BCSC indirect ally Rafi Khan settles with SEC
Hariston Corp HRSNF
Shares issued 12,663,113 1899-12-30 close $0
Thursday Jun 1 2000
See B.C. Securities Commission (BCSEC) Street Wire
by Brent Mudry
Rafi Mohamad Khan has cut a deal so sweet with the United States Securities and Exchange Commission that he might as well have authored it himself. The relentless tout has done a deal excommunicating himself from any broker or dealer for at least five years, as penalty for his egregious rig jobs of Future Communications Inc. in 1993 and L.L. Knickerbocker Co. Inc. in 1995.
In a consent settlement dated Wednesday and released Thursday, the SEC imposed no fines or disgorgement orders on the controversial stock promoter. Under the settlement, Mr. Khan is barred from association with any broker or dealer, with liberty to reapply after five years. A previous injunction on April 17 bars Mr. Khan from future violations of antifraud provisions of U.S. securities laws.
The resolution of the SEC case comes two days after Barron's lead columnist Alan Abelson, crediting journalistic sleuth Jaye Scholl, noted that the Khan clan has popped up in NetSol International Inc. NetSol shares, which traded at $2.50 a year ago, rose from $7 in November to a momentary spike peak of $80 in early March. (All figures are in U.S. dollars.) The stock fell $2.50 to $16.25 on Thursday.
Barron's noted that Rafi Khan's nephew and niece played key roles with NetSol associates, but Mr. Khan assures everyone he is completely out of the picture. "No, no, no business dealings with my nephew," he told Ms. Scholl.
The SEC settlement is likely a clue for Mr. Khan's former colleagues just how frighteningly helpful the former key Irving Kott associate must have been since he became a star witness for the U.S. Department of Justice in the fall of 1998.
The activities of Mr. Kott, the legendary boiler-room operator, have been a high-profile investigation target of the SEC. The U.S. regulator's probe covers the period from Jan. 1, 1993. In spring of that year, Mr. Kott led a group which took control of Reynolds Kendrick Stratton, a Los Angeles penny stock brokerage.
Mr. Khan was a key RKS broker, and the pair share a fondness for Howe Street, the centre of dealings for the former Vancouver Stock Exchange, the exchange formerly known as the Scam Capital of the World, a moniker bestowed by writer/humourist Joe Queenan in Forbes magazine.
With the assistance of the British Columbia Securities Commission, the SEC has made Vancouver a prime focus for the Kott probe, as Vancouver securities lawyer David Anfield has served Mr. Kott's Howe Street companies since at least 1986.
Mr. Khan's SEC settlement comes after a separate plea agreement with justice department officials last year. Mr. Khan pleaded guilty on July 6 to a single count of tax evasion in the U.S. District Court for the Central District of California.
The tax evasion charge relates to filing a false federal tax return in 1991, in which Mr. Khan claimed inflated deductible expenses of $927,000. Mr. Khan's tax evasion occurred while he was employed as a broker with H.J. Meyers, a brokerage in Beverly Hills, Calif. that assisted Howe Street promoter Harry Moll at that time.
While the Justice Department and the Federal Bureau of Investigation rarely reveal their moles, informants and co-operative witnesses, Mr. Khan's key role was revealed in connection with the plea bargain. "He is co-operating with ongoing investigations," Assistant U.S. Attorney Christopher Painter told Stockwatch last year.
Mr. Khan was sentenced to six months under house arrest last October after a sentencing hearing on the tax evasion case. The helpful promoter was also sentenced to probation of three years.
In the current settlement, the SEC notes that shares of Future Communications, an insolvent cable television programming company based in Dallas, Tex., quadrupled from $6.50 to $27.25 between June 30 and Aug. 30 of 1993, boosted by a rig job masterminded by Mr. Khan.
The National Association of Securities Dealers halted the stock on Aug. 31, 1993, and it never traded again. The company formally declared bankruptcy that November and it was liquidated.
Knickerbocker was equally notable as a rig job. Under Mr. Khan's firm hand, the company's stock rose 866 per cent from $6 to $52 between July 3 and Aug. 11 of 1995. Soon after, the stock collapsed, and that Aug. 25 the NASD delisted the stock. Three creditors filed a petition to liquidate the company.
The SEC notes that Mr. Khan orchestrated both rig jobs in a variety of fraudulent and deceptive ways, including controlling the floats, imposing a "no net selling" policy, supporting the stock prices, executing unauthorized trades, parking stock, discouraging sales, making false and materially misleading statements, publishing "wildly exaggerated" earnings and price projections, promoting a short squeeze scheme, tipping insider information, selling at or below market prices, establishing price domination and engaging in trading collusion.
For this lengthy list of egregious securities violations, Mr. Khan, who has officially been out of the market for a number of years now, has promised to stay away from brokerages for at least five years.
The SEC investigation into Mr. Kott's empire, and its tentacles in Howe Street, continues.
(Readers wishing details of the SEC's BCSC-assisted Howe Street probe of Mr. Kott's empire may refer to Streetwires dated Jan. 21, Jan. 24, Jan. 26, Jan. 27 and Jan. 28, under the Canadian symbols BCSEC and HRSNF, and the U.S. symbols HRSNF and SRRIF.)
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