Whitehall Probes $2M Loss; Suspects Insiders

The Brickell Avenue-based holding company, in the middle of Miami's financial district, comprises a mortgage banking/residential title insurance division that operates in 12 states, a hair-growth stimulation firm and a medical diagnosis software section.

The company's balance sheet is in shambles, Whitehall president/CEO Luis Alvarez tells shareholders in a prepared statement trying to explain the unprecedented loss.

The company "has identified three significant developments over the past six months which resulted in Whitehall reporting an approximate loss of just over $2 million," Alvarez says. "I want to assure our stockholders that these developments are isolated situations and not indicative of the company's actual operations."

Revenues were $10.54 million versus $3.58 million in 2000. Expenses totaled $12.4 million compared to $6 million previously. Total assets were $7.4 million. Total liabilities decreased to $2.89 million versus $4.18 million in fiscal 2000.

Alvarez says in his statement the $2.21 million loss comprises an impairment of long-lived assets; an allowance for doubtful accounts; and "the recognition of unauthorized bonuses and misappropriation of corporate funds" by the former management of Whitehall's subsidiary, Alternative Lending Group.

Alvarez says the impairment loss charge shown on the balance sheet is $655,307 or 25% of the carrying value of the license formerly held by Windmill Scientific for the DocPal product. Windmill "illegally canceled the licensing agreement," Alvarez alleges. Whitehall is arbitrating that issue.

A second factor contributing to the operating loss was a $3.5 million default by an unidentified buyer of Whitehall's MegaBlow Moldings. Alvarez tells shareholders the notes are covered by the buyer's real estate. Whitehall gave the buyer a payment extension and took a charge of $1 million "for doubtful accounts."

On the $460,427 allegedly taken by previous employers, Alvarez says Whitehall will sue the workers unless the money is returned "and other matters are resolved." But the $460,427 can't be booked as a receivable until a court judgment is issued, Alvarez says.

Whitehall's common was trading on the Over-the-Counter Bulletin Board at .008 cents per share Feb. 11, down 19.19% from .0099 cents Feb. 8. Trading volume Monday was 482,700.