Indictment in U.S. links to B.C. brokers
David Baines, Vancouver Sun
Published: Tuesday, April 29, 2008
In the fall of 2005, B.C. securities regulators cranked up the heat on Vancouver brokerage firms that were acting as conduits for illicit stock transactions.
The B.C. Securities Commission had just completed a marathon hearing into allegations that U.S. promoters had used Pacific International Securities to manipulate the shares of U.S. over-the-counter stocks and launder the proceeds.
A decision in this important case, which was expected to set new standards on Howe Street, was pending. Brokers were waiting with baited breath. Or so we thought.
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Font:****At the same time, the Investment Dealers Association of Canada was hot on the trail of Union Securities, with respect to similar allegations.
The situation was so dire that in July 2005 the IDA placed Union under third-party supervision. This would keep the firm in line. Or so we thought.
In the middle of this regulatory shakedown, three brokerage firms -- two based in Vancouver and one in Toronto -- sold $32 million worth of allegedly fraudulent OTC stock at the behest of their crooked clients, then dispersed the proceeds to accounts in offshore tax and secrecy havens, according to an indictment handed down by a North Carolina grand jury last week.
Shockingly, one of those firms was identified as Union Securities, which during that very period was operating under the third-party supervision of Grant Thornton LLP.
The other Vancouver firm was Global Securities, which, under the leadership of chairman Art Smolensky and president Doug Garrod. The third firm is Blackmont Capital, a Toronto brokerage that also has an affection for OTC stock.
According to the indictment, Montreal promoter Bryan Kos conspired with U.S. spam king Jeremy Jaynes and convicted U.S. felon David Hagen to manipulate the shares of GTX Global Corp. and several other companies quoted on the "pink sheets" in the United States.
The indictment alleges that in April 2005, they delivered millions of GTX shares into a half-dozen offshore accounts, transferred those shares into accounts set up by offshore companies at Union, Global and Blackmont, then dumped the shares into the market.
"Approximately six million shares were sold from the brokerage accounts at Global Securities, Union Securities and Blackmont Capital for proceeds of approximately $32 million," the indictment alleges. "Proceeds of the fraudulent scheme were then further wired to and laundered through various foreign and domestic financial institutions," including First Caribbean International Bank in the Bahamas, Hellenic Bank in Cyprus, and First Curacao International Bank in the Netherland Antilles.
The indictment cites specific transactions. For example, on Dec. 2, 2005, the conspirators are said to have caused $1.2 million to be wired from an account at Global Securities in the name of Walcott Indies (an Anguilla-registered company) to an account at First Caribbean in the name of Montague Securities (a Bahamian investment advisory firm).
And on Nov. 21, 2005, $70,100 was similarly wired from an account at Union Securities in the name of Toussaint Liberte SA (another Anguilla-registered company) to First Caribbean.
