In February, 2003, Asensio
removed the following letter to him from his website. Asensio Exposed was
able to locate the text
on a message board. Regrettably, the company
letterhead and officer's signature is not
reproduced in this
format.
December 10, 2001
Mr.
Manuel P. Asensio
Chairman, President and Chief Executive Officer
Asensio
& Company, Inc.
767 Third Avenue
New York, NY 10017
Dear Mr.
Asensio:
We received your fax dated November 15, 2001 as well as today’s
fax. We have responded both publicly and also directly to you regarding your
various statements about Research Frontiers, a fact which, like others that do
not suit your purposes, you have conveniently chosen to ignore. Our most recent
public response is dated November 29, 2001. Much of what you describe as
“questionable” transactions in your November 15th letter apparently appears
“questionable” only to you since these transactions were not only fully
disclosed in our public filings and statements, but involve matters that are
common and well-understood by anyone who has successfully financed a public
company with minimal dilution to its shareholders. We note in this regard your
admission of your own failed attempts to take Asensio & Company public
(although the real reasons for your withdrawal of your public offering has not
been publicized). I also note that you raised some of these same issues with the
reporter from Forbes Magazine who when attempting to ascertain the accuracy of
the facts you presented to him, discovered with easy verification that various
statements by you were either exaggerated or untrue. He interviewed us and
repeated the many things that he said you had told him about Research Frontiers
which, in the final analysis were not relevant enough to include in his article
about you. You will also note that this reporter stated in his article that
Forbes did not recommend to their readers that they short the stock of Research
Frontiers or any company having a market capitalization of less than $300
million.
We also note that you seem to use a scattershot approach to
your “research” where you will raise an issue and when proven wrong, just keep
raising other issues. This is clearly reflected in your November 15, 2001 letter
where, after previously insinuating erroneously that our technology might never
be used in a product, attempting to malign our licensees and others involved
with Research Frontiers and our SPD technology with information you know to be
false, reaching conclusions about our patent position which is contrary to the
public record available to anyone with a computer and access to the Internet,
you then chose to take well-documented and properly authorized transactions
which were fully disclosed to the market, and ascribe some sort of unspecified
and improper motive to them. We also note your similar attempts to malign and
defame Ailouros Ltd., including what must have been for you an embarrassing
correction on your web site of your November 28th press release in response to
our public response to you in this matter dated November 29, 2001.
Your
letter accuses us of being engaged in a “pump and dump” scheme. Yet you have
intentionally ignored some of the facts which are clearly inconsistent with your
opinion, such as the fact that insiders have recently been buying Research
Frontiers stock, and the fact that the last sale by any member of management
occurred almost 16 months ago with a small sale of 7,800 shares by Robert Saxe.
The foregoing makes it quite clear that it is you and your clients that are
engaged in a “short and distort” scheme. We have been developing information
about you and your clients and intend to focus the light of truth on your
collective activities. Based on our information, we believe that it would be
appropriate and in the public interest for the identities and activities of your
clients and you with regard to our Company to be revealed to the public as part
of a full disclosure of these activities.
On March 15, 2001, you
approached Research Frontiers and asked if we would sell stock directly to your
“friend” who had a short position in our stock and who might want to cover that
position without having to repurchase these shares in the open market. Although
you have publicly denied that this meeting took place in your two separate
“press releases” dated August 24th, our evidence, including your own
correspondence after the meeting confirms that you in fact did meet with us on
this date. As you may recall, we appropriately turned down your request.
On June 15, 2001 you issued your first public “press release” about
Research Frontiers entitled “REFR makes unsubstantiated future profit forecast.”
While our targets are based upon data supplied to us by our various licensees,
your conclusory statement that you believe our forecasts to be unsubstantiated
is your own opinion which itself is not supported by any facts. In addition to
the unsubstantiated opinions you express in your June 15th press release, we
have publicly noted and stated in earlier correspondence which both we and our
law firm have sent to you which you have chosen to ignore, that statements
contained in your various press releases are false and misleading.
At
approximately 10:00 p.m. on June 14, 2001 (about 10 hours before you initiated
your public campaign against Research Frontiers but presumably well after you
and your clients had already established a short position in our stock), you
sent us a fax listing selected language from various press releases and media
articles. While we stand behind our own public statements, like every other
company in America, we cannot control what the press chooses to say about us.
Despite this obvious fact, you issued a false and misleading “press release” on
June 18, 2001 that somehow attributed a statement made by a reporter in
Automotive News two months earlier which, by all accounts of the executive
interviewed, misquotes one of our licensees, as some sort of conspiracy by
Research Frontiers and the media to indicate that the various automotive
applications for our patented suspended particle device (SPD) technology was
something newly discovered. This is obviously inconsistent with Research
Frontiers’ numerous public statements which have consistently over time noted
that automotive applications are one of the many excellent uses for SPD
technology, a fact that anyone reviewing our history should have known. Although
you admit these facts later on, you still repeated this theme in the press
release that you issued on September 11th. Since the markets were closed on
September 11th and for the balance of that week because of the terrorist attacks
on our country that occurred the day you issued your “press release”, we can
only assume that you reissued your September 11th “press release” again on
September 18th with a different title but with the same themes and absurd
conclusion that Research Frontiers and the media have somehow conspired with
each other. Your continued repetition of statements you know to be false is
fraudulent, defamatory, and a violation of applicable laws and regulations which
apply to you and your firm.
Since we have already publicly responded to your
September 6, 2001 “press release” about our extensive patent portfolio in our
September 7th press release, which also outlines some of your other abusive and
unlawful tactics, I now turn to the remaining “press release” which, like your
other press releases with which you have barraged the public about Research
Frontiers in the course of a three month period, is false and misleading. In
addition to the erroneous statements you have repeatedly made about SPD aircraft
applications, we have discovered that your private activities (only some of
which I address in this letter), are even more egregious and legally actionable.
First, we find it interesting to note that in various press releases and other
statements that you issued prior to August 22, 2001, you stated that SPD
aircraft window products would never be produced. When you were proven wrong on
August 15th with the first sale of a commercial SPD product, you then had to
scramble around for other ways to hurt Research Frontiers and its licensees and
their customers so as to protect you and your clients from losses stemming from
your short position in Research Frontiers. One of your most egregious tactics
was to contact and harass (and even threaten) each and every customer for SPD
products whose names were publicly announced by our licensee, InspecTech Aero
Service, Inc. While others who represented themselves to work for Asensio and
Company started this practice almost immediately after customer names were
announced, you then became personally involved. We understand that each customer
who has installed SPD aircraft windows purchased from InspecTech have not only
confirmed their purchase to you, but also reported back to you that they and the
owners and passengers on these various aircraft were very pleased with these
windows. I understand that even the legal department of one of these customers
has been in contact with you. This information and the evidence of your improper
activities has been, and will be, turned over to the proper authorities for
further action.
We also note from publicly available sources that
Asensio & Company currently states that it only has four clients. Our
information about your clients indicates that you may have indeed lost a number
of clients recently. Could this be due to the poor performance of your stock
picks and/or because they no longer wish to be associated with you for other
reasons? We note your public statements of your track record, but also note that
in the past you have been fined and censured for misrepresenting your record and
selectively disclosing information. Conveniently for you, you have not publicly
disclosed when you initiate your short position and those of your clients, and
when you cover such positions. However, the apparent loss of your clients over
time and your refusal to disclose publicly the details of your track record
seems to be strong indication that your results are not what you would like the
public to believe, and that there may be other problems that you and your
company have failed to disclose.
We
also note that at least one of your clients has sued you and obtained a judgment
in excess of three times the amount you and your firm were fined last year by
the NASD for various offenses, including selectively disclosing information
including your misrepresentation of your performance record, repeated rule
violations of applicable rules regarding determining whether stocks you and your
clients had sold short were indeed borrowable, failure to report as required by
applicable laws sales made as being short sales, omitting material facts and/or
making misleading statements or claims, violating rules regarding Internet
message board posting and advertising. In this regard, we also find it
suspicious that certain of your activities seem to correspond to postings on
public Internet boards critical of Research Frontiers by individuals purporting
not to be affiliated with Asensio and Company. We invite your public sworn
statement that no postings made on the Internet about Research Frontiers have
been or will be made directly or indirectly by you or your clients, or by any of
your agents, employees, or individuals or firms directly or indirectly
compensated by you or your clients, agents and employees. We also have reason to
believe that you are in violation of the settlement agreement that you entered
into with NASD Regulation, Inc.
In your various "press releases" you
have repeatedly stated that you have sold shares of Research Frontiers common
stock short. Research Frontiers has lawfully obtained and turned over to the
proper authorities documentation indicating that Asensio & Company has
maintained a long position in Research Frontiers common stock during the
relevant periods when Asensio & Company had indicated in its press releases
that it had a short position in Research Frontiers common stock. We invited you
on several occasions to publicly explain in detail why this is so, and why you
have not publicly disclosed this fact in view of the legal requirement that you
make full disclosure. Unlike our transactions, which you complain of in your
recent letter to us, which the investing public has received full disclosure of
and which are so ordinary as to not raise any legitimate concern by anyone with
even a superficial knowledge of corporate finance (for example, you raise as
highly unusual that Research Frontiers has granted management stock options
under stock option plans approved by our shareholders), you have yet to respond
to our evidence that you have maintained a long position in Research Frontiers
common stock despite your public comments that you and your clients are short.
In letters sent privately by you to us, you insist falsely that you have never
had a long position in Research Frontiers common stock, but you curiously also
ask us to show you how we do know that you have a long position. As noted in our
earlier letter to you in this regard, we have turned over our evidence to the
proper authorities, and invited you to obtain this evidence from the NASD or SEC
directly since we do not want to compromise any ongoing investigations by these
authorities regarding you and your firm. Based upon the information we have
obtained, we believe that your long position could very well be part of a scheme
in conjunction with your clients and/or others to manipulate trading in Research
Frontiers common stock, and engage in a repeating pattern of circumventing
various short selling rules. We have obtained and are turning over to the
appropriate regulatory authorities additional evidence of these improper
activities.
We also find it incredulous that someone who
claims to be a savvy market professional and whose firm claims to have acted as
a co-manager on certain public offerings (something we can find no public
evidence of in recent times and which is inconsistent with documents which we
have obtained), can question Research Frontiers’ stock repurchase programs
(details of which are all publicly disclosed) and characterize it as improper.
Like many companies, we repurchase our common stock in the open market whenever
we believe that it is an attractive use of our capital. If anything, this shows
not only the strength of our balance sheet and cash position, but also our
confidence in the prospects for Research Frontiers and our licensees. We
recognize that as a short seller attempting to drive down the price of our
stock, you would prefer us not to repurchase shares, but as usual, your comments
on this subject are self-serving.
You also challenge loans made to
insiders (the last such loan was made almost five years ago). These loans are
made at prevailing market interest rates and similar to margin loans made by
brokers. Details were also fully disclosed in our publicly filed documents. You
also challenge management compensation. As you may know from our public
disclosures, a large part of recent management and non-management compensation
has come in the form of bonuses. In 2000 and 2001, bonuses were paid to
management as a result of the creation of added shareholder value. Research
Frontiers stock outperformed all of the major market indices during the relevant
periods. For example, during 2000, Research Frontiers’ stock price increased by
over 18% as compared to the Nasdaq which fell by 39% and the Dow Jones
Industrial Average which also fell by over 6% during this same period. Through
the first half of 2001 when bonuses for this year were calculated, over $114
million in shareholder value was created as Research Frontiers stock increased
by over 54% (as compared to a 12.5% decline in the Nasdaq and a 2.6% decline in
the Dow Jones Industrial Average during this same period). Our record was
achieved by us despite heavy artificial sales pressure on our stock by short
sellers whose short sales aggregated nearly 1.7 million shares as of
mid-November, 2001. As a short seller whose actions and economic self-interest
are to reduce or destroy shareholder value, we understand why you would not like
to see management’s compensation aligned with the building of shareholder value.
We also challenge you to explain your statement that Research Frontiers
has sold approximately 4.5 million shares in unregistered offerings. Any
innuendo by you that we have had any illegal or improper securities offerings
is, again, false and defamatory. As far as your comments about Ailouros Ltd., I
provided you with their contact information when you and I had met in March
2001. The terms of our relationship with them are fully disclosed in our
periodic filings with the SEC including the registration statement filed in
connection with their investment. We note that while you have corrected some of
your statements about Ailouros, Ltd, on your web site, you have repeated in both
your November 28 and November 29 “press releases” information which you know (or
which any competent professional in the securities industry should have known)
to be false.
As the author of your letters, you are of course
free to publish them and accept whatever legal consequences result from such
publication. We also invite you to publish this letter in its entirety (and
reserve the right to do so ourselves) if you are so confident of what you like
to categorize as your “exhaustive research and in-depth analysis” as evidenced
by the so called “press releases” you have issued to date about Research
Frontiers. Consistent with your checkered history of selective disclosure (for
which you have already been sanctioned and fined by NASD Regulation), we do not
think that you will stand behind your so-called “research” and publish the
complete correspondence between our two companies.
In order to help
complete their files, we are providing copies of your latest letter and your
letter dated November 15, 2001 and this response to the SEC and NASD.
Sincerely,
Joseph M. Harary