Federal prosecutors in Manhattan filed an indictment on Tuesday charging 53-year-old Melville ten Cate with plotting a fraudulent $14 billion bid to purchase Textron Inc.
The U.S. Attorney’s office for Manhattan alleged that ten Cate, former head of the now-defunct London-based Xcalibur Aerospace, Ltd., tried to take over Textron with a fake tender offer.
Ten Cate and Xcalibur are also facing regulatory action by the Securities and Exchange Commission (SEC), which allege that the fake offer drove up Textron’s shares.
While a bid to purchase a company is not illegal, this is allegedly not ten Cate’s first involvement with Textron and Xcalibur.
The dual U.S.-Netherlands citizen’s alleged fraudulent attempt to purchase Textron can be traced back to January 2019 when ten Cate sent the manufacturer a purported tender offer for $66 per share.
“Ten Cate provided a number of documents to Textron concerning Xcalibur’s purported financial condition, including documents stating that Xcalibur earned approximately £161 million in revenue for 2018, and that in January 2019, Xcalibur received a $6.4 billion investment from a member of the Saudi Royal family,” states an SEC complaint.
An immediate red flag was raised for Textron, who further looked into the deal. The SEC says a slew of business failures, questionable commercial dealings, unpaid debts, and allegations of fraud helped Textron determine that the offer “lacked credibility.”
Ten Cate reached out again on February 28, 2020, which, according to court papers, Textron ignored.
In November of that year, ten Cate took advertised his tender offer in The New York Times claiming that Xcalibur would buy Textron shares for $60.50 each, a 56% premium.
“Upon The New York Times’ request for advanced payment, ten Cate provided an international bank wire receipt indicating payment from a purported Swiss bank account,” the SEC complaint states. “However, no such bank account existed.”
The New York Times was never paid for the advertisement.
While authorities claim the advertisements were false, they did move the markets.
Textron’s common stock price rose roughly 15% the day the ad was released. With trading volume soaring 450% higher than the previous trading day, the New York Stock Exchange halted trading in Textron shares.
“We allege that the defendant, ten Cate, pretended to run a financially viable business while leaving a trail of bad debts that included never paying for the very advertisement that announced the fictitious offer,” said Carolyn Welshhans, the SEC’s associate director from the Division of Enforcement.
A LinkedIn page belonging to ten Cate says the defendant has “fixed wing flight experience” and a master’s degree in aerodynamics from the Delft University of Technology in the Netherlands.
Ten Cate, who is still at large, is charged with one count of tender offer fraud, one count of securities fraud, and two counts of wire fraud. Each of the counts carries a maximum of 20 years in prison.
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