (When I draw out the capital flows, entities, name changes, and downright fraud in the financials you'll understand why they brought in the experts!.....more on that good stuff later). Translated: 58 Housing prices listed pledged 116 million shares of developers robbing Peter to pay Paul

Letter to Michael Lewis regarding CDO Manager, Harding Advisors, Wing Chau’s defamation suit.

NOTE:  I wrote this with the intention of sending it to author Michael Lewis; however due to abnormal difficulty in locating his contact information I decided to post it here with the hope one way or another he comes across it.

Dear Michael Lewis,

You're book The Big Short was not only excellent, it has been instrumental in the side project I'm currently working on.

I saw that you are being sued by Wing Chau and this bothered me.

Page 141 of the hardcover Big Short; when Eisman is shocked to find out Wing Chau had sold his portfolio of CDO’s and wasn’t carrying anything.   A lot of questions remain, where the housing paper losses went. It is my opinion based off my research; those losses were fraudulently disguised and merged onto the balance sheet of certain companies; for example WCI Communities.

What the Big Boys are looking at

Here are two examples of what these guys are shorting (Click to Enlarge)

It’s a no brainer if you ask me; I don’t think it will take much of a slowdown in China for this market to run into trouble.  If you take a
forensic look at what the Hedge Funds, Banks, and Structured Finance
Arrangers are doing to the underlying market; infecting it with structured finance schemes which act like a cancer, at the same time act as fuel for the asset bubble—similar to what Magnatar was accused of doing back in 2007.

I almost hate to call these guys game out because it’s a great trade and I wish I had the means to put it on (in an ethical, honest fashion).  That last part I don’t believe is possible for these guys as they are just too big; instead they resort to fraud, deceit, and downright thievery in order to build a market large enough for them to short.  

The methods in which the Banks, Funds, and Arrangers employ for this will be the topic of future entries.

Feel free to contact me with any questions.

Donny

John Paulson Connection to Madoff…

I'm very interested in the story of John Paulson.  The brilliance that he seems to get assigned is completely counter to the vibe he throws me.  Listening to his congressional testimony and the occasional story in the paper he never really struck me as a sharp guy; especially compared to a Soros, Faber, or Jimmy Rogers.

From the Big Short,

China Property CDO's...Merged On You're Balance Sheet...

Despite my efforts of sending my report to a large number of fund managers in Melco, global regulators, company auditors, reporters, and a good number of the Funds in the ISDA club, the stock seems little interested.  

What did Deutsche Bank and Morgan Stanley do with that Synthetic?

I mean just read how ridiculous this is.  A lease hold?  Its painfully obvious DB and ML, are advancing $ for the ramp up of a CDO.  I'll write some commentary on this soon, along with a big relationship map of how Melco connects to the HK and Chinese property market the hedge funds are currently shorting.

http://www.hkexnews.hk/listedco/listconews/SEHK/2007/0601/LTN20070601056.pdf

Macau Gaming license was revoked, Whats the rest worth?

What is the Equity of Melco, Las Vegas Sands, and Wynn worth if its Macau Gaming license was revoked for violations of law, thus subjecting it to asset seizer by the Macau Government?

Real simply: (From Melcos 20-F)

Propublica.org Las Vegas Sands Article: Inside the Investigation of Leading Republican Money Man Sheldon Adelson

7-16-2012

Propublica.org Las Vegas Sands Article:  Inside the Investigation of Leading Republican Money Man Sheldon Adelson

This was an great piece.  Something I found especially interesting was that Leonel Alves, being on the Macau legislative board, was outside council for Las Vegas Sands and billing exorbitant rates.  Worth nothing is that back in May 2006, there was a deal where Melco paid a down payment as part of a partnership with an entity managed by Angela Leong On Kei, member of Macau Legislative board, wife of Stanley Ho, and mother of Lawrence Ho (CEO of Melco).  The deal was terminated 40 months later: thus the whole thing seemed to just act as a 100M HKD loan, to the entity Angela Leong On Kei represented. 

What is also interesting is that as you can see from the 2009 filing, Angela was on both sides of the deal, which seems itself inappropriate, not to mention the possible foul play with that deal in regards to her being on the Legislative board and the purpose of the transaction to acquire concession rights.

9-17-2006 Downpayment                     http://www.hkexnews.hk

Termination Dec 2009                          http://www.sec.gov

For more of this and things like the connection between Stanley Ho and Sino-Forest, I recommend you read my report posted here titled IHS Research Report Macau.

http://www.scribd.com/Russian_Research/shelf

Donald Shekels

Email:  IHS.Research@Mail.Ru

Twitter:  @Donald_Shekels