This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

L.A. Firm's China Ventures Turn Sour (Pt. 2)

Stocks in this article: NIV CIL CDM CELM

In Reverse Mergers, David Feldman writes that the WRASP process "may indeed provide another innovative, clean, and legitimate alternative to a traditional IPO for a company ready to trade on a major exchange."

That doesn't appear to have been the case for a Hong Kong distributor of watch movements called Asia Time Corp. (TYM), one of WestPark's earliest WRASP deals. Asia Time's stock began trading on the Amex in February 2008 after raising funds from the likes of banking giants ABN Amro and HSBC (HBC). The stock shot as high as $8.50 just weeks after its initial offering, heights it would never regain. Not a year later, the company abruptly went dark. Communication ceased with the SEC and with the Amex, which finally struck Asia Time's stock listing in April 2009. WestPark says the company relied heavily on bank credit to fund its inventory, and was simply forced to go out of business, "a casualty of the global credit and financial crises."

Some of WestPark's other WRASP deals have performed better. Take Hong Kong HighPower (HPJ), a battery maker based in Shenzhen. WestPark arranged for a private placement, selling 2.9 million shares for $1.76 each to a small group of investors. Its stock, after a public offering, started trading on the Amex at $3.25 in June 2008. Though it declined to $1.25 amid the financial crisis, HighPower's shares suddenly exploded in the fall of 2009, shooting nearly to $10 in early 2010 before commencing a long slide from which it has yet to recover. The stock was trading recently at $3.10. The company, as it happens, recently filed a notice with the SEC on March 31, saying it needs more time (not longer than 15 days, it said) to file its 10-K. But its auditor doesn't appear to be MaloneBailey; the company's audit a year ago was conducted by a Hong Kong-based firm called Dominic K.F. Chan & Co.

Rappaport's mission to get the WRASP deal structure up and running as a viable business wasn't easy. He spent two years trying to convince regulators to approve the procedure, according to Feldman in Reverse Mergers. (Feldman notes in the book that his law firm helped WestPark set up the Form 10 shells used by the firm in its WRASPs. Reached by TheStreet, Feldman declined to comment further on the WRASP process.)

Even while Rappaport was attempting to gain approval for his invention, some of his brokers were engaging in behavior that would later be sanctioned by the Financial Industry Regulatory Authority, or FINRA, which regulates broker dealers.

In May 2010, FINRA imposed a censure on the firm, including a $400,000 penalty, for failing to supervise brokers with histories of disciplinary action. Further, according to FINRA, brokers at a WestPark branch office on Long Island "churned customer accounts and engaged in unauthorized and unsuitable trading in multiple accounts." (WestPark has since shuttered that Long Island office.) According to a FINRA press release, several of the brokers involved in the sanctioned trading came to WestPark from the infamous Long Island boiler room Stratton Oakmont, whose principals pleaded guilty to pump-and-dump stock fraud in 1999, as well as other barred broker dealers. It was WestPark's third FINRA disciplinary action since 2004.

WestPark says it fired the brokers cited by FINRA after less than a year on the job.

Also, the firm pointed out, they weren't involved in any of WestPark's Chinese deals.

-- Written by Scott Eden in New York

This is the second of a two-part series on Westpark Capital, accounting firm MaloneBailey, and recent allegations of improper accounting at a handful of Chinese companies. Click here for Part 1 of this story.

>To contact the writer of this article, click here: Scott Eden.

>To follow the writer on Twitter, go to

>To submit a news tip, send an email to:

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
4 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs