YMB "News"
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Disgraced YBM hit by investor lawsuit in U.S.
By Jeffrey Jones
CALGARY, Dec 11 (Reuters) - Investors in magnet and bicycle maker YBM Magnex International Inc. on Friday filed suit against the onetime Canadian stock market darling now collapsed amid allegations it was a front for an elaborate global money laundering operation.
The lawsuit, filed in U.S. District Court in Philadelphia, seeks unspecified damages from the Newtown, Pennsylvania,-based firm, former executives, directors and auditors, who the disgruntled shareholders believe were responsible for YBM's demise and its ties to a notorious Russian mob figure.
Among those named in the suit are former YBM Chief Executive Jacob Bogatin, former head of Eastern European operations Igor Fisherman, onetime auditors Deloitte & Touche and ex-director David Peterson, a former premier of Ontario.
YBM, which is incorporated in Alberta and was listed on the Toronto Stock Exchange until May when its offices were raided by U.S. organized crime authorities, is now in receivership and said it expects to be indicted by a U.S. grand jury.
YBM this week admitted it had little defense against criminal allegations.
''To North American investors, YBM has exhibited the indicia of a legitimate business enterprise...,'' said the lawsuit, filed late on Friday by a Texas lawyer representing investors.
''These trappings of corporate legitimacy were in fact part of an elaborate scheme to defraud investors. Rather than profiting from selling magnets and bicycles, it is now clear that YBM's only successful business is the laundering of criminal proceeds...''
Documents filed this week in a Calgary court by shareholders who seized control of the firm in September in hopes of reviving it, allege a complex web of suspect Eastern European business deals by subsidiaries and related firms.
A forensic accounting report in the receivership documents draws a direct link between YBM and Russian mobster Semion Mogilevitch, capo of a major global syndicate with tentacles in arms dealing, drug smuggling, prostitution and murder. The link was previously denied by former YBM executives.
According to Canadian and U.S. media reports, British intelligence identified Mogilevitch as ''one of the world's top criminals.''
Accounting investigators alleged YBM was a front for an extensive money-laundering operation involving millions of dollars funneled through Russian, Hungarian, Lithuanian and U.S. bank accounts.
The report was a bitter pill for fleeced investors, who stand to lose as much as C$635 million in stock value.
Houston-based lawyer Paul Yetter, who represents the investors, told Reuters he believed the civil action could proceed during the expected criminal case.
The company's problems have also proved to be an embarrassment to the Toronto Stock Exchange.
Although Canadian securities regulators had been informed by British authorities of suspected criminal activity involving the Russian underworld, YBM was granted a listing on the Toronto exchange in 1996 and eventually earned a place on the prestigious TSE 300 Composite Index.
YBM's market capitalization ballooned to C$1 billion before its head office was raided on May 13 by the U.S. Organized Crime Strike Force after an investigation that included wire taps on phones and fax machines. Trading in its stock was halted and will likely never resume.
Efforts to reach former YBM officials for comment were unsuccessful on Friday.
($1 equals $1.54 Canadian)
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