Five Metro Vancouver shareholders admit lying to securities investigators
Surrey-based firm's share price rose from 30 cents to $4.75 in five months
By David Baines, Vancouver SunNovember 17, 2010
VANCOUVER - Five Vancouver-area residents have admitted to acting as nominee shareholders for a U.S. junior company and lying about it to B.C. Securities Commission investigators.
It's the only case I can recall where BCSC enforcement staff have taken action against people who agree to allow promoters to use their names to effect a phoney share distribution.
The five respondents are Parvin Kaur Dhudwal of Vancouver; Paul Uppal of Delta; and Amrik Singh Bahd, Kulbir (Kelly) Singh Uppal and Gurpreet Kaur Jhutty, all of Richmond.
In a settlement agreement with the commission, the five said a person (who is identified only as "AB") told them that he and certain other individuals (one of whom is identified as "CD") were forming a company and "needed some names and signatures to get it started."
That company was Sungro Minerals Inc., a Nevada-registered exploration company that is based in Surrey.
Sungro's president and majority shareholder was Malkeet Bains, who is a licensed insurance broker who owns M. Bains Financial Inc. in Surrey.
(I have determined that Bains is "CD," the person who was said to be organizing the company.)
To raise startup capital, Sungro sold seed shares at two cents each to 40 people. The five respondents each bought 118,750 shares in September 2007 and gave AB cheques for $2,375. On the very same day, AB returned cheques to each of them for the full amount, plus $50 to $205.
(I have determined that "AB" is Karn Bahd of Richmond, the son of respondent Amrik Bahd.)
Although not mentioned in the settlement document, the extra amount paid to the nominees is usually a bonus for allowing the use of their names.
The shares are registered for resale with the U.S. Securities and Exchange Commission, then the people behind the scenes gather them up, so they effectively control all the outstanding shares. This makes the stock easy to manipulate.
The settlement agreement states that, after the five respondents were reimbursed for their shares, they had no further involvement with Sungro until they were contacted by commission investigators, who were concerned about the rapid rise in the company's share price.
The stock had started trading on the OTC Bulletin Board in the United States in February 2009 at 30 cents, and by July that year had spiralled up to $4.75, giving the company a total stock market value of $46 million.
This was an unusually high capitalization considering that, by that time, the company had defaulted on its mineral property option and its total assets consisted of $299 cash.
Suspecting that the seed stock distribution had been rigged, commission enforcement staff issued a cease trade order against the company in July 2009, and began to subpoena the seed shareholders.
According to the settlement agreement, all five respondents were summoned to appear at the commission and answer questions under oath.
The five respondents admitted that, before attending the interviews, AB and/or CD met with them and gave them a Sungro share certificate and instructed them to tell investigators that they received it earlier in the year.
The five respondents dutifully told investigators that they had not received any money to pay for the shares. The investigators did not believe them, and in September this year, the commission cited them for lying.
A hearing into the matter was to be held Monday, but was averted when all five respondents admitted they had lied and agreed to six-year stock market bans in B.C.
That means they can't trade stock in B.C. (except in limited circumstances), or act as an officer or director of any issuing company, or serve in any management, consultant or investor relations role, for any issuing company for the next six years.
Kulbir Uppal and Paul Uppal also agreed to pay the commission $7,500 each to settle the matter, and Jhutty and Bahd each agreed to pay $5,000.
The commission said it would have normally ordered Dhudwal to pay $5,000, but she is bankrupt and unemployed and has no reasonable prospect of paying.
The investigation into the trading of Sungro shares is still in progress. On Sept. 25, a commission panel extended the cease trade order against Sungro until a hearing is held and a decision rendered.
dbaines@vancouversun.com
