Cornell Capital has always been on the slippery side of PIPE financing. Read the message boards and when Cornell Capital comes up there is rarely a positive word to be uttered. Apparently Cornell always seems to come out smelling like roses in their PIPE deals and is best known for the death spiral financing deals that have destroyed companies over the years.
As written previously by Matt Goldstein on TheStreet.com, (http://www.thestreet.com/_tscs/markets/matthewgoldstein/10255157.html & http://www.thestreet.com/_tscs/stocks/brokerages/10284937.html) Cornell has not been too far from the sights of the Securities and Exchange Commission in their investigations into PIPE dealings. Rumors have come and gone that Cornell was in trouble with the SEC and that some were looking to jump ship before the big wave struck them down.
So maybe the best way Cornell sees to avoiding any SEC enforcement action is to go out and pay big money to an SEC attorney out of the division of enforcement.
SEC Official Joins PIPEs Firm
By Chidem Kurdas, New York Bureau Chief | Thursday, June 08, 2006
NEW YORK (HedgeWorld.com)—Yorkville Advisors LLC, the manager of Cornell Capital and a large player in private investments in the public equity of small-cap companies, has hired Eric Hansen as senior legal counsel. Mr. Hansen worked for the Securities and Exchange Commission for 17 years, recently holding the titles of senior counsel and branch chief in the Division of Enforcement. During his SEC tenure he helped investigate instances of hedge fund fraud such as the well-known Lipper convertibles case Previous HedgeWorld Story and complex accounting problems at mortgage companies Fannie Mae and Freddie Mac.
Yorkville has gathered an exceptionally strong legal department that also includes former SEC attorney David Fine. Mr. Hansen will report to managing partner Mark Angelo.
Mr. Angelo said, in a statement, that fund pricing and valuation is one of the most critical challenges facing the industry and having Mr. Hansen's insight on this complex issue is invaluable.
The PIPE sector has been troubled by certain managers' manipulation of the market—several settled allegations that they took advantage of inside information to short-sell companies that were negotiating deals. The SEC has conducted a wide-reaching investigation into this type of abuse.
Jersey City, N.J.-headquartered Yorkville specializes in structured finance and is one of the most active investors in the field, with more than $1 billion in committed equity capital in over 100 U.S. deals.
CKurdas@HedgeWorld.com
What makes this so interesting is that the search Cornell made was one with the pre-requisite of SEC Enforcement Attorney on the resume. And the rumors are that Cornell is paying top dollar, high six figures, to get such a person.
So what is it, Cornell needs to escalate a possible $125,000 a year SEC Enforcement Attorney to a high six-figure salary to act as senior legal counsel? Is Cornell trying to buy a get out of jail free card with the SEC by hiring one from the agency in hopes he can pull some friendly strings and get the Commission to look the other way?
It will not come as any shock that this is all part of a timely settlement Cornell will undertake with the SEC on the alleged illegal activities involving PIPE deals. I can hear it now "Look guys, we cooperated and even hired one of your own to work us through our prior compliance shortcomings, be lenient on us for being proactive --- PLEASE."
Can it get any more blatant than this? Look at all the SEC departures over these past years and note how many are moving over to cushy jobs working at firms whose clients are these big Hedge Funds. SEC Director of Enforcement Steve Cutler, US Attorney Ken Breen, and now Hansen have all left their federal posts to take lucrative (cannot be turned down) offers from the Hedge Fund industry.