CEO's financial freefall mirrors Ram Venture's: creditors pursue chief of bankrupt firm, claim financials overstated

Arkansas Business, Dec 18, 2006 by Mark Friedman, John T. Lewis

"It was printed ... that we were going to sell registered securities, which we weren't," Lewis said in his bankruptcy hearing held Nov. 30, 2005. "We were going to sell unregistered securities."

The brief item in the newspaper said, "Stem Agee is the exclusive agent to sell up to $20 million in Ram's unrestricted common stock." The company's news release said Stern was hired as "our exclusive placement agent of up to $20,000,000 of our restricted common stock."

Lewis said Stern Agee's office received a lot of calls after the publication of the article from investors "wanting to participate." Stern Agee's compliance officer said that since it was supposed to be a private placement in a public company, the announcement was a violation of SEC regulations that necessitated a delay of six months.

Lewis said Ram Venture failed as a result of Stern Agee's decision.

But a Stern Agee official, who asked not to be named, suggested that Ram Venture's press release was the problem, whether or not it was correctly reported in the newspaper.

"We were doing a private placement and all of a sudden it was almost made public that they were doing the offering," he said. "So our legal counsel advised us that we were boxed out for six months."

Even if Stern Agee had raised the money, it would have been used for the acquisitions rather than to improve Ram's desperate cash flow situation.

In either case, Ram couldn't wait six months.

Revenue plummeted 49 percent from $3.3 million in fiscal 2003 to $1.63 million in fiscal 2004, which ended March 31, 2005. However, the company's net loss improved from $5.1 million in 2003 to $4.4 million in 2004.

Collapse and Aftermath

Lewis resigned from Ram on March 3, 2005, without another job lined up.

In a special board meeting, Lewis said that "he was not satisfied with the company's lack of progress during his tenure," according to a Ram SEC filing.

Jeff Harris, who had been Ram's president, was promoted to CEO.

Without Lewis, Ram was falling deeper into debt, and other problems surfaced. ESPN2 canceled "Wildlife Quest" because of a change in programming at the station.

But the biggest blow came when Ram defaulted on March 31, 2005, on two loans from Delta Trust & Bank totaling $2.3 million.

Delta had a lien on Ram's property and seized all of it. Natural Gear was sold to EFO Holdings, the JBJ Lending Co. subsidiary, which is now running Natural Gear.

Even after the sale, Ram still owed Delta Trust $1.07 million. (Delta sued Ram and received a judgment for the amount in September 2005.)

On Oct. 10, 2005, Lewis filed for Chapter 7 bankruptcy protection, listing $980,000 in assets.

His main asset is his house in the 1800 block of North Monroe Street in Little Rock, which was valued at $650,000. Other assets include firearms--two Berettas, two shotguns and three pistols with a total value of $6,500.

Lewis listed $16.4 million in debt. Nearly all of it--$15.6 million--was to creditors holding unsecured claims. Among the creditors holding the largest claims are: