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EHRC has just filed its UNITED STATES SECURITIES AND EXCHANGE COMMISSION Form 10-Q; a Quarterly Report for the period ended 30 June 2007.
The financials are poor at best. The net loss to operations as of 30 June was USD$71,843,796. Other than its sale of shares, it appears to have no other revenue-producing assets.
The value of these shares is affected by the current parlous position of the company. In its report EHRC stated some of the reasons. These are EHRC's own words. These might be of interest:
“We are under investigation by the SEC, the DOJ and a U.S. Senate Subcommittee, and the results of these investigations could have a material adverse effect on our business, prospects, operations, financial condition and cash flow.
On May 4, 2006, a search warrant issued by the U.S. District Court of the Southern District of Texas, Houston Division, was executed on ERHC seeking various records including, among others, documents, if any, related to correspondence with foreign governmental officials or entities in São Tomé and Nigeria. The search warrant cited, among other things, possible violations of the FCPA, Section 10(b) of the Exchange Act, Rule 10b-5 under the Exchange Act and criminal conspiracy and wire fraud statutes. ERHC filed suit in federal district court in Texas in June 2006 seeking to protect our attorney-client privileged documents and to allow our counsel to determine the factual basis for the DOJ’s search warrant affidavit, which is currently under seal.
A related SEC subpoena was issued on May 9, 2006, and a second related subpoena issued on August 29, 2006. The subpoenas request from ERHC a range of documents including all documents related to correspondence with foreign governmental officials or entities in São Tomé and Nigeria, personnel records (specifically, those regarding our former Chief Financial Officer, Franklin Ihekwoaba) and other corporate records. We have been actively responding to both subpoenas.
On July 5, 2007, the U.S. Senate Committee on Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations served ERHC with a subpoena, in connection with its review of matters relating to the potential abuse of payments made to foreign governments. The subpoena, as amended on July 18, 2007, seeks documents and information regarding ERHC’s activities, particularly those related to the acquisition of ERHC’s interests in the Gulf of Guinea. ERHC’s attorneys, Akin Gump Strauss Hauer & Feld LLP, will assist ERHC in responding to the subpoena. Please see “Legal Proceedings” for more information.
The investigations by the DOJ, SEC and Senate Subcommittee are continuing. We anticipate that these investigations will be lengthy and do not expect these investigations to be concluded in the immediate future. If violations are found, we may be subject to criminal, civil and/or administrative sanctions, including substantial fines, and the resolution or disposition of these matters could have a material adverse effect on our business, prospects, operations, financial condition and cash flow.
These investigations could also result in:
- third party claims against us, which may include claims for special, indirect, derivative or consequential damages;
- damage to our business, operations and reputation;
- loss of, or adverse effect on, cash flow, assets, goodwill, operations and financial condition, business, prospects, profits or business value;
- adverse consequences on our ability to obtain or continue financing for current or future projects; and/or claims by directors, officers, employees, affiliates, advisors, attorneys, agents, debt holders or other interest holders or constituents of ERHC.
Continuing negative publicity arising out of these investigations could also adversely affect our business and prospects in the commercial marketplace. In addition, these investigations have resulted in increased expenses to ERHC, including substantial legal fees and the diversion of management’s attention from our operations and other activities. If we incur costs or losses as a result of these matters, we may not have the liquidity or funds to address those costs or losses, in which case such costs or losses could have a material adverse effect on our business, prospects, operations, financial condition and cash flow.
Item 1. Legal Proceedings
On May 4, 2006, a search warrant issued by the U.S. District Court of the Southern District of Texas, Houston Division, was executed on the Company seeking various records including, among other matters, documents, if any, related to correspondence with foreign governmental officials or entities in São Tomé and Nigeria. The search warrant cited, among other things, alleged violations of the Foreign Corrupt Practices Act, Section 10(b) of the Exchange Act, Rule 10b-5 under the Exchange Act and criminal conspiracy and wire fraud statutes. With the guidance of the law firm of Akin Gump Strauss Hauer & Feld LLP, ERHC Energy continues to work with the U.S. Department of Justice in connection with the Department’s investigation. The Department of Justice agreed to ERHC’s request to return to ERHC a complete copy set of all paper documents seized in the government’s May 4, 2006 search of ERHC’s Houston office. ERHC has received a copy set of these business documents. ERHC filed suit in federal district court in Texas in June, 2006. The lawsuit sought to protect the Company’s attorney-client privileged documents and to allow ERHC counsel to determine the factual basis for the Justice Department’s search warrant affidavit, which is currently under seal. Although the judge has ordered that the affidavit remain under seal, his ruling requires the Justice Department to provide a neutral “taint team” to review all seized documents and to identify those that may be privileged. The neutral taint team is charged with the responsibility to withhold from the investigating attorneys any documents that it believes to be privileged. The ruling also provides the Company with the right to challenge the Justice Department’s privilege determinations in court. Since the ruling, ERHC has been in communication with the Justice Department regarding the government’s compliance with the ordered taint team procedures, and regarding the government’s ongoing investigation.
The attorneys of Akin Gump Strauss Hauer & Feld LLP are also assisting in ERHC’s response to a related SEC subpoena issued on May 9, 2006, and to a second related subpoena issued on August 29, 2006. The subpoenas request a range of documents, including among others, all documents related to correspondence with foreign governmental officials or entities in São Tomé and Nigeria as well as for personnel records (specifically, those regarding former CFO, Franklin Ihekwoaba) and other corporate records from the Company. ERHC has responded to both subpoenas.
On July 5, 2007, U.S. Senate Committee on Homeland Security and Governmental Affairs’ Permanent Subcommittee on Investigations served ERHC with a subpoena, in connection with its review of matters relating to the potential abuse of payments made to foreign governments. The subpoena, as amended on July 18, 2007, seeks documents and information regarding ERHC’s activities, particularly those related to the acquisition of ERHC’s interests in the Gulf of Guinea. ERHC’s attorneys, Akin Gump Strauss Hauer & Feld LLP, will assist ERHC in responding to the subpoena.
In October 2006, Lakeshore Capital Limited (“Lakeshore”) filed an arbitration claim against ERHC before the American Arbitration Association, seeking $4,400,000 for the alleged value of 4,500,000 shares of ERHC common stock and for a warrant to purchase 1,500,000 shares at an exercise price of $.20 per share, including interest and costs. Lakeshore claimed it was owed this sum for services previously rendered under a contract with ERHC. During the quarter ended June 30, 2007, this claim was settled for ERHC’s payment of $250,000 to Lakeshore and the arbitration was discontinued with prejudice.
In July 2007, ERHC and Godsonic Oil commenced negotiations over relinquishment by Godsonic of any claims by Godsonic to entitlement to a 9% interest in Block 4. Provisional settlement agreement has been reached on payment of $250,000 to Godsonic in consideration of relinquishment of all claims by Godsonic, with the condition that if settlement is not completed by August 30, 2007, the settlement is null and void and of no effect. If the settlement is not completed, litigation might ensue between the parties.
From time to time, ERHC may be subject to routine litigation, claims, or disputes in the ordinary course of business. In the opinion of management, no pending or known threatened claims, actions or proceedings against the Company are expected to have a material adverse effect on ERHC’s consolidated financial position, results of operations or cash flows. ERHC intends to defend these matters vigorously; the Company cannot predict with certainty, however, the outcome or effect of any litigation matters specifically described above or any other pending litigation or claims. There can be no assurance as to the ultimate outcome of these lawsuits"
This may not be the best of times for Emeka Offor. Perhaps he can use this lull to finish the Turnaround Maintenance contracts in Nigeria’s refineries.
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Gary K. Busch 
Posted by Robot| 10.08.2007 21:21