THE WHEELS OF JUSTICE KEEP TURNING!
B.C. Securities Commission -
BCSC 12-year ban on Seifert has Maitland mum
B.C. Securities Commission
BCSEC
Shares issued 0
1899-12-30 close $0
Friday Dec 17 1999
Also Delgratia Mining Corp (DELGF)
Also Arakis Energy Corp (AKSEF)
by Brent Mudry
LAW SOCIETY LAUNCHES PROBE
In a precedent-setting move designed to send a blunt message
to Howe Street and Bay Street securities lawyers who serve
as aiders and abettors in dodgy stock promotions, prominent
Vancouver securities lawyer Michael Seifert has been fined
$450,000 and effectively kicked out of the securities industry.
The British Columbia Securities Commission has banned Mr.
Seifert for 12 years from making any filings to the commission
or the new Canadian Venture Exchange, for his key roles in
offshore share stuffing and shuffling in Terry Alexander's
Arakis Energy scandal in 1995, then one of the biggest stock
collapses in Canadian history, and several other promotions
on the former Vancouver Stock Exchange.
Mr. Seifert funnelled his offshore dealings through at least
three Vancouver brokerages: Pacific International Securities,
which has been named as a conduit in a number of unrelated
United States penny stock cases, Yorkton Securities and
now-defunct Marleau Lemire Securities.
While Mr. Seifert is also likely to face serious disciplinary
proceedings with the Law Society of B.C., it is unclear
whether he will continue to serve with companies on the
barely-regulated OTC Bulletin Board. Mr. Seifert has not
been named in any regulatory proceeding by the U.S.
Securities and Exchange Commission, which has investigated
Arakis.
Although Vancouver stock promoter Mr. Alexander suffered
most of the adverse publicity in the wake of the collapse of
both Arakis and Delgratia, Mr. Seifert was often by his side at
critical periods, including the much-vaunted Vancouver
appearance of a supposed Saudi prince who was claimed to
be Arakis's big backer.
Arakis shares rose to $26 in July of 1995 after Mr. Alexander
claimed the company had arranged $750-million (U.S.) in
financing for its Sudanese project. After reaching a peak
market capitalization of $1-billion (U.S.), Arakis shares
plummeted when the supposed financing flopped.
In February, Mr. Alexander was fined $1.2-million and
banned for 20 years in a settlement with the BCSC over his
key role in the Arakis affair. In downplaying his serious
securities violations, Mr. Alexander gave little credit to Mr.
Seifert. "I recognize that I made serious, but honest mistakes.
If I had to do it all over again, I would have had a lawyer at
my side at every turn, dotting the 'i's' and and crossing the
't's'," Mr. Alexander stated this spring.
While Mr. Seifert's $450,000 fine, including $200,000 in
investigation costs and the 12-year bans on trading, serving as
an officer, director or securities lawyer in B.C. is believed to
be the harshest prosecution of a securities lawyer in Canada,
even more notable is the fact that Mr. Seifert agreed to the
penalties in a negotiated settlement. The settlement precludes
the ordeal of a lengthy and unflattering hearing probing into
Mr. Seifert's Howe Street dealings.
At this momentous point in his career, Mr. Seifert has chosen
to be out of town, presumably on vacation. "He is away to the
10th of January," says the receptionist at his law firm,
Maitland and Company, one of the leading securities firms in
Vancouver.
Maitland is mum on their star securities partner's misfortune.
The law firm has designated one lawyer, Brian Mason, to
field all media calls on the matter and tell everything the firm
wants to say. "No comment," Mr. Mason told Stockwatch
repeatedly, refusing to say anything. "I just don't have any
comment, sir, I am going to hang up on you now," Mr. Mason
told a reporter.
With the BCSC prosecution now settled, the spotlight shifts to
the Law Society of B.C., which regulates lawyers in the
province and rarely disciplines the most egregious
rule-breakers. James Matkin, who headed the Matkin
Commission inquiry into the scandal-ridden VSE in 1994, and
was named secretary of the Law Society in 1997. "I can't
comment ... it would be inappropriate because he could be the
subject of a disciplinary action," says Mr. Matkin.
The Law Society subsequently confirmed that after receiving
the BCSC's order, it is launching an investigation into Mr.
Seifert's affairs. Mr. Seifert remains a member in good
standing, and no formal citation has been made.
In his previous role, delivering a scathing report on the
Vancouver penny stock world, Mr. Matkin was particularly
outspoken. Mr. Matkin told the media it was clear that most of
the dubious VSE stock promotions were "aided and abetted"
by professionals, especially lawyers and accountants. He
described the VSE as a "forum for shams, swindlers and
manipulations."
While the Arakis sham headlines the BCSC's prosecution of
Mr. Seifert, the regulator also targets his dealings with Mr.
Alexander's other big disaster, Delgratia Mining, a salt job,
and two other VSE companies: Consolidated Dencam
Development and Allied Strategies. The settlement sheds an
unwelcome light on perhaps the most lucrative tool used by
penny stock promoters: accounts in a myriad of secretive
offshore havens.
"Of course an offshore account is only offshore because it is
intended to cheat the tax department, money launder or insider
trading," panel chairman Barry McLoughlin told a VSE
hearing earlier this year, probing the dealings of former
Pacific International broker Jean-Claude Hauchecorne, who
handled offshore accounts for U.S. mobsters Phil Gurian and
Phil Abramo.
When Mr. McLoughlin offered his blunt assessment of
offshore accounts, Winton Derby, a fellow Queen's Counsel,
quickly interjected. "That's overstating it. There's a lot of
legitimate offshore accounts. I mean, offshore accounts are
definitely used for those purposes, that's part of the business
that we investigate and get involved in from time to time - not
setting them up but tearing them down," Mr. Derby told the
Hauchecorne panel.
Mr. McLoughlin's outspoken comments were particularly
prescient, as they partially describe the activities of Mr.
Seifert, whose downfall centers on his use of offshore
accounts for undisclosed insider trading and Mr. Alexander's
Arakis promotion.
The BCSC now reveals that Mr. Seifert made numerous
securities violations relating to his control and handling of
Insco Holdings Ltd. The lawyer's offshore entanglement dates
back to September of 1989, when he set up the Michael L.
Seifert Trust, using the trustee RYCO Trust Ltd., which
provides trust, investment and related services from offices in
St. Helier, Jersey in the Channel Islands, an enclave offshore
of the United Kingdom.
On Aug. 9, 1990, Insco Holdings was incorporated in another
offshore haven, the British Virgin Islands, with legal title
vested in RYCO as trustee of the Seifert Trust. (RYCO was
sold to Integro Trust Holdings (Jersey) Ltd. on Jan. 14, 1994.)
The Vancouver securities lawyer agrees that from September
of 1989 through September of 1995, he periodically gave
instructions to RYCO and Integro for trading through his
Seifert Trust Insco in shares of VSE companies, including
Delgratia, Dencam, Allied and Arakis.
Mr. Seifert's personal trading violations trace from his
dealings in shares of Allied Strategies, now Sleeman
Breweries, from 1992 to 1994, to his dealings in Arakis,
Delgratia and Dencam in 1994 and 1995. The busy Howe
Street lawyer's Arakis transgressions date back to its
formative stages in 1992.
Mr. Seifert's latest admissions about his Allied dealings were
most revealing. While he served as a director from June 12,
1992, to April 26, 1994, it is only now, more than five years
later, that he admits the truth. In an Allied private placement of
11.2 million special warrants at $1.20 on the last day of 1993,
Mr. Seifert's Insco account bought 373,000 special warrants.
On his own secret Insco accounts at Marleau and Yorkton, Mr.
Seifert was a busy seller. In one account at Marleau, Insco
received 400,000 shares and sold a single block of 376,000
shares for proceeds $451,200. Through another Marleau
account, Insco purchased 31,500 Allied shares in two trades
for $39,050 and sold 34,500 shares in six trades for $50,500.
In a third account, at Yorkton, Mr. Seifert's Insco account
received 200,000 shares and sold a block of 150,000 shares
for proceeds of $178,200. Mr. Seifert transfered out the
remaining 50,000 shares. Mr. Seifert also admits he controlled
10,000 shares of Allied held in the name of Anthem
International, the British Virgin Islands company which played
a prominent role in Mr. Alexander's Arakis.
In a false filing with the securities commission, the lawyer hid
his own share interest. "The purchaser has only bearer shares
outstanding and is controlled by the Ryco Trust Executor &
Trustee Company, a Jersey corporation controlled by its' (sic)
directors namely Michael Sampson, Kerry Carter, Michael
Fielding, John Gamlin and Rodger Young," stated Allied in its
private placement submission. Although Mr. Seifert handled
this filing, he forgot to mention he was behind Insco.
Mr. Seifert's offshore account came in particularly handy
during Mr. Alexander's Delgratia promotion, which the lawyer
served as a director from June 29, 1994, to Sept. 25, 1995.
During this period, Mr. Seifert's Insco account, sold 83,000
shares of Delgratia in 26 trades for gross proceeds of
$385,600, through one account at Pacific International.
Through another account in the popular Vancouver conduit
brokerage, Insco sold 44,000 shares in five trades for gross
proceeds of $182,400.
In a similar time period, Mr. Seifert was a busy trader through
Pacific International and Marleau Lemire in shares of
Dencam, a company which he served as an officer from June
30, 1994, to Sept. 13, 1995. One of Mr. Seifert's Insco
accounts at Pacific International sold 413,000 shares in 15
trades, for gross proceeds of $312,900 and bought 30,700
shares in three trades for proceeds of $24,600. The Insco
account also received 342,000 Dencam shares. Mr. Seifert
also transferred out a modest 6,300 shares through one of his
secret Marleau Lemire accounts.
Mr. Seifert's busiest time was handling Arakis and his
undisclosed trading in its shares. The Maitland lawyer served
as Arakis's legal counsel from January of 1992 through
December of 1995.
The Howe Street lawyer used at least four accounts at Pacific
International: two in the name of Insco and two in his own
name. Between January of 1994 and the end of July in 1995,
he sold 39,500 shares in 15 trades through one Insco account,
for gross proceeds of $295,100. In another Insco account, he
purchased 26,500 Arakis shares in two trades in August of
1994, for $163,000.
Through his two personal accounts at Pacific International,
Mr. Seifert received 37,000 shares of Arakis, and transfered
out 2,000 shares. He sold the remaining 35,000 shares in 12
trades for gross proceeds of $331,300 in one account and
$366,300 (U.S.) through another account.
Perhaps the most serious and intriguing transgressions of Mr.
Seifert relate to his integral role in setting up Arakis,
especially the mysterious million shares that ended up
offshore in the name of Anthem. In the original vend-in of the
Sudanese oil and pipeline project, Arakis was to issue five
million shares to the shareholders of State Petroleum Corp.:
Lutfur Khan, Dr. Asif Ali Syed, Nadeem Khan, Waseem
Rahman (Pvt.) and Westrim Enterprises.
Before closing the acquisition of State, Arakis decided to hand
over six million shares, with the extra million shares going to
Anthem. Anthem had been hurriedly added as a State
shareholder just before the revised agreement, although it had
nothing to do with the Sudanese concessions.
On Feb. 11, 1994, on the instructions of Mr. Alexander,
Arakis's president, Mr. Seifert told the VSE that the extra one
million shares were being issued to State shareholders, on the
pretense that the value of State's interest in the concessions
had exceeded the expectations of both Arakis and State. Mr.
Seifert forgot to mention that he knew the Anthem issuance
was made to accomodate a group of European financiers. The
BCSC has not yet clearly identified who these financiers and
their fronts are.
Using his relationship with RYCO and Integro, Mr. Seifert
arranged to have the one million Arakis shares issued to
Anthem, and several times he gave instructions to the offshore
trustee on behalf of Anthem.
(c) Copyright 1999 Canjex Publishing Ltd.
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