and mpre BCSC talks tough on offshore insiders
Donner Minerals Ltd
DML
Shares issued 31,689,657
1999-12-21 close $0.11
Tuesday Dec 21 1999
See B.C. Securities Commission (BCSEC) Street Wire
by Brent Mudry
With a second associate of banned Vancouver promoter Terry Alexander facing
regulatory jeopardy for alleged illicit and illegal offshore dealings, the British
Columbia Securities Commission's long-awaited and much-overdue crackdown
on Howe Street's proliferation of shady offshore deals is picking up steam. On
Tuesday, a few days after fining Michael Seifert $450,000 and banning the
disgraced Maitland & Co. star securities lawyer for 12 years, the BCSC targeted
his long-time close associate, David Michael Patterson.
The regulator claims Mr. Patterson, an active promoter on the former Vancouver
Stock Exchange, the exchange formerly known as the Scam Capital of the World,
hid his offshore dealing in five companies, including his once-flagship Donner
Minerals.
While BCSC officials cannot comment directly on Mr. Patterson's case, as he is
presumed innocent pending a hearing or settlement, the regulator is keen to warn
Howe Street of its belated intolerance for dubious offshore dealings. "We have
seen a number of cases where persons in B.C. are trading through offshore
accounts and not reporting, when they have insider interests," BCSC enforcement
director Sacha Angus told Stockwatch. "We are trying to send a message that this
practice must cease ... it's invidious .. it's got to stop," says Mr. Angus.
The Patterson citation shows the BCSC's offshore investigation into Mr.
Alexander's Arakis Energy affairs, which included several trips to the secretive
offshore enclave of the Channel Islands, proved fruitful. In February, Mr.
Alexander was fined $1.2-million and banned for 20 years in a settlement with the
BCSC. On Friday, in another negotiated settlement, Mr. Seifert agreed to pay a
$250,000 fine and $200,000 in investigation costs and put himself in a 12-year
penalty box for setting up Arakis's million-share Anthem gift to shadowy European
"investors" and his own secret offshore dealings.
Mr. Patterson's own troubles trace back to the same offshore dodge which
tripped up Mr. Seifert, in Jersey in the Channel Islands. The BCSC claims the
stock promoter, who set up a secret Jersey account in September of 1990,
exactly one year after Mr. Seifert set up his own secret account in the same house,
traded shares of Donner, Crazy Horse Industries, Allied Strategies, Zicor Mining,
Consolidated Valley Ventures and Prairie Rose Resources, but repeatedly forgot
to make any disclosure to either securities regulators or the general public.
In its offshore probe, the BCSC discovered that in September of 1990, the VSE
stock promoter set up the D. Patterson Trust through RYCO Trust in Jersey. The
Patterson Trust, was also known as JT167, but it is unknown if this is a reference
to Mr. Alexander, also known as J.T. Alexander. RYCO served as trustee of the
trust, with Mr. Patterson nominating his wife, his daughter, his parents and his
parents-in-law as beneficiaries. The same month he established the account, Mr.
Patterson allegedly directed RYCO to acquire Bray International, a holding shell
in another offshore enclave, the British Virgin Islands.
DONNER
Mr. Patterson, the president and chief executive of Donner, was a busy secret
trader in his company's shares for at least 14 months. The BCSC claims that
between Nov. 27, 1995, and Jan. 10, 1997, the Bray account bought 80,500
shares for $112,200 in 18 trades and sold 40,900 shares for $66,700 in 12
trades, all unreported. The secret Bray account also received in 242,000 Donner
shares and delivered or transfered out 267,000 shares.
Donner has been a favourite of Vancouver and offshore Howe Street followers
for several years. A private placement in April of 1998 featured such buyers as
Michael and Gwen Seifert, Mr. Seifert's New York partner Joseph Sierchio, his
and Mr. Patterson's associates Harvey Keats and Colin Watt, and then-Yorkton
Securities chairman Robert Cross's Can Oro Consulting. The offshore buyers
included secretive Swiss financier Carlo Civelli, backer of countless VSE deals
and Laiy Ltd., a Nassau account.
A large private placement of five million units at 20 cents this February featured a
stronger offshore contingent. Mr. Civelli's Clarion Finanz bought 500,000 units,
followed by Scorpio Services, a Jersey post box account, with 250,000 units, and
Synergy International Facilitators Ltd., housed in another Nassau post box, with
125,000 units. Mr. Patterson bought the same amount as Mr. Civelli's mystery
client: 500,000 shares.
CRAZY HORSE
Mr. Patterson was also active offshore in trading of Crazy Horse, according to
regulators. The promoter served as Crazy Horse's president, CEO and chief
financial officer. Between Dec. 31, 1996, and Jan. 6, 1997, the secret Bray
account transferred out 339,500 shares in two trades, but the forgetful Mr.
Patterson again neglected to tell anyone besides his family and close associates.
Crazy Horse was also a popular Howe Street promotion. An Aug. 14, 1996,
private placement of 360,000 special warrants at 37 cents featured such buyers as
Mr. Patterson's close associate Barry Ching, using ARC Capital Management in
Jersey, Pacific International Securities brokers Michael Patterson and Dirk
Rachfall, arrested this summer by the FBI in an unrelated mob deal, Harold
Hodgson of Haywood Securities and Brad Birada of McDermid St. Lawrence
Securities, each with 100,000 units.
A large financing of four million units at 15 cents in April of 1998 featured such
buyers as Mr. Patterson, associates Mr. Seifert, Colin Watt, Harvey Keats, Mr.
Ching, using a different offshore post box, and Mr. Sierchio, along with Mr.
Civelli's Clarion, Maitland managing partner Ross McCutcheon and newsletter
writers Bob Bishop and Peter Grandich.
Later that year, Mr. Cross's Oro, Mr. Matthews and Harold Hodgson's boss,
John Tognetti, bought in, along with Chris and Jamie Storrow. It is not known
whether the latter pair are related to prominent defence lawyer Mr. Storrow, who
negotiated Mr. Seifert's BCSC settlement and recently represented the P.I.
brokers Mr. Patteron and Mr. Rachfall.
ALLIED STRATEGIES
Mr. Patterson's cited offshore trading began in December of 1993, when his Bray
account bought 495,000 special warrants of Allied Strategies for $594,000, while
he served as a director. Allied was quite a favourite of Thai financier Rakesh
Saxena, now holed up in Vancouver fighting extradition for his alleged key roles in
massive frauds at the Bangkok Bank of Commerce.
ZICOR
The BCSC also claims that between March of 1995 and December of 1996, Mr.
Patterson's secret Bray account sold 59,000 shares of Zicor in 14 trades for
$34,600, which the account had received in. Although Mr. Patterson was a
director of Zicor, he forgot to disclose his trades.
Zicor, renamed Mano River, remains an offshore favourite. In a Sept. 16, 1998,
vend-in valued at $7.24-million (U.S.), Mano paid 40.83 million shares to a
variety of offshore accounts all care of Vector XXI Finance SA of Switzerland.
CONSOLIDATED VALLEY
The BCSC also claims Mr. Patterson used his Bray account to secretly buy a
modest 60,000 units of Consolidated Valley while he was a director. In this
contentious 30-cent placement, he also bought 60,000 shares in his own name.
The other Howe Street buyers include Mr. Seifert, with 25,000 shares and fellow
Howe Street lawyer Bernie Zinkhofer, with 20,000 shares.
Barbara Dunfield's 458685 B.C. and Ian Rozier's Heritage Mineral Investments
each bought about 250,000 shares, while the biggest buyer was offshore:
Zolarium Ltd. of Hong Kong, with 450,000 shares. Zolarium also showed up in
two 1995 private placements, including leading a one-million unit 38-cent financing
with 350,000 units.
Although Consolidated Valley later changed names to CVL Resources, with Ian
Rozier now serving as president and chief executive, its offshore flavour remains.
The company's last major filing, on Sept. 14, was for 500,000 incentive stock
options at 45 cents to Milet Global Corp., which operates out of the secretive
haven of Tortola in the British Virgin Islands. In November of 1997, close to four
years after Bray's dubious private placement, Milet was the major buyer in
another placement of 12 million shares at 60 cents. Milet bought 4.85 million
shares, while Incidental Holdings Ltd., which operates out of the Offshore
Incorporation Centre in Tortola, purchased the same amount.
A private placement of 3.6 million special warrants at $1.50 in early 1996
featured a host of Howe Street notables, including penny-stock-boosted mutual
funds, First Marathon Securities brokers, a few Canaccord Capital associates and
the requisite offshore accounts. Fund manager Steve Misener's BPI Canadian
Small Cap Fund was the biggest buyer, with 700,000 units and his BPI Small Cap
Fund, with 300,000 units, while now-disgraced fund manager Frank Mersch's
Altamira Management bought 300,000 units.
First Marathon's Vancouver brokers and clients took down 635,000 shares,
including Cartaway Resources engineers Blayne Johnson and Rob Hartvikson,
with about 100,000 units each. The Canaccord buyers included Peter Brown's
MacLachlan Investments, CLD Financial Opportunities and Goosly Resources,
each with 100,000 shares.
The offshore buyers included such familiar Howe Street faces and fronts as
Euroswiss Securities of Jersey, Societe Bancaire Julius Baer, Cantrade Ormond
Burrus Banque Privee, both of Geneva and Bunnaton of Hong Kong, each with
100,000 units, Midland Bank Trust of London, with 400,000 units, and Indian
Investments, which operates out of a post box in the Republic of Suriname, with
75,000 units.
It may be that the BCSC sees a pattern here. |
