SEC fines Vancouver fan Veitia $45.7-million (U.S.)
Stratcomm Media Ltd U:SMMM
Shares issued 9,322,668
Fri 30 May 2003
Street Wire
See (U:*SEC) Street Wire
by Brent Mudry
Florida penny stock tout Roberto Veitia and several of his companies have
been fined a total of $45.7-million by the United States Securities and
Exchange Commission, capping a 3-1/2-year court case launched by the
regulator. (All figures are in U.S. dollars.)
The SEC announced Thursday that it won the landmark summary judgment
against Mr. Vietia, his public flagship Stratcomm Media Ltd. and
subsidiaries Corporate Relations Group Inc. and Gulf/Atlantic Publishing
Inc. The court award, made May 13 in United States District Court for the
Middle District of Florida in Orlando, is believed to be the largest
regulatory judgment ever won against an investor relations and stock
touting organization.
The judgment marks a setback for Mr. Veitia and Stratcomm, previously
listed on the former Vancouver Stock Exchange, dubbed Scam Capital of the
World by writer Joe Queenan in Forbes magazine more than a decade ago.
Stratcomm was delisted in October of 1998 from the VSE, and continued
trading on the OTC Bulletin Board market in the U.S.
Although not noted in the SEC's complaint, regulatory filings show that
Stratcomm was a major client of controversial Vancouver brokerage Union
Securities, which served the company, its U.S. subsidiaries and its
secretive offshore affiliates, mainly domiciled in Costa Rica, through
numerous accounts through which millions of shares were traded.
In an unrelated case, Union is best known for servicing New York
Mafia-linked career felon Ed Durante, who was also the star client of
indicted offshore promoter Terry Neal's Nevis-based Exchange Bank and
Trust, which had its $18-million money laundering account at Bank of
Montreal in downtown Vancouver shut down in April, 2000, by the British
Columbia Securities Commission, acting on behalf of the SEC. Although Mr.
Durante helped the FBI ensnare his Union broker, Trevor Koenig, who
returned to Canada in the past month after serving his jail term, there is
no suggestion that Union had any clue of any wrongdoing in either the
Durante or Veitia cases, which are unrelated.
In an unfortunate but unrelated coincidence, Bank of Montreal, which has
aggressively courted Howe Street business for years, also serviced at least
one Veitia group account, related to C.A. Oportunidad S.A., a Costa Rican
entity formed in 1994. There is no suggestion, of course, that the
unfortunate bank had any idea anything was amiss.
"Oportunidad collected over $703,000, including a profit of nearly
$154,0000, from the Regulation S transactions in Delta stock in the winter
and spring of 1996," states the SEC in its 73-page complaint. "These
proceeds were wired to an account at the Bank of Montreal and used to buy
$800,000 of Delta Series C convertible securities."
Delta is Delta Petroleum Corp., a Colorado oil and gas promotion, then
trading in the $6 (U.S.) range.
The court judgment marks a stark contrast with the happy picture Mr. Veitia
presented publicly in September, 1999, when the SEC launched its
prosecution. "We applaud the SEC's efforts to clean up the seamier side of
the investor relations industry; however, in this case, we believe they are
aimed at the wrong target," stated Mr. Veitia. A decade earlier, in 1988,
Mr. Veitia was ordered by regulators in Michigan and his home state of
Florida to cease and desist from offering and selling unregistered
securities in another case.
District Court Judge John Antoon II has now ordered Mr. Veitia, Stratcomm,
Corporate Relations and Gulf/Atlantic, which are all jointly and severally
liable, a total disgorgement of $25.57-million, representing profits gained
as a result of their misconduct, plus prejudgment interest of
$19.28-million, for a total of $44.85-million. In addition, Mr. Veitia was
fined $1.4-million personally, while the three companies were filed
$100,000 each.
"The court found in granting summary judgment that the defendants engaged
in a fraudulent scheme, primarily perpetrated by Veitia, CRG and its
principals, involving 14 different small public companies. The court found
that CRG acquired large blocks of discounted stock from its issuer-clients
to pay for promotions and then sold that stock, often in large unregistered
distributions, while CRG was touting those stocks in various CRG-sponsored
publications," states the SEC.
The regulator notes that among other things, the Florida court found that
Corporate Relations Group failed to disclose either its compensation from
the issuers for promoting the securities or that Corporate Relations was
selling its positions in those same securities while promoting the
companies to the public. The promotions were published in such Vietia group
publications as Money World, Confidential Fax Alert, The Rumor Mill and
Growth Industry Report, all owned and operated by the defendants.
In broad strokes, the SEC claims that Corporate Relations Group, through
its principal associates Mr. Veitia, James W. Spratt III and James A.
Skalko, who also happened to be Union Securities clients, directed and
operated a fraudulent scheme in which they acquired investment control of
large blocks of penny promotions or other small companies either for free
or at a steep discount from the market price.
"They then touted these securities to the public in CRG publications and
ordered employees to promote the stocks to brokers, some of whom were
bribed to sell the securities to their customers. CRG, sometimes by and
through other defendants, then sold the securities at a profit while
promoting them to the public," states the SEC in its complaint.
This tout-and-scalp campaign was particularly egregious as Corporate
Relations Group's newsletters repeatedly forgot to mention that CRG was
paid richly to tout the stocks and that it was actively dumping shares.
The Veitia group's many tricks included shorting touted promotions before
receiving cheap shares, washing restrictive legends off shares through the
purportedly independent offshore dodges, Oportunidad and Fondo De
Acquisiciones E Inversiones Internacionales XL SA in Costa Rica, and
greasing compliant brokers with bribes.
Although not named as a defendant, lawyer Leonard Aronoff, who served as
corporate counsel to Stratcomm and Corporate Relations, and de facto
attorney for Fondo and Oportunidad, was credited by the SEC as being a key
facilitator in the broad Veitia scheme.
"Aronoff opened U.S. and Canadian bank and brokerage accounts for the Costa
Rican entities in which funds were deposited and securities were deposited,
bought and sold," states the SEC in its complaint. Mr. Aronoff also
assisted in having transfer agents to handle stock certificates.
One multipart transaction, relating to Tracker Corp. of America, a company
which paid Corporate Relations $450,000 in 1994 for its touting services,
demonstrates the Veitia group's prowess with profits. "This series of
transactions beginning with a phony Regulation S transfer to Fondo resulted
in payment of only $1.4-million to Tracker, instead of over $3-million
which was called for by the subscription agreement, but CRG, Spratt and
Skalko realized profits of approximately $1.8-million by selling the
unregistered stock in the United States," states the complaint.
Bank of Montreal was a popular conduit for a number of the Veitia group's
rapid-fire transactions. "On September 30, 1996, Fondo transferred $500,000
to Oportunidad's account at the Bank of Montreal. The next day, Oportunidad
paid Ammonia Hold's president $300,000 for the 100,000 shares sold to
Oportunidad the previous month. Oportunidad realized (a) $370,000 profit on
the entire transaction," states the SEC.
Before this recent landmark judgment, the SEC also won settlements with a
number of other Stratcomm defendants.
In May of 2000, U.S. broker Arnold Zousmer was ordered to pay disgorgement
and interest of $963,000, plus a fine of $15,000. In a consent settlement,
Mr. Zousmer also agreed to a three-month suspension from association with
any broker or dealer.
In an unrelated case, former Lyric International Inc. major shareholder
Brent A. Wagman pleaded guilty that same month to two securities-related
criminal charges, seven weeks after he was fined $110,000 and ordered to
disgorge $24-million raised in a Ponzi scheme targeting senior citizens.
Mr. Wagman fled in the summer of 1999 to Panama, where he was arrested in
March of 2000. Although not noted in the SEC and criminal cases, Mr. Wagman
and several of his companies also had significant dealings with Trans
Energy Inc., which hired Mr. Veitia, CRG and Mr. Veitia's associate and
co-defendant James Skalko in 1998 for "consulting services."
bmudry@stockwatch.com
(c) Copyright 2003 Canjex Publishing Ltd. stockwatch.com
Click here for company snapshot:
new.stockwatch.com
Click here for recent SEDAR documents:
new.stockwatch.com |
