B.C. Securities Commission - Street Wire
BCSC's EBT probe reveals sixth Howe St. brokerage
Fri 19 May 2000 Street Wire
by Brent Mudry
A sixth Vancouver brokerage has appeared in the ever-expanding regulatory
probe into the affairs of Exchange Bank & Trust, the mysterious offshore
bank whose conduit pooling account at Bank of Montreal was frozen five
weeks ago by the British Columbia Securities Commission, acting on behalf
of the United States Securities and Exchange Commission.
The latest Howe Street brokerage of interest is Pacific International
Securities, which suffered the misfortune last year of popping up as a key
conduit in at least four SEC prosecutions of suspect OTC Bulletin Board
deals, and narrowly dodged the bullet in a fifth case last fall.
"Although I am a signing authority for various accounts, I have no
beneficial interest in any brokerage accounts with Goepel McDermid, Yorkton
Securities, Union Securities, Thomson Kernaghan, IPO Capital Corp. or
Pacific International Securities, but merely act as a nominee for client
accounts such as Berkshire Capital in my capacity as a senior trust officer
of NATC," stated Gillian Hobson, EBT's trust and banking operations
manager, in a sworn affidavit tendered at a BCSC hearing on Friday.
The Nevis-based offshore banker-front swore her affidavit on Thursday on
U.S. soil, in Minnesota, where she is attending a family function.
While BCSC enforcement chief Sacha Angus is anxious to hear everything Ms.
Hobson knows about the widespread securities dealings of EBT clients and
players, EBT lawyer Tom Manson of Fasken Martineau DuMoulin has invited the
regulators to Nevis in the West Indies.
EBT's lead Vancouver lawyer, Stephen Holmes of Holmes Greenslade, has been
directing the offshore bank's legal strategy, while the concerned Bank of
Montreal has also sent a series of successive lawyers to appear at or
observe the continuing hearing.
In Nevis, Ms. Hobson will be more than happy to spell her name for the
record and answer any question about her controversial bank and its clients
permitted under the Nevis Confidential Relationships Act of 1985, which
basically shrouds the entire island in a veil of secrecy.
"Ms. Hobson is evidently able to get off the Island of Nevis. She made it
to Minnesota, we want her to make it to British Columbia," Mr. Angus told
panel members Brent Aitken, Joan Brockman and John Graf.
The EBT probe is the latest SEC-related case targeting Pacific
International clients. In September, two months after being named in three
U.S. indictments in three days, and a month after dodging the bullet in a
fourth federal indictment, the Howe Street brokerage was noted by the SEC
as serving as the key conduit for disbarred California lawyer Kevin James
Quinn.
Mr. Quinn allegedly netted more than $200,000 in profits by selling more
than 1.2 million shares he stole from two bulletin board companies which he
served as an officer, director or corporate counsel.
P.I. also served as a key conduit in three much more serious cases, in
which former Calgary branch manager Jean-Claude Hauchecorne served New York
mobster Phil Abramo and his Florida underling Phil Gurian; Vancouver
brokers Dirk Rachfall and David Patterson served notorious
promoter-informant David Houge in another mob stock case with the Colombo
crime family and the Russian Bor mafia in New York; and an unnamed P.I.
broker served French fugitive Philippe Hababou.
The busy brokerage woke up in another SEC case, targeting Vincent
Napolitano and his team of ex-Stratton Oakmont brokers, by closing a
dubious account the day after it was opened.
The hearing into EBT's challenge of its Bank of Montreal account freeze has
progressed into a fishing contest between commission counsel, Mr. Angus,
and EBT lawyer, Mr. Manson, with both lawyers nosing around to find out how
much the other side knows.
After discovering that EBT was founded by the SEC's chief Itex Corp. fraud
target Terry Neal and that the offshore bank's fine clients include
eConnect tout Stephen Sayre, career financial criminal Edward Durante, and
other regulatory targets, BCSC investigators are keen on further prying off
the lid of this apparent cornucopia of crooks.
Mr. Manson, meanwhile, is anxious to keep the lid firmly nailed down and to
discover everything he can about the BCSC's EBT targets, especially those
whose identities have not been divulged by the BCSC or the SEC yet.
Although many of EBT's reputed 700 clients may be nervous, none have yet
stepped forward to complain about the account freeze and proclaim their
innocence.
"There is no obligation at this point to disclose. The staff are at the
beginning of an investigation," Mr. Angus told Mr. Manson. "We have seen
something going on and we have concerns about what we have seen," said Mr.
Angus.
Mr. Manson argues that he is entitled to further particulars under the
commission's April 13 freeze order, not the subsequent investigation order.
"Staff crossed the Rubicon when they issued the freeze order," Mr. Manson
told the panel, citing Julius Ceasar's infamous crossing of the border into
Italy two milleniums ago.
Mr. Angus also waxed poetic at a later juncture, in a brief paean to
Shakespeare's Hamlet. "I cannot resist this. It really comes down to 2b or
not 2b, this is not dealing with 2a," said the commission counsel,
referring to arguments over one of four freeze orders targeting the
offshore bank's conduit account and its clients.
After being tracked down in Minnesota to sign her affidavit, Ms. Hobson the
front, echoed Mr. Manson's position on a bunch of new EBT-linked names
revealed by Stockwatch on Wednesday.
"Although commission staff refuse to provide particulars, I have become
aware of an article in the May 17 edition of Stockwatch pertaining to
parties alleged by a Mr. Mudry to be associated to EBT being Aronson &
Aaronson Inc., Bullock & Bryson Financial Inc., Bullock Investments Inc.,
Dobbins & Dotenhoff Ltd., and Friedman Capital Ltd. (together, the
"Additional Stockwatch Names")," states Ms. Hobson.
"Since commission staff refused to provide particulars of these names in a
timely fashion, I have been unable to get consents to disclose whether any
of these entities have accounts with EBT and whether there are any funds in
the accounts," states the offshore banker in her affidavit.
At this point, Ms. Hobson herself has not even confirmed whether the
Aronson, Bullock, Dobbins and Friedman accounts are connected to EBT,
although Stockwatch has linked all either directly or indirectly to herself
and other EBT directors and officers, based on documents obtained by
Stockwatch.
"Bullock & Bryson Financial is beneficially owned by Andrew Titley," states
one document. Mr. Titley is a director of the fine offshore bank, while
another Titley, John, is a repeat securities offender who served as a key
associate of EBT founder Mr. Neal in the Itex fraud.
"Friedman Capital is beneficially owned by Julie Mills," states the same
useful piece of paper. Ms. Mills is not only an EBT director herself, she
is also the sole stated officer in May 2 documents removing Mr. Neal as a
signatory on the frozen conduit account at Bank of Montreal.
Aronson and Dobbins have less direct links to EBT, both showing up as
backers of New Tech Ventures. Aronson, also known as Aaronson, uses the
identical post box address in Charlestown, Nevis, as Wesley Capital Ltd.,
which features the ubiquitous front, Ms. Hobson, as president. Dobbins uses
a post office box near Nevis in St. Kitts.
Although EBT's position is that Ms. Hobson may go to jail if she reveals
anything about its clients without their consent, this also puts the fine
offshore bank in the intriguing position of shrouding at least two of its
own officials, Mr. Titley and Ms. Mills, under this client gag of silence.
In another challenge to the BCSC freeze order, Ms. Hobson referred to the
SEC's recent PSA Group fraud case against Mr. Durante, Timothy Pinchin,
Burton Vishno and their associates, without noting any of the three
securities fraudsters by name.
"I am unaware of any temporary restraining order or injunction in the
United States or any other jurisdiction (except this freeze order in
British Columbia) pertaining to the PSA Group, the additional PSA
defendants, the Additional Stockwatch Names or any member thereof," states
Ms. Hobson in her affidavit.
Ms. Hobson also claims she has no clue which regulatory target OTC Bulletin
Board stocks are being traded through several Vancouver brokerage accounts
she is involved in.
"Given the refusal of the commission staff to provide particulars, other
than PSA Inc., I am unaware of which, if any, securities are the subject of
concern for commission staff in connection with alleged trading in any
account or accounts of Berkshire Capital and Carter Associates at Union
Securities and IPO Capital Corp.," states the offshore banker.
In listing the PSA ring members who are not EBT clients, Ms. Hobson
conveniently omitted any mention of Mr. Durante, who is described as a
"long-term customer of a number of regulatory and law enforcement
authorities in the United States" by Mr. Angus. "Mr. Durante ... has an
insidious history," the BCSC official told the panel.
"EBT is unaware of and has never maintained an account for Burton G.
Vishno, Walter J. Zink, or Timothy James Pinchin, or First New Haven Corp.,
Thomas J. Donahue, Investment Resources Inc., Daniel C. Sanders, Thomas G.
Scalzon Jr., Shareholder Communications Group LLC, Pacific Corporate
Equities LLC, Jackson L. Morris, Mark E. Gould, Thomas K. Williams, Syncom
International Inc., World International Marketing Inc., Janice Sheely
Durante, Stanley T. Deck Sr. (the additional PSA defendants)," states Ms.
Hobson.
As the BCSC has already alleged that PSA was one of the bulletin board
stocks traded through Vancouver brokerages using EBT as a money conduit,
this raises the prospect that either Mr. Durante was the only PSA player
active in Vancouver, or the BCSC may discover some new PSA names to hand
over to the SEC.
Ms. Hobson, in vintage front-speak, also asserts she is not the real person
behind other EBT-linked Vancouver brokerage accounts. "Although I am a
signing authority for various brokerage accounts, I have no beneficial
interest in any brokerage account or accounts of Sovereign Securities with
Goepel McDermid, but merely act as a nominee in my capacity as a senior
trust officer of NATC," the offshore banker states.
Mr. Angus expressed great interest in these assertions. "Someone else is
trading the accounts. We want to get the truth and we want the unvarnished
truth from them," the enforcement director told the panel.
"She says she is not the beneficial owner, others are ... we want to know
more about this. This supposedly innocent director of the account," is not
trading, it is someone else, "well who's that, we'd like to know," says Mr.
Angus.
"If she's innocent, we're happy for her. We want her to come forward and
answer questions here," Mr. Angus told Mr. Manson. While Mr. Manson accused
the commission of "slamming innocent people" like Ms. Hobson, Mr. Angus
said this was "bogus ... simply and utterly inaccurate."
In the first response on behalf of any EBT clients, Mr. Manson tendered two
identical letters faxed by U.S. lawyers to his associate Mr. Holmes, one
dated May 11 from Arnold Goldstein of Florida, the other, dated May 17,
from Kevin Mirecki of Santa Ana, Calif.
"The clients that we represent are primarily business owners and medical
professionals" wishing to shield their assets from the burden of litigation
fears, stated Mr. Goldstein, parroted by Mr. Mirecki.
"We work with trust companies and banks throughout the world including EBT
in Nevis. I have personally visited the office in Nevis and have met with
the staff and management. We have referred many clients to EBT and have had
nothing but positive experiences," stated the lawyers in unison.
"Our clients have been pleased with the level of service and accuracy that
EBT has provided them. They have been professional, responsive and
honorable in all dealings with my clients and our firm," stated the Florida
and California lawyers.
"Our clients use the EBT account for legitimate business purposes and are
upset and seriously concerned that deposits are unavailable which can
severely effect their activities. It is completely unfair and unreasonable
that our clients' accounts should be affected when they have done nothing
wrong and have dealt with a legitimate licensed bank holding deposits in a
major financial institution in Canada," stated Mr. Goldstein, parroted by
Mr. Mirecki.
Neither lawyer made any mention of how many of their clients use EBT, how
much of their funds are frozen, and if they are willing to step forward and
identify themselves in public.
Mr. Sacha noted that not a single client of EBT has yet contacted the BCSC,
and he attacked the advocates' carbon-copy letters.
"It is remarkable even though they were written six days apart and a
continent apart they have managed to use exactly the same words. What a
remarkable coincidence," he told the panel.
The letters were not entirely identical. "Mr. Goldstein says very
sincerely, Mr. Mirecki just says sincerely ... which presumably someone
dictated to them," said Mr. Angus.
"If they come up and will be interviewed by us we may well agree with
them," said Mr. Angus. As it stands, "the evidence is worth nothing," the
BCSC counsel claims.
The hearing continues.
(Readers wishing more details of Bank of Montreal's fine offshore banking
client may refer to Streetwires dated May 4, May 5, May 8, May 9, May 10,
May 11, May 12, May 16, May 17 and May 18 under the symbols BCSEC and ECNC.
Links to a host of other related articles are noted in the May 5 and May 8
Streetwires.)
(New Tech Ventures' offshore backers are noted in the May 5 Streetwire,
while KINeSYS's offshore backers, which comprise the "Additional Stockwatch
Names" are noted in the May 16 Streetwire. Details of the penny stock deals
of New Tech backer Joe Sierchio, a New York lawyer, with controversial
Vancouver securities lawyer Michael Seifert are noted in a Streetwire dated
Dec. 17 under the symbol BCSEC.)
(Details of eConnect's regulatory troubles are noted in Streetwires dated
March 13, March 24, April 10 and May 4, under the symbol ECNC.)
(Details of Itex's regulatory troubles, featuring Mr. Neal, are noted in
Streetwires dated Feb. 11 and Feb. 17, under the U.S. symbol ITEX and the
Canadian symbols GKC or GKCI. Details of PSA's troubles, featuring Mr.
Durante, Mr. Vishno and Mr. Pinchin, are noted in a Streetwire dated Dec.
3, 1999, under the symbols BCSEC and KEW.)
(Details of Pacific International's Rachfall/Patterson saga are noted in
Streetwires dated July 5, July 6 and Oct. 4, 1999, and Feb. 22 and Feb. 24,
2000, under the symbol NA. P.I.'s client Quinn is noted in Streetwires
dated Sept. 21, 1999, and Feb. 4, 2000, under the symbol NA. The Napolitano
case is noted in a Streetwire dated Aug. 26, 1999, under the symbol NA.)
(P.I.'s Hauchecorne case is noted in Streetwires dated Feb. 17, Feb. 18 and
Feb. 19, 1999, under the symbol VSE, and July 9 under the symbol NA. The
Hababou case is noted in Streetwires dated July 7, July 8 and July 9, 1999,
under the symbol NA.)
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