YBM Magnex and the Mob -- is there room for everybody in the life-raft?
The case of YBM Magnex represents a surfeit of riches for those interested in the standards of practice and levels of due diligence exercised within Canada's securities industry. Public company principals, lawyers, accountants, promoters, brokers, underwriters, mutual and pension fund managers, analysts, regulators and more all contributed their own special talents in making YBM such a "success".
Now that the various players in this scandal are locking horns, it's hoped that they will wrestle out of each other all the ugly details that will educate the public as to how the stock business really works in this country.
The Ontario Securities Commission has, this week, fashioned a notice of hearing that, understandably, focusses upon disclosure issues concerning matters about which it alleges YBM, its principals and associates, failed to inform the regulators. Those targetted by the OSC will, hopefully, respond by telling the public what the OSC also knew about YBM's Russian mafia origins and links and its history of incomplete or false disclosure.
In the end, if there is to be some real benefit from this mess -- we may all learn why none of the industry players, be they securities regulators or stock hustlers, informed the public of those damning details about YBM which were known to them long before the company's stock became the latest and greatest embarrassment to the once-prestigious TSE 300.
On August 10 1995, Britain's Home Secretary signed an order excluding Russian organized crime leader Semion Mogilevich from the United Kingdom. Despite the findings of U.K. police about Mogilevich and the Channel Islands-registered entity Arigon, identified as a principal conduit for Russian organized crime, Mogilevich and his associates saw their vehicle Arigon welcomed into Canada's public stock markets and nurtured.
Arigon, essentially, went public on the Alberta exchange and then graduated to the TSE, despite the company's continuing pattern of misleading or false public disclosure. The company's publicly filed documents from 1994/95 report multimillion dollar Canadian sales that never existed. These same filings, among other omissions, failed to disclose the management role of YBM director Michael Schmidt with the scam company Technigen Corp. (one-time VSE-high flier). Subsequent filings by YBM falsely claimed that the company had generated $20 million in sales during 1996 from an oil desulphurisation process. The Financial Times of London journalist Ted Alden has revealed that OSC officials were told, before they approved YBM's 1997 prospectus, that the oil desulphurisation claims could not be substantiated.
And so it goes...
By late 1997, and much earlier in some instances, YBM players and securities officials, knew or ought to have known, that: the company's origins could be traced back to the Russian mafia, that principal businesses and associates were believed (by the world's
top police intelligence corps) to be engaged in money laundering activities, and that YBM was making misleading and false public claims about its products and sales.
At what point does someone within the securities industry structure blow the whistle and say, "This must stop!"?
We all know the answer to that question. The game is over when more than five dozen U.S. government agents raid the company's headquarters, as happened in the case of YBM Magnex on May 13 1998.
What Canadians knew and did between 1994/95 and 1998 should be told. If it is, YBM may provide a more valuable study of Canada's prevailing securities culture than any scandal since the mid-1960s Windfall Oil & Gas fallout.
For more on this story, look into The Magnex Files @
imagen.net ; for other stock market news and analyses, visit the Investigative Research & Analysis web-site at imagen.net |
