Page 21
Cumo had substantially ended and when the market price of the
shares was not even high enough to pay off the amount of the
unlawful margin.
44. In further particular, the Nine Corporate Partners and
the Eight Individual Partners were all privy to, participated in,
and agreed with the decision of C.C.D., in May 1981 and
subsequently, unlawfully to margin the Plaintiffs' accounts without
the Plaintiffs' authorization.
45. The Defendant, Anker Bank, is the successor to
Handelskredit Bank AG, the bank in Switzerland used by Mr.
Charpentier as his and the Plaintiff's offshore bank.
46. The Plaintiffs say that Anker Bank (forzarly known as
Handelskredit Bank AG) knew or should have known that their bank
was being used generally by Mr. Charpentier and Mr. Price,
(particularly Mr. Charpentier), in allowing Mr. Price and Mr.
Charpentier to open up many “offshore” controlled accounts to trade
Cumo shares, when the real owners of these accounts could not be
identified, in order to further the ends of an illegal stock
manipulation. Trading between accounts controlled by the same
promoter to give the appearance of market activity is central to
a fraudulent promoters “modus operandi” and this was known or
should have been known by Handelskredit Bank
===============================================================
Page 22
47. In particular, Handelskredit Bank shoud not have
allowed;
(i) accounts to be opened in the names of the Plaintiffs
without first receiving proper verification that the
Plaintiffs knew of the accounts, wished to continue the
accounts and knew of all of the conditions involved in
such accounts; and
(ii) the two accounts of the Plaintiffs to be completely
drained of all shares without first ensuring that the
Plaintiffs.
(a) knew what was in the accounts and that the shares
were being removed; and
(b) that the Plaintiffs had appropriate independent
advice concerning the withdrawals and that they
approved of such withdrawals.
In the result, Handelskredit. Bank colluded, connived and conspired
with, and aided and abetted, Mr. Charpentier and Mr. Price in their
frauduIent breach of trust in unlawfully removing all the
Plaintiffs' Cumo shares from their offshore accounts.
48. The Defendant, Yorkton Securities, was formerly known as
Yorkton Continental, which is the successor to Continental
===============================================================
Page 23
Securities, which is the successor to C.C.D., which is the
successor to C.C.D. Ltd. Yorkton Securities succeeded Continental
Securities on October 5, 1989. The principals of both Yorkton
Securities and Continental Securities publicly announed the merger
of their brokerage houses in Vancouver, Calgary, Toronto, London
(England) and Zurich in June 1989. The name of the merged company
was Yorkton Continental Securities. This merger took place after
the judgment in the first action in the trial division but before
the court of Appeal judgment in the action was pronounced on
December 3, 1990. Three days after the Court of Appeal handed down
its Reasons for Judgment on December 3, 1990, Yorkton Continental
Securities dropped the name "Continental" from their title and
returned to their previous name of Yorkton Securities.
49. The Plaintiffs any that:
(i) The merger consisted of the amalgamation of the
Continental and Yorkton offices in Montreal,
Toronto, and London, England as well as the offices
of Continental and Yorkton in Vancouver. Thus the
Defendants referred to in paragraph 5 herein became
merged into the new firm;
(ii) Most of the corporate officers, partners and
employees of Continental in Vancouver, Toronto,
Montrea I and London, England joined the merged firm,
===============================================================
Page 24
and included such key personnel as Shawn Shaunigan
who was transferred to the merged office In Toronto;
(iii) the merged firm continued to carry on the business
of Continental;
(iv) the merged firm Yorkton continued to carry on
business out of the office premises of Continental
in Vancouver and Toronto. The Montreal office of
Continental was closed down ie. the premises were
sub-let. In London, England, Continental moved into
the Yorkton offices out of which the merged firm now
operates.
50. Thereby, the Plaintiffs say that Yorkton Continental and
Yorkton Securities became liable as the successors of C.C.D. Ltd.
and, therefore, are jointly liable to pay the judgment. of C.C.D.
Ltd., C.C.D. and Continental Securities.
51. Yorkton Securities was also a major participant in the
actual manipulation of Cumo stock through their employees and
agents, Mr. Risling, Mr. Bocking and Mr. Stanford. The Cumo stock
manipulation was set up and administered as follows: The
manipulation of the Cumo stock, from around $1.00 in January 1980
to $39.75 in June 1981 and back down to $3.00 (post split) by March
1982, was accomplished by a coordinated network of brokers in the
===============================================================
Page 25
U.S., where the stock traded on NASDAQ, and in Canada, where it
traded on the V.S.E. Early in the promotion, Mr. Charpentier was
a guiding force in helping to put a “package” together to divide
up Cumo stock amongst the main participants. Tha original
distribution amongst the main participants involved approximately
60% of Cumo stock going to a U.S. citizen, the Defendant Mr.
Karosen, who put up most of the initial capital to buy the shares
at .35 cents for the free-trading shares and 1-1/2 cents per share
for the escrow shares; 10% to Mr. Charpentier and 20% to another
U.S. citizen, the defendant Mr. Henry Lorin; with the remaining 10%
of the stock to be distributed to the public. In this "package",
Mr. Lorin, who presently resides in a U.S. penitentiary for stock
fraud and insider trading, was to be the main promoter in both
countries but Mr. Charpentier and his firm, C.C.D. and Mr. Risling
and his firm, Yorkton, were to be the main agents and promoters for
the Canadian trading. As the promotion progressed the percentages
changed with Mr. Lorin getting as much as 40% and Mr.- Charpentier
20%.
52. As the promotion got under way in Canada the key
participants were Mr. Price; Mr. Bocking, Mr. Stanford and Mr.
Risling at Yorkton and Yorkton itself; the principal promoter, Mr.
Lorin; and Mr. Charpentier at C.C.D. Ltd. and C.C.D itself. The
coordination of all these parties was maintained mainly by Mr.
Charpentier and Mr. Lorin whose functions, inter alia, were to
===============================================================
Page 26
ensure, the efficient coordination of all parties involved In the
manipulation.
53. In particular, Mr. Charpentier was not a mere “order
taker" who had been dragged unwillingly into the stock manipulation
scheme by Mr. Price, as he had alleged and testified to in the
first action, but in fact, was a major participant in the stock
manipulation. Whilst the courts in the first action concluded that
Mr. Charpentier was indeed not a mere "order taker" but was
involved in the unlawful stock promotion through his involvement
with Mr. Price, new evidence has become available since the first
action which establishes that Mr. Charpentier's involvement was not
because of his relationship with Mr. Price, but because Mr.
Charpentier, long with Mr. Lorin, was the head and brains of the
whole fraudulent stock promotion. Based on this new evidence, the
Plaintiffs say they are entitled to damages against Mr. Charpentier
as particularized herein in addition to those, awarded in the first
action.
54. The Plaintiffs say that Yorkton through its employees and
agents became an integral and essential component of the whole
fraudulent operation. The Plaintiffs therefore say that Yorkton
colluded with, .connived and conspired with and aided and abetted
the other participants referred to above in the unlawful
manipulation scheme and are thus jointly liable for the fraudulent
breach of trust.
===============================================================
Page 27
55. In addition, Yorkton was further involved in the scheme
as follows; Mr. Price opened an account at Yorkton in Mrs. Huff's
name by forging her name on the opening documents. Mr. Price
traded Mrs. Huff's Cumo stock in that account and also margined the
account without the knowledge and consent of Mrs. Huff. Mr.
Bocking and Mr. Stanford were registered representatives at Yorkton
Securities and Mr. Risling was their supervisor at all material
times.. These three defendants worked closely with Mr. Price and
knew or should have known that he was using and margining Mrs.
Huff's account in the stock manipulation without her knowledge or
consent. They took no steps to know their true client and took no
steps to warn Mrs. Huff of the fraud being perpetrated against her
in respect of her Cumo stock in her Yorkton account.
56. Further, Mr. Lorin opened an account at Yorkton as part
of the overall scheme of manipulation of Cumo stock. The
registered representative at Yorkton for this account was Mr.
Stanford. As a very large amount of trading in Cumo stock was done
in this account it was also closely monitored and supervised by Mr.
Risling.
57. In particular, these Defendants, Mr. Risling, Mr.
Bocking, Mr. Stanford. and Yorkton, did not warn the Plaintiff, Mr.
Huff of the unlawful stock manipulation of Cumo; the unlawful
concentration of Cumo stock in her account; the unlawful margining
===============================================================
Page 28
of her account; the unlawful withdrawal and sale of the Plaintiff's
Cumo stock; and the other breaches of duty particularized in the
judgments of the Supreme Court of British Columbia and the British
Columbia court of Appeal.
58. The PlaintIffs therefore say that Yorkton Securities and
its employees, Mr. Bocking, Mr. Stanford, and Mr. Risling are also
liable in damages for participating in a fraudulent breach of trust
on Mrs. Huff with respect to the shares traded in Mrs. Huff's
Yorkton account between November 19, 1981, when the account was
opened and February 5, 1982, by which time Mrs. Huff's Cumo shares
in her Yorkton account had all been sold off without any benefit
to Mrs. Huff.
/
59. In the same way that Yorkton was involved in this illegal
scheme through the activities of its agents and employees, so were
L.O.M. (formerly known as Canarim Investments Ltd.) and Westcoast
Securities. Mr. Price also opened an account at Canarim in Mrs.
Huff's name to trade in Cumo without her knowledge and consent.
Her account at Canarim was under the supervision of the Defendant,
Mr. Cerney, a registered representative employed by Canarim at all
material times, who also knew or should have known that Mr. Price
was using Mrs. Huff's account in the stock manipulation without her
knowledge and consent, in order to further the aims of the illegal
stock manipulation and without any benefit accruing to Mrs. Huff.
===============================================================
Page 29
60. In particular, these Defendants, Mr. Cerney and Canarim,
did not warn the Plaintiff Mrs. Huff of the unlawful stock
manipulation of Cumo; the unlawful concentration of Cumo stock in
her account; the unlawful withdrawal and sale of the Plaintiff's
Cumo stock; and the other breaches of duty particularized in the
judgments of the Supreme Court of British Columbia and the British
Columbia Court of Appeal.
61. Similarly, the registered representative at West Coast
at all material times was Mr. Hope, and he performed the same
function for Mr. Price at West Coast, that was performed by Mr.
Cerney at Canarim. He also knew or should have known that Mr.
Price was using Mrs. Huff's account without her knowledge or
approval to trade in Cumo in order to further the aims of the
unlawful stock manipulation without any benefit accruing to Mrs.
Huff.
62. In particular, these Defendants, Mr. Hope and West Coast,
did not warn the Plaintiff Mrs. Huff of the unlawful stock
manipulation of Cumo; the unlawful concentration of Cumo stock in
her account; the unlawful withdrawal and sale of the Plaintiff's
Cumo stock; and the other breaches of duty particularized in the
judgments of the Supreme Court of British Columbia and the British
Columbia Court of Appeal.
===============================================================
Page 30
63. As described above, Mr. Karosen and Mr. Lorin were key
participants in the fraudulent scheme that resulted in the
Plaintiffs being defrauded. The Plaintiffs say Mr. Karosen and
Mr. Lorin are also jointly liable for conspiring in the fraudulent
breach of trust heretofore particularized.
In further particular, Mr. Charpentier introduced Mr.
Lorin to Mr. Karosen. Mr. Karosen put Mr. Charpentier's son on the
board of directors of Cumo. Mr. Karosen was at all times a key
person with Mr. Charpentier and Mr. Lorin as a guiding force behind
Cumo and its market activity. Mr. Karosen aided and abetted Mr.
Price in lending $50,000 U.S. (in approximately September 1981) (a
form of unlawful margin) to prevent Mrs. Donnelly from selling any
of her Cumo shares.
WHEREFORE THE PLAINTIFFS CLAIM:
(i) Against Yorkton Securities, Yorkton Continental
Securities, ContinentaI Securities, Continental
Securities Limited, C.C.D. , Continental Securities (Ont.)
Limited, Continemtal Securities (Quebec) Limited,
Continental Securities (U.K.) Limited,, the Nine Corporate
Partners and the Eight Individual Partners, for an Order
that they are jointly and severally liable with C.C.D.
Ltd. and J. Arthur Charpentier to the Plaintiffs for the
amount of the judgment, interest and costs in the first
===============================================================
Page 31
action; and in addition to the aforesaid judgment monies,
aggravated and punitive damages and solicitor and own
client costs;
(ii) Against J. Arthur Charpentier, aggravated and punitive
damages and solicitor and own client costs;
(iii) Against Yorkton Securities, Yorkton Continental, Mr.
Risling, Mr. Bocking, Mr. Stanford, Mr. Hope, Mr. Cerney,
L.O.M. Securities, West Coast Securities, Mr. Lorin, Mr.
Karosen, Handelskredit Bank, Anker Bank for:
(a) General Damages;
(b) Special Damages;
(c) Aggravated and Punitive Damages;
(d) Accounting of all funds entrusted to the Defendants,
and profits made therefrom;
===============================================================
Page 32
(e) Interest pursuant to the Court Order Interest Act;
(f) Solicitor and own Client Costs;
(g) Such further and other relief as to this Honourable
Court may seem meet.
PLACE OF TRIAL: VANCOUVER, BRITISH COLUMBIA
Dated
Solicitor for the Plaintiffs
THIS STATEMENT OF CLAIM is filed and delivered by John N. Laxton,
Q.C., of the firm of Laxton & Company, Barristers & Solicitors,
Solicitors for the Plaintiffs herein, whose address for service and
place of business is 10th Floor, 1285 West Pender Street,
Vancouver, B. C. VGE 4BI (682-3871)
=============================================================== |
