Boock isn't giving up without a fight, see half way down
SEC wins decision against hijacking target Wong
2011-08-31 14:03 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (C-PZG) Paramount Gold and Silver Corp
by Mike Caswell
The U.S. Securities and Exchange Commission has won an order finding Ontario resident Jason Wong liable for a scheme to hijack defunct public companies. In a summary judgment released on Aug. 25, 2011, New York Judge Denise Cote has ruled that Mr. Wong "engaged in deliberate fraudulent behavior" when he filed false documents with Cusip Global Services and government agencies.
The SEC claimed that Mr. Wong and others improperly took control of 43 inactive public companies between 2003 and 2007. Using false paperwork and bogus corporate resolutions, they obtained new Cusip numbers and trading symbols for the companies. They then sold them as shells, profiting from both the sale of control and from subsequent share sales, the regulator said. One of the companies went on to become Toronto Stock Exchange listing Paramount Gold and Silver Corp. and another became Surrey-based World Hockey Association Corp. (The SEC did not accuse either company of any wrongdoing.)
The regulator sought a summary judgment against Mr. Wong on Feb. 25, 2011, arguing that the case against him was so overwhelming that there was no need for a trial. The SEC's evidence included several e-mails in which he and his co-defendants discussed the day-to-day issues they faced in taking over and selling the shells. Moreover, two of his co-defendants had admitted to allegations in the complaint, and both implicated Mr. Wong.
Judge Cote, in Friday's decision, agreed with the SEC. In doing so she rejected Mr. Wong's argument that he did not know anything about the hijackings and that somebody had used his name. She said it was clear that he knew the corporations had been misappropriated as he participated in nearly every step of the scheme. Among other things, he issued shares for the hijacked companies and worked to find shell buyers. He also sold millions of shares, the judge found.
With the issue of Mr. Wong's liability decided, the SEC may now apply for an appropriate penalty against him. That process could take some time, if the case against Mr. Wong's co-defendant, Ontario resident Irwin Boock, is any indication. The SEC won a default against Mr. Boock on March 26, 2010, and has been attempting to obtain his banking records in Canada for several months to help determine his penalty. The regulator has complained several times about little co-operation from Mr. Boock in obtaining the records, and recently sought the assistance of the Ontario courts.
SEC's complaint
The case began on Sept. 29, 2009, when the SEC filed a civil complaint against Mr. Wong, Mr. Boock and others in the Southern District of New York. The suit claimed that the men 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.
Aiding with the scheme were two Houston lawyers, Roger Shoss and Nicolette Loisel, who helped Mr. Boock and Mr. Wong obtain free-trading shares in the companies, the complaint stated. The lawyers, who are also defendants, drafted bogus opinion letters that authorized the issuance of 223 million free-trading shares for 19 of the companies. Ms. Loisel also prepared fraudulent transfer agent verification forms, and received $455,000 for her services, according to the SEC. (All figures are in U.S. dollars.)
The complaint did not clearly state how much money the men made from the scheme. The SEC said that Mr. Boock received $267,625 in 2007 by selling shares of five of the hijacked companies through a Florida brokerage account. It also said that another of the defendants, Toronto resident Stanton DeFreitas, sold shares of 30 hijacked stocks through offshore companies and had his brokerage transfer $2.2-million in proceeds to a Toronto bank account.
The SEC sought appropriate civil penalties and penny stock bans against each defendant.
With the decision against Mr. Wong, the SEC has won the liability part of the case against each Canadian defendant. A judge found that Mr. DeFreitas had defaulted in the case on March 26, 2010. The only issue to determine is the penalties.
The case against the remaining two defendants, Mr. Shoss and Ms. Loisel, is on hold while they answer criminal charges for a separate hijacking scheme. According to Florida prosecutors, they were part of a group that hijacked 54 companies and sold shares in those companies to residents in the United Kingdom, taking over $100-million from investors. Mr. Shoss and Ms. Loisel have pleaded not guilty and await trial.
