Endeavour Resources Inc -
Shull and Fiessel's U.S. promoter pleads guilty
Endeavour Resources Inc ERUShares issued 198855381998-06-12 close $0.17Monday Jun 15 1998U.S. BROKERS BRIBED WITH CASH, SHARES, POKER CHIPS AND BANK TRANSFERS by Brent Mudry Boston stock promoter Patrick Collins, the key U.S. ally of British Columbia promoters Leonard Fiessel and Robert Shull in the 1993 broker bribery and stock manipulation of Fairmont Resources, has pleaded guilty to two counts related to securities fraud. Mr Collins, 46, pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud, in an out-of-court agreement with the U.S. Attorney for the U.S. Department of Justice in the District of Massachusetts on June 3. Fairmont, a penny oil and gas stock listed on the Alberta Stock Exchange, changed its name to Endeavour Resources two years ago, and the Fairmont promoters are no longer associated with the company. The U.S. Securities and Exchange Commission disclosed the guilty plea on Monday, two months after Mr Collins, Mr Fiessel, 62, Mr Shull, 41, and his brother Terry Shull, 36, were jointly named in a 45-count indictment in the U.S. District Court for the District of Massachusetts. The terms of Mr Collins' plea bargain are not known, but each of the 45 original counts carries a potential maximum penalty of five years in prison and a $250,000 (U.S.) fine. The SEC claims the Shull-Fiessel team, using a network of bribed U.S. brokers, sold 1.22 million shares of Fairmont to more than 150 investors in 17 states. Mr Shull and Mr Fiessel ran the operation from Vancouver, using accounts at a number of brokerages, especially Union Securities. The pair reside in B.C.'s sunny Okanagan region, with Mr Shull in Osoyoos and Mr Fiessel and his wife Colleen in Peachland. The SEC filed a $2-million (U.S.) suit against the Fiessels and Mr Shull in B.C. Supreme Court on January 26, to enforce its consent judgment against Mr Shull and its default judgments against the Fiessels, both reached in August, 1996. The SEC claims that Mr Fiessel, Mr Shull, brother Terry and Mr Collins conspired to push Fairmont's stock price up ten-fold, from 30 cents to $3.10, from January to June, 1993, by paying $540,000 (U.S.) in kickbacks to U.S. stockbrokers who induced their clients to buy the stock. The SEC claims the stock manipulation included buying and selling large quantities of stock in wash and cross trades, and controlling the timing and pricing of certain transactions to ensure the price would continue to rise. U.S. regulators claim that Mr Shull, Mr Fiessel and Ms Fiessel each realized illegal profits of up to $1-million (U.S.) from the scheme. The Fairmont scam traces back to December, 1992, when Pachanga, the controlling shareholder of Fairmont, sold 4.79 million shares to a group led by Mr Shull's father-in-law, Carl Halicki, and Mr Shull's father, Leo Shull. The same day, Mr Fiessel sold a commercial property he owned in Las Vegas to Fairmont for $144,200 (U.S.), payable in 1.44 million shares at a dime each. Through these two transactions, Mr Shull and the Fiessels directly or indirectly owned 6.23 million shares of Fairmont, or 73 per-cent of the outstanding shares. The SEC notes that Mr Fiessel was employed as a broker in Canada until 1988, when he quit after being sanctioned by the Vancouver Stock Exchange for manipulating a penny stock. His wife was a broker until 1991, until she was suspended for 15 years for unauthorized trading. Ms Fiessel was also disciplined by the VSE in 1987 for manipulating a penny stock. With Fairmont firmly in their control, Mr Shull and the Fiessels hired Mr Collins, a freelance stock promoter, to recruit a network of ethically challenged brokers, mostly in the state of Massachusetts. At a January 26, 1993, meeting in Spokane, Washington, due south of B.C.'s Okanagan, Mr Fiessel and Mr Shull met with Mr Collins and offered to give him 150,000 shares of Fairmont if he helped set up a network of bribed brokers. Mr Fiessel told Mr Collins to open an account at Union to receive the shares. The U.S. promoter was also paid $5,000 (U.S.) at this meeting. Two weeks later, on February 11, the trio met again at the Villa Florence Hotel in San Francisco, where Mr Shull and Mr Fiessel told him he would have to pay the money to "grease" the brokers out of their payments to him, and they would not give him any more money. Mr Collins ended up receiving 111,700 shares and $12,500 (U.S.) cash, with a total value of $132,000 (U.S.), from the Okanagan promoters. On February 17, the same day he opened his Union account, Mr Collins recruited Mark Hamel, a broker with Dickinson & Co in Boston, who proved to be one of the biggest producers in the Fairmont scheme. Mr Hamel was paid $233,000 (U.S.) in cash, or 43 per-cent of the total bribes received by the brokers in the Fairmont affair, for persuading his clients to buy 550,000 Fairmont shares, or 45 per-cent of the total shares sold in the scheme. The SEC notes that Mr Hamel and the other brokers neglected to tell their clients about the additional compensation, or bribes, they earned for shilling Mr Shull's stock. Mr Shull told another broker he would give him one share of Fairmont for every ten shares he sold to his clients. This kind of secret deal is known by brokers, including those in Vancouver, as a "ten-for" deal, the short form of "ten-for-one." According to the SEC, Mr Shull and Mr Fiessel motivated their sales force of crooked U.S. brokers with trips in Las Vegas and at least one trip to Los Angeles. Mr Fiessel was so pleased with Mr Hamel's performance that he threw in an extra perk during a visit to the Santa Anita horse track as part of the L.A. trip in mid-March. According to court documents, Mr Fiessel told the bribed Boston broker he was a "helluva salesman" for placing so many Fairmont shares, and the Canadian promoter offered to give him a bonus of 100,000 shares at 20 cents. Fairmont's stock had reached $1.75 by this time, so the bonus was worth $155,000 on paper. While many of the victims were relatively small accounts, Mr Hamel succeeded in selling one client 140,000 shares of Fairmont at about $1.52, a $213,000 transaction, five days before his race track excursion. That same month, in March, 1993, Mr Hamel also recruited Robert Raffa, a broker with Gruntal & Co in Boston, who quickly became a top producer for the Fairmont team. On April 30, with the stock at $2.70, Mr Fiessel and Mr Shull flew in Mr Hamel and Mr Raffa to meet them in Las Vegas to chat about business. Mr Shull handed Mr Hamel $8,000 (U.S.) in cash and gambling chips, while Mr Raffa got about $15,000 (U.S.) in cash and chips. A few days later, Mr Shull wired $65,000 (U.S.) from his brother Terry's account at Wolverton Securities in Vancouver to Mr Hamel's personal bank account at Shawmut Bank and $57,700 (U.S.) to Mr Raffa's personal bank account at Fleet Bank. By mid-1993, the SEC was on to the Fairmont scheme, but Mr Shull had a plan after he got wind of the SEC probe. The Osoyoos promoter flew to Boston, where he met Mr Hamel, Mr Raffa and the other dirty brokers on July 14 at Kowloon's Restaurant. Mr Shull gave his network of bribed brokers backdated promissory notes to make it look like the kickbacks were really sales financed by loans he had made to them. The cover-up flopped and the SEC filed a civil action in August 1994, revealing the penny stock fraud and seeking a disgorgement order to compensate the victims. (c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
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