Penalties reach $6M for Sulja Bros. stock scheme
'They were in effect printing money: ' Lawyer
By Brian Cross, The Windsor Star July 25, 2011
windsorstar.com
The main players in a “pump and dump” stock scheme that portrayed a humble Harrow lumberyard as an international firm with hundreds of millions in Middle East contracts have been hit with more than $6 million in penalties and paybacks.
The recently issued Ontario Securities Commission decision in the Sulja Brothers fraud outlaws brothers Sam and Steven Sulja, Pranab Shah, Tracey Banumas, Petar Vucicevich and a Texan named Andrew DeVries from trading or acquiring stocks or from becoming a director or board member of a publicly traded company for periods ranging from five years for lesser players like Banumas and Shah, to forever for Vucicevich and DeVries. They’ve also been hit with penalties ranging from $5,000 for Banumas and Shah, to $150,000 each for the Suljas, to $775,000 for Vucicevich, to just over $1 million for DeVries.
But the biggest penalty is called a “disgorgement,” a requirement that Colchester resident Vucicevich, DeVries and their companies collectively cough up $5.6 million. That’s the amount they received from investors as a result of their fraudulent activity, the decision states.
The pump and dump penny stock scheme was cooked up to bail out the small lumberyard, now closed, as it struggled in the building slump that began around 2005. Close to 100 news releases were issued, hyping Sulja Brothers as a world player in Middle East construction and cement sales. The OSC investigators said the claims made in the news releases ranged from “gross exaggerations to just plain false.”
Hundreds of investors bought the stock in an electronic over-the-counter market called the Pink Sheets in 2006 and 2007. The stock’s value peaked at 21 cents a share in 2006. Close to 500 million shares were said to be sold.
OSC lawyer Usman Sheikh said 10 to 12 nominee accounts were created. Sulja Brothers shares were transferred into these accounts and then sold to the market once their value was inflated. “What we said is they were in effect printing money,” said Sheik.
Attempts to reach Sam and Steven Sulja and Vucicevich were unsuccessful Friday. During the OSC hearings last year, the Suljas’ lawyer said that the brothers were working menial jobs and that Steven Sulja had lost his house and business.
They portrayed themselves as unsophisticated players who were convinced by Vucicevich to take their company public. They claimed they believed what they were doing was legal and that the company news releases were prepared by Vucicevich.
Vucicevich is also facing criminal charges of fraud laid in 2008 by the RCMP, who also placed restraining orders on 11 properties, most in Colchester, purchased by Vucicevich two years earlier.
Vucicevich insisted last year that “no one walked away with bags full of money,” from the stock scheme. And he claimed DeVries was the mastermind who wrote the news releases.
The OSC decision concludes that “investors across North America were deprived of at least US$5.6 million as a result of the trading scheme directed by” Vucicevich and DeVries. “It is clear that the securities law violations committed by these two respondents are serious and the amount of provide involved is significant.”
The OSC did determine where the investor money went. Vucicevich and his company Kore Canada retained about $3.4 million, DeVries retained US$1.38 million, Banumas retained about $100,000, Shah retained about $200,000, and Sam Sulja retained about $100,000, plus another $350,000 from an account in his father John’s name.
What’s unclear is where all that money ended up. Kathryn Daniels, the OSC’s deputy director of enforcement, said the OSC will go through the civil process of trying to recover the money.
“It’ll be a while before the dust settles on all this,” she said
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