Taub’s Involvement with Regis Possino and Phillippe Hababou (a/k/a Phillippe Solomon)29.During the Material Time, Taub was involved in a series of transactions regarding L’Air Holdings Inc. (“L’Air”), a company whose securities trade on the OTCBB. L’Air was formerly known as Superior Networks Inc., (“Superior Networks”). 30.Also involved in the series of L’Air transactions are the following individuals: a. Phillippe Hababou (a/k/a Phillippe Solomon, a/k/a Haim Hababou), (“Hababou”); b. Regis Possino, (“Possino”), a personal friend of Taub and resident of the United States; c. Frank MacKay, (“MacKay”); d. Nazim Gallani (“Gallani”), a personal friend of Taub and a B.C. resident; and e. John Switzer (“Switzer”), a U.S. resident who has been disciplined by the SEC for promoting penny stocks on the internet. 31.On or about January 8, 2003, Taub opened the following accounts at Research: a. Geneva Equities Ltd., (“Geneva Equities”), a Panamanian company apparently connected to Possino; b. Phillippe Solomon in his personal capacity; and c. Universal Capital Partners Corp., (“Universal Capital”) a corporate account controlled by Hababou/Solomon.
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- 9 -32.Prior to the opening of the above-noted accounts, in October 2002, Superior Networks shares were crossed in accounts for which Taub was the registered representative, including his mother’s corporate account, Monmouth Consulting Inc. and Verdun Investments Ltd. No cash was deposited into these accounts in furtherance of the transactions.33.On January 15, 2003, within one week of the accounts being opened, Taub received by e-mail transmission from Possino, a draft copy of a Consulting Agreement as between L’Air and Geneva Equities. Taub was asked to provide any questions or comments and Possino noted that they “were anxious to move ahead”. 34.On January 21, 2003, Taub received a second e-mail form Possino with the draft Consulting Agreement and the advice that “$50K for Harry and everyone’s a happy camper”. 35.On January 23, 2003, Taub forwarded the draft Consulting Agreement to his assistant.Minutes later, phone logs show that Taub contacted Possino’s telephone number in California. 36.Over the next two weeks, trading activity occurred in the Solomon and Universal Capital accounts which appeared to be or was consistent with market manipulation or deception. 37.Also during this time period, between February 11 and 25, 2003, Taub contacted Switzer in the U.S. on more than 25 occasions. Switzer was responsible for public relations and promotions of L’Air in the U.S. 38.On February 26, 2003, Research compliance personnel discovered that the Geneva Equities account was apparently connected to a company of the same name in California whose president (Possino) was a former lawyer who had been disbarred for drug trafficking. Research compliance personnel advised Taub that only sales at low volume of L’Air shares would be permitted or that the L’Air shares could be delivered out to another firm. 39.On February 27, 2003, Research compliance personnel learned further that Universal Capital was an investor relations firm for L’Air. Accordingly, Research compliance personnel prohibited any buying or selling of L’Air securities by Solomon, Universal Capital or any one connected to it. 40.On February 26 and 27, 2003, Taub made 12 calls to Possino in California and no calls to Geneva Equities in Panama. 41.Shortly after the trading in L’Air was stopped by Research compliance personnel, the volume of transactions and price of L’Air shares collapsed. 42.By facilitating and participating in this activity Taub failed in his duties to act as gatekeeper for the securities industry.
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- 10 -Taub’s Involvement with FIDRA Holdings and Iain Brown43.During the Material Time, Taub opened off-shore corporate accounts at Brant for an individual named Iain Brown (“Brown”) in the name of FIDRA Holdings Ltd., FIDRA Holdings Ltd. 001, FIDRA Holdings Ltd. #2, FIDRA Holdings Ltd. #3 and FIDRA Holdings Ltd. #4, (collectively , “FIDRA”). 44.Taub routinely accepted hundreds of cheques from third parties for deposit into the FIDRA accounts. Over a 14-month period, Taub wired a total of $8,700,000 from the FIDRA accounts to its off-shore bank accounts. 45.Taub made no, or minimal, efforts to determine the economic basis for the wire transfers. His only knowledge was that he “believed the accounts belonged to wealthy Canadians” who “had little private dealings”. 46.Ultimately, Brant compliance personnel required Brown to take his business elsewhere and required the FIDRA accounts to be closed. 47.The transactional activity in the FIDRA accounts would have required a reasonable registrant to make appropriate inquiries as to the purpose of the transactions. In failing to do so, Taub failed in his duties to act as gatekeeper for the securities industry. D. Opening Accounts and Trading for Parties Outside of his Jurisdiction of RegistrationTaub’s Involvement with Harvey Rubenstein / Monmouth Beach Consulting Inc.48.During the Material Time, in late March 1999, Taub opened an account at Brant for Monmouth Beach Consulting Inc., (“Monmouth”). This account appears to have been a nominee account for Rubenstein. The account opening documentation lists an address in Vancouver, B.C., but a telephone number in New Jersey. The President and signing officer for Monmouth is identified as one Stanley Merdinger, a U.S. national. The address on the Monmouth account is identical to an address used by Rubenstein. 49.As of February 2000, the account statements for the Monmouth account were delivered to an address in Markham, Ontario. The Markham address was also an address used by Rubenstein. 50.In October 2001, when Taub had transferred his registration to Research, an account was opened there for Monmouth. The address on the account opening documentation was the same Vancouver address and New Jersey telephone numbers as had been used to open the Monmouth account at Brant.
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- 11 -51.In early 2002, when Taub was required by Research compliance personnel to close his accounts with B.C. residents, he provided a letter to Research advising that Monmouth’s Vancouver address had been closed effective immediately and that all business would now be conducted out of an address in Markham, Ontario. The Markham address is the same address that had been used by Monmouth at Brant after February 2000. In late February, the address was changed to a different location in Markham. Both of the Markham locations were identical to addresses used by Rubenstein. 52.Notwithstanding the information on the account opening documentation, Taub and his sales assistants delivered over 40 faxes to New Jersey and placed in excess of 200 telephone calls to the former New Jersey telephone number listed on the account. 53.Taub is not registered to deal with U.S. residents nor does the account opening documentation accurately reflect the involvement of Rubenstein in the account. Accordingly, Taub circumvented IDA and SEC rules by opening accounts for and accepting orders from clients outside his jurisdiction of registration. Taub’s Involvement with Marc Sporn54.During the material time, Taub opened an account at Research for an off-shore corporate entity, Investment Management Inc. (“Investment Management”). The principal for Investment Management and the individual who provided trading instructions was Marc Sporn (“Sporn”). 55.While reviewing the exercise of stock options by Investment Management for a company called Universal Ice Blast (“Universal Ice”), Research compliance personnel discovered that Sporn, who was noted on the Investment Management NCAF as residing in Hong Kong, was actually a resident of Boca Raton, Florida. 56.Research compliance personnel also raised concerns that the Universal Ice stock options were originally for the account of Marc Siegel, an individual who was understood by Research Compliance personnel to have been the subject of an informal SEC investigation. When these concerns were raised with Taub, a letter was produced later that same day indicating that the Universal Ice options should be for the account of Investment Management, rather than Siegel. 57.Research compliance personnel required the Investment Management account to be closed as a result of Sporn’s U.S. residency. 58.Furthermore, over an extended period of time, Taub’s staff sent daily faxes to Sporn at a telefax number in Florida.
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- 12 -59.Taub is not registered to deal with U.S. residents. Accordingly, he circumvented IDA and SEC rules by opening accounts and accepting orders from clients outside his jurisdiction of registration. E. Dealing with Individuals other than the stated Account HolderTaub’s Involvement with Rafi Khan60.During the Material Time, Taub opened an off-shore corporate account at Research for Aura PVT Ltd. (“Aura”), ostensibly for Qaiser Imran (“Imran”), a resident of Pakistan. There was no third party trading authority given over the account. 61.Imran is the brother of Rubina Khan (“Mrs. Khan”) and the brother-in-law of Rafi Khan (“Khan”). 62.In March 2002, Research was contacted by the SEC and asked for information concerning the relationship between Taub and Khan. The SEC had obtained an injunction against Khan prohibiting him from trading securities in the U.S. on the basis of allegations that he had been involved in price manipulation schemes. 63.In April 2002, Taub provided a declaration to the SEC that, although he communicated on the telephone with Khan, they did not discuss the Aura account. 64.In December 2002, the SEC moved to enforce an investigative subpoena against Mrs.Khan, on the basis that Khan may have been violating the terms of the injunction. The SEC expressed concerns that Khan may have been circumventing the restrictions on his ability to trade by using accounts in the name of family members (including Mrs. Khan) and Pakistani entities to conceal his involvement. 65.When Research compliance personnel became aware of the SEC concerns, they inquired into the details of Aura and its connection to Khan. 66.In early January 2003, Taub’s assistant confirmed by e-mail to Research compliance personnel that the Aura account was in no way connected to Khan and that all instructions came from Imran in Pakistan. 67.However, in June 2003, Taub’s assistant exchanged e-mails with Khan and arranged for certain share certificates of SVI Solutions Inc. (“SVI Inc.”) in the name of Khan to be transferred into the name of Aura. Khan describes Taub’s assistant as “Aura’s broker” to the lawyer for SVI Inc. who was to deal with the transfer of certificates. 68.Other e-mails from Taub’s assistant indicate that in response to questions about Aura account activity from Khan she provided such advice to him, despite the fact that she told Research compliance personnel that Khan had nothing to do with the account.
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- 13 -69.Further, telephone and fax records indicate that Taub’s assistant was frequently in touch with Khan. Taub’s assistant acknowledges that she was acting on instructions fromTaub. 70.Taub ought not to have provided, or instructed his assistant to provide, Khan with confidential information regarding Aura account activity. Taub’s Involvement with Paul Taylor71.During the Material Time, Taub opened 21 accounts at Research for Costa Rican entities, including Z3 Limited (“Z3 Ltd.”). Trading authority over these accounts was provided to three individuals including David Ricci (“Ricci”). 72.Ricci is also connected with a Costa Rican company, Red Sea Management (“Red Sea”), which shares the same business address as the Costa Rican accounts. Red Sea is engaged in the business of setting up off-shore asset protection structures and only operates on a referral basis. Taub referred Red Sea to Saxena. 73.Z3 Ltd. held shares of an issuer, Trezac Ltd (“Trezac”). Paul Taylor (“Taylor”) is the CEO of Trezac. Taylor has no connection with the Z3 Ltd. account in that he is not a principal or authorized signatory, nor does he have trading authority. 74.Taub’s assistant, acting on instructions from Taylor, attempted to journal 500,000 shares of Trezac from Z3 Ltd. to Sharpe Capital Ltd. (“Sharpe Ltd.”), a company for which Taub was the registered representative. 75.When research compliance personnel rejected the journal request, new documentation was prepared by Taub’s assistant in which Frank Carino, the principal of Sharpe Ltd. stated that the journal request related to a personal settlement between the principals of Z3 Ltd. and Sharpe Ltd. and, further, that the journal request was made “without involvement of any other companies, including Trezac”. 76.Taub’s assistant acknowledges that she had oral instructions from Taub to deal with Taylor. 77.Taub ought not to have taken instructions from or instructed his assistant to take instructions from Taylor regarding the Z3 Ltd. transaction described above. F. Misleading their Member Firm78.Taub misled his Member Firm when asked about the potential connection between Aura and Khan and thereby engaged in conduct unbecoming a registrant contrary to Association By-law 29.1.
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- 14 -79.Taub misled his Member Firm regarding the Z3 Ltd. transaction and thereby engaged in conduct unbecoming a registrant contrary to Association By-law 29.1. GENERAL PROCEDURAL MATTERSTAKE FURTHER NOTICE that the hearing and related proceedings shall be subject to theAssociation’s Rules of Practice and Procedure. TAKE FURTHER NOTICE that pursuant to Rule 13.1, the Respondent is entitled to attend and be heard, be represented by counsel or an agent, call, examine and cross-examine witnesses, and make submissions to the Hearing Panel at the hearing. RESPONSE TO NOTICE OF HEARING TAKE FURTHER NOTICE that the Respondent must serve upon the Association a Response to the Notice of Hearing in accordance with Rule 7 within twenty (20) days (for a StandardTrack disciplinary proceeding) or within thirty (30) days (for a Complex Track disciplinary proceeding) from the effective date of service of the Notice of Hearing. FAILURE TO RESPOND OR ATTEND HEARING TAKE FURTHER NOTICE that if the Respondent fails to serve a Response or attend the hearing, the Hearing Panel may, pursuant to Rules 7.2 and 13.5: (a) proceed with the hearing as set out in the Notice of Hearing, without further notice to the Respondent; (b) accept as proven the facts and contraventions alleged by the Association in the Notice of Hearing; and (c) order penalties and costs against the Respondent pursuant to By-law 20.33, 20.34 and 20.49. PENALTIES & COSTS TAKE FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the Hearing Panel may, pursuant to By-law 20.33 and By-law 20.34, impose any one or more of the following penalties: Where the Respondent is/was an Approved Person:
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- 15 -(a) a reprimand; (b) a fine not exceeding the greater of: (i) $1,000,000 per contravention; and (ii) an amount equal to three times the profit made or loss avoided by such Approved Person by reason of the contravention. (c) suspension of approval for any period of time and upon any conditions or terms; (d) terms and conditions of continued approval; (e) prohibition of approval in any capacity for any period of time; (f) termination of the rights and privileges of approval; (g) revocation of approval; (h) a permanent bar from approval with the Association; or (i) any other fit remedy or penalty. Where the Respondent is/was a Member firm: (a) a reprimand; (b) a fine not exceeding the greater of: (i) $5,000,000 per contravention; and (ii) an amount equal to three times the profit made or loss avoided by the Member by reason of the contravention; (c) suspension of the rights and privileges of the Member (and such suspension may include a direction to the Member to cease dealing with the public) for any period of time and upon any conditions or terms; (d) terms and conditions of continued Membership; (e) termination of the rights and privileges of Membership; (f) expulsion of the Member from membership in the Association; or (g) any other fit remedy or penalty.
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- 16 -TAKE FURTHER NOTICE that if the Hearing Panel concludes that the Respondent did commit any or all of the contraventions alleged by the Association in the Notice of Hearing, the Hearing Panel may pursuant to By-law 20.49 assess and order any investigation and prosecution costs determined to be appropriate and reasonable in the circumstances. DATED at Toronto, this 21stday of October, 2005. Aleksander Popovic Vice-President, Enforcement INVESTMENTDEALERS ASSOCIATION OF CANADASuite 1600 121 King Street West Toronto, Ontario M5H 3T9
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