Subject: Stockwatch: Street Wire: Pay Pop criminal probe heats up; CIBC Mellon mum
Pay Pop criminal probe heats up; CIBC Mellon mum
Tuesday Oct 3 2000
See (U:PAYP) Street Wire
by Brent Mudry
The made-in-Vancouver scandal of Pay Pop Inc., an OTC Bulletin Board
promotion targeted in a broadening investigation by the Commercial Crime
Section of the RCMP and the United States Securities and Exchange
Commission, may prove to be a major embarrassment, at best, for one of
Canada's leading stock transfer agents, CIBC Mellon Trust.
Canadian police allege a CIBC Mellon employee in Vancouver issued unrestricted
stock certificates for millions of Pay Pop shares based on forged treasury orders
forwarded by Pay Pop president Daryl Desjardins, the partner of controversial
Howe Street promoter Robert Zaba, and received a bribe of 800,000 shares.
CIBC Mellon is extremely close-mouthed about the Pay Pop affair. Van Bot,
CIBC Mellon's senior manager of client relations in Vancouver, confirms the
employee, Alnoor Jiwan, is no longer with the transfer company, having left last
November. "I certainly cannot say anything about that matter now," Mr. Bot told
Stockwatch, before referring further comment to head office in Toronto.
CIBC Mellon's designated spokeswoman, sales and marketing assistant
vice-president Cathy Goetz, declined to comment, after being briefed by the
company's in-house legal counsel.
"The concern is we have some confidentiality obligations," says Ms. Goetz, who
declined to say whether the confidentiality was owed to former employee Mr.
Jiwan, former client Pay Pop or anyone else. "As a matter of policy we cannot
comment on anything in litigation," says the CIBC Mellon official.
While investigations on both sides of the border are far from complete, Canadian
police are considering seven criminal charges: one joint fraud count against Mr.
Zaba and Mr. Desjardins, five forgery-related accounts against Mr. Desjardins,
and one bribery count against Mr. Jiwan.
It should be clearly noted that no criminal charges have yet been laid, and the
proposed charges may later be modified, reduced, expanded or abandoned. Mr.
Desjardins, Mr. Zaba and Mr. Jiwan remain presumed innocent until proven guilty
of any criminal charges.
A recent 26-page "Information to Obtain a Search Warrant" details the 18-month
probe by the RCMP, co-ordinated with a separate SEC probe, into Pay Pop's
affairs. According to court-filed documents, the RCMP has gathered extensive
evidence, including internal documents from and interviews with a number of
former Pay Pop employees and officials, and three in-laws of Mr. Desjardins.
While account records from at least six U.S. brokerages have been received,
Howe Street brokerage Pacific International Securities, named as a key conduit in
a number of other SEC penny stock cases last year, also appears to have been a
key conduit in the Pay Pop case. Yorkton Securities is the only other Canadian
brokerage noted in the case to date.
The RCMP and SEC investigations into Pay Pop come amid a broadening
crackdown on penny-stock frauds on the barely regulated but often punished
OTC Bulletin Board by the SEC. Many of these are linked to Howe Street, the
centre of dealings on the former Vancouver Stock Exchange, dubbed the Scam
Capital of the World more than a decade ago by writer Joe Queenan in Forbes
magazine.
The four-page Pay Pop search warrant, which has been executed in searches of
various brokerages and other premises, notes that the RCMP are considering
seven charges relating to transactions between July 1, 1998, and Feb. 11, 2000,
in the matter of Pay Pop, Delecom Communications, Mr. Desjardins, Zaba
International Holdings, Mr. Zaba, CDN Gold Brite Eagle Investments and Mr.
Jiwan. No recommendation has yet been made to Crown counsel on the laying of
official charges.
In Count 1, police claim Mr. Zaba and Mr. Desjardins, between July 1, 1998,
and Feb. 11, 2000, in Abbotsford, "did by deceit, falsehood or other fraudulent
means" defraud Pay Pop of common shares, valued at more than $5,000,
contrary to Section 380 (1)(a) of the Criminal Code.
In Count 2, police claim Mr. Desjardins, in the same date range, did knowingly
make false documents: letters of instruction to a transfer agent, for forging the
endorsement of Michael Cohen and other unidentified persons, with the intent that
the documents be acted upon as genuine, and "did thereby commit forgery,"
contrary to S. 367 (a) of the Criminal Code.
In Count 3, police claim Mr. Desjardins, on Nov. 13, 1998, at Vancouver and
elsewhere in B.C., "did knowingly cause CIBC Mellon Trust to use or act upon a
forged document: a treasury order to issue unrestricted certificates from the
treasury of Pay Pop," contrary to S. 368 (1)(a) of the Criminal Code.
In Count 4, police claim that Mr. Desjardins similarly utilized CIBC Mellon's
services, on Nov. 30, 1998. Counts 5 and 6, both naming Mr. Desjardins, relate
to similar dealings with CIBC Mellon, on Dec. 21, 1998, and Dec. 29, 1998,
respectively.
The final count, Count 7, is the most troubling for CIBC Mellon. Police claim that
between July 1, 1998, and Feb. 11, 2000, Mr. Jiwan, being an agent of CIBC
Mellon, accepted or agreed to accept from Pay Pop, Mr. Desjardins and/or Mr.
Zaba a benefit, free-trading shares of Pay Pop, "as consideration for doing or
having done an act relating to the affairs of business of CIBC Mellon," contrary to
S. 426 (1)(b) of the Criminal Code.
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