A.C.L.N. Speaks Up, Somewhat

Belgian shipping company A.C.L.N.(ASW Quote - Cramer on ASW - Stock Picks) issued a news release Friday responding to some of the issues raised in this column and in an article in The New York Times regarding missing shares, the ownership of a ship it uses and discrepancies in its financial statements.

"These statements are not true and the inquiries being made by short-sellers to our business partners have been harmful to our business," CEO Aldo Labiad said in the statement.

On Thursday this column noted that as many as 2.2 million shares (2.8 million after all stock splits) held by entities controlled by Chairman Joseph Bisschops had vanished from the "principal and management shareholders" list in the company's Securities and Exchange Commission filings. The missing shares belonged to four of Bisschops' entities. In its statement, A.C.L.N. didn't dispute that the shares vanished; in fact, it said an additional 1.2 million shares from an additional entity may have been sold without advising shareholders. A.C.L.N.'s statement said Bisschops owned the shares derived from a power of attorney but that he no longer has an "economic interest" in those entities. Moreover, before last June's filing of the annual 20-F, the power was withdrawn, and after that, "these shareholders may have sold some or all of these shares," the statement said.

However, the company's answers raise questions of their own -- questions I submitted in writing to the company Friday evening. For example, why didn't A.C.L.N.'s chairman disclose that he no longer had economic interests in entities that had been significant shareholders of the company? Regardless of who had power of attorney, weren't these still restricted shares that required some sort of disclosure about their sale or transfer?

Then there was the question of who owned the company's only ship, the Sea Atef. Shipping industry records show that it's registered to Sea Atef Shipping, which was jointly owned by Merhi Ali Abou Merhi and D.C.C. Ltd.; Bisschops was on Sea Atef Shipping's board. In its statement Friday, the company says it owns the Sea Atef "indirectly" through Sea Atef Shipping. A.C.L.N.'s statement also said Bisschops controls D.C.C. "on behalf of the Company." Merhi, who is not an employee of A.C.L.N., holds shares in Sea Atef Shipping -- also "on behalf of the Company." The company statement also says that under generally accepted accounting principles, its "control of the Sea Atef Shipping Company is sufficient for inclusion of the Sea Atef in the company's financial statements."

But that still begs the question: If the company doesn't directly own the Sea Atef, who does? And where, specifically, does GAAP permit this type of accounting? (GAAP, as this column has reported, has many gray areas that can be very subjective in interpretation.) Furthermore, how is it that Merhi, an outsider, partially controls something on behalf of a public company? Why was this relationship never disclosed? (In my emails to company officials Friday evening I also tossed in this question: Who paid for Sea Atef?)

My column Thursday also raised questions about discrepancies in the amount of money reported on the company's annual financial statements for 1999 and 2000 involving fees paid by A.C.L.N. to MFT, a company owned by Bisschops. In its statement Friday, the company claimed the discrepancy was due to an "oversight." Why didn't its Cyprus-based auditors catch that?

My column Thursday also pointed out a discrepancy in the amount of the selling, general and administrative costs from A.C.L.N.'s year-end earnings press release for 2000 and its 20-F for the year. In its statement, the company said the amount was immaterial.

A.C.L.N.'s statement did not respond to several other issues raised in the column, specifically:

What happened to 198,000 shares that were transferred from A.C.L.N. to Pearlrose International one day before A.C.L.N. went public. At the time, Pearlrose was identified as one of Bisschops' holdings. Those shares never showed up as part of Pearlrose's holdings. As it turns out, Pearlrose filed Form 144s on three separate occasions over the past two years indicating its intent to sell those shares. And the amount of shares sold actually exceeded the number of shares that had been transferred to Pearlrose. A.C.L.N. never answered questions raised in my column regarding those shares, such as where the money from those additional shares went.

Why did the company say in a press release for the third quarter of 2000 that the third quarter of 2000 marked the "first full quarter of utilization" for the Sea Atef when the company's annual 20-F for that year said the ship had been in shop for "significant engine repairs" and only took one brief trip during that quarter?

Why wasn't the company consistent about the number of cars it has sold and delivered during the first quarter of this year, and why did the revenue for the cars sold remain the same even though the number of cars actually sold fell.

Why Labiad, the CEO, made comments on the company's third-quarter conference call that were inconsistent with the company's revenue-recognition policy.

I sent multiple emails Friday afternoon and evening to A.C.L.N.'s investor relations representative and CFO raising these questions and have no response yet. I'll pass along their responses when I get them.