C3D features controversial Vancouver promoter
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Wednesday Nov 3 1999 Street Wire
HOWE ST. GRADUATE BIG ON THE BULLETIN BOARD
by Brent Mudry
While C3D Inc. is anxious to dispel media linkage to two stock promoters
shot to death in an execution-type hit a week ago in a New Jersey mansion,
the highflying and not-yet-reporting OTC Bulletin Board company traces
directly back to Vancouver. C3D legal director Michael Goldberg points out
that Vancouverites must be tired of their city's stock-world reputation,
earned by the Vancouver Stock Exchange, the exchange formerly known as the
Scam Capital of the World, and he suggests that C3D may be the big winner to
recover the city's image. "Hey guess what, Vancouver did a good one," Mr.
Goldberg told Stockwatch on Wednesday, en-route home to Florida after a busy
day on Wall Street.
Mr. Goldberg disputes any link between C3D and Internet stock promoters
Maier Lehman, a former broker with alleged bucket shop A.S. Goldmen, and his
partner Albert Chalem, murdered Oct. 25. The double-homicide has been a
major news event, and the New York Times reported on Saturday that C3D
shorts, who told investigators that Mr. Chalem was helping them, feared that
he and Mr. Lehman had been killed as a result.
"We have never retained any promoters ... we have no idea who they are ...
they were not stockholders, and coming from a former prosecutor, I've dealt
with the media a lot," says Mr. Goldberg. The C3D official, now 50, notes he
served as a homicide prosecutor in Philadelphia before an internship stint
with the U.S. Attorney's office in Washington.
"I didn't even know about this so-called murky world of penny stocks" before
the Times article, says Mr. Goldberg. The lawyer suggests that "the
unfortunate circumstance of our stock symbol probably ending up on a piece
of paper in someone's office" may be all there is to the media speculation.
He points out that C3D is a real company with more than 60 employees, of
which 40 are senior scientists, all with PhD's and at least half of them are
double-PhD's. "It is unfair for anyone who thinks this is a bullshit
company, excuse my French," Mr. Goldberg told a Canadian reporter.
Both Mr. Goldberg and John Swanson, a New York publicity agent retained by
C3D, are quick to point out that C3D's "revolutionary" optical data storage
technologies were vindicated in their debut Oct. 4 at a press conference in
Israel. Both men point out that a Reuters reporter legitimized the company
and gave it mainstream credibility in a favourable report. (In an unrelated
deal several years ago, now-banned Vancouver promoter Terry Alexander gave
an exclusive entree to his mystery Saudi Arabian sheik to a Reuters reporter
just as his Arakis Energy promotion was about to collapse.)
Mr. Goldberg says that all his fine scientists are very upset that their
company has been associated with murky penny-stock dealings. "I wish I had
some dirt to give you, but I can't," says the former homicide prosecutor.
While Mr. Goldberg knows of no dirt, he is more than happy to credit Phil
Garratt and Clair Calvert, both of Vancouver, with much of C3D's success so
far. "I have only nice things to say about these guys ... I hope they can
make a lot of money on this deal," says Mr. Goldberg.
Although C3D has made no detailed regulatory filings yet, its stock has been
a stellar performer on the bulletin board in recent months. The
thinly-traded issue began trading in late April at less than $3 (U.S.) a
share and peaked at $25.88 (U.S.) on Oct. 18. The stock has become quite
volatile in recent weeks, falling 30 per cent to bottom out at $17.50 (U.S.)
in a six-day stretch ending Oct. 26, then bouncing back to $23 (U.S.) two
days later. The stock closed Wednesday at $18.69 (U.S.), recovering from a
fall to $16.06 (U.S.) in the wake of unfavourable media coverage.
While Mr. Garratt and Mr. Calvert may not be household names on Wall Street,
they are certainly well known on Howe Street, the centre of dealings on the
VSE. Both Mr. Garratt, a controversial stock promoter from Australia, and
Mr. Calvert, who left the brokerage industry three years ago, are perhaps
best known in Vancouver for Mr. Garratt's Cycomm International, previously
known as Sonatel Communications. The Cycomm file is particularly well-known
by investigators with the Ontario and British Columbia securities
commissions, who delved deeply into Mr. Garratt's dealings.
In one of the highest-profile regulatory scandals in Vancouver in decades,
British Columbia's finance minister called an inquiry in August of 1994 into
the B.C. Securities Commission's controversial approval of an $8.75-million
Cycomm financing prospectus. (The biggest mutual fund buyer in the Cycomm
financing was Altamira Investments of Toronto, which subsequently had the
misfortune of watching its star fund manager Frank Mersch get suspended and
fined for lying to regulators about his secret personal trading in shares of
another Vancouver promotion, Robert Friedland's Diamond Fields Resources.)
In the affair, dubbed Holley's Folly, then-B.C. Superintendent of Brokers
Dean Holley receipted prospectuses for both Cycomm and Cam-Net
Communications Network, overruling the well-evidenced objections of his
investigators, his senior staff and himself. After some spirited
behind-the-scenes negotiations with Cycomm's lawyers, Mr. Holley
flip-flopped and gave his thumbs-up, on the condition that Mr. Garratt be
forced to step down as president. (In a flavour-of-Vancouver coincidence, a
C3D shell founder resides in the same luxury waterfront condo tower that a
former Cam-Net chief executive, a fugitive from the FBI, is holed up in.)
Lloyd McKenzie, the former supreme court judge selected for the 15-month
Cycomm inquiry, did a masterful job in his final report by missing his
mandate, dismissing extensive evidence, exonerating the BCSC and attacking
stock market whistle-blower Adrian du Plessis, who resigned as a BCSC
investigator over the commission's questionable handling of the file. Mr. du
Plessis has since retired from his dirty-stock-sleuth career after winning a
National Newspaper Award in Canada for breaking the story of YBM Magnex
International, the Russian money-laundering play which featured reputed
mobster Semion Mogilevitch, a player in the Bank of New York
money-laundering scandal.
"The mountain of evidence speaks for itself," the unrepentant Cycomm
investigator told a reporter after Mr. McKenzie released his report. Public
investors and several of Canada's top mutual funds lost millions of dollars
on Cycomm shares soon after the BCSC's controversial approval. The shares,
priced at $3.50 in the financing, fell to $1 six months later.
If C3D proves to be a great tech-stock success story, it will mark a
significant vindication for Mr. Garratt after his Cycomm/Sonatel career of
ropeless, floatless, self-propelled crab traps and assorted non-existent
electronic devices. Vancouver Sun reporter David Baines noted that Mr.
Garratt told Sonatel shareholders in 1987 that the company was on the verge
of "revolutionizing" the fishing industry with an automatic fishing device.
The next year, Mr. Garratt shifted his promotional pitch to touting the PL
2000, a revolutionary device to convert party lines into single phone lines.
Once again, "the actual revenues were zero," Mr. Baines reported.
With two flops in hand, the indefatigable promoter turned his talents to
pitching the Ad-Zapper and the Ad-Swapper, two more devices allegedly
invented by fraudster Dieter Blum, the creater of the PL 2000. The zappers
and swappers purportedly allowed hotels to replace television commercials
with their own advertising content. Although Cycomm shares ran to $8.25 in
1998, once again, product revenues were negligible to nil.
In a particularly unfortunate development for Mr. Garratt, his much-vaunted
scientist Mr. Blum was later exposed as a fraud. The pseudo-scientist
claimed to have degrees from the University of Basel in Switzerland and
Roosevelt University in Belgium. In reality, Mr. Blum was a high-school
dropout with a lengthy criminal record for fraud-related offences, and he
was serving time behind bars in a B.C. prison during his purported European
academic career.
Mr. Calvert was a key broker for Mr. Garratt during this period. In trading
investigated by the OSC and later reviewed by the BCSC, Mr. Garratt
accounted for 95 per cent of the total Sonatel trading volume one month. The
Sun reported that most of Mr. Garratt's stock was acquired by T.C. Coombs,
which redistributed it to its clients. Mr. Calvert, a broker at Continental
Securities, later merged into Yorkton Securities, handled both sides of Mr.
Garratt's trades. T.C. Coombs later had the misfortune of being shut down by
London regulators.
In one of the more intriguing twists in the Cycomm affair, shares of Cycomm
and Rare Earth Resources, an affiliate, were purchased through P.O. Box 423
in Geneva Airport, the same post box used as a conduit for shares in Asil
Nadir's Polly Peck scandal. Although the Serious Fraud Office of Britain
mounted a major investigation into Polly Peck, Mr. Nadir skipped off to
Cyprus where he remains beyond the reach of British regulators.
With Mr. Garratt's Cycomm affair in the past, he and Mr. Calvert now emerge
as the main players behind C3D, forming the shell and handling most of the
public-float shares. C3D's Mr. Goldberg, the former homicide prosecutor, is
not shy of giving credit to the pair. "We bought a shell from a Miami
securities law firm ... it had a clean history, which is why we chose it,"
says Mr. Goldberg.
The C3D executive notes that Mr. Calvert set up the shell, and he thinks Mr.
Garratt came on board after. Mr. Goldberg is particularly impressed with Mr.
Garratt. "I've found him to be an honourable guy," he says.
Mr. Goldberg notes that Mr. Garratt and Mr. Calvert raised $3-million (U.S.)
for this clean shell. He also confirms that while C3D has about 14 million
shares outstanding, the public float is a little less than three million
shares, and the Garratt group accounted for virtually all of this. The other
11 million shares are restricted shares, for the vend-in of the technology.
"None of us guys have any free-trading stock," Mr. Goldberg points out.
While Mr. Goldberg says that Mr. Garratt and Mr. Calvert have been "nothing
but gentlemen," he points out that C3D retained outside counsel to do
extensive due diligence on the deal and the players. "Vancouver deals do not
always have the best reputations ... we have very able counsel from a very
large and prestigious firm, and they pretty much checked it out from asshole
to elbow," says Mr. Goldberg. It is not clear if the busy lawyers bothered
checking any media clippings on Mr. Garratt and Cycomm.
(c) Copyright 2002 Canjex Publishing Ltd. canada-stockwatch.com
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