For the second time in seven years, a proposed reinsurer headed by former Aon (Bermuda) boss Robin Spencer-Arscott has reportedly failed to get the go-ahead from Island regulators.

News of the attempt to get a new insurer off the ground were revealed this week in Web-based newsletter InsideBermuda, which reported that the failed application to the Bermuda Monetary Authority was on behalf of River Reinsurance Ltd., which is owned by Bermuda-based River Capital Ltd.

The e-zine said that even though notification was given to River Capital by the BMA several weeks ago, River - a publicly-traded firm - had failed to make the news public in a filing to the SEC, despite its share price increasing by 3,281 percent in the nine months after announcing it had agreed to buy River Capital.

The SEC-reporting firm, which recently changed its name from Ballistic Ventures Inc. to River Capital Group Inc., (RCGI) is reportedly controlled by Scott Lines and Brian Lines, who are already under investigation by the SEC for alleged securities fraud and market manipulation.

RCGI's share price began to rocket on the pink sheets market immediately after the firm issued a Press release on November 14, 2003 announcing its proposed acquisition of River Capital.

"As part of the adopted business plan, the company's Bermuda operation will seek registration as a Class 3 Insurance Company with the Bermuda insurance regulators," stated the release.

According to a researcher at New York-based Pink Sheets LLC, RCGI's last traded price before the announcement was $0.16 on November 11, 2003. In the first trading day after the news release, RCGI's shares traded for $1.22 and, by December 31, 2003, had reached $3.25, with trading volume of approximately 30,000 shares over the six-and-a half-week period, said the researcher.

The price has gone up even further since then, most recently trading at $5.25.

The increase occurred even though, at the time of the announcement, RCGI had no employees, no revenue, was subject to a going concern warning by its auditor and had a history of failure and the Bermuda company it intends to buy had just one employee.

Apart from shareholders cashing in on the pink sheets, the positive message conveyed by the Press release also helped RCGI raise capital in private placements.

From November, 2003 to March, 2004, the company sold 1,030,000 of its shares for $0.50 each for gross proceeds of $515,000, according to SEC filings.

The company has stated its goal is to raise $1.5 million to fund a Class 3 insurer, which must have a minimum capitalisation of $1 million by law.

River Capital Ltd. is owned by Howard J. Taylor, 9,600 shares, and Robin Spencer-Arscott, 2,400 shares, and, at the time of the announcement, had just one employee - Mr. Taylor - after nine years in business.It was incorporated in Bermuda as Concorde Capital Corporation Ltd. on June 8, 1995 and changed its name to River Capital Ltd. on February 1, 2001.

Mr. Taylor, a British national living in Bermuda, is President and a director, while Bermuda attorney Michael E. Smith, of Smith & Co., is Vice President and a director.

When first contacted by InsideBermuda in late August, Taylor said that an insurance licence application had been submitted to the BMA and a decision was pending.

"This is an exciting project," he said.

However, when we contacted him again a few days later after we learned that the BMA had essentially turned down the licence, he said he had been informed of this "two or three months ago" and he was preparing to submit a revised application.

The application "is certainly not dead", said Taylor, adding: "I am currently working on it and we will be re-submitting our application in the future."

Mr. Spencer-Arscott will run the insurer, if approved, he said. RCGI is currently providing up to $20,000 per month to the Bermuda company to cover "all reasonable expenditures pursuant to the merger", according to RCGI's 10QSB filing with the SEC on August 23, 2004.

The filing, which was signed by William Dickie, RCGI's Toronto-based Secretary and CFO, made no disclosure that the insurance licence upon which its future is being based had been denied.

Mr. Dickie, who also issued the press release which sent RCGI's share price soaring, did not respond to an inquiry asking him to explain the price increase and identify the firm's stock promoter.

There was also no response to questions sent to Mr. Spencer-Arscott and Mr. Scott Lines, with only Mr. Taylor prepared to comment, according to InsideBermuda.

Mr. Taylor reportedly told InsideBermuda that, if an insurance license application is approved, an institutional investor, which he did not identify, was prepared to invest $25 million in River Capital.

But the e-zine said there were plenty of red flags for anyone contemplating investing in RCGI, which, according to an SEC filing on May 14, 2004, was 56 per cent owned by offshore companies controlled by Scott and Brian Lines, who are Managing Director and President, respectively, of investment firm Lines Overseas Management.

Among these was that LOM, the Lines brothers and two other Bermudians who have been insiders of RCGI at one time or another - Richard King and Michael Heslop - are currently being investigated by the SEC for alleged securities fraud and market manipulation involving Sedona Software Solutions Inc. and SHEP Technologies Inc., both of Vancouver, Canada, and HiEnergy Technologies Inc., of Irvine, California.

Mr. King, an employee of Bermuda liquor firm Gosling Brothers, was RCGI's chairman and CEO until a few weeks ago and remains a shareholder, while Mr. Heslop's firm Aberdeen Holdings Ltd. was a shareholder in 1999 when RCGI was known as whOOdOO.com Inc.