Ld Holdings Draws More Scrutiny As A Company Promoter Gets Indicted By Grand Jury

On September 21, we published our initial short thesis on Ld Holdings (OTC:LDHL) on Seeking Alpha - Don't Get Dunked In The Ld Holdings Pool Of Hype. If investors still choose to hold a long bias view after reading even more evidence presented in this follow-up, it is certainly their prerogative. But they have been warned. Our most striking finding will show that LDHL seems to be in bed with who we consider to be a less than angelic individual accused of running a $23 million investment fraud scheme. This should almost ensure that LDHL is heading back to near sub-penny levels any day now.

Outspoken LDLH Supporter Indicted For Fraud

Brad Huebner is an individual who, as we will show, has been instrumental in promoting the LDHL story. As an example, take this excerpt from a Huebner email solicitation, obtained from the web with a little digging:

"In the last 60 days this thinly traded stock has gone from .02 cents to .24 cents and we're just now launching our marketing campaign to introduce LD Holdings to the Dinar community and beyond. Once you understand the demographics that'll grow this Company, I think you'll agree that it's worth taking a serious look at!"

Sincerely
Brad and the BH Group Team

This screenshot suggests that the email was in distribution in December of 2011.

Well, in a latest development Brad Huebner was apprehended last week on allegations that his firm (BH Group) orchestrated a $23 million hedge fund Ponzi scheme. Here are two quotes from the ToledoBlade.com that broke the story on 9/21/2012:

"The owner and two employees of a Toledo business (BH Group) that markets high-yield returns in the sale of Iraqi currency (Dinar) have been indicted by a federal grand jury on conspiracy and wire-fraud charges for allegedly duping investors out of more than $23 million.

Bradford L. Huebner, 65, of 2936 Pembroke Rd., Ottawa Hills, is charged with conspiracy to commit wire fraud, wire fraud, and multiple counts of money laundering. He is being held in the Lucas County jail."

"According to the indictment, the sale of Iraqi currency and the nonexistent hedge fund promoted by BH Group attracted "in the tens of thousands" of customers in the United States and other countries."

We don't believe the market has quite fully digested this new finding, but can be almost certain that once it does, it will share our negative sentiment.

Our September 21, 2012 exposé on Ld Holdings showed that CEO John Ayling was unsuccessful in his attempt to build a formidable swimming pool manufacturing company from 2004 to 2008. Now his goals are to develop a chain of diners, acquire revenue generating companies and help other companies raise money. If the success of these ventures were to be measured in the attainment of goals set by Ayling himself, then it is our opinion that these endeavors have failed or are failing.

While we see nothing wrong with the pursuit of the American dream, we could not ignore what we viewed as red flags in the company's approach to communicate its "legitimacy". Unrealistic acquisition goals, underachievement of business objectives, the loss of an Investment Advisory License of a company owned by the company's CEO and the unfounded and unrelenting use of buzz words to attract investors led us to believe that the only thing that LDHL has really been successful with is misleading investors into thinking that there is some sort of future for the company.

Even if some investors want to view LDHL as a legitimate company, its relationship with Huebner almost ensures that it will lose the needed credibility to raise the much needed capital to execute its current business plan.

To continue our dissection of the LDHL story, we will focus on:

• The motivation for the pump of LDHL shares, as well research into characters, mainly Huebner, that have been very direct in encouraging investors to sweep up LDHL shares.
• Letters of Intents ("LOI") that may have helped fuel the pump of LDHL shares. These "agreements" were inked with companies/ventures that appear to have become inactive within month of their formations. No disclosures have yet to be made regarding the status of these LOIs.
• Inconsistencies Across Filings; Weak Disclosures

The Ties between Brad Huebner and LDHL: Incentive for the Pump

Brad Huebner owns BH Group.

"Brad formed The BH Group as a portal that contains thousands of individuals that he has assisted with the investment in the Iraqi Dinar. It will also attract entrepreneurs and positive minded individuals from around the world interested in ongoing types of businesses and financial opportunities presented by The BH Group."

Remember, LDHL is a company that reported 2012 second quarter revenue of around $46,000 from one diner operation. Here are additional excerpts from the earlier referenced email solicitation that proves that Brad Huebner has played an integral role in LDHL promotional efforts:

• I would like to present a "ground floor" opportunity with a Public company that I've personally invested in.
• I'm also working with the Company in the business development arena to introduce it to the WORLD.
• If you don't have an online account you should set one up as this is the most economical way to trade LDHL shares.
• If you have any questions or need help setting up your account you can call me or John Ayling.
• We'll be acquiring these companies at Venture Capital rates without Venture Capital risks related to startup companies at three times earnings or less and taking them from the private market to public market at 8 to 10 times earnings.

One of the most striking statements made by Huebner is his plea to readers to contact him and/or John Ayling if they needed assistance in setting up brokerage accounts in order to buy shares of LDHL. We are not legal experts, but we speculate that Huebner and Ayling are walking a fine line with the SEC by soliciting investors to buy stock.

We urge Huebner to send a follow-up email disclosing his 18 million shares which are up for grabs through a business consulting arrangement with LDHL and his company, Financial Wellness LLC.

The next question investors may now be asking:

• Is Brad Huebner really just an investor in LDHL?
• Is he being compensated to tell the LDHL story?

While we can assume Brad's comments insinuate that the answer is yes to the first question, the answer to the second is a resounding yes!

Suspicious Consulting Agreement involving Brad Huebner

On April 17, 2012, LD Holdings signed a Management and Business Development Consulting Agreement with Financial Wellness LLC, established in Indiana within the last 12 months.

"Financial Wellness will assist the company in the development and implementation of its business plan."

EX-99.1 of the relevant 8K summarizes the details of this arrangement, revealing that a total of 18.4 million consulting shares are up for grabs for Financial Wellness. We found it humorous that the milestones that Financial Wellness must achieve to receive its shares are based on the movement of LDHL's share price as opposed to its business achievements.

The following passage on page 4 of the 2012 second quarter 10Q filed four months after the original consulting agreement only added to our skepticism regarding the integrity of the agreement:

On April 17, 2012, LD Holdings signed a Management and Business Development Consulting Agreement with Financial Wellness LLC. Financial Wellness will assist the company in the development and implementation of its business plan. Per the agreement, the consultant will be compensated through the issuance of 1 million stock options with an exercise price of $0.10 with a possible 15 million additional options contingent on the 1 million being exercised. The options were originally to expire June 30, 2012 and were extended to August 31, 2012.

First, notice that the agreement was extended. But more importantly, notice that it appears that the entire first batch of options can now be exercised once the 1 million options with an exercise price of $0.10 are exercised. The original requirement was dependent on the stock price moving up through different levels.

We decided to probe a little further and found that Financial Wellness, an Indiana LLC, actually resides in Toledo Ohio, just 15 miles from LDHL's "backyard."

• Financial Wellness address: 2936 Pembroke Rd, Toledo, OH 43606
• LDHL address: 1070 Commerce Drive Perrysburg, OH 43551

Furthermore, this company that was retained to assist LDHL with the "implementation of its business plan" was formed on March 1, 2012, around a month and a half before the "Management and Business Development Consulting Agreement" was inked. This can be verified by inputting Financial Wellness LLC into the Indiana Secretary of State database.

With some more digging we found that this consulting company is registered to the house of Bradford and Anne Huebner.

This is when our research team rang the alarm bells!

Was LDHL attempting to be vague with Brad's relationship with Financial Wellness? Two observations have rendered us to also answer YES to this question.

1. First, page 2 of the consulting agreement signature page does not "print" the name of the Financial Wellness representative associated with the signature. Now that we know who it is we can kind of make it out to be Brad Huebner.

   

2. Second, why didn't Brad Huebner just run this agreement through BH Group which has been telling the LDHL story and states that one of its objectives is to "attract entrepreneurs and positive-minded individuals from around the world interested in ongoing types of businesses and financial opportunities presented by The BH Group?"

Combine these two points with the fact that Brad Huebner, through BH Group, is touting LDHL only adds credence to our opinion that he may have not have wanted investors to easily discover his relationship with Financial Wellness.

It appears to us that Financial Wellness was set up for the sole purpose of receiving and promoting shares of LDHL. As far as we can tell Brad's options/warrants could be worth in excess of $10 million at LDHL's current price (assuming he did not sell a significant amount of exercised shares under $1.00).

Whether you want to reference Brad Huebner's "consulting" business run out of his home or his possibly fraudulent Iraq Dinar operation, it hardly appears that he is in a position to significantly put LDHL's business plan into motion, especially now that he has been indicted on allegations of fraud in connection with activities at the BH Group.

Aside from the obvious evidence we have already discussed, we believe that this stock is close to dumping due the fact that most of the consulting options have met their performance targets that qualifies them to be exercised. Also keep in mind that Brad may have some hefty legal bills ahead of him.

In addition to LDHL's consulting agreement with Financial Wellness, three additional events that took place earlier this year telegraphed a high probability that LDHL would pump (as it did and as we predicted).

Event One: Parallels to the Sefe Inc. (OTC:SEFE) pump and dump story we wrote about on Seeking Alpha.

Per page 5 of the 2012 second quarter 10Q,on August 15, 2012, LD Holdings signed two (2)debt to equity conversion agreements for a total consideration of 400,000 shares (valued at $0.24 per share) of the company's common stock. On April 18, 2012, LD Holdings, Inc. converted $73,433 of debt and accrued interest from a former officer of LD Holdings, Inc. into 2,670,290 shares of common stock of LD Holdings, Inc. The SEFE story also involved a series of conversion of debt to equity arrangements.

Event Two: Issuance of stock to unnamed individuals

On February 28, 2012, LD Holdings, Inc. (OTC:LDHL) sold 800,000 restricted shares of the Company's common stock in a private transaction for $24,000 at $0.03 per share. The stock was sold to two individual long-term investors. Details of the who the investors are have not been provided.

Event Three: The Company pumps its own stock through a video.

LDHL's website broadcasts a video. Here is a transcription of the intro;

"Welcome to Boomer 101, this video will introduce you to the "Baby Boomer Generation" and a related financial opportunity to own stock in LD Holdings Incorporated that is perfectly positioned to profit from the aging of the largest demographic group in American History."

Letters Of Intent Add Fuel to the Pump

In our first column on LDHL, we presented extensive evidence found in company press releases and SEC filings that led our team to surmise that LDHL was just putting out fluff to pump its shares. But we believe much more evidence exists to support this opinion.

Pump and dump stories are commonly accompanied by letters of intent to excite investors. These letters often discuss contracts and acquisitions that are never consummated.

When LDHL traded as LDTI it issued at least two letter of intent press releases, one in 2006 and the other in 2007, discussing imminent acquisitions expected to yield combined annual revenues of $15 million and EBITDA of $2.3 million. As one might have guessed, these transactions never occurred as evidenced by the company only reporting revenues $35,000 during the last three years of its swimming pool days from 2006 to 2008.

And the company is at it again. Under the new business plan the company has thus far entered into a letter of understanding and a letter of intent, both of which did not deliver what was promised.

On August 18, 2010, LD Holdings, Inc. (OTC:LDHL) entered into a Letter of Understanding to form and incorporate a new wholly-owned subsidiary, Balance Sheet Solutions, Inc. (BSS)

"as part of its financial services group and its overall plan to which is to help facilitate the transfer of "Baby Boomer" businesses in the $2-$20 million annual sales range to younger generations."

The company asserts that BSS will provide businesses with financial solutions to maximize assets and to minimize liabilities.

Under the terms of the Letter of Understanding, LDHL is committed to provide start-up and working capital to BSS on an "as-needed basis".

And here we go again with the inviting financial targets:

"By the end of 2011, it plans to establish between 20 and 30 independent sales representatives in major markets comprising about 25% of the U.S. population. BSS business plan projects sales of about $3 million and an EBITDA of $750,000 for the year ending 2011. The representatives will concentrate their efforts to market the company's services to businesses with between $500,000 and $10,000,000 in annual sales."

Further due Diligence into this topic reveals once again that the company was unable to meet its operational targets. In fact, The Florida Dept. of State's Division of Corporations website shows that BSS was dissolved as of September 23, 2011 and is inactive.

Furthermore, it's obvious the company has not met its stated BSS goals since it contributed zero revenues to LDHL's 2011 operating results. Yet, the company has not disclosed its inactive status in its SEC filings.

On August 22, 2011 a letter of intent was signed between LDHL and a company called SE Holdings, LLC. The basic premise of the agreement stipulated that LDHL and SEH will form a new company called Video Business Center, Inc. (VBC) as a public entity. SEH was slated to own 51% of VBC, and LDHL was to own 49%. For this new company, LDHL would be responsible for raising $50,000 to implement VBC's business plan centered around:

"Services to provide a comprehensive range of services with the objective of facilitating and enhancing existing businesses, and incubating and establishing new businesses."

If you deduced that LDHL once again failed in a business venture you would be correct. Government records show that SE Holdings was dissolved in less than 5 months from its formation and is currently inactive.

We could not find any information on VBC over the internet.

We honestly do not know what LDHL is up to. Why was the company even toying with the "VBC development stage venture" when its stated goal is to invest in quality revenue generating firms. More troubling is LDHL's inability to help companies raise funds, seemingly not even able to raise $50,000 for this venture. We think that LDHL's management is just attempting to get a nice pump going, throwing stuff at the market until some of it sticks.

Inconsistencies Across Filings; Weak Disclosures

It was no surprise when we noticed this passage after reading numerous LDHL filings.

"An evaluation of the effectiveness of the Company's disclosure controls and procedures as of June 30, 2012 was made under the supervision of John R. Ayling, the Chief Executive Officer/Chief Accounting Officer. Based on that evaluation, Mr. Ayling concluded that the Company's disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms."

Here some examples of what appears to be a lack of management's attention to detail, a trait we run across when performing due diligence on companies we believe are not being transparent with investors

Here are inconsistencies of disclosures across filings:

Inconsistencies Regarding Terms Of The Consulting Agreement With Financial Wellness:

Passage from page 5 of the 2012 first quarter 10Q:

On April 17, 2012, LD Holdings signed a Management and Business Development Consulting Agreement with Financial Wellness LLC. Financial Wellness will assist the company in the development and implementation of its business plan. Per agreement, consultant will be compensated through the issuance of 16 million stock options with exercise prices ranging from $0.10 to $2.00 with a possible 2.4 million additional options with an exercise price of $0.05 per share of common stock

Passage from page 4 of the 2012 second quarter 10Q:

On April 17, 2012, LD Holdings signed a Management and Business Development Consulting Agreement with Financial Wellness LLC. Financial Wellness will assist the company in the development and implementation of its business plan. Per the agreement, the consultant will be compensated through the issuance of 1 million stock options with an exercise price of $0.10 with a possible 15 million additional options contingent on the 1 million being exercised. The options were originally to expire June 30, 2012 and were extended to August 31, 2012.

Besides the change in the option conversion terms we discussed earlier, what happened to the reference to the 2.4 million additional options?

Inconsistencies Regarding Business Plan

It seems the company is uncertain about how many companies it will be acquiring in the first year of implantation or the years after. It can't get its numbers straight! Will it be 3 companies or several? Or is it 15 times EBIT or EBITDA? What about 8 times EBITDA? The following passages were present in various SEC filing:

Passage from page 6 of the 2012 second quarter 10Q

"The company's plans are to acquire at least 3 companies with $25 million sales and EBIT of $2.5 million in the next year. At 15 X EBIT this would place a market capitalization of $37 million on the company.

Passage from page 7 of the 2010 first quarter 10Q:

"In the first full year of operations, the company plans to acquire several companies with $25 million sales and EBITDA of $2.5 million. At 15 X EBITDA this would place a market capitalization of $37 million on the company".

Passage from page 4 of the 2008 10K:

In our first full year of operations (2009) the company plans to acquire at least 3 companies with $25 million sales and EBITDA of $2.0 million. At 8 X EBITDA this would place a market capitalization of $16 million on the company.

Regarding disclosures, we could not locate any filings that contained information to account for the following:

• Termination of numerous letters of intent
• The names of the investors in a 2012 private placement.
• Details surrounding why one of its subsidiaries, Avalon, last mentioned in its 2007 10K, just disappears from filings out of the blue.

We also believe that the company could have been more transparent with the following items by filing 8Ks instead of burying them within the many pages of the 2012 second quarter 10Q.

• An Amendment of the consulting agreement with Financial Wellness, that essentially provided more time for the stock to go up so that options/warrants would be in the money
• A possible amendment of the consulting agreement with Financial Wellness that changed the exercise terms of the options.

Conclusion:

It appears to us that LDHL is just a shell run by an inexperienced CEO who has not paid attention to detail. If you're interested in owning shares of a 'holding company' that has ties to some dubious characters and owns a small diner in Ohio that caters to the "Boomer Generation", then LDHL is your ticket to that end. If you are looking for an experienced management team with real and significant business growth drivers you may want to look somewhere else. If you have already invested in LDHL and made money in the pump move, congratulations, but beware that we believe an imminent dump move is lurking.

Disclosure: I am short OTC:LDHL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Also actively seeking for more shares LDHL to short.