SEC target Boock loses appeal of massive U.S. fine
2015-08-17 12:17 ET - Street Wire
Also Street Wire (U-*SEC) U S Securities and Exchange Commission
by Mike Caswell
Toronto's Irwin Boock has lost his appeal of $16.8-million in sanctions he received for a corporate hijacking scheme. (All figures are in U.S. dollars.) In a decision handed down on Thursday, Aug. 13, the U.S. Court of Appeals for the Second Circuit has denied the appeal as being too late. Mr. Boock, who is representing himself in the case, missed filing deadlines, including a 60-day period to appeal a ruling handed down in 2012.
Thursday's judgment upholds penalties the U.S. Securities and Exchange Commission won against Mr. Boock for a scheme in which he and others took over the identities of several inactive pink sheets companies. The group filed false paperwork that gave them control over the companies, and then sold the companies as shells, grossing millions, according to the SEC. The stocks produced from the scheme included a shell that became Paramount Gold and Silver Corp., a Toronto Stock Exchange listing, and another that became Surrey-based World Hockey Association Corp. (The SEC did not accuse either company of any wrongdoing.)
The case resulted in an initial $11.2-million judgment against Mr. Boock, followed by a $5.6-million order. Mr. Boock appealed both on March 26, 2015, but the appeal court has ruled that the filing came too late. He missed the 60-day deadline to appeal the the $11.2-million judgment by a substantial margin, as that penalty was handed down on Aug. 2, 2012. He also did not object in time to the $5.6-million sanction, which he received on Jan. 2, 2015, the appeal decision states.
It is not entirely clear what Mr. Boock's grounds for appeal would have been, as the matter was in the preliminary stages, but in previous court filings he claimed that he made a videotaped confession under duress. He said that he provided the confession during an interview that he attended in Toronto with an SEC lawyer. Around that time, his wife had been in the hospital, he had slept very little and he was suffering from the effects of medication he was taking for heart problems. As he saw it, the SEC's lawyer "could have had me admitting to murders in countries I had never been to if he so wanted."
In addition to denying Mr. Boock's appeal, the appeal court dismissed an appeal by one of his co-accused, a Toronto-area man named Jason Wong, for similar reasons. He had previously claimed in court filings that the case was a matter of mistaken identity. He said he knew nothing about the hijackings and contended that somebody else must have used his name. The judge that heard the case, Denise Cote, rejected his argument entirely. In an Aug. 25, 2011, decision she ruled that it was clear he participated in every step of the scheme, engaging in "deliberate fraudulent behaviour."
The case against the two men dates back to Sept. 29, 2009, when the SEC filed a civil complaint against them and others in the Southern District of New York. The SEC claimed that they participated in a four-year scheme, starting in November, 2003, that targeted inactive public companies trading on the pink sheets. They ran the scheme through Select American Transfer, a transfer agency that they operated, and for which Mr. Wong served as president.
The hijacking targets, as described by the SEC, were typically inactive companies that still traded, but lacked a current transfer agent or contact person. The men scanned the pink sheets website to locate such companies. Once they identified a target, they reactivated the company through the appropriate secretary of state using false names and addresses, the SEC said.
In some instances, they discovered that the secretary of state had declared a company void. When this happened, they simply incorporated a new entity with the same name and used it to assume the identity of the old company, the SEC claimed. They would then roll back the stock, change the company's name, and obtain a new Cusip number and trading symbol. Once the men had control of the companies, they sold them off as shells, fetching prices between $80,000 and $200,000 each, according to the complaint.
The other defendants were Stanton DeFreitas of Toronto and two Houston lawyers, Roger Shoss and Nicolette Loisel. The judge found Mr. DeFreitas and Mr. Shoss jointly liable with Mr. Boock for $8.2-million in gains. Ms. Loisel was ordered to pay $143,000 for aiding the scheme. (The SEC's case had to be completed in two parts because of a separate criminal trial against Mr. Shoss. In 2011 prosecutors in Florida charged him for an investment fraud and money laundering scheme. He ultimately received 18 months in jail.)
Throughout the case the SEC said little about the buyers of Mr. Boock's shells, but it did identify some of them. One was Quebec resident Jean-Francois Amyot. According to the SEC, he paid $1-million to buy 10 to 12 shells. The regulator did not accuse Mr. Amyot of any wrongdoing in the case, but it later filed civil charges against him for the pump-and-dump of an OTC Bulletin Board listing, Spencer Pharmaceuticals Inc. Mr. Amyot denied any wrongdoing, but failed to appear at his trial. The SEC is seeking up to $11-million in penalties by default.
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