Man linked to YBM fraud arrested in Russia
Associated Press and Canadian Press
Friday, January 25, 2008
MOSCOW — Russian police have arrested a suspected international crime boss sought by the FBI who allegedly bilked investors in a company incorporated in Canada out of millions of dollars.
Semyon Mogilevich, a Ukrainian-born Russian citizen and the driving force behind defunct YBM Magnex International Inc., has long been wanted by the FBI on suspicion of involvement in organized crime.
Mr. Mogilevich was detained in Moscow late Wednesday, said Angela Kostoyeva, spokeswoman for the Russian Interior Ministry's anti-organized crime unit.
The businessman was detained under the alias of Sergei Schneider, she said, adding that he has used 17 other names and holds passports from several countries. A Moscow court approved his formal arrest Thursday.
The FBI said on its website that Mr. Mogilevich and two other men were wanted for his alleged participation in a multimillion-dollar scheme to defraud investors in the stock of YBM, a company that formerly traded on the Toronto stock market.
The ITAR-Tass news agency said Mr. Mogilevich, who also has Hungarian and Israeli citizenship, also has been sought by police in Ukraine and Israel on charges of money-laundering, racketeering, weapons smuggling and illegal energy deals.
According to a U.S. indictment, investors in YBM Magnex lost $150-million (U.S.) through Mr. Mogilevich's scheme, which involved inflating stock values, false accounting and laundering money.
Mr. Mogilevich ran the scheme from his base in Budapest but left Hungary for Moscow in 1999 after a special FBI task force was set up in Budapest.
In just four years, YBM Magnex saw its stock soar from 10 cents a share to around $14 a share on the Toronto stock market before officials halted trading in 1998.
In 1999, a U.S. judge fined the company $3-million and ordered it to repay more than $77-million to defrauded investors. YBM, as a corporation, pleaded guilty to fraud and agreed to sell its $6.3-million headquarters to settle its debt.
Nine YBM officers and board members - including former Ontario premier David Peterson - along with National Bank and investment dealer Griffiths McBurney, faced allegations of failing to disclose all material facts about YBM in a 1997 prospectus.
Five YBM directors - but not Mr. Peterson - were variously ordered to repay the Ontario Securities Commission's investigation and hearing costs, ranging from $75,000 to $250,000 (Canadian), or barred from sitting on boards for a period of three years to life, or both.
The OSC argued that YBM officials knew of allegations that company founders had ties to the Russian mob for months before investors were told. The respondents said there was no solid evidence of criminal activity.
Hearings were held in Toronto over 18 months in 2001 and 2002.
Mr. Mogilevich, who has an economics degree, has lived in Moscow for the past several years, according to news accounts. The 61-year-old businessman lived in Israel before moving to Hungary in 1995.
Wednesday's arrest was made in connection with an investigation into an alleged tax evasion scheme by the owners of Arbat Prestige, a successful chain of Russian cosmetic stores.
Dozens of police grabbed Mr. Mogilevich on the street near a supermarket, along with Vladimir Nekrasov, the majority owner of Arbat Prestige. The two men, who had been accompanied by a large group of bodyguards, surrendered without resisting.
Authorities said Arbat Prestige was suspected of evading about $2-million in taxes.
A spokesman for the U.S. Embassy declined to comment on the arrest. The U.S. has no extradition treaty with Russia.
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