Steve Bannon’s adventures in penny stocks – Politico
Steve Bannon, who rose to power as Breitbart News chairman and Donald Trump’s strategist on a wave of anti-Wall Street fury, spent much of the last decade-and-a-half using many of the complex financial mechanisms employed by the largest financial services firms as a board member and investor in penny-stock ventures.
Court filings and corporate records reviewed by POLITICO show that during this period, long after Bannon’s stint with Goldman Sachs in the 1980s, these penny-stock firms employed some of the complex corporate maneuvers favored by financial masters of the universe — trans-national acquisitions, reverse mergers and asset purchase agreements — though on a much smaller scale. Most of the companies failed to take off, often in the throes of legal troubles, in the years before Bannon emerged as a populist critic of financial wizardry run amok and failures to prosecute Wall Street executives.
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“It’s just sheer hypocrisy,” said Jaime Harrison, chairman of the South Carolina Democratic Party and a candidate for chairman of the Democratic National Committee, of Bannon’s recent stances. “It’s: ‘Do what I say, not what I do.’”
Bannon’s partner in a series of these ventures was a close friend and ongoing business associate with whom he shares a voting address in Florida. (Bannon registered at the address following news reports that he was previously registered to vote at a vacant property.)
Before Bannon shared a home address with the man, Andy Badolato, the pair partnered in a series of business ventures that included homeopathic nasal sprays, cosmetics and fragrances. The ventures came during an overlooked chapter of Bannon’s career, in the years leading up to the last financial crisis, when Trump’s chief White House strategist dove into the world of penny stocks.
Badolato has been the defendant in numerous lawsuits related to his personal finances. Though he was never charged, Badolato was also implicated by the government in a stock manipulation scheme that grew out of one of Badolato’s ventures with Bannon and put two men in prison. Another one of Bannon’s colleagues in these ventures, Seattle attorney David Otto, was slapped in an SEC settlement with a six-figure fine and a five-year ban from participating in the offering of penny stocks for his alleged role in an unrelated stock fraud scheme.
Bannon, who declined to comment through a spokeswoman, emerged unscathed from the murky milieu of the pink sheets — where companies that do not make it onto major stock exchanges trade — climbing to conservative media mogul-dom and now the White House.
“The guy is smart and knows exactly what he is doing,” wrote entrepreneur Mark Cuban, a vocal critic of Donald Trump who has dealt with Bannon in the purchasing of film distribution rights and met with him in New York on Tuesday, in an email.
Bannon’s foray into the high-risk, high-reward world of penny stocks began around the turn of the millennium. The foray spanned multiple firms, and Bannon, as a veteran Wall Street and Hollywood dealmaker, would often serve as an advisor in his role as board member and shareholder, according to his associates in some of the ventures.
Todd Van Siclen, a former associate at Otto’s law firm who was involved in some of the ventures, said Bannon mostly stayed away from the day-to-day operations. “People such as Bannon, their role with those companies was more involved with review, consultation – as opposed to being hands on,” he said.
One of those ventures was Donna Messenger Corporation, a cosmetics business registered in 2003 in Delaware that included Bannon, Otto and Badolato on its board, according to corporate filings.
Another was SinoFresh, a maker of homeopathic nasal sprays. Ahead of a 2003 IPO, Badolato, a Sarasota-based entrepreneur, began providing SinoFresh with financial advice and Bannon and Otto joined its board, according to corporate records and legal filings in Florida. But their partnership with the company soon soured.
The company’s founder, Charles Fust, uncovered an alleged scheme by Badolato to rob him of a million shares of stock by putting it under the control of a corporation registered in Belize and controlled by a Costa Rica-based businessman named Jonathan Curshen.
Fust and his allies responded in early 2004 by attempting to remove Bannon and Otto from the company’s board, citing their ties to Badolato, according to an SEC filing. Bannon, Otto and two relatives of Badolato retaliated with a lawsuit alleging that Fust used company funds to purchase an engagement ring, among other misdeeds. Bannon and Otto were reinstated to the board, but a court-appointed independent expert found that the allegations against Fust were baseless.
The independent expert also found accounts of the disputed shares given by Badolato and Curshen – who ran a firm in Costa Rica that offered offshore financial services – unconvincing and riddled with inconsistencies, and awarded the shares to Fust, according to court records in Florida. SinoFresh was roiled by the dispute and performed poorly. Eventually its stock stopped trading altogether in 2011.
Bannon, Badolato and Otto moved on. In 2005, they formed a company called “Bio-Flavorance Technologies and Research Inc,” which owned rights to patents for the flavors and fragrance industry, according to its press release.
In January 2006, the company was acquired by Industrial Biotech Corporation, or IBOT, via an asset purchase agreement, and issued a press release. IBOT had been founded four months earlier, and was registered to the same Sarasota office suite that Bannon and his partners had listed as their address in the Bio-Flavorance filing. Following the acquisition, Badolato became chairman and president of IBOT. Otto and Van Siclen joined its board.