SEC bans Pro Net figure Freiberg
2005-03-28 13:28 ET - Street Wire
Also Street Wire (U-PNLK) Pro Net Link Corp
by Stockwatch Business Reporter
The U.S. Securities and Exchange Commission has imposed a penny stock ban on former Florida stock tout Irving Freiberg for his part in the pump-and-dump of Pro Net Link Corp., an OTC Bulletin Board promotion that included nominee accounts at brokerages in Vancouver and Montreal. The ban follows a criminal case in which Mr. Freiberg pled guilty last December to charges that he and eight others defrauded the investing public of $33-million. (All figures are in U.S. dollars.)
Settling the criminal case cost Mr. Freiberg his Florida home and his collection of fast European sports cars.
In settling the SEC's civil case, Mr. Freiberg did not admit to any wrongdoing. He agreed to pay a $145,098 civil penalty, to be satisfied by his forfeiture of assets in the related criminal case.
The criminal allegations
In the criminal case, state lawyer Christopher J. Christie said Mr. Freiberg and his eight co-accused pumped Pro Net Link over a three-year span while selling shares through nominees at Canadian brokerage accounts.
Mr. Freiberg handled the touting end of the Pro Net deal; other defendants in the case established and managed the nominee accounts.
Beginning in March, 1998, and ending in May, 2001, Mr. Christie said Mr. Freiberg and co-accused Irving Stitsky began listing Pro Net Link as a "stock pick of the month" on www.stockgenie.com, a touting website they ran. They said Pro Net specialized in importing and exporting services, provided via the Internet.
Pro Net was immediately boosted by the Stockgenie appearance. The company rose from a 52-week low of 62.5 cents on March 10, 1998, to a $7.46 high by May 13, 1998.
According to the U.S. indictment, co-defendant Jean Pierre Collardeau issued free-trading shares of Pro Net Link to nominee accounts in the names of Fode Diop, Philippe Hababou, Robert Sambou, Eric Niger, Martine Meillot, Charles Nisenbaum, Wallflower Investments, Muriel Prochasson and an unknown party only identified as "M.B."
(Mr. Collardeau, who served as Pro Net's president, pled guilty in August of last year. The 62-year-old French national has not yet been sentenced.)
Nominees Mr. Diop, Mr. Niger and Ms. Procasson were among Mr. Frieberg's co-accused in the criminal case.
The indictment says one of the nominees, the so-called Robert Sambou, was not even a real person. This apparently did not disqualify him from being a shareholder, however. Mr. Collardeau apparently instructed Pro Net's transfer agent to deliver 1.15 million shares to the non-existent Mr. Sambou on Oct. 17, 1997.
The indictment says the fictitious Mr. Sambou, in one particularly large transaction, sold 1,007,000 of his Pro Link shares through Vancouver brokerage Pacific International Securities Inc. on April 28, 1998. Although the indictment does not specify how the proceeds of $1,745,000 found their way back to the defendants, it does say "the defendants and their co-conspirators distributed the funds amongst themselves for their personal gain."
The indictment identifies two Canadian brokerages other than Pacific International as those used by the Pro Net group: Montreal firms Desjardins Securities Inc. and Financiere Banque National. There is no indication in the indictment that any of the brokerages knew something untoward could be happening, and none of the brokerages were accused of any wrongdoing in the U.S.
State lawyer Mr. Christie asked for a $33-million judgment against Mr. Freiberg and his co-accused. He also asked that the state be permitted to seize assets belonging to the defendants, including Florida land and three New York apartments. He also asked for the contents of bank accounts in the United States, Switzerland and the Netherlands Antilles that apparently belonged to the defendants.
Mr. Freiberg pleads guilty
Mr. Freiberg, on Dec. 13, 2004, reached a plea agreement with the U.S. Attorney's Office in which he agreed to plead guilty and turn over personal assets, including his car collection, in return for a reduced sentencing recommendation. (The maximum sentence a judge may impose on Mr. Freiberg is 10 years in prison.)
The assets he agreed to forfeit included five vehicles, a home in Palm Beach, Fla., and $1,175,331 held in three U.S. bank accounts.
The five vehicles forfeited included Mr. Freiberg's small collection of fast, expensive European cars. The cars he agreed to hand over were a 2004 Maserati Spider, a 2002 Bentley Azure and a 2003 Aston Martin Vanquish. Rounding out the list were a 2003 Mercedes Benz CL500 and a 2003 GMC Yukon, both registered to Mr. Freiberg's wife Abbey.
The U.S. judge handling the case has not yet sentenced Mr. Freiberg. Mr. Freiberg will, however, be a busy person in the interim. As part of his settlement, he agreed to refile his taxes for the past several years, with all of his ill-gotten income, and make satisfactory payment arrangements with the U.S. Internal Revenue Service.
Pro Net appears in BCSC v. Pacific International
The B.C. Securities Commission brought up the involvement of Pacific International accounts with Pro Net during its lengthy 2003 hearing into compliance issues at the Vancouver brokerage. One of the allegations the local regulator made in that case was that Pacific International failed to ensure it was not helping its clients sell restricted shares into the U.S. market.
The BCSC's Pro Net evidence
In presenting his evidence, BCSC lawyer Mark Hilford brought up the account of non-existent Mr. Sambou. He said there were problems with the account that should have tipped off the brokerage that something was amiss. He said the biggest issue with the Sambou account was the fact that Mr. Sambou never received money from his own sales, it was always sent to third parties.
Mr. Hilford said Julie Suo-Antilla, a Pacific International employee, also discovered irregularities with Mr. Sambou's account that extended beyond the ordinary. Ms. Suo-Antilla apparently found discrepancies in addresses, discrepancies in signatures and returned mail.
Mr. Hilford said Pro Net figure Mr. Hababou appeared to be controlling the account, and he received at least some of the proceeds from Pro Net sales. (In the Pro Net case, the U.S. state lawyers named Mr. Hababou as a co-conspirator, but not as a defendant.)
Pacific International says it did its best
Pacific International, for its part, said it could not have reasonably known Mr. Sambou's account was in fact a nominee account. Richard Thomas, the brokerage's compliance officer, testified that Pacific International initially identified Mr. Sambou's account as a potential problem.
Mr. Thomas said the brokerage, during an internal review of the account, noticed Mr. Sambou did not appear to be receiving any money from his account. The proceeds were always wired to third parties. Mr. Thomas said he examined the outgoing transfers in detail, suspecting the account may be a nominee account.
He said in a typical nominee situation, the money is always wired to one party. He said he found with the Sambou account, however, that was not the case. "After review of that account, we, we felt that the funds had been going to a number of third parties and so that became less of an issue," he testified.
Mr. Thomas identified these third parties as Charles Nisenbaum (a French national listed as a nominee shareholder in the U.S. case, but not as a defendant), Sutton Capital Corp. (a company belonging to Mr. Freiberg) and a stamp dealer known as Cherrystone Stamp.
"Those, those people looked more like business associates of our clients as opposed to people that were using accounts as nominees," Mr. Thomas testified.
The BCSC has not yet made any findings in its Pacific International hearing. |
