Wall Street financial executives scratch heads over Las Vegas company’s planned stock sale

Gary Thompson

Tuesday, Nov. 30, 1999 | 10:54 a.m.

The purported financial savior of Las Vegas Entertainment Network Inc. isn't letting an investigation of LVEN stock trading -- suspended since Oct. 18 -- derail his plans to sell stock in another suspect company.

Fred Cruz has filed a registration statement with the Securities & Exchange Commission saying his Countryland Wellness Resorts Inc. of Las Vegas is selling 10 million shares at an anticipated price of $18 to $23 a share. After expenses, the SEC filing said, Countryland expects to net at least $160 million.

But the prospectus names as underwriters some of the top investment bankers on Wall Street -- and they don't know anything about the proposed offering.

"Who?" responded Leslie Thompson, a spokesperson for Donald, Lufkin & Jenrette, when asked Monday if she was aware of the Countryland filing. "We've never heard of them."

DLJ, Morgan Stanley Dean Witter, and Salomon Smith Barney are listed as co-underwriters of Countryland's initial public offering, according to the SEC filing. But they all told Barron's financial weekly they don't know anything about the Countryland claim.

Cruz is a former podiatrist who lost his California medical license in 1965 following his conviction on conspiracy and grand theft charges.

He petitioned the California Board of Podiatric Medicine for license reinstatement in 1996, but the board denied his motion. It cited subsequent criminal convictions in Nevada and Wyoming and said Cruz had "made a number of false or misleading statements to the board."

Countryland's Nov. 19 SEC filing said Cruz "no longer has a license to practice medicine or podiatry as he is retired."

The new Countryland filing contains additional extraordinary statements. For example:

"Any death before that should be considered a premature death," the filing said.

Bally's and Paris are owned by Park Place Entertainment Inc., whose spokesman said Monday there are no such agreements with Countryland.

That 9 percent daily interest rate is more than 520 times the current daily rate paid on U.S. Treasury notes and would yield some truly amazing profits. For example, one dollar invested at 9 percent compound interest a day would grow to $45,779,574,134,957 -- or about $45.8 trillion -- in just one year, according to Bill Anthony, a financial consultant with Wells Fargo Bank.

Previous Countryland filings said the Indonesian bank guarantees are for $100 million each, so the taxes alone on Countryland's investment program would easily wipe out the accumulated debt of every nation on earth in just a year.

But there's no immediate danger Cruz and his aides will sell their holdings, since "our executive officers, directors and other security holders have entered into lock-up agreements with the underwriters."

"Without the prior written consent of Morgan Stanley & Co. Inc., none of us will, during the period ending 180 days after the date of this prospectus," sell and stock or options.

Again, Morgan Stanley told Barron's the investment banking firm has no deals pending with Countryland, let alone an executed lock-up agreement.

In an SEC filing it made just a month and a half ago, Countryland claimed it had assets of $2.4 billion. That filing valued the gold and silver reserves at $1.3 billion and said the company had "cash and equivalents" of $1.1 billion.

The "cash and equivalents" consisted of 11 $100 million bank guarantees from an Indonesian bank, the filing said, and "$22.3 million" of gold stored in a California warehouse.

"With respect to gold in storage" in California, the latest filing said, "the company has determined that the warehouse went out of business about three or four years ago and said gold deposit has been declared a casualty loss.

"In the opinion of the company counsel, the gold has been lost or stolen, and in any event is missing."

That isn't the only matter under investigation. According to the accountant who audited Countryland's earlier filings, the SEC has been looking into Cruz' filings for months.

And SEC and NASDAQ investigators are probing the purported $495 million "investment" Cruz made in LVEN, whose stock trading was halted after a rapid price run-up fueled at least in part by the news of his largess. Part of his investment called for Cruz to pay more than $101 a share for LVEN stock when it was publicly trading for a little over $1 a share.

The investigators have asked LVEN for information about the company, but LVEN officials have refused to respond to repeated requests for comment by reporters. It isn't known whether they've responded to the investigators questions, though LVEN stock trading is still halted.