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Interesting news story...

Vancouver and Spokane: Penny stock axis of evil

By David Baines, Vancouver Sun May 9, 2009

Forbes magazine has dubbed Spokane, Wash., "The Scam Capital of America." "Welcome to Spokane, Wash., a metropolitan object lesson in what can befall the unwary when rugged individualism is revered and consumers unsuspecting," writes William P. Barrett in the magazine's latest edition. "Con games are so much a part of the fabric that even an official City of Spokane press release carried a whiff of resignation last November when it warned that 'another scam has come' to town. That one involved tricking mail recipients into cashing rubber checks and returning most of the proceeds to the sender." "It's liked a runaway train," the magazine quoted Zan Deery, an investigator for the Spokane Better Business Bureau, referring to the number and variety of scams that are afflicting the city.

The headline harkens back to a similarly themed story that Forbes published in May 1989. That story branded Vancouver as "The Scam Capital of the World" due to the antics of Vancouver stock promoters and brokers. "Like most large North American cities, Vancouver has a serious garbage disposal problem, but this one is unique," wrote author Joe Queenan. "The garbage is the Vancouver Stock Exchange. It is polluting much of the civilized world." The article brought such shame to Vancouver that exchange officials eventually phased out the VSE and replaced it with a better-regulated bourse, now known as the TSX Venture Exchange. But the sleazier of the Vancouver promoters, rather than seeking to improve their ethical practices, simply moved their dirty deals to the U.S. over-the-counter markets.

Forbes similarly traces Spokane's chicanery to its stock exchange: "Dicey stocks are another longtime growth industry," the magazine observes. "Founded in 1897, the Spokane Stock Exchange was the country's last regional exchange devoted to questionable penny stocks when it was shuttered in 1991 amid SEC pressure. Not that its demise stopped Spokane's stock touts from plying their trade...."

This is where these scam capital stories intersect. Spokane's junior stock players hooked up with Vancouver's junior stock players and formed their own axis of evil. "In January," Forbes notes in its article, "the SEC suspended trading for 10 days in Future Canada China Environment, a Bellingham, Wash,. firm whose over-the-counter shares soared from 92 cents to $28.50 -- a $1-billion market cap -- despite the apparent lack of any underlying business." As I have reported in previous columns, Future Canada is not really based in Bellingham. That's just a mail drop. It's based in Vancouver, and its controlling shareholder is a former Burmese political refugee who lives in Surrey.

Forbes went on to say that Future Canada's legal counsel was Conrad Lysiak, a veteran Spokane securities lawyer who once served as the Spokane Stock Exchange's compliance officer. "After leaving the exchange Lysiak was censured, fined and briefly suspended in the 1990s by regulators after he was found to have been compliance officer for a brokerage office that committed fraud on his watch. Lysiak, whose client list has included a number of public companies, declined to comment to Forbes."

As I have noted in previous articles, Lysiak has provided legal services for many Vancouver-based companies that trade on the U.S. over-the-counter markets and turn out to be shams. Some have developed into obvious stock manipulations, such as Aberdene Mines Ltd., which was prosecuted by the B.C. Securities Commission. Just two weeks ago, I noted that Lysiak was filing solicitor for Ridgestone Resources Inc., an obvious sham which morphed into an accident-waiting-to-happen called GreenChek Technology Inc. Forbes also notes in its article that Spokane is home to Williams & Webster, an accounting firm that has garnered considerable infamy in recent years.

In June 2007, the U.S. Public Company Accounting Oversight Board called into question the firm's audit of a U.S. junior company and suspended partner John Webster for one year and partner Kevin Williams for two years. The firm, which agreed only to a reprimand, is still permitted to audit public companies. Williams & Webster have also been the accountants of choice for many other Vancouver penny stock deals, including CellCyte Genetics Corp., which was based in Seattle but was being promoted by West Vancouver's Brent Pierce, who until last year had been banned from dealing stock in B.C.

Forbes notes that Lysiak and Williams & Webster "teamed up to work for what became Arctic Oil & Gas. It had all of $155 in the bank, but its stock nevertheless rose 70,000% within weeks to $3.65 a share early last year. Investors, it would seem, were encouraged by the firm's claim of rights to 30% of all energy resources near the North Pole. In January, Arctic, which now lists a California address, changed its name to Placer Gold Corp. Recent price: one cent." I have written several stories about Arctic Oil & Gas. Among other things, I have noted that its president, Peter J. Sterling, once hired psychic spoon-bender Uri Geller to dowse one of his Australian properties for gold, and that one of the company's directors was Senator Ed Lawson of Vancouver.

"Just what makes Spokane look like an overachiever in dodgy endeavors is a matter of debate," Forbes mused in its article. "Some say it's the town's remoteness, or its proximity to the Canadian border..." I think what we have here is two wild-west towns, both with long and storied histories of penny stock skullduggery, who have found each other and are doing what comes naturally.

http://www.vancouversun.com/business/Vancouver+Spokane+Penny+stock+axis+evil/1578975/story.html