Receiver sorting out books at LV technology company

Grace Leong

Wednesday, May 10, 2000 | 10:19 a.m.

Four shareholders of Instant Holographic Imaging Inc. of Las Vegas, accusing its president and co-founder Jeff Allen of gross mismanagement and illegally seizing majority control, won a court order to appoint a temporary receiver to preserve corporate assets and resolve disputes that grounded its operations.

Led by Britton Zabka, Instant Holographic's other co-founder, shareholders Investor Resource Services Inc., Aurora Holdings Inc. and Ocean Marketing Corp. sued the Las Vegas company in Clark County District Court as a preemptive move against alleged threats by Allen to sue them if they opposed his control and to use $250,000 of the company's funds to pay for his planned litigation.

Allen and the shareholders blamed each other for mismanaging and misusing company funds meant for developing the "holographic printer" technology that Zabka pioneered, and failing to keep proper accounting records.

The suit said Zabka's invention is a "major breakthrough in the holographic industry with many potential commercial applications." The technology enables an optical printer to make static holographic images that could be embossed on credit cards.

Allen, in a Feb. 25 notice to the shareholders, accused Zabka of squandering the company's funds, failing to build the printer or produce credible records of his expenses and progress.

But the shareholders' suit said the firm's internal affairs are "in extreme disarray" because of disputes over the identity and number of persons serving on the board and those holding company stock.

District Judge Michael Douglas last month appointed accountant David Chavez as receiver to "provide a full and complete inventory of all estate, property and effects of the corporation." The order also vests Chavez with the authority to access all company records and take possession of its assets.

Chavez said he expects his report to be completed by the end of the month at the earliest if he completes his fact-finding by May 15.

"We've issued requests for copies of checks and agreements and should get some answers by May 15," he said. "The report should be completed by the end of the month or it may take a couple more months depending on when I get the information I need. But we now know where the bank accounts are and who the players are."

Allen's attorney, Silvio Nardoni said: "We didn't contest the appointment of a receiver. In fact we need someone objective to examine the records, find out how much is misspent or not spent, and who are the owners of corporation stock."

"The company is in disarray because of poor record keeping on the part of many people, not just Allen. The receiver's report will outweigh many times over what the shareholders have alleged," he said.

The shareholders, which said they have a combined ownership of 49.7 percent of the company, accused Allen of a "blatant attempt" to seize majority control at an allegedly unauthorized meeting of the board of directors he held just a day before a scheduled special meeting of shareholders on March 6.

The March 6 shareholders' meeting was adjourned to a later date because of the shareholders' fight with Allen, the suit said.

The shareholders said Allen defrauded them and violated Securities and Exchange Commission regulations at meeting the day before the March 6 shareholder's meeting by issuing 200,000 shares at only 5 cents a share to one of his controlled entities and awarding 57,920 shares to Linda Siegel, an alleged director, for past services without the shareholders' consent.

The shareholders, who said they paid $2.50 a share under a private offering of company stock that generated up to $390,000 to date, alleged Allen took the money but hasn't yet issued all the stock to the appropriate shareholders.

The shareholders said Allen used corporate funds for personal expenses such as groceries, made "unsubstantiated withdrawals from corporate bank accounts of approximately $3,500 per month," and misused corporate funds to retain Nardoni as counsel for his defense.

Nardoni, however, denied the allegation. "I've never received one penny of money belonging to Instant Holographic."

They also accused Allen of holding up the company's listing on the Nasdaq stock exchange by failing to complete a financial audit, and blamed the firm's inability to conduct business on Allen and Siegel's alleged "collusion, mismanagement, misfeasance, malfeasance and nonfeasance."

Grace Leong is a business writer for the Sun. She can be reached at (702) 259-2326 or gracel@lasvegassun.com