BCSC drops bombshell on National Bank's P.I.
National Bank of Canada NA
Shares issued 188,728,712 2001-07-09 close $29
Tuesday Jul 10 2001 Street Wire
See B.C. Securities Commission (BCSEC) Street Wire
by Brent Mudry
In a landmark prosecution rocking Howe Street and sending ripples throughout Canada's brokerage industry, the British Columbia Securities Commission has launched a broad case against Pacific International Securities, a scandal-plagued Vancouver brokerage controlled by National Bank of Canada, and nine current or former officers, including chairman and chief executive Max Meier, senior executive Larry McQuid, president Jean-Paul Philippe Bachellerie and executive vice-president Bert Quattrociocchi. Also named is Germain Carriere, president and chief operating officer of National Bank Financial.
The securities regulator portrays Pacific International as a haven for stock crooks, rolling out the welcome mat for numerous securities violators and felons, particularly in the barely-regulated OTC Bulletin Board market. All the respondents remain presumed innocent until proven guilty, and a full hearing date will be set.
Mr. Meier could not be reached for comment, as he is away on holiday until next Monday. Mr. McQuid was tied up in meetings and unavailable for immediate comment.
While Stockwatch has chronicled Pacific International's continuing saga of regulatory woes since early 1998, with the Katz, Hauchecorne, Rachfall and Patterson, Hababou and other scandals, the BCSC list of dirty P.I. clients is far broader than earlier thought. The standout star P.I. client is Shalom Weiss, fined $100-million (U.S.) and sentenced to a mere 845 years in jail three years ago on racketeering and money-laundering charges.
The BCSC specifically names clients Gerald Burns, currently in pretrial jail in the United States related to the Cambridge International Bank and Trust scandal, and associate Angel Lorie, Mafia-linked players Joe Garofalo and Salvatore Mazzeo, convicted stock felons Paul Harary, David Hesterman and ZZZZ Best's Maurice Rind, Members Service Corp. player Todd Moore and fellow American securities violators Randy Beimel, Jimmy Ray Carter, Anthony Elgindy, Richard Gladstone and Steven Keyser.
The BCSC claims that P.I. knew or ought to have known of some or all of four U.S. indictments issued from March, 1997, through June, 1999, naming either P.I. clients or P.I. as a key conduit. In a number of the cases, Stockwatch broke the bad news to P.I. head and founder Mr. Meier.
The B.C. regulator claims that Pacific International, like a number of other Vancouver brokerages, aggressively targeted U.S. business, especially in the OTC-BB market, and its U.S. commissions swelled from $2.3-million, or 14 per cent of total firm revenues, in 1993, to $19.2-million, or 67 per cent, in calendar 1999. A mere 15 of P.I.'s 85 brokers accounted for a whopping 82 per cent of the firm's U.S. business, and 80 per cent of the brokerage's business came from non-resident accounts, including those in numerous secretive offshore havens.
While the BCSC claims Pacific International senior executives were totally asleep at the switch, either knowingly or not, the most troubling allegation relates to money-laundering compliance. The regulator claims the brokerage's client verification procedures frequently did not meet the minimum standards of Canada's Proceeds of Crime (Money Laundering) Act and related regulations. No criminal allegations are made.
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