LITTLE ROCK — A Pulaski County Circuit judge unfroze the assets of a Sherwood-based company that state regulators claim is a front for a stock scam.
Judge Timothy Fox on Thursday also declined a request from the Arkansas Securities Department to appoint a receiver to manage Clean Technology International Corp., which is developing a cleaning device for industrial wastes.
At the request of agency investigators who claim Clean Technology president William Darrell Lainhart is behind a stock swindle that could top $15 million, Fox suspended the company's assets on July 30, also freezing the assets of Lainhart and his wife, Irene Mattie Fay Lainhart, along with another company and two trust funds they are said to control. There's no dispute that the machine exists, with investors testifying the device is still in development.
Regulators claim Darrell Lainhart, a former investment broker, sold stock in Clean Technology, but diverted the funds for his personal use. Lainhart sold shares ranging from 67 cents to $5 a share with promises the stock's initial public offering would start at $20 to $25 per share and rise quickly to $100 to $200 a share, department investigators claim.
With Thursday's ruling, Fox ordered all of the couple's assets to remain frozen indefinitely, with the exception of Darrell Lainhart's Social Security benefits. Fox had already allowed Mattie Lainhart to access her Social Security and retirement income.
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Thursday's 2/2-page order also bars the couple, either themselves or through representatives, from buying and selling any securities or acting as brokers or agents. Clean Technology alsois ordered to provide the court within two weeks a list of all company shareholders, including how many shares each holds and when they were purchased and at what price.
Fox's ruling also requires the Lainharts and the company and trusts alleged to be controlled by them, Diamond Capital Corp., Capital Heritage Irrevocable Trust and Capital Heritage Revocable Trust, to provide the court with an accounting of their assets and details of all funds received from the purchase of Clean Technology stock. The report is required to include the names of purchasers, how much they paid and when, with a description of how those moneys were used.
The Lainharts, both 73, claim the allegations stem from an ongoing shareholder dispute that has led to court battles in Nevada, Texas and Puerto Rico. They had challenged the request to put a receiver in charge of Clean Technology, submitting their own candidate and asking the judge to appoint someone who would help develop the company.
In a filing , Ken Shemin, the attorney for the Lainharts and the companies, argued that the Securities department has taken too long to act on complaints. Also, regulators are restricted from acting if buyers are offered the opportunity to return their shares, and Clean Technology twice made that offer before 2002, which binds regulators to a three-year statute of limitations, Shemin argued in a three-page brief.
State regulators dispute the statute of limitations applies to the commission's duties to enforce regulations preventing the sale of fraudulent securities, in a 16-page brief to support their allegations.
Almost all of the Lainharts' income, aside from Social Security and retirement payments, comes from illegal sales of Clean Technology stock, state regulators argue in their brief. The couple used the money to buy property in Hot Springs, guns and antique cars, and to refinance their home loan and a hotel near Malvern, according to the filing.
Arkansas, Pages 17 on 08/30/2009