Offshore brokerage with Pacific International Securities:
theglobeandmail.com
B.C. broker used as funnel by U.S. players in fraud
Indictment says thousands of shares moved through
Pacific Int'l in massive money-laundering scheme
Brian Milner and Peter Kennedy
The Globe and Mail; With files from reporter Ann Gibbon.
Friday, June 18, 1999
New York and Vancouver -- BRIAN MILNER
in New York
PETER KENNEDY
in Vancouver
Key U.S. players accused in a massive stock-fraud and money-laundering scheme allegedly controlled by organized crime moved shares and money through a small Vancouver brokerage house, according to a U.S. federal indictment.
Pacific International Securities Inc., which has a history of regulatory problems in British Columbia, was used by several of the defendants to transfer hundreds of thousands of dollars and thousands of shares that were part of schemes that defrauded investors of more than $100-million (U.S.), the federal charges say.
The indictment naming -- but not charging -- Pacific International was one of three handed down this week by a federal grand jury in Brooklyn, N.Y.
Charges against 89 people accused of participating in schemes that defrauded thousands of unsuspecting investors and laundering the proceeds capped a three-year investigation by U.S. federal and New York state law enforcement agencies and stock market regulators into organized crime's infiltration of the equity markets.
Nine brokerage houses, including Pacific International, were named as playing some kind of role in the various schemes. Most are now out of business.
Senior officials at Pacific International Securities said they did not want to comment on the allegations until they had a chance to read over the documents.
"We have no idea what it is," said president and chief executive officer Max Meier. "No one told us who was indicted. No idea. I was shocked to see our name there."
Pacific International is 35-per-cent owned by the National Bank.
The RCMP aided U.S. law enforcement officials in their probe, which continues.
Law enforcement officials uncovered "a nest of securities scam artists" who laundered their proceeds "through a complex system of accounts," said Zachary Carter, the U.S. Attorney for the district covering Brooklyn, N.Y.
The specific scheme in which Pacific International is allegedly implicated netted the participants, including licenced and unlicenced stockbrokers and known associates of a New York crime family and a Russian mob, more than $10-million in illegal profits, the indictment says.
The participants operated a classic boiler-room scheme, using false and misleading hard-sell pitches to induce investors to put their money into worthless stock, the federal indictment charges.
Dominick Dionisio, who is named in the indictment as an associate of the Colombo crime family; Yakov Slavin, described as an associate of the Bor Russian mob; a New York stockbroker named Christopher Mormando and others moved stock and cash into and out of accounts held at Pacific International under the names of Debra Lee and Associates and Nyack Partners Inc.
Both are shell companies set up by a stock promoter named David Houge to hold the manipulated securities used in the fraud against unsuspecting investors, the indictment charges.
Mr. Houge is an unindicted co-conspirator in the case.
All told, close to $1-million in cash and 225,400 shares of a company called Legend Sports Inc. were moved through Pacific International to other accounts controlled by the defendants, according to the charges.
"We have been in contact with our U.S. counsel a number of times and that is all I have to say," said Richard Thomas, the company's head of compliance.
British Columbia regulatory authorities and the RCMP were just as reticent. Lang Evans, deputy director of enforcement at the British Columbia Securities Commission said the policy of the BCSC is not to confirm or deny any investigations.
"We are in continuous contact with our U.S. counterparts," Mr. Evans said.
Peter Montague, head of the RCMP's market fraud investigations unit in Vancouver did say, however, that the RCMP has been helping the FBI in its investigation into this case under a Mutual Legal Assistance Treaty with the United States.
"But I can't get into specifics," he said.
Mr. Montague said it isn't unusual for people engaged in organized crime to try to disguise their activities by using different brokerages in different countries.
He said these people simply open up several accounts and put in their orders. "It removes the suspicion that the activity is coming from one spot," said Mr. Montague, adding that brokers engaged in illegal activity may take commissions and added fees to promote a given stock.
"But we don't know if that applies to the situation that we are talking about here," he said.
Pacific International has had previous brushes with regulatory authorities. Yesterday a BCSC panel dismissed an application by one of its former brokers -- Jean-Claude Hauchecorne -- to stay a series of penalties imposed on him by the VSE.
Another former Pacific International stock broker, Andrew Katz, was fined a record $350,000 and banned for life from trading on the VSE for stock manipulation.
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