SEC fines Maid Aide riggers $6.8-million with BCSC's help
2002-09-13 09:42 PT - Street Wire.
by Brent Mudry
The United States Securities and Exchange Commission has won $6.8-million in judgments against four co-conspirators, including convicted Las Vegas lawyer Max C. Tanner, in the Maid Aide case, a 1998-1999 boiler room penny stock rig job which featured controversial Vancouver brokerage Pacific International Securities as a stock and money laundering conduit for dubious offshore dealings. (All figures are in U.S. dollars.) The penalties bring the total Maid Aide fine tally to $11.4-million.
The SEC has credited the British Columbia Securities Commission, the Federal Bureau of Investigation, the Department of Justice, the U.S. Attorney's Office for the Southern District of New York and NASD Regulation Inc. for their valuable assistance in cracking Mr. Tanner's Maid Aide case.
The latest settlements come as the BCSC gears up for its blockbuster prosecution hearing of Pacific International, set to start Oct. 7, barring any last-minute settlement negotiations. In a landmark case, the Canadian regulator claims P.I. has catered to much more than its Howe Street share of U.S. stock crooks, accommodating numerous securities violators and felons, including Sholam Weiss, recently extradited from Austria to Florida after fleeing an 845-year prison sentence. The BCSC regulatory defendants include German Carriere, the head of National Bank Financial of Montreal, which controls Pacific International.
While P.I. has not yet filed a formal defence, it will likely claim it had no clue how it became such a powerful magnet for offshore penny stock clients around the world, many of whom have been, now are or may soon be guests of the U.S. Bureau of Prisons. Although the Maid Aide was not noted in the BCSC's original P.I. notice of hearing, Mr. Tanner and his band of crooks will likely be discussed in the upcoming hearing.
The SEC announced Wednesday that it recently won a combined $3.7-million in judgments in consent settlements with promoter Kenneth Kurtz, of Salt Lake City, Utah, and bucket shop brokers Alex Sheyfer, of Staten Island, N.Y., and Alexander Zalmenenko, of Brooklyn, N.Y. Mr. Kurtz was ordered to pay $157,773 in disgorgement of ill-gotten gains and a $50,000 civil fine. Mr. Sheyfer and Mr. Zalmenenko were both ordered to pay disgorgement of $1.75-million, but payment was waived based on their documented pleas of poverty. In the settlements, entered by U.S. District Court Judge William Pauley on July 26, all three promised to do their very best to refrain from future securities violations.
U.S. authorities also won $4.6-million in judgments noted in two consent settlements also finalized July 26. Mark A. Taylor Sr., of Brooksville, Fla., was ordered to pay $3.58-million in restitution in a related criminal case. Kevin J. Ruggiero, of Hewitt, N.J., was fined $1.02-million by the SEC, but payment and a civil fine were waived based on his plea of poverty. In SEC administrative proceedings settled Aug. 13, the pair of dirty brokers were also banned from any association with any broker or dealer.
In another settlement, not yet publicized, the SEC won a $3.11-million default judgment against Mr. Tanner last month. Mr. Tanner was ordered to pay $2.14-million in disgorgement, $616,000 in prejudgment interest, and a $350,000 civil fine, in the judgment, entered Aug. 8 by Judge Pauley. Mr. Tanner's $350,000 fine is the biggest levied by the SEC against any of the nine Maid Aide defendants, and one of the most notable recent penny stock fines levied by the regulator.
Many of the Maid Aide riggers are either now in jail or packing their toothbrushes after being convicted on related grand jury indictments. Mr. Taylor pled guilty to conspiracy to commit securities fraud, mail fraud and wire fraud, and was sentenced to five years in jail in addition to his heavy restitution order. Mr. Ruggiero pled to similar charges and awaits sentencing.
Mr. Sheyfer and Mr. Zemenenko were both indicted for conspiracy to commit securities fraud, securities fraud and wire fraud for similar boiler room activities at the time of the Maid Aide rig job, and subsequently pled guilty.
Mr. Kurtz pled guilty last September to filing a false income tax return related to Maid Aide, while Mr. Tanner and his right-hand man Dennis Evans, also of Las Vegas, were convicted by a federal jury after a five-week trial last November, for conspiracy to commit securities fraud. Mr. Tanner was also convicted of money laundering for his offshore P.I. dealings. It took the jury about 11 hours in deliberations to find Mr. Tanner guilty on all 37 counts charged.
In its civil case, the SEC claims lawyer Mr. Tanner, brokers Mr. Ruggiero and Michael Boston, both of Baxter Banks & Smith, a junky brokerage shut down by regulators, unlicensed Baxter brokers Mr. Sheyfer and Alexander Zalmenenko, promoter Mr. Kurtz, Salt Lake City market-maker Kevin Kirkpatrick, and Mr. Taylor, the head of brokerage G.L. Barrett & Associates Securities, conspired in a fraudulent pump-and-dump promotion of Maid Aide on the bulletin board, netting proceeds of at least $3.7-million.
While the criminal indictment detailed Mr. Tanner's use of a Pacific International account in the name of Delta Financial Resources Inc., his offshore Cayman Islands company, the SEC complaint reveals two other Maid Aide riggers used offshore accounts at a Canadian brokerage. Mr. Taylor controlled a Canadian brokerage account in the name of Gold Coast Investments S.A., in the exclusive offshore enclave of Alofi, Niue, while Mr. Ruggiero controlled a Canadian account in the name of Chios Investments Ltd., registered in the exotic offshore enclave of Gibraltar. While both accounts were believed to have used brokerages in Vancouver, it is not known whether P.I., or another local house, was used.
The SEC credits the BCSC's investigations staff for speedy service digging the dirt on the Tanner ring in Vancouver. "The BCSC was extremely useful in facilitating getting records from Canadian broker-dealers. They responded so quickly it was almost instantaneous," Caren Pennington, assistant regional director for the SEC's Northeast region, told Stockwatch.
"The defendants gained control of a shell company, set up two boiler room operations, and directed unlicensed brokers to sell more than 475,000 unregistered MDAN shares to investors at artificially inflated prices using high-pressure sales tactics in exchange for undisclosed kickbacks," states Wayne Carlin, the SEC's regional director for the Northeast regional office, in the complaint.
The SEC notes that in September, 1996, Mr. Tanner and his associate Mr. Evans incorporated Maid Aide, which was purportedly a commercial and residential cleaning services company but in fact was little more than a promotional shell. On Sept. 30, 1996, the pair appointed Mr. Evans's house cleaner as Maid Aide's sole director, to serve as their front. The regulator claims the cleaning lady knew little or nothing about the company's business, except for signing papers at time to time at the direction of Mr. Evans.
Maid Aide trading debuted at $6 a share on March 2, 1998, through Mr. Kirkpatrick, a market-maker with Olsen Payne & Co. of Salt Lake City, with BBS's boiler room phone chimps drumming up interest. Two separate BBS boiler rooms began touting the stock, with one supervised by Mr. Ruggiero and Mr. Boston and the other supervised by Mr. Sheyfer and Mr. Zalmenenko.
The boiler room operations followed the script of Penny Stock Rig Jobs 101. "The telemarketers concealed their true identities and the fact that they were not registered with the commission or licensed by the NASD by posing as Ruggiero and Boston. In exchange for allowing the telemarketers to assume their identities, Ruggiero and Boston received kickbacks equal to 5 per cent of the total MDAN sales proceeds generated," states Mr. Carlin in the complaint. The hired phone chimps lured their cold-call victims with claims the stock would "go through the roof" and "double in six months" while they peddled more than 550,000 shares, although they forgot to mention the more than $570,000 in kickbacks they were greased with.
Pacific International, the Vancouver brokerage now fighting to defend its reputation, was chosen by Mr. Tanner, the Las Vegas lawyer, in October, 1996, when he opened an account under the name of Delta Financial. (While the SEC and the feds were able to figure it out, now-convicted lawyer Mr. Tanner, however, did not show up as an owner or authorized person of the offshore Delta account when P.I. did its own internal review, according to a source familiar with the case.)
By March 15, 1999, Mr. Tanner had sold more than 300,000 shares through Delta's Pacific International account, for proceeds of more than $2.1-million. The Las Vegas lawyer paid the boiler-room chimps' commissions directly to Mr. Ruggiero, who distributed these proceeds of crime. "As of July, 1998, Tanner had wired at least $1.1-million in commission proceeds to accounts maintained by Ruggiero," states the SEC.
Between March and July, 1998, Mr. Tanner also wired a total of $127,000 to accounts controlled by Mr. Sheyfer and Mr. Zalmenenko, the unregistered brokers who ran the second Maid Aide boiler room. Other secretive offshore accounts at a mystery Vancouver brokerage were soon to follow Mr. Tanner's lead.
While U.S. authorities already had a pretty strong case against the Maid Aide ring, lawyer Mr. Tanner was also dimed out by client Eric Sterling, a Nevada fraud mastermind arrested in California after "America's Most Wanted" television viewers ended his 11-month run on the lam. Mr. Stein, the head of the Sterling Group, was sentenced to eight years and ordered to pay $34-million in restitution for ripping off scores of television infomercial suckers.
Nevada Attorney General Frankie Sue Del Papa called the Sterling fraud possibly "the largest investment scam" in state history, according to Las Vegas Review-Journal reporter John G. Edwards. In statements to the judge and the media, Assistant U.S. Attorney Margaret Stanish confirmed that Mr. Sterling, who ratted out other crooks, agreed to testify against Mr. Tanner.
"Tanner advised Stein on how to set up offshore accounts for money laundering, but the judge didn't allow Stein to testify in the criminal trial, Stanish said," reported the Review-Journal. |
