Commencing A Distributed Effort To Outsource The SEC's Information Gathering And Processing Operations
Karen Singer – The New Jersey Housewife of an SEC-Barred, Convicted Fraudster, the Most Recent 13G Filer on Primus Telecom, and One of the Most Successful Telecommunications Investors Ever?
Researched and written by: Wally the Tiger
Primus Telecommunications Group Inc. (Ticker: PMUG.OB) provides integrated telecommunications services primarily in the United States, Australia, Canada, Brazil, the United Kingdom, and western Europe. Primus’ stock trades on the over-the-counter bulletin board, as the company emerged from bankruptcy on July 1, 2009 and has not yet relisted on a major exchange. The company has substantial size, with LTM revenue and EBITDA of $826 million and $86 million, respectively. Importantly, Primus’ management estimates that the company will generate $23-28 million of annual free cash flow, or $2.38-2.89/share of FCF, representing a 34-41% FCF yield at its current $7.00 share price. On a multiple basis, it also trades very inexpensively, at 3.1x EV/EBITDA and 0.3x EV/Revenue (as of June 15, 2010). Potential catalysts may include: (i) listing on major exchange; (ii) continued use of FCF to retire debt; and (iii) potential sale of entire company. The company’s exposure to Canada and Australia are large positives given their relative stability. Per the proxy, as of May 1, 2010, Primus’ top eight shareholders collectively owned 45.3% of the company’s stock.
Yesterday (June 15, 2010), a new 13G was filed by Karen Singer reporting ownership of 931,295 shares of PMUG.OB, which are presently worth $6.5 million. This caught my eye for two reasons: (1) Mrs. Singer is a new filer, and her shares represent 9.6% of all shares outstanding, making her Primus’ largest shareholder; and (2) this was not an institution, but an individual listing her address as a home in suburban New Jersey (212 Vaccaro Drive, Cresskill, NJ 07626 or check out the street view here), who has sole dispositive and voting power with respect to 931,295 shares of the reported securities as the trustee of Singer Children’s Management Trust.
As an interested deep value investor and PMUG shareholder myself, I decided to do a little homework on Karen Singer, to find out who she is, why she loves this bulletin board stock so much and where she got the funds to be a major buyer.
The first thing I found was that Karen Singer apparently shares her home in Cresskill, NJ with a certain Gary A. Singer (also see here). Googling Gary Singer + Cresskill turned up a very interesting article in the New York Times from November 11, 1992. It turns out that Gary A. Singer of Cresskill, then 37 years old and Chairman of The Cooper Companies (an eye-care product company), was charged with 24 counts of racketeering, conspiracy, money laundering and fraud relating to “an extensive criminal scheme to profit from insider tips on junk bond trades.” The Cooper Companies was also charged with 10 counts of conspiracy and fraud. Further, the SEC “accused Gary Singer individually of fraudulently shifting the company’s junk bond trading profits into family accounts” and also implicated his brother, Steven G. Singer (Cooper’s then COO) of participating in the scheme. Today, Gary would be ~55 years old, the same age listed for Karen by pipl.com here. The fact that the children’s trust was set up “for the benefit of the children of Karen Singer and Gary Singer” also clarifies that the relationship between Karen and Gary Singer was or is marital. This is also confirmed by a filing discussed later.
Mr. Singer was convicted of 21 felony counts in the fraudulent high yield bond schemes described in the NY Times article and sentenced to 28 months in prison. On March 10, 1997 the SEC released information stating that Mr. Singer had been barred from acting as an officer or director of a public company. Interestingly, this release also cites Karen Sue Singer as a “Relief Defendant.” Very notably, the release states that the SEC “previously obtained disgorgement and pre-judgment interest arising from Singer’s violations in the amount of $4,182,994” and “no civil penalty was imposed against Singer based on his demonstrated ability to pay.” So, apparently Singer was broke in 1997 after paying the SEC.
Additional Google searching turned up an incredible blog posting in Businessweek in 2005 that also describes Gary Singer and his brother Steven Singer’s alleged bad acting in the case of Motient Corp., a wireless communications company chaired at the time by Steven Singer and which, according to the blog post, had a 40% stake in Mobile Satellite Ventures, a Reston, VA based provider of mobile satellite communications that owned “valuable spectrum licenses.” Read the Businessweek account. Perhaps this is the origin of the Singers’ interest and expertise in telecom companies?
Back to Karen Singer. I wanted to find out if PMUG is the first stock on which she has filed a Schedule 13G or 13D. The answer is a resounding NO. Mrs. Singer is a grizzled veteran of Schedule 13 filings, and has generated investment returns in small telecom companies that are literally incredible.
On June 18, 2004, Karen Singer filed a 13D with respect to her ownership of 4.9 million shares (or 9.76% of the class) of iBasis, Inc. of Burlington, Mass. iBasis is a wholesale carrier of international long distance telephone calls, with enhanced services for mobile operators, and a provider of retail prepaid calling services. iBasis sold a majority interest to KPN B.V. on October 1, 2007, which resulted in a $113 million dividend (or $3.28/share) paid a week later, on October 8, 2007. Assuming Mrs. Singer still had the same number of shares, she would have cashed north of $16 million pre-tax on this transaction alone. Five years later, in December 2009, iBasis agreed to sell the residual 44% interest not yet owned by KPN to KPN for an additional $93 million (or $3.00/share). If Mrs. Singer retained her shares in iBasis, this would apparently have resulted in nearly $15 million of additional pre-tax proceeds.
On June 24, 2007, RCN Corp. announced that it was to acquire wholesale communications provider Neon Communications (formerly Globix Corporation) for $260 million. A key member of Globix’s Board and former non-Executive Chairman was Gary Singer’s brother, Steven Singer, whom the NY Times reported was implicated in The Cooper Companies fraudulent junk bond scheme. The fact that Steven was Karen’s brother-in-law was disclosed in Item 9 of an April 8, 2005 Schedule 13G filing. In conjunction with the announcement of Neon’s sale to RCN, Karen Singer filed two 13Ds (original and amended) regarding her ownership of 4.5 million common and 699,098 preferred shares of Neon, representing 9.2% of Neon’s common stock outstanding. In Item 2 of the 13Ds, Karen Singer represented that: “(d) The Reporting Person has not, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); (e) The Reporting Person has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws.” Her 9.2% interest in the $260 million sale price appears to have been worth approximately $24 million.
On February 18, 2009, Karen Singer filed an amended 13D with respect to her ownership of 6.0 million shares (or 13.1% of the class) of LiveWire Mobile, Inc., which trades on the pink sheets (Ticker: LVWR.PK) According to the filing, Mrs. Singer purchased these shares for an aggregate of $5.97 million, or less than $1.00/share on average, including 547,566 shares in January and February 2009 at prices ranging from $0.12 to $0.15. Today, LVWR trades at $3.50/share, representing an apparent 3.5x return on invested capital, or another $15 million profit, for Mrs. Singer. Whether this apparent profit is presently realized or unrealized is not determinable.
In light of these amazing datapoints and apparent investment returns, there are a number of big questions that come to mind:
- Is Karen Singer presently married to Gary Singer and what role, if any, does Gary, as an SEC-convicted fraudster, racketeer, conspirator and money launderer, play in her investment activities?
- What role, if any, has Steven Singer, Gary Singer’s brother and Karen Singer’s brother-in-law, played in Karen Singer’s investment activities?
- If Gary Singer was effectively broke at the time of his settlement with the SEC, where did the Singers get the money to start speculating in these stocks?
- Is the SEC fully aware of the Singer family’s investment activities, or by filing in Karen Singer’s name alone have the Singers remained under the radar?
- How did Karen Singer become such an expert in telecommunications stocks, particularly very small companies trading on the pink sheets or bulletin board? What education and professional background trained her for this success?
- Is there another telecom investor in the world with a track record of speculative investment returns that can match Karen Singer’s?
- How does Karen Singer pick which companies to buy and how did she identify PMUG as her most recent investment?
- Is Karen Singer properly disclosing all relevant family history with the SEC in her 13D filings?