"a late 1980s VSE scam that involved arms-dealer Adnan Khashoggi"
Prew, a former Chair of the Alberta Stock Exchange, and his Yorkton
associates earned some negative publicity in 1996 for having sponsored
Timbuktu Gold onto the ASE. Timbuktu ? a partial replay of a late 1980s VSE
scam that involved arms-dealer Adnan Khashoggi, U.S. securities violator
Oliver Reese and claims of discovering King Solomon?s Mines in Mali, West
Africa ? rocketed to $26.50 a share on the ASE in April 1996 before the
media flagged the disreputable background of Reese and his Mali claims.
Alberta regulators then discovered that the company?s vaunted gold assay
results were bogus. Why Michael Prew and other Yorkton officials failed to
uncover, or disclose, the history of Timbuktu Chair Oliver Reese in
performing their due diligence on the company has never been publicly
explained. Why securities regulators failed to spot this easy mark also
remains a mystery.)
From: Adrian du Plessis (howenow@imagen.net)
Subject: YBM Magnex: Part 10 - Of money and management...
This is the only article in this thread
View: Original Format
Newsgroups: misc.invest.stocks
Date: 1998/08/17
YBM Magnex: Securities Industry Due Diligence in a post-Bre-X Market - Part
10 ? Of money and management...
Follow the money.
This standard advice ? a line popularized during the Richard Nixon/Watergate
scandal era ? applies well to numerous stock market cases and is
particularly appropriate when considering those enterprises associated with
suspected money-laundering activities.
YBM Magnex has delicately described the leaders of Russian organized crime
publicly linked to the company (via Arigon et al) ? referring to, both,
Semion Mogilevich (AKA ?Uncle Seva?) and Sergei Mikhailov (AKA ?Mikhas?) as
?reputed? crime figures (??reputed? being the necessary, if comical, fig
leaf of technical innocence? observes Albert Mobilio, in his essay on the
Italian mafia, ?Made Men of Letters: Our thing about the Cosa Nostra? ?
published by Harper?s Magazine in October 1997).
YBM has stated that: ?Although Semeon Mogilevitch? was one of the 31
original shareholders of the company, he is not a director or officer of the
Company, has never exercised control over the Company and has never had any
involvement in the management of the Company.? YBM says: ?Sergei Mikhailov?
was not an original shareholder and is not currently a registered
shareholder of the Company. This individual has never been associated with
the business affairs of YBM.?
Police and other government investigators in the United Kingdom in 1995 and
in North America today may have more elemental interests than tagging who
shows up on the public company?s board, or who may have registered YBM
Magnex shares in their own name, or who can be shown to be involved with
?management? of the company or its ?business affairs.?
On a trail of suspected money laundering and securities fraud the objective
is to follow the money.
In late 1995 U.K. authorities reported that: ?Amongst the intelligence
gathered in the investigation of Operation Sword was a record of every
financial transaction conducted on behalf of Moguilevitch and other Russian
Organised Crime figures (by their London lawyer) in the last five years. All
of the intelligence has now been passed to NCIS (National Criminal
Intelligence Service) for distribution to other Law Enforcement Agencies,
with the added bonus that if required the South East Regional Crime Squad
are in a position to produce any part of intelligence as evidence in any
Court of Law.?
Crippled by a lack of assistance from Russian agencies ? notorious for their
perceived failure to pursue mafiya figures ? frustrated U.K. police missed
the opportunity to prosecute Mogilevich, his partner Konstantin Karat
(another Arigon director and original YBM shareholder) and others in the
network of ?Seva.? Their extensive and detailed review of the organization?s
financial activities, however, identified Arigon Co. of the Channel Islands
(soon to go public in Canada following its merger with YBM Magnex) as a
central conduit for the flow of money. Of the million$ moving through an
Arigon account in London, England, British police reported: ?Intelligence
sources indicate that a large proportion of this money is the proceeds of
the activities of Russian Organised Crime in Eastern Europe, specifically
the Mogilevitch organisation and an organisation called Solntsevskaya
(headed by Sergei Mikhailov, the Averin brothers et al).?
(Academic and other public, as well as police, sources have linked Mikhailov
?s criminal organization, the Sons of Solntsevo, and Arigon ? the enterprise
that spawned a TSE 300 star. ?Rossiiskaia prestupnost?, a monograph on
?Russian Criminality?, published on-line in 1997, is available in book form
in the west and is of value not only to criminal investigators but also to
libraries such as those at universities offering Russian studies. In a
chapter on Sergei Mikhailov, the monograph?s author, Alexander Maximov,
writes: "When Mikhailov and the Averin brothers made their way abroad (each
of the brothers immediately acquired an osobnyak in Prague), they also
purchased, in order to launder stolen money, several foreign companies.
Among the properties of the leaders of the Solntsevo gang are the firms
'Maxim', the Joint-Stock Company 'SV-Holding', the SP 'Arbat International',
the Hungarian firm 'Magnex', the English company 'Arigon', and the Israeli
firm 'Empirebond'. Likely this list is far from complete." Perhaps
illustrative of the inter-related ? and not strictly heirarchal ? nature of
Russian mafiya activities, a range of newspaper and magazine articles
published in Western and Eastern Europe between 1995 and 1997 identify,
both, Mogilevich and Mikhailov in connection with Arigon and related
entities. It?s remarkable that Canadian stockbrokers, mutual fund managers,
market regulators etc., either, did not search out these items ? an
increasingly simple task in this age of internet data-banks and multi-search
engines like SavvySearch and Dogpile ? or, these professionals did know of
Arigon?s history ? and the alarming reputation of Mogilevich and Mikhailov
as mafiya godfathers ? and decided this was not something that they need
inform public investors.)
In mid-1995 the Mogilevich organization was being shut down in the U.K. and
?Seva? himself was being banned from entering the country.
Contemporaneously, Mogilevich and such associates as Konstantin Karat were
entering the Canadian public market ? their passage facilitated by the
province of Alberta?s Junior Capital Pool (JCP or ?blind pool?) program.
In May of this year, Michael Gillard and David Connett, a pair of
investigative reporters with The Observer in London, reported that a
confidential 1995 police document on Operation Sword alleged Canada was
?used purely to legitimise the criminal organisation by the floating on the
stock exchange of a corporation which consists of the UK and USA companies
whose existing assets and stocks have been artificially inflated by the
introduction of the proceeds of crime."
It is the pattern of the vory v zakone, Russia?s godfathers of crime, to
have roles as (unseen) organizers and inspiration, not as direct, or
up-front, participants. There appears little or no reason to expect that
?Seva? or ?Mikhas? would appear in any management roles or official
capacities with YBM Magnex or any of its subsidiaries if the money of the
Mikhailov and/or Mogilevich organizations was being channeled through
YBM-related entities today (something that the public will likely not learn
one way or the other until U.S. federal investigators make any public
declarations about their ongoing criminal probe).
Mogilevich?s documented role as a director of Arigon, the Channel Islands
company that, essentially, went public with the YBM/Pratecs shell on the
ASE, may be seen more as an anomaly than as a blueprint. The presence nearby
of such a figure is more likely to be signified by nominees or associates
aboard a company or related entities than by a personal directorship or
official management position. (This is a pattern well established by some
stock promoters in Canada?s junior markets ? and is especially helpful when
the promoter?s own notoriety would impede the progress of a stock play.)
On July 18 1994 , Pratecs Technologies Inc. (subsequently renamed YBM Magnex
International) became a Junior Capital Pool company with the acceptance of
its prospectus by Alberta regulators. In theory, until a JCP has completed a
?Major Transaction?, (in this instance, the takeover of YBM/Arigon), it is a
shell whose most material asset upon listing on a stock exchange is the
successful public company experience of its management. This is the official
explanation used by exchange brass to sanctify the process. In practice,
however, this relevant track record of company principals may be, either,
undisclosed or ignored.
As noted in an earlier chapter of this series of articles, when Pratecs/YBM
went public it listed only two directors with a track record aboard Canadian
junior companies -- Kenneth Davies and Michael Schmidt -- neither of whose
background with Vancouver-listed ventures was admirable. Both Davies (of
White Rock, B.C., a suburb of Vancouver) and Schmidt (resident of another
suburban Vancouver locale, Burnaby) continue to be directors of YBM Magnex
in 1998.
The company?s prospectus, at least, detailed the various entities on the VSE
with which Davies was associated ? thereby providing any interested industry
professional with a simple opportunity to carry out a due diligence check on
these junk companies. But the Pratecs filing failed to disclose the public
company background of director Michael Schmidt. The July 18 1994 prospectus
listed Schmidt?s ?Principal Occupation During Past 5 Years? as ?Independent
businessman since 1980; sales associate, Realty World ? Intown (a real
estate company) 1992 ? present.? From at least 1989 to 1991 (within the five
year period designated in the prospectus), Schmidt had been Manager of
Investor Relations, or chief tout, for Technigen Corp., one of the most
infamous scams to come out of the scandal-plagued Vancouver market. Schmidt?
s official role with Technigen -- a grossly misrepresented promotion of
computerized golf-driving ranges ? was entirely omitted in this prospectus
and other Pratecs/YBM filings.
Signing off on this prospectus as agent and certifying its contents as
constituting ?full, true and plain disclosure of all material facts? was
Michael Prew, a Vice-President with the Calgary, Alberta office of Yorkton
Securities. For lending its imprimatur to this stock offering of 4 million
shares priced at $0.10 each, Yorkton received a commission of $40,000,
reimbursed expenses of about $3,000 and an option to purchase 400,000
Pratecs/YBM shares at $0.10 each for a period of 18 months following the
company?s ASE listing date.
(Prew, a former Chair of the Alberta Stock Exchange, and his Yorkton
associates earned some negative publicity in 1996 for having sponsored
Timbuktu Gold onto the ASE. Timbuktu ? a partial replay of a late 1980s VSE
scam that involved arms-dealer Adnan Khashoggi, U.S. securities violator
Oliver Reese and claims of discovering King Solomon?s Mines in Mali, West
Africa ? rocketed to $26.50 a share on the ASE in April 1996 before the
media flagged the disreputable background of Reese and his Mali claims.
Alberta regulators then discovered that the company?s vaunted gold assay
results were bogus. Why Michael Prew and other Yorkton officials failed to
uncover, or disclose, the history of Timbuktu Chair Oliver Reese in
performing their due diligence on the company has never been publicly
explained. Why securities regulators failed to spot this easy mark also
remains a mystery.)
Such low standards of due diligence help make Canada?s stock markets a
breeding ground for scandal. When routine background checks are overlooked,
and questionable disclosure is not questioned, the stage is set for even
greater problems. There is almost an inevitability to how many Canadian
stock deals, including that of YBM Magnex, play out in the public
marketplace.
Apart from Schmidt and Davies, the other Pratecs/YBM principals at the time
of the company?s public launch had no established track record ? good or
bad ? in the field of Canadian junior public companies.
Pratecs? original president, Robert Ventresca, of Doylestown, Pennsylvania,
had been an investor in Technigen when Michael Schmidt was managing PR for
the deal in 1990. (After becoming a financial disgrace in Canada the company
moved south of the border and hooked investors.) Ventresca was described as
a CPA and President of Alpha Financial Group in which he reportedly held
shares (45%) alongside Jacob Bogatin (10%) and a background player, Michael
Bachurski (45%). (Ed Bachurski Sr., of Melbourne, Florida appears as a
stakeholder in YBM in 1994 regulatory filings.)
Jacob Bogatin, of Richboro, Pa., an initial director who later replaced
Ventresca in the role of president, was represented to be a man of science ?
having been ?manager, Magnetic Department, SPS Technologies, Inc.? (an
American public venture producing specialized steels) from 1987 ? 1993 and,
before that, ?Professor, Chief, Magnetics Laboratory Saratov State
University, Russia, 1970 ? 1986.? Bogatin was the only founding YBM director
with a recognized background in magnetics and, as the company?s profile
grew, he became a central spokesperson for its business.
(Since May of this year, Bogatin, who is still president, has retreated from
public view following such controversial public disclosures as media reports
identifying his brother, David Bogatin, as a senior Russian crime figure
sentenced to a lengthy U.S. jail term, and his nephew, Michael Kogan, as
having started up a brokerage firm under YBM?s roof in Newtown, Pa. ? a firm
that has since been tagged by securities regulators in Pennsylvania and
Maryland and fined for operating without proper registration.)
While Bogatin provided the substantial link to magnetics in the Pratecs/YBM
prospectus, other members of management contributed less obvious value. Guy
Scala, the YBM VP who has recently taken over spokesperson duties (after
Bogatin and VP Jim Held stopped making public statements in the wake of this
year?s FBI raid etc.), has told The Vancouver Sun that he isn?t sure what
qualified Technigen tout Michael Schmidt to be a director: ?I would say he
was familiar with the market there (in Canada) and was available for the
company?s guidance.? Similarly, it is not immediately clear how a penny
stock promoter like Kenneth Davies and some of his management associates
would benefit a company that Bay Street analysts and fund managers
characterized as a solid junior industrial -- an emerging blue chip winner
(with a value approaching CDN $1 billion).
Last month, when The Globe and Mail?s Karen Howlett revealed that Davies had
sold most of his YBM shares after he learned, but before the public was
informed, that Deloitte & Touche had suspended its audit and had serious
concerns about the company?s affairs, this founding director explained: ?To
me it wasn?t a big deal because I buy and sell stuff all the time. I don?t
have a nine-to-five job, so to speak. I?m all over the place all the time? I
?m a heavy trader. That?s what I do for a living.? (Davies explained to the
Globe: ?I?ve always kept my personal holdings to zero.? The possibility that
he may also trade shares not registered under his own name was left open
when Davies was asked if he held stock through other companies. ?I can?t
disclose that,? he replied.)
One of Pratecs/YBM?s original officers was Leonid Rabovetsky, described as a
computer programmer employed by Thompson Financial Services, Memorial Sloan
Kettering Cancer Center and Costar Computer Corporation. Prior to these
jobs, Vice-President Rabovetksy was said to have been a computer programmer
with an unidentified ?major construction company in Russia.? (Rabovetsky?s
south-Brooklyn apartment was situated not far from the Brighton Beach area
apartment of another significant YBM shareholder, Mara Soloveychik. The name
of another early shareholder, Naum Rabovetsky, of Feasterville, Pa., appears
alongside that of Soloveychik and others disclosed in Pratecs/YBM filings
with the Alberta Securities Commission.)
The company?s other Vice-President (and a large shareholder) upon public
listing was Jean Lear, of Cedar Glen West, Lakehurst, New Jersey whose
?Principal Occupation During Past 5 Years? was listed, simply, as ?Retired.?
Anyone looking for full, true and plain disclosure of Lear?s background ? in
order to assess what strength(s) she brought to the company?s management
?asset? mix ? could read this expanded explanation under the ?Management and
Key Personnel? heading in the company?s prospectus: ?Mrs. Lear has been
retired for over 25 years and as such focuses her time and attention on her
own business affairs.?
Rounding out this eclectic roster was director Elizabeth Brightman, of King
of Prussia, Pa. Brightman was identified as being the director of sales and
marketing for TVSM, Inc. -- ?a Private marketing consulting company? --
since 1989 and prior to that (1987-1989) as a marketing representative for
Triangle Publications, also ?a Private marketing consulting company. ?.
(Subsequent to YBM/Pratecs gaining a public listing, TVSM was described as a
?telemarketing company? and Jay Brightman, a CPA living in King of Prussia,
was identified as the Vice-President of Finance for the private YBM Magnex,
which had merged with Arigon, and as a ?financial consultant to Magnex RT
since 1993.?)
So, the time of launching its soon-to-be-titanic public venture, taken at
face value, Pratecs/YBM had on board: an experienced high-tech manager and
ex-professor of magnetics (Bogatin); an entrepreneurial accountant
(Ventresca); a real-estate salesman and former tout of a discredited golf
machine company (Schmidt); a marketer of fish oil, real estate and failed
public ventures ranging from mining projects to hair care (Davies); a
computer programmer (Rabovetsky); a veteran retiree (Lear); and a marketing
consultant of some sort (Brightman, of the distaff side).
End of Part 10
For more on this story, look into The Magnex Files @
imagen.net ; for other stock market news
and analysis, visit the Investigative Research & Analysis web-site at
imagen.net |
