Fraud sting nabs 16 Canadians
Six from B.C. caught in FBI's Operation Bermuda Short
Matthew Debock
Vancouver Sun
Friday, August 16, 2002
Former Vancouver lawyer Martin Chambers, shown in 1990, is charged with money laundering.
Six British Columbians and 10 other Canadians were among 60 people arrested Thursday in an international securities fraud and money-laundering sting operation that the RCMP and the FBI say prevented investors from losing about $200 million US.
Among those indicted in the U.S. after a three-year undercover investigation by the two agencies was disgraced Vancouver lawyer Martin Chambers, who is charged with money laundering and money laundering conspiracy, both of which carry a maximum prison term of 20 years.
Facing the same charges are Kevan Garner, Ronald Horvat and Jack Purdy, all of Vancouver, and Harold Jolliffe, of Duncan and Calgary,
Chambers, 62, who voluntarily withdrew his right to practise law in 1981, has never been convicted, but has previously been linked to several scandals, and was closely associated with failed Vancouver mortgage brokerage firm Eron Mortgage Corp. He was arrested in St. Louis, en route to Miami, according to the FBI. Purdy was arrested in New York City.
***Les Price of Vancouver has been charged with wire and securities fraud and money laundering. The fraud charges carry maximum terms of five and 10 years, respectively. Price previously lost a civil case involving stock manipulation.***
Mark Valentine, recently fired chairman of Toronto-based securities broker Thomson Kernaghan, was also among the 16 Canadians charged. He was arrested in Germany.
The investigation, codenamed "Bermuda Short," began three years ago in Florida, according to FBI Special Agent Frank Figliuzzi. He said one RCMP officer and one FBI agent spent the past two years undercover.
"The FBI undercover agent was posing as a fund manager," he said. "The fund was, of course, a complete fabrication, but it was ostensibly based in London, England. The agent said openly, 'I am a corrupt fund manager. I would be more than happy to buy shares in your stock at inflated prices. You give me a kick-back, and your company will become a part of my investment fund, thereby grossly inflating the value of your company.'"
Marcos Daniel Jimenez, U.S. Attorney for South Florida, noted that the undercover transactions were structured in such a way that no private investors lost money, because the deals never actually came off. Although a number of small transactions occurred, partly to build faith, and also to test whether the conspiracies would work, they had no impact on market prices, investigators said. The stocks themselves are not on major exchanges and rarely trade.
At a Thursday press conference, Jimenez said the need to protect investors was the underlying reason Operation Bermuda Short was needed, alluding to the debilitating impact that recent corporate scandals have had on public trust.
"The cornerstone of the federal securities law is to protect the investing public by requiring transparency and full disclosure by publicly traded companies," Jimenez said.
Figliuzzi said the initial operation was very successful, nabbing corporate officers, stock brokers and stock promoters.
"One of the things we were shocked by, in this operation, was that people lined up to do this," Figliuzzi said. "This is a massive case for us."
Figliuzzi said people involved in the scheme were bringing in friends and relatives right up until their final meeting with the undercover agent.
"It got to the point during the meeting, they were facing FBI agents in raid jackets, and they still didn't get it," he said. "They started shaking hands around the room and introducing themselves. That's how greedy these individuals were. The value of the inflated prices would have left investors with $200 million (U.S.) in losses, had this not been an FBI-RCMP operation."
Figliuzzi said the RCMP was brought into the operation when the FBI realized it had uncovered connections to organized crime in Canada.
"At some point, early on in our investigation, we realized we were now gaining access to and running into some of the same circles of people that the RCMP had been targeting for years," he said. "We had a surprise merger of a white-collar crime operation in the States with a more traditional organized crime operation in Canada. We found that some organized crime organizations in Canada, and some very bad criminals, were in need of laundering their ill-gotten gains."
He said the joint investigation found corporate officers, stock promoters and financial professionals laundering funds through U.S., Canadian and offshore banks. The undercover RCMP and FBI agents then posed as members of a Colombian drug cartel, and agreed to have about $1.4 million laundered.
"We told them it was cocaine money," Figliuzzi said. "That's where the RCMP undercover agent came in."
***Three Vancouver-based companies, the Bolivian Hardwood Corporation, Purdy Garner Venture Capital, and Diacom Ventures, were allegedly used to launder the purported cocaine profits.***
Figliuzzi said about a half dozen more people will be arrested in the next few days, and that the evidence against those charged is "quite strong."
"These people have entered the U.S. justice system, and some of them were quite shocked at the process," he said. "They were informed by a federal magistrate that there would be bond hearings and pre-trial detention hearings. Some of them expressed shock and amazement that they might be detained. They expressed dismay that that would not necessarily have occurred in Canadian courts."
According to the RCMP, the investigation is continuing, and additional charges are expected in Canada.
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