Valentine indicted in fraud ring
FBI nabs broker in Europe during sting operation
By Madhavi Acharya-Tom Yew
Business Reporter
Former high-flying financier Mark Valentine has been indicted in Florida in connection with an alleged securities fraud ring worth some $313 million (Canadian), U.S. authorities said yesterday.
As a result, the former head of now-bankrupt Toronto brokerage firm Thomson Kernaghan & Co. Ltd. is under arrest in Germany and faces extradition to the United States.
Valentine, who is currently banned from trading securities in Ontario, was one of 58 executives, stock promoters and brokers — including 16 Canadians — indicted following a two-year undercover sting operation called Bermuda Short.
"At this point in time, we have very limited information. Until we know more about it, it's difficult to say very much," Valentine's lawyer, Joe Groia, said in an interview. He declined to comment on the whereabouts of his client.
Valentine was nabbed by FBI agents in Frankfurt while boarding a flight to Canada, sources say.
Jacqueline Becerra, a spokesperson for the U.S. Attorney-General's office in Miami, confirmed Valentine was arrested "sometime in the last 48 hours."
It is unclear when the extradition process will begin, she added. "We have no information as to when that will start."
The U.S. indictment is unrelated to an ongoing investigation by the Ontario Securities Commission, a spokesperson for the commission said.
The sting operation, detailed by law enforcement officials for the first time yesterday, was a joint effort involving authorities from the Federal Bureau of Investigation and the Securities and Exchange Commission in the United States, and the Royal Canadian Mounted Police.
The resulting 23 indictments, which include wire, mail, and securities fraud conspiracy, securities fraud and money laundering, were announced at a news conference in Miami.
Federal officials say that while no investors lost money, the attempted fraudulent securities sales totalled more than $200 million (U.S.).
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`At this point in time, we have very limited information ... it's difficult to say very much.'
lawyer Joe Groia,
representing Mark Valentine
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The indictments include five B.C. men: stock promoters John Purdy and Kevan Garner; Martin Chambers, a former lawyer; and Ronald Horvat and Harold Jolliffe, who do not work in the securities industry.
During the first part of the undercover operation, an FBI agent posed as a corrupt securities trader employed by the U.S.-based representative of a fictitious foreign mutual fund. Some of the companies involved include Digital Concepts International, Uncommon Media Group, COI Solutions Inc. and FoneCash Inc., whose shares are publicly traded on the over-the-counter market.
The second part of the sting, which resulted in three indictments, involved money-laundering transactions through U.S., Canadian and offshore banks.
On May 14, a federal grand jury returned an indictment charging Valentine with one count of wire, mail and securities fraud conspiracy and two counts of securities fraud, according to U.S. Department of Justice documents.
Valentine is alleged to have owned and controlled a majority of the over-the-counter stock of C Me Run Inc., SoftQuad Software Ltd. and JagNotes.com Inc.
The indictment charges that Valentine and Paul Lemmon, director of a Bermuda-based financial services company called Voyager Group Ltd., conspired to sell the stock to the fictitious fund for a total of $29.4 million in return for a kickback of $7.8 million.
Authorities also allege that Lemmon and Valentine "were to cause securities brokers to receive undisclosed kickbacks" in return for helping to manipulate the market prices of the stocks by selling shares to unsuspecting clients.
The maximum penalty for securities fraud is 10 years imprisonment, while the maximum for conspiracy to commit securities fraud is five years.
The OSC slapped Valentine with a temporary cease-trade order in mid-June after he was abruptly suspended by Thomson Kernaghan. In July, an administrative tribunal ordered that the ban, which does not extend to Valentine's personal accounts, be extended until Jan. 31, 2003.
The commission and the Investment Dealers Association of Canada are currently investigating Valentine's actions as general partner of the Canadian Advantage Limited Partnership and the VC Advantage Fund Partnership.
The OSC alleges that Valentine participated in so-called "death spiral" financing for Jawz Inc., which traded on the Nasdaq, and favoured one client over another in the trading of shares of C Me Run Corp. The effect of these trades, the OSC claims, was to benefit himself or his accounts to the detriment of some of the firm's clients. None of the allegations has been proved in court.
Thomson Kernaghan was petitioned into bankruptcy in July, just one day after the brokerage was suspended from doing business because of a capital deficiency and lack of internal controls.
Bankruptcy trustee Ernst & Young revealed earlier this month the firm faces a shortfall in assets of at least $3.3 million. |
