Tuesday, March 28, 2006

The Tale of the Serial Recidivist

The intrepid Irving Kott is at it again.

Some may remember him from his days as the "de facto CEO" at JB Oxford & Co. He pled guilty to two charges of concealing material facts regarding his financial relationship to the firm's publicly traded parent company in 2004.

Others may remember Kott as the putative owner and major player in the now-defunct First Commerce Securities. An Amsterdam-based brokerage firm, First Commerce was accused of using high-pressure sales tactics to push dubious securities before the company was raided by Dutch authorities in 1986 and forced into bankruptcy the following year. According to Dutch prosecutor Jan Koers there was "overwhelming evidence that Kott owned the company and played a major role in running it."

Some would suggest that at that point, Mr. Kott should have listened to W.C. Fields:

"If at first you don't succeed, try, try again. Then quit. No use being a damn fool about it."

But Mr. Kott would have none of that. His latest adventure involves Mamma.com, the self proclaimed "mother of all search engines."

In Montoya, et. al., v. Mamma.com, et. al., 05 Civ. 2313 (S.D.N.Y.) (lead plaintiff / lead counsel order), Plaintiffs brought an action for violations of sections 10(b) and 20(a) of the Exchange Act. The crux of the complaint appears to be that during the class period, Mamma.Com was "secretly controlled, influenced and/or owned by Irving Kott." The failure to disclose this relationship, plaintiffs allege "would have materially impacted the share price" of Mamma.com securities.

The good news for plaintiffs is that Judge Baer agrees. In this opinion, Judge Baer denied the motions to dismiss filed by four of the defendants, holding:

"While senior officers do not, solely by virtue of their positions, always have access to information indicative of fraud, plaintiffs allege here that Kott personally controlled the company's affairs. Goldman, Bertrand and Fauré surely had a 'duty to monitor' who was actually running the company that they purportedly managed. Therefore, plaintiffs' allegations are sufficient to plead scienter."

Though named as a defendant, according to the opinion, Mr. Kott chose to answer the complaint instead.

1 comment:

Anonymous said...

Joseph J. Duggan, Kottt's Financial Engineer....wht about him he was the JB Oxford put it together for Kott man....he was with Hariston.....