Goodbye Jack, HAPPY NEW YEAR..."really".......
B.C. Securities Commission - Street Wire
BCSC-known promoter Garner flips in Bermuda Short
B.C. Securities Commission *BCSC
Monday December 23 2002 Street Wire
by Brent Mudry
In a significant setback for alleged organized crime associate Martin Chambers and the other Howe Street money laundering targets in Operation Bermuda Short, co-accused Kevan Garner, a Vancouver penny stock promoter, has pled guilty and is presumably co-operating with federal authorities. Court documents in Miami confirm Mr. Garner has pled guilty to money laundering. Mr. Garner, finally out on bail, is believed to be the first Howe Street defendant to plead guilty in Bermuda Short, a two-year joint RCMP-FBI undercover sting operation.
The details of Mr. Garner's plea and co-operation are not yet public, as his plea agreement has not yet been publicly filed. Mr. Garner is believed to have formally entered his guilty plea on Dec. 2, the date of three sealed documents filed in his case in United States District Court for the Southern District of Florida.
On Howe Street, Mr. Garner is best known as the close business partner of fellow promoter John (Jack) Purdy, who is a close associate of Don Sheldon, a veteran penny stock promoter. While Mr. Purdy was also targeted in Bermuda Short, no allegations have been made against Mr. Sheldon, who was not involved, implicated or otherwise mentioned in the criminal case.
A total of 60 targets, including 20 Canadians, were nabbed on Aug. 14 and Aug. 15 in the well-choreographed arrest operation of Bermuda Short.
The unprecedented Bermuda Short sting operation featured two ruses: a money-laundering sting in which an undercover FBI agent and an undercover RCMP officer posed as agents of the Colombian Cali cocaine cartel to lure targets to agree to launder millions of dollars of dirty drug money, and a much bigger sting which lured targets to agree to bribe corrupt mutual fund officials in return for multimillion-dollar investments in penny stock promotions.
Three of Bermuda Short's 23 indictments targeted alleged money launderers, all of whom are Howe Street players and all but two of whom are from Vancouver or elsewhere in British Columbia. Mr. Chambers and offshore accountant Michael Hepburn of Barbados were the two biggest fish caught in the net, which also snared stock promoters Mr. Garner and Mr. Purdy, and Ronaldo (Ron) Horvat and Calgary-based Harold Joliffe, exotic forestry entrepreneurs also involved in Vancouver's penny stock market.
Mr. Chambers has been denied bail after a top-secret ex parte hearing in which a veteran Canadian police officer revealed portions of the sensitive RCMP dossier, including details of his alleged close links to the Hells Angels, the organization of entrepreneurial motorcycle enthusiasts, and the allegation that Mr. Chambers himself ordered a contract hit on a cocaine conspiracy figure.
Mr. Purdy is out on a $5-million personal surety bond, after surrendering his passport and agreeing not to set foot outside the Southern District of Florida. He also has a curfew of midnight to 6:30 a.m., and he is required at all times to wear an electronic monitoring anklet, at his own expense.
The Garner plea is not the only recent event in the money laundering case. In another intriguing development, likely disturbing to the co-defendants, Mr. Horvat abruptly filed to sever his case from Mr. Purdy on Dec. 6, four days after the apparent flip-roll-and-plea date of Mr. Garner.
The existence of Mr. Garner's guilty plea emerged earlier this month, when Mr. Horvat, required to remain in the U.S., applied to travel home to the Vancouver area for Christmas. "Kevan Garner, another Canadian, recently plead (sic) and was granted permission to reside in Canada pending sentencing," states Howard Milton Srebnick, Mr. Horvat's Miami lawyer.
The plea was confirmed last week by Assistant United States Attorney Richard Hong, the lead prosecutor in the money laundering case. "Defendant Horvat's sole basis for this (travel) request is that co-defendant Harold Joliffe, who appeared after defendant Horvat, and Kevan Garner, a defendant in another set of money laundering cases, who had pled guilty to money laundering charges, before Judge Moore, were allowed to return to Canada," states Mr. Hong in a Dec. 17 response, opposing the Christmas trip.
The latest developments trace back to early December. On Dec. 3, the day after the three sealed documents were filed, prosecutor Mr. Hong and defence lawyer Bruce Fleisher filed an agreed motion and order modifying Mr. Garner's bond conditions, springing him free and ending his 3-1/2-month stint in jail.
After a brief detention hearing in Florida on Aug. 19, four days after his arrest, Mr. Garner was ordered released by U.S. Magistrate Robert Dube on a $200,000 unsecured personal surety, a $100,000 personal surety with 10 per cent posted, and a $150,000 corporate surety. He was also allowed to return home to Canada. By the end of that day, however, the order was stayed pending appeal.
Unlike the case of Mr. Chambers, both sides in the Garner case were apparently close together on the bail issue. "The parties have been engaging in discussions resolving the bond appeal without judicial intervention. The parties will need approximately two more weeks to determined the appeal may be resolved," stated prosecutor Mr. Hong in a Sept. 6 court filing. Little mention was made of Mr. Garner's situation since.
Fast forward to Dec. 3, when Mr. Hong and Mr. Fleisher appeared before Magistrate Dube, who approved their consent order on bond. "This court . . . enters this order granting the release of defendant Kevan Garner from custody forthwith, after the entry of guilty plea in the above matters," states the court order.
Under the new terms, the U.S. government has withdrawn its bail appeal, and consented to the release of Mr. Garner on $200,000 personal surety with 10 per cent down, unsecured personal surety of $500,000 signed by Mr. Garner and his wife Michelle Garner, and his return to Vancouver.
Mr. Garner must also report weekly in person and twice-weekly by phone to the closest Federal Pre-Trial Services office in Washington, but the U.S. government has no objection to him reporting instead to Allan Shoom of Vancouver Correctional Services. "Vancouver authorities have agreed to the supervision of Mr. Garner as a courtesy," states the agreed order.
The bond deal has apparently been in the works since at least early November. In a Nov. 8 affirmation, Mr. Garner's sister on Vancouver Island notes she loaned $10,000 to the Garner Family Trust for bail, sourced from a Nov. 1 loan from Household Finance Co. In a Nov. 9 affirmation, Mr. Garner's father-in-law, based in New York, notes he loaned $5,000 from his personal savings to the Garner Family Trust. Mr. Garner's wife also contributed $5,000, sourced from a Sept. 30 mortgage she took out on the family house.
The next big development came on Dec. 6, four days after the Garner plea, when Mr. Horvat filed a court motion to sever his case from Mr. Purdy and win a separate trial. In court filings, defence lawyer Mr. Srebnick describes Mr. Horvat as a Canadian national who has worked in the lumber industry for a decade. The filings give the first detailed insight in Mr. Horvat's potential defence.
"In September 2000, Mr. Horvat began working in a sales and marketing capacity for Bolivian Hardwood Corp. Mr. Horvat reported to Jack Purdy, who is a principal of Bolivian Hardwood together with co-defendant Harold Joliffe," states Mr. Srebnick. "Bolivian Hardwood harvested and imported lumber from South America for distribution in Canada and the United States."
Mr. Srebnick notes Mr. Horvat is charged with money laundering and conspiracy offences between October, 1999, and February, 2002, but he is just a small fish. "It is alleged that Mr. Horvat conspired with Jack Purdy and Harold Joliffe to launder money from an undercover agent posing as a Colombian drug dealer. In exchange, Bolivian Hardwood ultimately would use the funds as short-term financing for its importation of timber."
According to the defence lawyer, Mr. Horvat was mainly implicated in the conspiracy by a single transaction, his receipt of $55,000 cash on July 26, 2001, during a trip to Miami.
"Upon accepting the cash from the undercover agent, Mr. Horvat almost immediately deposited the money in the account of Harold Joliffe at a Citibank branch in downtown Miami," states Mr. Srebnick. "At the bank, Mr. Horvat used his own name and presented his Canadian passport as identification. At no time did anyone directly represent to Mr. Horvat that the cash came from drug transactions."
"On October 10, 2002, the government filed a Response to the Standing Discovery Order and advised that at trial it will seek to present an apparently substantial amount of other crimes evidence against Jack Purdy. Specifically, it will present the discovery from United States v. Kevan Garner et al . . . and an unspecified number of audio tapes from United States v. Chambers et al," states Mr. Horvat's defence lawyer.
In the Chambers case, Mr. Chambers, Mr. Garner and Mr. Hepburn were indicted for money laundering. The indictment notes that Mr. Garner is Mr. Purdy's business associate in Garner Purdy Venture Capital and Diacom Ventures Ltd., both of Vancouver. The indictment claims that between April and July of this year, Mr. Garner introduced Mr. Chambers to FBI and RCMP undercover agents posing as Colombian Cali cocaine cartel members, and the trio accepted $700,000 in supposedly dirty bait money to launder.
In the Purdy case, Mr. Garner and Mr. Purdy were charged for money laundering cases between February and August of this year. "According to the government, Jack Purdy required cash to fund business ventures, consisting in large part of 'fraudulent stock deals.' To satisfy this need, Jack Purdy and Kevan Garner became involved with undercover agents in a transaction to launder $500,000 of 'drug money,'" states the recent court filing.
Defence lawyer Mr. Srebnick argues that at trial, evidence from both these cases will unfairly prejudice Mr. Horvat and deprive him of a fair trial, as he is just a bit player. "Mr. Horvat had no involvement in these matters and the evidence is not admissible against him. The evidence will create the real danger of jury confusion and improper influence. Only a separate trial will ensure a fair determination of Mr. Horvat's guilt or innocence," he states.
Mr. Srebnick notes that Mr. Purdy is one of the main targets of Bermuda Short, involved in three different cases, and he is described by the U.S. government as a "leader" who has a "money laundering business."
"In contrast, Mr. Horvat's role in this case is based on one isolated incident -- i.e. the acceptance of a bag containing cash in Miami on July 26, 2001. Thus, Mr. Horvat may be easily 'yoked' with Jack Purdy and 'dragged along' in a manner that (would) practically guarantee that (Mr. Horvat) could not, and would not, receive fair and impartial treatment at the hands of the jury," states the defence lawyer.
Mr. Srebnick notes that Mr. Horvat resigned from Bolivian Hardwood in October, 2001, and his alleged conspiracy ended this February, before the offences in the Purdy case began. "Moreover, Mr. Horvat had no relationship with Martin Chambers or Michael Hepburn. Mr. Horvat had no knowledge whatsoever of (Mr. Hepburn's) Key West Swiss Investment Bank." The defence lawyer also asserts that Mr. Horvat never worked for Garner Purdy Venture Capital or Diacom Ventures, and he is not alleged to have participated in any of Mr. Purdy's alleged "fraudulent stock deals."
In addition, Mr. Srebnick notes that the U.S. government has asserted the undercover agents referred to "drugs" and "cocaine" as the source of more than $1-million in proposed bait money. "Here, on the other hand, the government stipulates that undercover agents never directly informed Mr. Horvat of the source of the funds and the defendants only transacted a total of $185,000."
The defence lawyer claims that at trial, the U.S. government will likely present its weakest case against Mr. Horvat first. "Then it will shore up the Purdy-Horvat-Joliffe conspiracy with damaging evidence of other money laundering cases."
Meanwile, while flipper Mr. Garner will be home for Christmas, the U.S. government wants to keep co-defendant Mr. Horvat on U.S. soil.
Mr. Horvat was only in jail for a month, released Sept. 19 after meeting bond conditions set Sept. 12 by Magistrate Judge Bandstra. The bail included an $850,000 personal surety bond collateralized by the homes of Mr. Horvat's uncles, Professor Leonard Neufeldt and Alvin Neufeldt, and a $100,000 cash bond co-signed by his father-in-law Professor Victor Neufeldt. Mr. Horvat was ordered to live with his father-in-law in Gig Harbor, Wash., near Seattle, with a curfew of 11 p.m. to 6 a.m. and electronic monitoring.
Mr. Srebnick argues his client deserves to travel home to his mother's residence in Canada from Dec. 23 to Jan. 2, 2003. "Not once has Mr. Horvat violated his curfew or committed an infraction. Instead, he has tried to restart his business selling wood flooring and he helps Professor Neufeldt with household repairs and projects. As well, Mr. Horvat spends time with his wife and two small children when they are able to make the trip from Vancouver, British Columbia, to Gig Harbor," states the lawyer in a Dec. 12 court filing.
In a Dec. 17 response, prosecutor Mr. Hong notes the U.S. government remains concerned that it will have a "very difficult time" extraditing Mr. Horvat back to the U.S. if he decides to remain in Canada. "He still poses the same risk of flight," states the official.
Mr. Hong argues that members of other families often endure lengthy travel to get together for Christmas, and the three-to-four-hour drive from Vancouver to Gig Harbor is not "unduly burdensome." "The United States is not unsympathetic to Horvat's family concerns, but the request made by Horvat is unacceptable." The judge's decision has not yet been released.
bmudry@stockwatch.com
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