CEO's nephew ran securities firm from YBM headquarters
By SANDRA RUBIN
The Financial Post Wednesday, June 24, 1998
YBM Magnex International Inc., whose offices were raided last month in a U.S. federal investigation into organized crime and money laundering, had a securities dealer run by the chief executive's nephew operating from its Philadelphia headquarters in 1996.
The U.S. Attorney's Office is examining its records.
A YBM lawyer said there is no evidence company stock was ever traded from that location.
But securities sources said having a "friendly broker" would theoretically make it easier for someone to manipulate a stock because there would be no need to spread orders among many nominee accounts to hide the intent.
It would also simplify buying and selling blocks of stock for family and business associates without attracting outsiders' attention.
"We rely on brokers to be the front line, to see if there's suspicious trading and to make sure all the documentation is correct," said a source close the Toronto Stock Exchange.
"If the broker's in bed with the bad guy, you're not going to get the kind of front-line screening you'd expect."
The securities dealer, Jefferson Gersch Inc., was operated by Michael Kogan, 26.
Kogan was approached by investigators with the U.S. Attorney's Office and has turned over records, his lawyer, Nicholas Harbist, said yesterday. It is not clear whether the documents were surrendered voluntarily or after a subpoena.
"We were asked to provide documents and we responded accordingly," Harbist said from his office in Haddonfield, N.J.
He also said there was nothing improper about the office arrangement and YBM chief executive Jacob Bogatin was merely giving his nephew a helping hand.
"He was helping him get a start in business. I don't really want to get into all the details, but it's not anything one would think a relative would not do for another relative."
Kogan worked in YBM's finance department from April 1996 until his stock brokerage was incorporated in July that year. He stayed at the company's offices until early 1997.
YBM (ybm/tse) traded between $5.75 and $8.50 over that period.
Robert Courtney, head of the Organized Crime Strike Force at the U.S. Attorney's Office in Philadelphia, would not say whether investigators have uncovered any trading in YBM shares.
"I'm not going to be able to comment on that," he said.
But Joseph Groia, the lawyer representing the magnet manufacturer in Toronto, said he spoke with two YBM officers and one senior official yesterday, and "they all said they did not trade through Mr. Kogan. They also said that to the best of their knowledge, nobody at YBM traded through Mr. Kogan."
Groia declined to name the three senior figures.
He said he also spoke directly with Bogatin and was told it is "his understanding there was no trading done in the [YBM] office in that period -- in any stock."
Groia said it was a "pure commercial arrangement. Mr. Kogan paid rent and there was a lease involved. It lasted six months."
YBM, which started life as a shell company on the Alberta Stock Exchange, moved to the TSE in March 1996.
The company has never been listed on a U.S. exchange.
Securities industry sources said that means if Kogan did trade YBM shares, he would have had to place the order through a brokerage firm with a seat on the TSE.
He would not have been required to say who his clients were, but could simply open a trading account in the name of Jefferson Gersch. He would have been able to buy and sell any TSE-listed stock for any U.S.-based investor.
The fact Jefferson Gersch was another brokerage firm would make a Canadian broker less suspicious about potentially peculiar trading patterns, industry sources said.
YBM has acknowledged that Semion Mogilevitch, a known Russian mobster, is an investor but says his holding is only about 3%. The company would have no way of knowing, though, if he bought and sold shares in the form of street certificates held in a brokerage's name.
Harbist declined to say whether Bogatin is a client of his nephew's, but said Jefferson Gersch is "kind of dormant." He confirmed the small firm had run-ins over its registrations with securities regulators. It agreed to halt operations in Pennsylvania.
Kogan is working at another brokerage house, Harbist said, although he declined to identify it.
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