Risky Venture Seeking Dockworkers’ Retirement Funds

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Risky Venture Seeking Dockworkers’ Retirement Funds

By DAVID GREENBERG

Staff Reporter

A group with plans to start a trucking company at the ports of Los Angeles and Long Beach has raised $3 million, mostly from unionized dockworkers who are being encouraged to raid their 401(k) retirement accounts for an investment that is described in the prospectus as high risk.

The stock sales, led by a self-described investment banker with no securities license and several names, have been promoted via mailers and informational meetings at the Ports O’ Call Village.

While there is no indication that the private offering itself is illegal, the prospectus is filled with unusual provisions and claims.

Among the examples:

– If all of the targeted $12 million is raised, company insiders will own about 80 percent of the company, despite having contributed few hard assets. Typically, financial investors would take a much larger stake in a start-up than 20 percent.

– The company projects sales of $36.7 million this year and ramping up from there even though it has yet to begin operations, has not signed a lease on a container storage yard and has no customers.

– A paragraph marked in bold type on the second page of the prospectus encourages investors to withdraw funds from their 410(k) retirement accounts even offering to offset the 10 percent early withdrawal penalty with a 10 percent discount on the $6 per share offering price.

“If it were a friend or relative who was going to invest their 401(k) money in this venture, I would stop what I am doing and drive them to an insane asylum,” said Jeff Winikow, a Century City attorney specializing in employee rights. “If you have to dip into your 401(k), you shouldn’t be investing in something this speculative.”

Under Securities and Exchange Commission rules, investors must be “qualified” to buy into private offerings that will not be registered with the SEC. The purpose of these rules is to shield unsophisticated investors from highly risky offerings.

By virtue of their high net worth and high incomes over $100,000 a year, in many cases many unionized longshoremen qualify.

“We tell the people basically, if you want to take a high risk and put in a small portion of your assets, then do it,” said David Thomas, president of Irvine-based All American Capital Corp., which has taken the lead role in promoting the offering.

Thomas, who serves on the board of the start-up company, Allied Port Transporters Inc., minimizes the risk involved.

“To me, this is a slam dunk winner because we have hired the best people in the United States that we can get and because the unions are working cooperatively with us,” he said. “We don’t have any competition because we’re the only ones running 24 hours in the harbor.”

Thomas claims that the company has already signed contracts with the longshoremen’s union and the International Brotherhood of Teamsters as it seeks to exploit its union connections with dockworkers at the ports.

But a local Teamster official denied last week that any agreement with Allied Port Transporters had been reached. “If someone at the company told you that, it’s inaccurate,” said the official, who requested anonymity. “Not only is there no contract, there are no formal negotiations.”

Plans call for the company to have 200 trucks in operation within 30 days many of them aging vehicles purchased from independent owner-operators. As of last week, only 27 trucks had been purchased.

No securities license

Thomas, who claims in the prospectus to have headed “leading investment banking firms” in recent years, admitted that the only investment-banking firm he has headed recently is All American Capital, which is not licensed by the National Association of Securities Dealers. He added that in 1983, he co-founded another company, American Central Stock Exchange Co., to write laws for a stock exchange that was established in Panama.

The prospectus also indicates that Thomas has “successfully assisted over two-dozen private placements and IPOs.” In an interview, he said the IPOs include Agouron Pharmaceuticals Inc., U.K.-based Bitter Automobile and PharmaPrint Pharmaceuticals Inc.

Only PharmaPrint was named in the prospectus. That firm, where he claimed to serve as a director, was trading for 1 cent a share last week on the pink sheets.

Several companies where Thomas is listed in the prospectus as having served as a director, in addition to “many other successful companies,” did not turn up on Web searches or searches of the Factiva database. They include Century National Bank of Texas, Newport Film Producers and Spaulding Sports Refresher.

Another company listed is Ozelle Pharmaceuticals, where Thomas said he was a director in 1996 and 1997. The Food and Drug Administration barred Ozelle in 1999 from shipping an extract of the poisonous oleander plant because it hadn’t proved that the extract was safe. In May 1997, Ozelle issued a statement promoting the extract as a “new weapon against cancer and AIDS” that was “especially effective against prostate and breast cancer.”

Thomas said the herbal treatment has been used successfully in Ireland and Belize, and he blamed the FDA for not recognizing the importance of the medication.

He said he saw patients dying in an Irish hospice who were then cancer free after 90 days after they began herbal treatments. “If you could see what I saw in Ireland, you would wonder sometimes why the FDA does what it does,” he said.

There also is the matter of his name. In state incorporation papers for All American Capital, Thomas lists it as “David Jack Thomas,” but in the offering prospectus, it is listed as “Philip David Thomas” in one place and “David Thomas” in another.

He told the Business Journal that his full name is Phillip Lee David Jack Thomas, a combination of names he kept after learning as a young adult that he had been adopted.

All things to everyone

According to the prospectus, the three largest shareholders of Allied Port Transporters are Chief Executive John P. Trutanich and Chief Operating Officer Rudy E. Aguirre, both listed as longshoremen, and Peter J. Ralli, executive vice president. Each holds a 31.8 percent stake in Allied Port Transporters, a Nevada corporation, through three California corporations, each controlled by one of the insiders.

Trutanich joined local 13 of the International Longshore & Warehouse Union in 1965, according to the prospectus, before opening investment advisory and real estate businesses.

Aguirre has served as a chief supervisor clerk at the ITS Shipping Terminal at the Port of Long Beach for the last 4 & #733; years, according to the prospectus.

Ralli once worked for the L.A. City Attorney’s Office and was once a financial advisor for Morgan Stanley Dean Witter Inc., according to the prospectus.

The group is touting its business plan as a solution to massive congestion stemming from the movement of containers within and out of the Ports of Los Angeles and Long Beach.

APT ultimately wants a fleet of trucks that use cleaner burning fuel. Only trucks 5 years old or newer meet current federal Environmental Protection Agency requirements calling for easy conversion to low-sulfur diesel fuel.

“What we’re trying to do is something good for the community, the terminal operators and shippers by lowering pollution, moving cargo more quickly and getting trucks off the freeways during peak hours,” Ralli said.

Insider’s advantage

Allied Port Transporters is also trying to seek an edge in the low-margin trucking business by cutting down waiting times at the ports.

One method is to run an after-hours operation. Around-the-clock operations have long been a goal of many port officials and residents, but progress has been slow due to cost-sharing issues and the difficulty in coordinating the many parties involved.

Allied Port Transporters plans to hold some of the cargo at its own storage yard, but hasn’t yet signed a lease, despite plans to have a full-blown operation under way by April 1.

The fledgling business is finding appeal with some dockworkers who are being asked to pony up at least $3,000 each as a minimum investment.

Domenick Miretti, a 53-year-old longshoreman, said he was excited about the company’s plans early on and remains so because he said alleviating traffic congestion and pollution are sorely needed. But he said he hasn’t decided whether to invest because of the risks of a start-up company and the fact that anti-labor factions might try to stifle the company’s growth.

“The industry at large might not welcome them with open arms because some of the folks out there feel that what they might be doing is expanding ILWU jurisdiction,” said Miretti. “The shippers and some of the terminal operators would say, ‘Do we really want to get involved in this?'”

Winikow said that longshoremen “aren’t typically on an investment bank’s radar screen when doling out opportunities to get in on the ground floor companies. What I think might be happening is a dynamic where the longshoremen feel this is their opportunity.”

After two months, APT has sold about 500,000 shares at $6 each, totaling about $3 million with 80 percent of it coming from ILWU members and their families, Thomas said. “Most of the stock is sold to people who know what’s happening on the docks,” he said.

There are significant risks.

The hiring of unionized drivers sets the new company’s payroll at nearly double that of a firm that uses independent owner-operators in an industry with notoriously tight margins. The company also plans to factor its receivables sell them to a financing company at a 1.25 percent discount cutting into margins even further.

Miretti said if he does invest, he will not be digging into his retirement account, citing the risk of an unproven company. He said most of the other longshoremen he knew were careful with their investments.

But he added: “Some invest their money poorly.”

– The company projects sales of $36.7 million this year and ramping up from there even though it has yet to begin operations, has not signed a lease on a container storage yard and has no customers.

– A paragraph marked in bold type on the second page of the prospectus encourages investors to withdraw funds from their 410(k) retirement accounts even offering to offset the 10 percent early withdrawal penalty with a 10 percent discount on the $6 per share offering price.

“If it were a friend or relative who was going to invest their 401(k) money in this venture, I would stop what I am doing and drive them to an insane asylum,” said Jeff Winikow, a Century City attorney specializing in employee rights. “If you have to dip into your 401(k), you shouldn’t be investing in something this speculative.”

Under Securities and Exchange Commission rules, investors must be “qualified” to buy into private offerings that will not be registered with the SEC. The purpose of these rules is to shield unsophisticated investors from highly risky offerings.

By virtue of their high net worth and high incomes over $100,000 a year, in many cases many unionized longshoremen qualify.

“We tell the people basically, if you want to take a high risk and put in a small portion of your assets, then do it,” said David Thomas, president of Irvine-based All American Capital Corp., which has taken the lead role in promoting the offering.

Thomas, who serves on the board of the start-up company, Allied Port Transporters Inc., minimizes the risk involved.

“To me, this is a slam dunk winner because we have hired the best people in the United States that we can get and because the unions are working cooperatively with us,” he said. “We don’t have any competition because we’re the only ones running 24 hours in the harbor.”

Thomas claims that the company has already signed contracts with the longshoremen’s union and the International Brotherhood of Teamsters as it seeks to exploit its union connections with dockworkers at the ports.

But a local Teamster official denied last week that any agreement with Allied Port Transporters had been reached. “If someone at the company told you that, it’s inaccurate,” said the official, who requested anonymity. “Not only is there no contract, there are no formal negotiations.”

Plans call for the company to have 200 trucks in operation within 30 days many of them aging vehicles purchased from independent owner-operators. As of last week, only 27 trucks had been purchased.

No securities license

Thomas, who claims in the prospectus to have headed “leading investment banking firms” in recent years, admitted that the only investment-banking firm he has headed recently is All American Capital, which is not licensed by the National Association of Securities Dealers. He added that in 1983, he co-founded another company, American Central Stock Exchange Co., to write laws for a stock exchange that was established in Panama.

The prospectus also indicates that Thomas has “successfully assisted over two-dozen private placements and IPOs.” In an interview, he said the IPOs include Agouron Pharmaceuticals Inc., U.K.-based Bitter Automobile and PharmaPrint Pharmaceuticals Inc.

Only PharmaPrint was named in the prospectus. That firm, where he claimed to serve as a director, was trading for 1 cent a share last week on the pink sheets.

Several companies where Thomas is listed in the prospectus as having served as a director, in addition to “many other successful companies,” did not turn up on Web searches or searches of the Factiva database. They include Century National Bank of Texas, Newport Film Producers and Spaulding Sports Refresher.

Another company listed is Ozelle Pharmaceuticals, where Thomas said he was a director in 1996 and 1997. The Food and Drug Administration barred Ozelle in 1999 from shipping an extract of the poisonous oleander plant because it hadn’t proved that the extract was safe. In May 1997, Ozelle issued a statement promoting the extract as a “new weapon against cancer and AIDS” that was “especially effective against prostate and breast cancer.”

Thomas said the herbal treatment has been used successfully in Ireland and Belize, and he blamed the FDA for not recognizing the importance of the medication.

He said he saw patients dying in an Irish hospice who were then cancer free after 90 days after they began herbal treatments. “If you could see what I saw in Ireland, you would wonder sometimes why the FDA does what it does,” he said.

There also is the matter of his name. In state incorporation papers for All American Capital, Thomas lists it as “David Jack Thomas,” but in the offering prospectus, it is listed as “Philip David Thomas” in one place and “David Thomas” in another.

He told the Business Journal that his full name is Phillip Lee David Jack Thomas, a combination of names he kept after learning as a young adult that he had been adopted.

All things to everyone

According to the prospectus, the three largest shareholders of Allied Port Transporters are Chief Executive John P. Trutanich and Chief Operating Officer Rudy E. Aguirre, both listed as longshoremen, and Peter J. Ralli, executive vice president. Each holds a 31.8 percent stake in Allied Port Transporters, a Nevada corporation, through three California corporations, each controlled by one of the insiders.

Trutanich joined local 13 of the International Longshore & Warehouse Union in 1965, according to the prospectus, before opening investment advisory and real estate businesses.

Aguirre has served as a chief supervisor clerk at the ITS Shipping Terminal at the Port of Long Beach for the last 4 & #733; years, according to the prospectus.

Ralli once worked for the L.A. City Attorney’s Office and was once a financial advisor for Morgan Stanley Dean Witter Inc., according to the prospectus.

The group is touting its business plan as a solution to massive congestion stemming from the movement of containers within and out of the Ports of Los Angeles and Long Beach.

APT ultimately wants a fleet of trucks that use cleaner burning fuel. Only trucks 5 years old or newer meet current federal Environmental Protection Agency requirements calling for easy conversion to low-sulfur diesel fuel.

“What we’re trying to do is something good for the community, the terminal operators and shippers by lowering pollution, moving cargo more quickly and getting trucks off the freeways during peak hours,” Ralli said.

Insider’s advantage

Allied Port Transporters is also trying to seek an edge in the low-margin trucking business by cutting down waiting times at the ports.

One method is to run an after-hours operation. Around-the-clock operations have long been a goal of many port officials and residents, but progress has been slow due to cost-sharing issues and the difficulty in coordinating the many parties involved.

Allied Port Transporters plans to hold some of the cargo at its own storage yard, but hasn’t yet signed a lease, despite plans to have a full-blown operation under way by April 1.

The fledgling business is finding appeal with some dockworkers who are being asked to pony up at least $3,000 each as a minimum investment.

Domenick Miretti, a 53-year-old longshoreman, said he was excited about the company’s plans early on and remains so because he said alleviating traffic congestion and pollution are sorely needed. But he said he hasn’t decided whether to invest because of the risks of a start-up company and the fact that anti-labor factions might try to stifle the company’s growth.

“The industry at large might not welcome them with open arms because some of the folks out there feel that what they might be doing is expanding ILWU jurisdiction,” said Miretti. “The shippers and some of the terminal operators would say, ‘Do we really want to get involved in this?'”

Winikow said that longshoremen “aren’t typically on an investment bank’s radar screen when doling out opportunities to get in on the ground floor companies. What I think might be happening is a dynamic where the longshoremen feel this is their opportunity.”

After two months, APT has sold about 500,000 shares at $6 each, totaling about $3 million with 80 percent of it coming from ILWU members and their families, Thomas said. “Most of the stock is sold to people who know what’s happening on the docks,” he said.

There are significant risks.

The hiring of unionized drivers sets the new company’s payroll at nearly double that of a firm that uses independent owner-operators in an industry with notoriously tight margins. The company also plans to factor its receivables sell them to a financing company at a 1.25 percent discount cutting into margins even further.

Miretti said if he does invest, he will not be digging into his retirement account, citing the risk of an unproven company. He said most of the other longshoremen he knew were careful with their investments.

But he added: “Some invest their money poorly.”

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