Wednesday, February 22, 2012

Darius Parsi, the “Star witness” for the US Securities and Exchange Commission complaint against Florian Homm and others. Joke of the year?

This was passed to me by a friend and I thought I'd post it:

I must say I am quite fascinated by the Florian Homm saga. It beats any soap opera or “wall street” flic hands down for entertainment and educational value. The one sided portrayal of events drama is also remarkable. When his company ACMH, Florian’s company, was booming success had many fathers. But when it disintegrated, there was only one culprit, Florian. Does that make sense? Following is my little contribution to lateral thinking and fair reporting.

Florian Homm and others are charged with portfolio pumping by the SEC in a civil complaint (I must admit I do not really understand what that is) and other bad things. For years now Florian has been crucified by the media. He is allegedly wanted and a fugitive from law enforcement. I checked with Interpol and Europol and other law enforcement agencies. This perception is totally false. Florian is 100 percent a free man and can travel and live wherever he wants. He may actually prefer to stay under the radar because he made legendary enemies during his career as a raider and short seller. I am certain a few people would like to settle old scores with him employing shady characters and detectives to locate him. Another unknown fact is that Florian has won a major lawsuit (Cascade, Federal Court of Colorado, the appeal failed and the case is closed) and another one by his former employer ACMH has been dismissed (Federal court of Manhattan, currently under appeal). He lost a small case in California state court, but is overall legal record is pretty good at 2:1. I have no clue about the merits of the last remaining lawsuit, but I do know the “star witness” better than almost anyone else including the SEC.

I have known the Homm family, Florian’s business operations and Darius very well, almost intimately for over a decade. Darius considered me one of his closest friends. I never considered him one of mine. Darius was only really ever interested in Darius. He lacked compassion frequently insulting women in night clubs. He was often depressed and full of self-pity. At other times he thought himself the smartest of all of us. He was miserly and too self-involved to ever become a true friend.

Florian hired me years ago and gave me my start in business. For that I am grateful, especially since I had zero experience. Florian tutored me in finance and took a personal interest in my professional development. I stayed in touch with Florian for professional and personal reasons and have been with Darius and Florian on numerous occasions during his time in Mallorca. Florian gave Darius an even better opportunity than me: the opportunity of a life time.

Darius is anything but a “star witness”. Let me explain why:
Darius earned over 1 Million dollars while working for Florian basically tax free over three years (in cash and large transfers into his Swiss bank account at Banque SCS Alliance in Zurich, capital gains..) which is now called Compagnie Bancaire Helvetique and made another USD 1.3 Million flipping his ACMH shares. He never disclosed his full earnings while working in Mallorca, Spain for ACMH (I saw his tax returns) and benefits to the Internal Revenue Service. He blatantly violated Spanish law never filling a tax return in that country, owing the Spanish tax authorities hundreds of thousands of Dollars in back taxes.

Ever since I have known Darius has been a habitual marijuana and hashish user. When he lived and worked in Amsterdam he bought a lot of pot and hashish in coffee shops and was smoked almost daily. He even planted pot plants openly in the estate’s garden. Much to Darius’ chagrin the attentive gardener familiar with the cannabis plant discovered Darius’ mini-plantation and elegantly destroyed the “criminal” evidence on instructions of the lady of the manor.

Darius lived for free on the Homm estate, had a BMW 3 series convertible at his sole disposal, had a rent free 110 meter apartment with a 110 meter ocean view roof terrace cleaned by the Homm staff, all utilities paid and regular meals with the family. The maid even did his laundry. Other privileges were the unlimited use of tennis and basketball court, swimming pool etc. His parents, Doctor Parsi of Waco, Texas and his mother, also benefited staying on the estate for weeks as guests of Florian. Darius worked at ACMH from the beginning of the company for little more three years.
Darius was jobless, heavily in debt and with no immediate prospects when Florian hired him. He was an Editor of a dotcom magazine which went out of business in the dotcom crash. Florian was a regular contributor to the magazine had stayed in touch with Darius, who had worked at another one of Florian’s companies in Germany’s years earlier. When Darius left ACMH he had several million dollars and was debt free.
In 2004, Florian was subject to a criminal investigation in Germany for a Sell Short recommendation where he accurately predicted the demise of a major company (WCM AG). Darius co-authored this report and distributed it. He even published it on Bloomberg. WCM went bust. However, Florian was charged with insider dealing and market manipulation by the Frankfurt, Germany district attorney. Darius had major roles writing, publishing and disseminating this report. He was profoundly involved. Yet Florian insisted on having been the sole perpetrator (research, writing, editing, electronic publishing, media dissemination\; in short a lot of things of which he was totally incapable of…) to the Frankfurt District Attorney, covering for Darius’ back 100 percent. Darius was looking at 1-3 years of prison time and a 7 figure fine at the time for his involvement but Florian covered for him. In the end there was a lot of noise about nothing after Florian had spent two hundred thousand Euros on defense and Darius did not contribute a dime. Florian got 18 months of probation and paid a 40,000 euro fine and the matter was settled. Darius got off scot free.

Late in 2004 Darius’ performance began to slouch noticeably. By then he smoked pot and hashish almost every day, consumed hard liquor frequently and used cocaine occasionally. During the last year of his employment Darius was a severe drag on the organization (mid/late 2005), working less than anybody else while getting paid very well and making outrageous demands. He told everyone who would listen he was underpaid and deserved the number two spot since he had been with the organization from the start. By this time the organization had grown from a boutique operation of three people into a medium sized asset manager with more than dozen highly capable professionals as well as support personnel with offices in Palma de Mallorca, the Cayman Islands and Zurich. The best jobs went to the best performers and not to those with the most seniority. ACMH was an enterprise, a meritocracy not a decadent dynasty. He also wanted to move to Iran to get closer to his roots and maybe invest there. He talked about an arranged marriage to an Iranian virgin. He was increasingly enamored by Muslim fundamentalism and critical of our western ways.

During his descent, Darius falsified Florian’s signature to enable a USD 300,000 wire transfer to his brother to fund his male personal care product line while Florian was traveling. Florian almost jumped out of his pants when he discovered the fraud. Darius’ brother had to come to Mallorca to explain himself. Florian decided not to go after Darius and expose his actions. That was probably a major error. This brotherly act turned out to be a total write-off and loss for ACMH fund holders.

A plot to defraud ACMH funds by millions of dollars by Darius and his roommate and boyfriend Petr Ondrusek, (a Czech and former journalist and colleague in Amsterdam also working for ACMH), was uncovered by before his departure and confirmed by Sylvester Walczak, a senior portfolio manager from Poland. Sylvester liked his job and did not want to engage in major fraud. He refused to join the attempted multi-million dollar fraud scheme and blew the whistle. This was more serious. Petr Ondrusek, literally disappeared from one day to the next after the discovery and could not be contacted even with the help of detectives from there on.

Unlike Petr, Darius stayed on a little longer in spite of the failed fraud attempt believing his credit with Florian for his early critical work would suffice to keep him away from the law or being fired right away. Darius also applied for jobs elsewhere and was told by an extremely successful Spanish fund manager he would have to take a 75 percent pay cut if he wanted to apply. Darius’ assumptions about Florian’s reaction were only partially right. The Parsi/Ondrusek fraud attempt was discussed amongst personnel and management and it was decided it was best if Darius left or resigned from ACMH. If he did not leave of his own accord he would have to be fired. For Florian it was difficult to hold on to an employee who had shown criminal intent. Moreover, Darius was disruptive, wanted to be the undisputed number two while working only half as much as any other senior executive at the firm. He was setting a horrible example through his laziness and negativism. But how does one fire someone who is seriously ill (addiction, heavy medication, personality issues) and who had been at one stage an important contributor during the early development stage of the company? Florian made his second error.

Darius underwent a risky operation and a lengthy recovery period. While his body recovered I was less sure about his mind. He was under heavy medication for quite a while. However, the operation and the recovery went well affirming Darius’ faith in Allah and the teachings of the Koran. Florian told me he was rather concerned how Darius could reconcile the almost usurious distress loan rates ACMH charged its risker clients in light of Sharia law which does not allow charging interest at all. I think he was kidding at the time.

During his hospitalization Florian visited Darius regularly and offered to pay the considerable medical bill in spite of Darius’ destructive attitude and deplorable actions. Darius eventually got the message and resigned from ACMH. Allah had given him strength. He was no longer addicted and was now abstinent. He stopped drinking and using drugs and returned to Waco, Texas. He did not look for a job, doing very little living at home. All this time Darius thought ACMH would collapse immediately after he left. The heavy pain medication and effect of years of drug addiction had clouded his judgment. He was suffering from delusions of all sorts and no longer needed to work for a living. The ACMH organization became much more professional and productive, when a top ranked and accomplished analyst (Peter Berg, a Swede) replaced Darius, who had been a failure as head of research. The new CEO, Sean Ewing, bought Darius’ shares for about USD 1.3 Million a few months before the listing on the London Stock Exchange. When Darius was back in Texas he asked Florian for a recommendation. Florian complied, wrote him a glowing one (another Florian error) and wished him well in his future endeavors. In Florian’s mind the failed fraud attempt and the destructive, fraudulent behavior was an anomaly caused by too many drugs and heavy medication. After all Darius’ fraud scheme was uncovered just in time unable to cause serious damage. Both Petr and Darius were replaced with more competent staff and productivity and team spirit had returned to high levels. Florian thought, “let bygones be bygones” . After all, Darius had given two full years of his life to launch ACMH. Why not help him?

After returning to the US Darius realized, had he held on to his shares for only a few more months more, he would have made about ten million dollars instead of 1.3 million. Had he sold near the top and waited less than a year he would have grossed over twenty million dollars on his stake. Nobody had forced him to sell the shares. It was entirely his choice. He was incredibly upset though.

During this period I spoke with Darius several times. He was bitter. He could not believe ACMH was listed and trading not only on the London but also on the Frankfurt Stock Exchange. In the months following the listing, the shares appreciated seven hundred percent. Darius had sold his shares at a huge discount to the listing price (about 70 percent) and missed out on another 700 percent in capital appreciation. Darius had made the mistake of his life, leaving ten to twenty million dollars on the table. But others were going to pay for his stupidity. He blamed Sean Ewing for stealing his shares and began inventing lies about Sean. But Sean was simply a more rational less confused buyer. Darius could have kept some shares. Instead he sold all of his holdings at about one times earnings and a thirty percent dividend yield. He was disappointed because rather than collapse; the organization prospered and became much more effective without him. He had two choices. Be grateful for becoming a millionaire after two years of hard work and move on with life or enjoy retirement in his mid-thirties. Or he could blame and destroy others for his failure. He preferred to blame others and was presenting various vengeance schemes to me seeking to impact maximum financial, reputational and emotional carnage.

I told him he was off his rocker, tried to dissuade him and told him as an experienced capital markets professional he only had himself to blame. I was not surprised by his preferred choice. In the decade I had known Darius he had never assumed responsibility for any of his own actions and mistakes. Everyone else was to blame always, never Darius himself. After all Darius the Great was similarly infallible.

Darius went on a ballistic hate mission. I guess in his confused mind he was Islamic seeking blood revenge, an eye for an eye. He wrote about twenty letters to regulators, brokers, bankers and clients of ACMH under a false identity using emails sent from a mock account from He actually sent these emails from his computer at his parent’s house. He made completely false and malicious claims against Sean Ewing, insulted Florian’s then wife personally and railed into trading and valuation practices at ACMH and its funds, which were audited and monitored some of the best firms in the world. He said Florian took drugs during work. That is possibly true. I would not rule out Florian smoking a joint during lunch about ten times a year. The aim was to demolish Florian who had not given him the position of power, personal and corporate prominence he “rightfully deserved in his mind. As the company grew Florian spent less and less time with the underperforming Darius, an insult Darius would never forgive him. Darius hated him Florian for neglecting him.
He wanted to punish Sean Ewing as well, who had “cheated” him out of his shares for a pittance. He wanted to destroy the company which employed dozens of people he disliked and who he considered undeserving and less brilliant. He also insulted Florian’s then wife truing to injure her emotionally for treating him poorly,” like a vassal”. This claim is as absurd as most of the others. Darius was only partially successful. Several important clients redeemed their funds after the Darius hate mails, Sean Ewing was pissed off and threatened legal action, Florian was completely disappointed but life went on and the organization continued to evolve.

In 2006 I told Florian Darius had committed this vengeful act. I told him Darius was single mindedly focusing his energies on destroying anything and anybody associated with ACMH, Florian and Sean. Florian considered Darius’ behavior the greatest personal disappointment in his life.

I am not defending any of Florian’s actions while at ACMH. Florian is generous and had been a great mentor and always supportive. On a personal level I like him. But he lives in grey zones and his actions towards the end of his career are unethical if not worse. On the other hand, Darius Parsi as a star witness for the SEC, is a pathetic character. As an American citizen he committed, tax fraud in at least two jurisdictions, a felony. He sold and used drugs another felony offense. He filed his income records with the IRS each year but avoided taxes by understating hundreds of thousands of Dollars of income and benefits. While at ACMH he routinely front ran investment recommendations to benefit from insider information, another felony according to US securities law. He was actively involved in all facets of the WCM report and should have been subject to criminal charges just like Florian. The pot Florian was smoking at the time, he smoked mostly with Darius and Petr, was supplied exclusively by Darius and Petr. This is like the dope dealer accusing his clients of usage in a court of law. Under US law you are still guilty of felony drug charges even if you sell and consume drugs even in non-US jurisdictions such as Spain and Holland. Darius’ libel assaults on Sean Ewing were malicious and totally false, another serious offense. His parents stayed at the Homm estate for weeks. Darius was a guest for three years. As a fundamental Muslim he turned on his host family and violated the most basic pillars of Islam: hospitality, gratitude and respect
His motivation to work with the SEC is based on revenge, greed, ingratitude and hatred. His hatred has not yet been fully ventilated. The SEC complaint is the perfect outlet for his bile. Darius had lost his position and credibility within the organization, made a monumentally stupid financial decision. He never accomplished anything of note after leaving ACMH 5 years ago. He left before he was forced to leave being regarded by all senior executives as problematic and unproductive. And as usual everybody else was to blame. Florian had given Darius, who was unemployed and heavily in debt, a great career opportunity, adopted him into his home and helped him become millionaire. He covered his ass from criminal prosecution in Germany. Darius was basically a member of the Homm family for three years, playing tennis with Florian, swimming with the children and dining with them regularly. Then Darius goes on this psychotic, single minded man hunt. If you have friends like Darius, who needs enemies?
Darius sees it differently. He sees himself as a victim of greed and disrespect; the faultless and righteous profoundly ethical man who has been persecuted and abused. In his twisted mind he firmly believed he would make the world a better, more just place if he destroyed dozens of families and lives. Once again, He is now the defender of the law, the avenger and an all important witness for an agency of the US government, without doubt a very important, righteous person. He will right the wrongs of portfolio pumpers and self-dealers. Darius is probably unable to see the hypocrisy, absurdity, maliciousness, duplicity and true motives behind his own actions: greed, delusion, vanity and vengeance. Just for once, Darius should look at his hand as he points his finger at others. While one finger points at the object of disdain, feeding his religious zealotry and self-righteousness, three fingers are pointing at him.
Make up your own mind.

I would not use precious time to write all this if I did not believe Darius is a malevolent, pernicious hypocrite who needs to be exposed for what he is. I would also not write this if the allegations were not so easy to prove. There are at least half a dozen witnesses who can support several of these claims. The falsified documents and the illegal USD 300,000 transfer to his brother are part of the investment records at ACMH or its prime banker, administrator and auditor. Document falsification combined with the transfer of large sums is a criminal offense in Spain. The front running and dealing on insider information (positioning his personal portfolio before mammoth ACMH orders which by themselves would drive up the market price or placing orders for his portfolio in shares before the issuance of research reports which would certainly have an impact on price) can be traced through his Swiss bank accounts and the timing of ACMH research releases and large buy orders violate insider trading laws in several European countries. His complicity on the WCM report is verifiable through Bloomberg, basic interviews and trading records of his Swiss bank accounts. Bank and trading records are routinely stored for at least ten years. His libelous accusations against Sean Ewing and Homm’s ex-wife are available through Glen Kennedy (legal counsel and Director of ACMH), the SEC, Sean Ewing and other former ACMH executives. The most basic cash flow calculations, showing uses of funds (expenditures) compared to officially declared income would show Darius spent far more money than he ever declared. Tax evasion and trading on insider knowledge and using the proceeds thereof is considered money laundering, a criminal offense in Switzerland, the US and Spain.
Darius’s cannot deny he also received six figure benefits he never disclosed to the IRS, another potential felony and never paid any taxes in Spain even though he lived and worked there permanently without a formal residency permit for years. Not disclosing all his offshore and unreported accounts would constitute another felony under current law, not counting all all the wire and mail fraud offenses. Under oath, former ACMH personnel or Sylvester Walczak, would not lie about Darius’ and Petr’s multi-million dollar fraud attempt.

Darius has left a huge trail of deception, fraud, greed based on deranged motives and exhibiting criminal behavior. He has no credibility. That does not inherently make Florian a better man. But it shows us the other side of the coin in this bizarre melodrama. I wonder how Darius would stand up under professional cross-examination as a star witness in court. Maybe he should reflect on his own actions and behavior before he seeks to destroy others in the future. And, maybe he needs to be more forthright with the SEC (which cannot know everything and is just trying to do its job). The SEC must be completely misinformed about the machinations and history of their “star”. They would not be the first ones tricked and fooled by Darius. Maybe they have offered him civil and criminal immunity from prosecution in the US, Switzerland and Spain. I doubt it.

Actions have consequences. What goes around comes around.