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theglobeandmail.com
Broker conduit for 12 transfers: indictment
National Bank shocked and embarrassed by news
of Pacific International unit's involvement
BRIAN MILNER, PETER KENNEDY and ANN GIBBON
The Globe and Mail
Saturday, June 19, 1999
New York and Vancouver -- BRIAN MILNER
in New York
PETER KENNEDY
in Vancouver
ANN GIBBON
in Vancouver
Vancouver brokerage Pacific International Securities Inc. was a conduit for about 12 stock, cash and wire transfers orchestrated by the U.S. Mafia and Russian mob, according to a U.S. federal indictment.
An investigation by U.S. law enforcement agencies alleges the money held in accounts at Pacific was moved out by cash or wire transfers in increments ranging from $14,500 (U.S.) to $374,000 between December, 1996, and October, 1997. The total amounted to nearly $1-million.
Details of Pacific International's involvement -- potentially embarrassing for regulators in British Columbia and the brokerage's biggest shareholder, National Bank of Canada -- emerged after the RCMP recently raided the brokerage's Vancouver office.
Pacific was named, but not charged this week in an indictment handed down by a U.S. federal grand jury in Brooklyn, N.Y. The indictment was one of three, which charged 89 people in stock fraud and money laundering schemes.
Separately, National Bank's brokerage arm said it was shocked and embarrassed by the revelations reported yesterday in The Globe and Mail.
"I was really surprised when I heard the news," said Pierre Brunet, chief executive officer of Lévesque Beaubien Geoffrion Inc.
Pacific said late yesterday in a statement it neither knew of alleged criminal activity nor "knowingly associated itself with alleged organized crime figures" named in the indictments.
Pacific said it "has co-operated fully since becoming aware of a U.S. investigation through the RCMP and the B.C. Securities Commission in June, 1998. Pacific International voluntarily froze the accounts at issue after a restraining order had been issued against . . . the parties named in the indictments."
Pacific said it met regulatory requirements in opening the accounts.
"There is clearly no wrongdoing alleged against Pacific International Securities," chief executive officer Max Meier said.
In some of the transfers involving Pacific, the money moved to an account of a company called Internet Domain Inc. at a Fleet Bank branch in Long Beach, N.Y. Internet Domain is controlled by Yakov Slavin, named by U.S. law enforcement officials as an associate of a Russian mob called Bor.
Dominick Dionisio, named in the U.S. federal indictment as an associate of the Colombo crime family in New York; Yakov Slavin, named as having Russian mob ties; an unregistered New York stockbroker named Christopher Mormando; and others moved shares and cash into and out of accounts held at Pacific under the names of Debra Lee and Associates and Nyack Partners Inc., it is alleged.
Both were shell companies set up by a New York stock promoter named David Houge to hold the securities used in the fraud against unsuspecting investors, the indictment charges.
Mr. Houge, an unindicted co-conspirator, also controlled one of the three companies, whose stock price was manipulated in the fraud, as well as First National Equity Corp., a New Jersey-based brokerage involved in the scheme, the indictment says.
Mr. Dionisio, Mr. Slavin and another defendant, Enrico Locasio, placed and supervised crews of brokers in boiler rooms inside New York-area branch offices of First National and three other brokerages, Global Strategies Group Inc., Amerivet Dymally Securities and Three Arrows Capital Corp., the indictment charges.
Mr. Dionisio and Mr. Locasio, also named as an associate of the Colombo mob, were the ringleaders, the indictment says.
The stock swindle also involved five licenced brokers who not only helped sell shares to unsuspecting investors, but also received cash payments for allowing unlicenced cold callers and unregistered brokers to use their names.
FBI assistant director Lewis Schiliro said this week it is not the first time Russian and American mobs have teamed up.
News of the scheme is a potential source of embarrassment for National Bank and B.C. securities regulators, who are trying to rid Vancouver of its negative reputation.
Peter Montague, head of the RCMP's market fraud investigation unit in Vancouver, said "he has no idea" why charges weren't laid against Pacific or any of its brokers.
"This is not our case, we were acting in an assistance mode," Mr. Montague said. He also said he didn't want to influence the outcome of the investigation by commenting further.
A senior Vancouver Stock Exchange official said he was reluctant to pass judgment until he had seen all the facts.
"I think it is significant that they weren't charged," VSE vice-chairman Chris Lay said. "They sure laid a lot of charges in the U.S."
"We were not aware of anything," said Gèrmain Carriere, Lévesque's retail division head in Montreal. "Max Meier [the head of Pacific] called me yesterday and said there was a problem, but he didn't know the specifics."
The brokerage did know of the misdeeds of two former Pacific brokers, Jean-Claude Hauchecorne and Andrew Katz, the latter having received the largest fine in brokerage history for stock manipulation.
Pacific said it "brought information concerning this matter to the VSE."
The bank felt it could help Pacific provide clients with more traditional, balanced portfolios that included the blue chips, instead of the speculative activities it was involved in at the time.
It was definitely Pacific that courted National, Mr. Carriere said.
MONEY MOVEMENTS
Here are some of the dozen transactions that went through Pacific International Securities -- and the people behind them -- as itemized in the indictment:
Dec. 11 and Dec. 16, 1996: Unregistered broker Christopher Mormando has 97,500 shares of Legend Sports Inc. transferred from a Debra Lee and Associates account at Pacific International to other accounts at a New York area brokerage controlled by people involved in the alleged scam. Legend is one of three companies whose stock was being manipulated as part of the massive fraud scheme, the indictment says. Debra Lee was a shell company set up to hold the stock and cash. All told, 225,400 shares of Legend will pass through the Debra Lee account at Pacific International.
Dec. 18, 1996: John Manion, then president of Continental Capital & Equity Corp. and a financial adviser to Legend, has $225,000 (U.S.) transferred to a Continental account at Pacific International from a Debra Lee account. Mr. Manion was one of 23 people indicted on the stock-fraud and money-laundering charges.
Jan. 13, 1997: Dominick Dionisio, described as an associate of the Colombo crime family, and Mr. Mormando have $97,500 wire transferred from a Debra Lee account at Pacific International to a Debra Lee account at City Check Cashing Inc., a New Jersey check-cashing business.
Aug. 14, 1997: Mr. Dionisio and others have $374,000 wire transferred from a Debra Lee account at Pacific International to the Debra Lee account at City Check Cashing. |
