5 company scam ring - Digging deeper into possible Vancouver connections
Jamie King - Vancouver promoter business partner of Scott Marshall and Sak Narwal at Beacons Gate Consulting Inc - Vancouver stock promotion company
RCMP raid Beacons Gate offices STOCKS I Controversial firm believed to be promoted out of a site on West Second David Baines Vancouver Sun Saturday, February 28, 2004 Investigator Paul McNamara is flanked by RCMP and Vancouver police officers outside Beacons Gate Consulting during search of the premises.
CREDIT: Ward Perrin, Vancouver Sun The offices of a Vancouver company whose principals are believed to be involved in the promotion of Silver Star Energy Inc. were raided Friday by members of Vancouver's new RCMP Integrated Market Enforcement Team. The group searched the offices of Beacons Gate Consulting Inc. at 302-1505 West Second Ave, which is believed to be where shares in Silver Star, a controversial junior exploration company with oil and gas interests in Alberta and California, are being promoted.
The raid involved nine police and civilian members of the team, nearly all wearing blue nylon jackets with "POLICE RCMP" in bright yellow letters on the back, supported by three uniformed Vancouver police officers. Inspector Bill Majcher, who heads the team, said the raid was prompted by two articles about Silver Star that were published in The Vancouver Sun Feb. 4 and 14. "As a result of those articles, some of our investigators started following up. We determined there was sufficient cause for concern and we wanted to find out what was going on in these premises," he said. Majcher is best known as the RCMP officer who, posing as a Colombian drug cartel operative, got former Vancouver lawyer Martin Chambers to agree to launder millions of dollars of purported drug money.
Chambers is now serving a 15-year jail sentence in the United States. After his successful undercover operation, Majcher was appointed head of Vancouver's market enforcement team, part of a five-year, $120-million national initiative to fight stock market crime. The Vancouver team consists of investigators from the RCMP, the Vancouver police department and the B.C. Securities Commission, as well as private forensic accountants and Crown prosecutors.
Friday's raid represents a dramatic debut and is bound to send a chill up and down Howe Street, which until now has rarely played host to such police actions In particular, it is certain to catch the attention of promoters who tout junior companies like Silver Star, which are based in Vancouver but trade in the United States and deal mainly with American investors.
The shares of many of these companies are promoted to irrationally high levels, but because they are not reporting issuers in B.C., they have managed to keep below the radar of B.C. regulators. Until several months ago, Silver Star's business was servicing automated teller machines. The total book value of its assets was only $15,663 and its stock was trading at less than one cent. Then the company agreed to acquire oil and gas interests in Alberta and California. Drilling hadn't started, but the stock price rocketed to more than $2 US per share earlier this month, giving the company a total stock market value of more than $200 million US.
The president of Beacons Gate Consulting, whose offices were raided Friday, is Scott Marshall. During an interview last week, he denied any involvement with Silver Star. However, disclosure documents show the Alberta properties were sold to Silver Star by 1048136 Alberta Ltd., whose directors include Marshall and Robert McIntosh, a professional engineer who serves as Silver Star's president. Marshall said he didn't know who the directors of the numbered company are.
When advised that the Alberta corporate registry shows he is a director, he replied, "I was, but I'm not involved today." Asked when he resigned, he said he couldn't remember. Asked whether he could provide a copy of his letter of resignation, he said he didn't have a copy in his office. Silver Star's disclosure documents show that Patricia Naomi Johnston, who has the same address as Marshall, is the second largest shareholder, with 22.3 million shares. Marshall initially said he had "no idea" who Johnston is, but when advised that disclosure documents show they share the same address, he admitted that Johnston is his wife.
Asked why he had provided incorrect information, he replied: "Why did you already know the answer before you asked? How can I be honest with you when you are not being honest with me?" Silver Star's disclosure documents also show the company's largest shareholder is Sakwinder Narwal, with 25.7 million shares. Narwal is a long-time Howe Street promoter who was involved in the mid-1990s in several controversial junior companies including Trellis Technology, Marlat Resources and Vescan Equities.
Also involved in one or more of those companies was Martin Chambers, Chamber's long-time nominee Barry Mann, who was recently indicted by a Florida grand jury for allegedly trying to bribe a witness in the Chambers money-laundering case; Paul Deyong, a former Chambers associate who was slapped with a two-year suspension by the Alberta securities market in 1987 for securities offences, and Robert Bozo Lalich, who was criminally convicted of stealing $176,000 from the treasury of a former VSE company called Payday Resources. Corporate registry documents show Narwal is also a director, along with Marshall, of Beacons Gate Consulting.
Marshall initially told The Sun he is the sole director of Beacons Gate. When advised that corporate registry documents show Narwal is a co-director, he claimed that Narwal had resigned that position. He acknowledged that Narwal was in the office at that moment, but insisted he is not involved in promoting Silver Star. Asked whether The Sun could speak to Narwal, Marshall replied: "He's busy right now. Leave your card and make an appointment." Asked what his association with Narwal is, he replied, "None of your business. It's private business. We are in vending machines." In November, Silver Star announced it would pay $15,000 per month plus expenses to Long Communications Inc., owned by Alex Long of Vancouver, to "stimulate the investment community's interest in the company." Long Communications' telephone number is listed in Winston's Growth Stock Advisor, a U.S. newsletter that has been enthusiastically touting Silver Star, as the contact number for prospective investors. An employee at that number told The Sun that Long Communications had been operating out of the Beacons Gate office, but had recently moved to Bellingham.
According to Internet stock chat forums, Silver Star is also being promoted by Jamie King, a Vancouver penny stock promoter who made and lost a fortune promoting flimsy high-tech stocks on the OTC Bulletin Board during 2000. One of the telephone message slot in Beacons Gate office is labeled, "J. King," but Marshall insisted it belongs to King's father, who is also named James and rents space from him. Asked what the elder King does in the office, he replied, "I have no idea."
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what about Jamie King and Trent Jordan from Vancouver, those guys buy ink by the 45 gallon drum for their glossies!
The companies might be run by guys in Vancouver, but the promoters are not from here. These promotions are done by guys in Florida, New York, LA, China, Philippines, and I can't forget of course... Russia.
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Canadian securities regulators and armed local police have raided a boiler room operation in downtown Vancouver which allegedly used high-pressure tactics to flog dubious penny stocks through a well-organized team of young telemarketers. The operation, on the 6th floor of 1100 Melville St., was raided 9 a.m. Thursday by nine investigators from the British Columbia Securities Commission, supported by a substantial number of uniformed officers from the Vancouver Police Department and a senior VPD fraud detective.
The prime individual target was Frank Biller, who already faces criminal fraud charges in the Eron Mortgage scandal, an unrelated case which featured controversial former Vancouver lawyer Martin Chambers, as a key behind-the-scenes player. Other key individual targets are believed to include Rick Jeffs and R. Leigh Jeffs, believed to be his brother. Rick Jeffs was not present during the raid and relocated earlier this year from Vancouver to London, according to securities filings.
Despite persistent Howe Street rumours, Jamie King, Rick Jeffs's recent former partner, was not a target. (Mr. King, Rick Jeffs and Heidi Hirst were partners in Pacific Capital Markets.)
All parties, targets or otherwise, are presumed innocent until proven guilty.
Mr. Biller declined to comment on the situation. "I'm sorry, I hope you understand," he told a reporter. An older man at the offices was confident all the targets will eventually be vindicated. "They (the BCSC) raided the wrong guys this time. We have a good operation here. We have several lawyers working here on-site to make sure we run a clean operation," stated Leigh Jeffs, who declined to identify himself.
The raid was executed by a team from the BCSC's enforcement division, led by Bob Abrams, the commission's manager of investigations. "We are very satisfied with the results of the search and we will be busy with the followup," Mr. Abrams told Stockwatch. A significant volume of paper and electronic evidence was believed seized.
Details of the preraid investigation are not clear, as the search warrant authorization remains sealed in court.
The BCSC official declined any further comment on the search, beyond crediting Vancouver police for their assistance. Most Canadian regulatory or civil raids, even in bankruptcy fraud searches, include one or two uniformed police officers assigned to maintain the peace, but the presence of so many armed officers in the Vancouver boiler-room raid is a rarety. No arrests were made and the raid was without incident.
The primary corporate targets are believed to be Fairtide Capital Corp., Bayshore Management Corp. and Pacific Cascade Group, which share the same suite of offices. Three other companies also using this address: Daval Productions Corp., a video production company, and law firms Daignault Law Corp. and Jeffs & Co. Law Corp., are not believed to be targets. Lawyer Rene Daignault, principal of his firm, currently represents Pacific Capital Markets in B.C. litigation. Susan Diane Jeffs, the principal of her firm, is the wife of Rick Jeffs.
A number of the companies feature common or similar directors, according to corporate registry filings. Fairtide and Bayshore were both incorporated Nov. 29, 2001, as numbered shell companies and changed names in mid-May. Fairtide's three directors are Leigh Jeffs, John Da Costa and Shirley W. Cui, all Vancouver-area residents, while Bayshore's three directors are Leigh Jeffs, Mr. Da Costa and Anne McFadden. Daval Productions features Rick Jeffs as president and one of two officers, the other being Joao (John) Da Costa, while Ms. Jeffs is also a director. No company with the official name of Pacific Cascade Group is currently registered in B.C.
According to Fairtide Capital's Web site, the stock promotion currently represents MidasTrade.com, a penny stock company which featured Rick Jeffs and Ms. Hirst, Communicate.com, a controversial public company previously promoted by Pacific Capital Markets, and at least four other penny promotions: Brek Energy Corp., affiliate Vallenar Energy Corp., Cryopak Industries Inc. and GlobeTrac Inc.
There is no suggestion that anyone at these client companies had any clue Fairtide is anything but a fine upstanding firm.
Fairtide describes itself broadly in its corporate bumpf. "Fairtide Capital represents a wide range of clients primarily in the technology and energy sectors as a full service venture capital, investor relations and strategic communications agency. Fairtide Capital provides startup financing, growth financing, and committed, strategic support to outstanding entrepreneurs and offer access to a universe of startup investment opportunities to investors."
One of Brek's former biggest shareholders is a German company, Gera Unternehmen GMBH, which held 192,000 shares as of October, 2000, in an account at dubious Toronto brokerage Thomson Kernaghan, which was shut down by Canadian regulators this summer. In an unrelated case, Thomson Kernaghan head Mark Valentine, of Toronto, was arrested Aug. 14 in Frankfurt, Germany, as part of Operation Bermuda Short, a two-year joint FBI-RCMP undercover sting operation which snared 60 penny stock players, including a list of 20 Canadians led by Mr. Chambers and Mr. Valentine.
Brek, which shifted its focus from electronic payment processing to oil and gas interests in July, 2001, has quite an international flavour. Its principal executive offices are located in Wanchai, Hong Kong, its lead securities lawyer is Roger Glenn, based in New York, and its current biggest shareholders are based in the secretive offshore enclaves of Liechtenstein, Bahamas, Bermuda and Hong Kong, as well as London. One of its directors even ran a clothing company in Panama a few years ago. Brek's transfer agent for its shares is Nevada Agency and Trust Co., based in Reno, while its transfer agent for its units is Bank of Bermuda, on aptly-named Front Street in Hamilton, Bermuda. (The stock is also listed on the offshore Bermuda Stock Exchange.)
Brek is a mere shadow of its former self. The stock, which peaked at $32.75 in February, 2000, now trades at 56 cents. (All figures are in U.S. dollars.)
The timing of the raid is particularly unfortunate for Brek and its selling shareholders. In an unrelated coincidence, Brek was delisted from the Nasdaq marquee National Market System on Friday, the day after the raid, after failing to maintain a $1 bid price during a 90-day period ended Oct. 30. The company, interlisted on the Berlin exchange, hopes to move to the Nasdaq SmallCap Market.
Meanwhile, major shareholders, including various offshore accounts, hope to sell up to 8.02 million shares, according to a Sept. 18 registration statement. The biggest of these selling shareholders, is Rick Jeffs, who filed to sell 1,237,500 shares in his own name and an equal number held in the name of Wet Coast Management. The next biggest selling shareholder, with one million shares, is Liechtenstein Global Trust, which has entrusted disposal and voting powers to a chap or outfit called Furst Hans-Adam von Liechtenstein, care of LGT Group Foundation in Vaduz, an important international financial capital in the offshore world.
The company candidly notes that it got this information on Liechtenstein Global Trust from some bank in Switzerland, which it neglected to name in securities filings. "Brek has no way of independently verifying the accuracy of this information and does not know whether this information is correct," states one filing.
The other offshore sellers include Warwick Ventures Ltd., with 748,000 shares, Ultratech Capital Management, with 132,000 shares, and Happy Profit International Ltd., with 80,000 shares. The authorized sellers are Stuart Smith, care of LOM Securities Bermuda Ltd. in Hamilton, Bermuda, for Warwick, Patrick Thomson of Nassau, Bahamas, for Ultratech, and Brian Langdon-Pratt of Hong Kong for Happy Profit International.
The company's biggest shareholder, president Gregory Michael Pek of Hong Kong, filed to sell 400,000 of his 1.78 million shares. Oddly enough, one of Brek's biggest shareholders, and by far its most distinguished, is not on the list of selling shareholders. According to a September filing, Power Technology Investment Corp. held 1.33 million shares, including 333,000 warrants. Brek states that Power Technology is a "wholly owned subsidiary" of Power Corp. of Canada, an established blue chip stock listed on the Toronto Stock Exchange.
In recent years, Brek has racked up an impressive amount of legal bills. It paid one law firm, which featured Brek director Ermanno Pascutto as a partner, $373,000 in calendar 2000, and a similar amount in 1999. Mr. Pascutto resigned as a Brek director in June, 2000, and entered into a direct consultancy agreement with the company at a modest $16,000 per month.
Another client promoted by raid target Fairtide Capital is MidasTrade.com, a pink sheets company Stockwatch noted in early August as featuring Rick Jeffs and Ms. Hirst, former partners of Mr. King. In a July 24 suit, Vancouver businessman Jasvindar Singh claims he was shafted by Mr. Jeffs and Los Angeles associate Brad Eckenweiler, who secretly cut him out of a reverse takeover.
In a sworn affidavit, Mr. Singh claims both Mr. Jeffs and Mr. Eckenweiler have been "purposefully maintaining an extremely low profile because of ongoing shareholder disputes."
"Two months ago I was advised by Eckenweiler that Jeffs had ceased all business activities in Vancouver, closed down his corporate operations here in Vancouver, and relocated to London. I have been unable to determine his whereabouts in London. Approximately one week ago Jamie King, a former business associate of Jeffs, advised me that Jeffs was then in Switzerland. I have been unable to determine his whereabouts in Switzerland or his general whereabouts," stated Mr. Singh in his affidavit, sworn in July.
While scores of pink sheet and OTC Bulletin board promotions, especially those with close Howe Street ties, have crashed and burned in the past year or two, MidasTrade's own stock has held up surprisingly well. MidasTrade shares closed at $1.10 on Friday, down from $1.70 soon after the suit was filed.
The stock, which began trading at $5 in September, 2000, peaked at $5.60 in May, 2001, and traded as high as $4.10 this spring. The volatile stock has fallen to the $1.25 range several times in the past two years, but has shown a remarkable ability to bounce back up quickly, doubling, tripling or even quadrupling on relatively light volume.
Both Mr. Jeffs and MidasTrade executive Ms. Hirst are best known as former partners of Mr. King in Pacific Capital Markets, a Howe Street promotional company notable for such dot-com flameouts as Vancouver-based Communicate.com, which also happens to be a current client of boiler-room raid target Fairtide. Communicate.com now features David Jeffs, believed to be the son of Rick Jeffs, as its president.
Communicate.com was one of the last promotions of Pacific Capital Markets and Mr. King, known for his big Howe Street spending sprees, before the dot-com markets collapsed. The penny stock promoter dropped a reported $500,000 in May, 2000, on a gala wedding reception at the Hotel Vancouver. (All wedding figures are in Canadian dollars.)
While early reports suggested Mr. King paid $500,000 to fly in hometown rocker Bryan Adams to sing some songs, and bride Christie Darbyshire wore a diamond tiara and necklace that cost $1-million, Mr. King later set the record straight, telling The Vancouver Sun that Mr. Adams was only paid $208,000 and the diamonds were borrowed. "I wanted to have a party," Mr. King told The Sun. "My companies have been very successful. I've raised over $100-million U.S. in venture capital funding for companies in the last two years."
In July, 2000, less than two months after Mr. King's brash wedding bash, his latest and most notable Howe Street promotion, Communicate.com, soared to $8.75 (U.S.) on the lightly regulated but heavily prosecuted OTC Bulletin Board market, amid a reverse takeover of Troyden Corp., a penny shell, before collapsing. After bottoming out at less than two U.S. cents last November, the stock now trades at 12 cents. Communicate.com's claim to fame was a portfolio of 80 Internet domain names, including Makeup.com, Perfume.com, Wrestling.com and Boxing.com, which it hoped to either auction off or joint venture somehow. Unfortunately, after the wave of Internet hype collapsed, the few reported sales Communicate.com made generally flopped after the buyers failed to pay cash beyond the first few instalments.
Mr. King is now off the scene at Communicate.com, which is now a family affair for the Jeffs family.
Mr. Biller, one of the key raid targets, already faces the biggest fraud prosecution in B.C. history in the $180-million Eron Mortgage fiasco. (All Eron figures are in Canadian dollars.) Brian Slobogian, the head of Eron, and Mr. Biller, his right-hand man, were both charged April 29 with 33 counts, including misappropriation of funds, misrepresentation and breach of trust. Both have entered pleas of not guilty and remain presumed innocent until proven guilty beyond reasonable doubt.
The BCSC, using a lower burden of proof, imposed $1.8-million in fines against Mr. Slobogian, Mr. Biller and Eron, including $300,000 fines each for the two men, in a penalty decision on Feb. 17, 2000. On March 16, 2001, the regulator lost an appeal of its landmark "fine-stacking" decision in the Court of Appeal for British Columbia, and the individual fines were cut to $100,000 each.
In addition, Mr. Slobogian was banned for life from access to B.C. securities markets, acting as an officer or director of a public company, or engaging in investor relations activities, while Mr. Biller received a similar 10-year ban. In a liability decision in November, 1999, the commission found the pair perpetrated a "massive fraud," although Mr. Biller's sins were mostly acts of gross negligence.
The criminal charges capped a 4-1/2-year investigation of the Commercial Crime Section of the RCMP, which began when Eron was shut down in October, 1997, by the British Columbia Securities Commission and B.C.'s Financial Institutions Commission. The RCMP's Eron probe is not only the largest white-collar probe ever in B.C., but one of the largest ever mounted in Canada.
At least 15 officers worked on the case full-time for four years, with more than 20 assigned at peak periods. The police probe was about as long as Eron's brief history, from birth in 1994 to shutdown in 1997. The RCMP's Eron probe is also one of the most expensive ever mounted in B.C. history, behind the mammoth Air India terrorism case.
While the RCMP has not disclosed its total tab, a rough conservative estimate could easily top $4.8-million. This is based on 60 man-years at $80,000, representing a guesstimate of salary, benefits, support and expenses. In addition, the force paid for a major outside forensic accounting study.
At the time of the Eron arrests, the RCMP boasted that its Vancouver Commercial Crime Section has 44 investigators "dedicated to investigating financial crimes in B.C." While more than a third of this formidable 44-person force was chasing Mr. Slobogian and Mr. Biller for more than four years, the RCMP's Vancouver market section was virtually eliminated over this same period, ensuring that Vancouver's international status as a haven for stock market crooks and crooked stock deals remains secure, as evidenced in numerous United States indictments and regulatory cases in recent years.
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