A shareholder lawsuit was filed this week against GenesisIntermedia, and names alleged arms dealer Adnan Khashoggi as a defendant, according to a press release from the law firm of Berman DeValerio Pease Tabacco Burt & Pucillo.

It is believed Mr. Khashoggi was a shareholder in the company, through his Bermuda-based company Ultimate Holdings Limited.

The Bermuda Registrar of Companies listed Ultimate Holdings Ltd. as existing at Milner House, 18 Parliament Street, Hamilton - the offices of the law firm Cox, Hallett and Wilkinson - with incorporation in 1997.

The Registrar of Companies listed three names on the Memorandum of Association of Company limited by shares - Douglas Pullen, Marty Brandt and Ellie Dolding.

The company is incorporated as a holding company, and to act as an investment company.

Requests for information by The Royal Gazette to Cox, Hallett & Wilkinson revealed the company is a nominee company of Coson Company Ltd.

Both the Walt Street Journal and the New York Observer have cited Mr. Khashoggi as being behind Ultimate Holdings Ltd.

The class action filed in the US District Court for the Central District of California seeks damages for violations of federal securities laws on behalf of all investors who bought GenesisIntermedia stock from December 21, 1999 to September 25, 2001.

It is believed to be the first class action against GenesisIntermedia that names Mr. Khashoggi, the Saudi arms dealer and financier who owned or controlled much of the company's stock.

Mr. Khashoggi was linked to the Ronald Reagan-era Iran-Contra scandal - and is said to have had financial ties to the world's most wanted man, Osama bin Laden.

Earlier this month, Ireland's Sunday Business Post reported on financial ties to bin Laden: "At a meeting in Paris, in 1998, international arms dealer Adnan Khashoggi was among a number of prominent Arab businessmen who agreed to continue what has been described by US intelligence officials as "protection payments" to bin Laden.

This legal action accuses GenesisIntermedia, Mr. Khashoggi, and former Chief Executive Officer Ramy El-Batrawi and others of engaging in an elaborate two-year scheme to manipulate the market in the company's stock and jack up its share price, reaping millions of dollars in illegal gains.

GenesisIntermedia is a telemarketing company based in Van Nuys. Mr. Khashoggi is said to own Ultimate Holdings, a Bermuda investment company that held up to 40 percent of GenesisIntermedia's stock during the Class Period.

The scheme began in December 1999 when Mr. Khashoggi and Mr. El-Batrawi made a secret stock payment worth $3 million to financial commentator Courtney Smith to tout the company's stock. Smith recommended the stock at least 18 times during appearances on CNBC, CNN, Bloomberg Television and other media outlets. By the time of Smith's last appearance in March 2001, the stock had jumped from less than $1.50 per share in December 1999 to highs of between $14 and $28 per share.

The stock jumped again in May 2001, soaring 40 percent in a single week after a buy recommendation by Rafi Khan, an ex-stockbroker banned from the securities industry who had spent several days meeting GenesisIntermedia executives at their offices.

According to the complaint, the defendants accentuated the stock run-up with their own false statements and insider trading. By late summer, the stock was selling at more than $17 per share and Ultimate Holdings, Mr. Khashoggi's company, had reaped some $7 million in "short-swing" profits.

The final chapter in the alleged fraud began in September 2001, when someone lent more than 7.2 million shares of GenesisIntermedia stock to Native Nations Securities, Inc., a small firm in New Jersey. The only two people holding enough shares to make the loan were Mr. Khashoggi and Mr. El-Batrawi, the complaint said.

Native Nations, in turn, loaned the 7.2 million shares to MJK Clearing, Inc., which then reloaned the shares to at least four other securities firms. When GenesisIntermedia's share price later fell and the other firms asked for repayment, Native Nations revealed that someone had altered its books and walked away with $60 million dollars.

The Securities Investor Protection Corporation seized MJK Clearing for insufficient capital - producing the largest failure of a US brokerage firm in at least 30 years. The Nasdaq Stock Market halted trading in GenesisIntermedia stock on September 25, 2001, but not before Mr. El-Batrawi had sold $1.7 million worth of his stock.

The Securities and Exchange Commission has since announced a formal investigation.