Thanks for the heads up - here is the article:
une 28, 1999
More Shell Games
Two years of investigation into money laundering yields
additional arrests
By Bill Alpert
The mysteries just multiply as prosecutors unseal indictments in a
long-running probe of transatlantic money laundering and stock fraud. The
latest indictment accuses 42-year-old London lawyer Andrew R. Warren of
creating fake shell companies for American stock swindlers. Allegedly helping
was a diplomat who lent his name to the shells. Interestingly, filings with the
Securities and Exchange Commission examined by Barron's indicate that the
diplomat was connected to a stock not mentioned in the indictment -- the
bulletproof-vest maker Guardian Technologies International, founded by
former Marine Lt. Col. Oliver L. North, a major figure in the Iran-Contra
affair during the Reagan Administration.
The indictment, announced June 17 by the Manhattan district attorney's office,
alleges that Warren participated in a seven-year conspiracy lasting through
July 1997, setting up phony shell companies in Liberia, the English Channel
Isle of Jersey and the British Virgin Islands, on behalf of four Americans who
already have pleaded guilty to conspiracy charges. They are Salvatore J.
Mazzeo, George A. Carhart and James E. Cohen -- all affiliated with the
defunct brokerage firm Westfield Financial -- and Felice F. Mischel, a
Manhattan securities lawyer. Hiding behind the offshore shells, the group sold
$17 million worth of unregistered stock in such firms as Saratoga Brands,
Response USA, Las Vegas Entertainment Network and the shoemaker
Candies. Manhattan DA Robert M. Morgenthau is asking Britain for
Warren's extradition.
Prosecutors say a Liberian diplomat served as a front man in Jersey, Liberia and
the British Virgin Islands for swindles involving stocks from New York, New
Jersey and Nevada. Barron's found the diplomat has been a large shareholder in
former Lt. Col. North's body-armor firm.
An earlier civil suit filed by the SEC alleged the swindlers reaped nearly $3
million in just one 1993 deal, in which the Candies company sold stock to a
purported Liberian company that supplied only the address "P.O. Box 26,
Moscow 117049." As Barron's reported two years ago ("Buyer Beware,"
August 25, 1997), several of the firms involved were controlled at various
times by A. Barry Witz or Parvinder S. Chadha.
In his guilty plea last year, Carhart told a judge that Barry Witz had instructed
the group in stock fraud. Neither Witz nor Chadha has been charged.
Currently, Chadha is chief executive of Osicom Technologies, a controversial
networking firm that holds itself out as rivaling Cisco Systems and Lucent
Technologies.
Under SEC regulations in effect until last year, foreign purchasers of a U.S.
company's unregistered stock had to wait 40 days before selling the shares in
the U.S. market. But Bear Stearns brokerage records from March 1993
show $198,000 worth of short sales in Las Vegas Entertainment by John J.
O'Carroll, the owner of record for some of the offshore entities mentioned in
this month's indictment. As Barron's reported in 1997, Barry Witz called
himself the lawyer for O'Carroll, whom London investigators described as a
money launderer for the Cali drug cartel. After the 1997 story, Chadha and
Osicom sued Dow Jones & Co., the publisher of Barron's, for libel in a
London court. A British appeals court upheld the suit's dismissal this year.
The London solicitor, Warren, has been out on bail since British authorities
arrested him last year, along with his law partner Stuart Creggy, a London
magistrate who rates an entry in Debrett's Peerage. Creggy has not been
charged with a crime. But a new arrest in the case came last month, when
Britain's National Crime Squad arrested Paul Martin Warren, a 52-year-old
accountant with the firm Gainsleys Financial Services (and who is no relation
to Warren the solicitor).
In reporting the accountant's arrest, the London Mail put a name to a
mysterious foreign diplomat. Manhattan prosecutors' filings have alluded to
the diplomat without ever naming him. The paper identified him as Charles
HNE Wilson and said he had been recruited by the conspirators in the belief
that the Liberian diplomat would be immune to interrogation and prosecution.
Prosecutors refused to confirm that Wilson was the diplomat mentioned in
court papers.
But among solicitor Warren's alleged conspiratorial acts, the latest indictment
does mention some allegedly false 1993 statements concerning the ownership
of Helmsley Finance. The very same entity turned up in annual SEC filings of
Ollie North's Guardian Technologies, where Helmsley Finance appeared as
an 8.5% shareholder, only to vanish in the latest proxy statement.
The SEC filings show a mailing address on the Isle of Jersey for Helmsley
Finance, described as a company in the British Virgin Islands founded in 1993
and "engaged in providing financial investment services." The filings identify
Helmsley's owner as Charles HNE Wilson.
While units of Guardian Technologies shot to $12 (before a subsequent split)
on the day of their 1996 initial offering, they soon sank to pennies. Along with
the firm's inability to make a profit, North's stock suffered from the collapse of
its underwriter Landmark International Equities, after a failed share offering
for an Italian-ice firm called Mama Tish's. Among the directors of Guardian is
Herbert M. Jacobi, a 59-year-old Manhattan securities lawyer who is no
stranger to controversy. Personal lawyer to convicted penny-stock crook
Meyer Blinder, Jacobi was barred for life from working for any brokerage
firm after the National Association of Securities Dealers concluded in 1991
that he was an undisclosed owner of the brokerage firm Winston-Frost
Securities. Jacobi has been a longtime friend and counsel to the Mazzeo
family, representing Sal Mazzeo's brother Peter against pending SEC civil
charges of stock manipulation.
Jacobi says that Helmsley Finance got its shares in North's body-armor firm in
a private placement arranged by Landmark International. "As for who this
individual is," says the lawyer, "I have no clue."
Ollie North, now Guardian's board chairman, does not talk to the media,
Jacobi says. Nor were calls to Guardian chief executive J. Andrew Moorer
returned by Barron's deadline.
Along with the alleged false entries for Helmsley Finance, the new indictment
charges London solicitor Warren with faking 1993 ownership papers of the
offshore entities Societe Investissement Fiduciaire Occidental, Marlborough
House Investments and Orient Investment Trust. Starting in 1993, those
entities also turned up as substantial shareholders of Malvy Technology,
according to Delaware Federal court records of a class-action suit concerning
Malvy.
Shares in Malvy got extra boosts from the Internet tout sheet SGA Goldstar
Research-whose publisher subsequently pleaded guilty to receiving shares for
his touts-and from four Boca Raton stockbrokers indicted last year for
accepting bribes to tout Malvy in 1993 (shortly after the exotically named
offshore entities became stockholders).
Yet another of Warren's allegedly false 1993 filings concerned the BP Group,
which has turned up in separate SEC filings of the aspiring casino firms
Winners Entertainment and Alpha Hospitality. In 1993 Winners announced
plans for a riverboat casino in Mississippi, in partnership with BP Group and
Las Vegas Entertainment Group (a company bankrolled by BP and
International Thoroughbred Breeders, the jewel in the crown of stock-fraud
king Robert E. Brennan). The riverboat plan soon flopped. Alpha also tried to
make a go of a Mississippi casino, but that also flopped.
Alpha's SEC filings identify the BP Group's owner as Patricia A. Cohen, a
sometime director and 11% shareholder of Alpha-and incidentally, the wife of
James E. Cohen, one of the four whose guilty pleas the Manhattan DA has
already nabbed in the transatlantic scam.
Before Felice F. Mischel had entered her January guilty plea for supplying
phony legal opinions in the offshore shell game, she had been a partner in the
Manhattan securities-law firm Schneck Weltman Hashmall & Mischel.
Although Saratoga Brands stiffed Mischel's firm for $94,000 in legal fees,
other public firms happily used her services, including baby-product maker
Diplomat Corp., where Mischel also served as a director. Diplomat's onetime
principal shareholder, Robert M. Rubin, was also a director and large
shareholder of Response USA, a personal-alarm service whose bogus 1993
stock placements were among the guilty admissions of Mischel and Sal
Mazzeo.
The 59-year-old Rubin has had a profitable career promoting small-cap
stocks that weren't consistently profitable for outside investors, including
American United Global and a little number underwritten by Sal Mazzeo
called Universal Self Care. Rubin's stocks also had strong support from the
Long Island brokerage firm Lew Lieberbaum & Co., whose
investment-banking chief sat on Response USA's board. Lieberbaum
survived a 1995 NASD disciplinary action for alleged stock manipulation
(which the firm neither admitted nor denied) by paying $1.1 million in fines
and restitution, but not a sensational $1.75 million settlement of charges by the
federal Equal Employment Opportunities Commission alleging that
Lieberbaum's male employees exposed themselves to female employees and
demanded oral sex. Rubin did not return messages by deadline.
Originally arrested with Andrew R. Warren was his senior partner, Stuart
Creggy. The wealthy 60-year-old magistrate and amateur stamp collector has
not been charged. His name came up, however, in 1995 as the manager of
Panavest & Co., a Gibraltar firm that Toronto newspapers reported as
owning a valuable Toronto land parcel whose development was stymied by
the presence of a historic landmark church -- until the church was destroyed
in a fire.
Panavest's Canadian agent, according to press reports, was one Bernard
Kraft, an accountant whose Toronto firm has audited another business that's
caught the eye of Manhattan prosecutors -- a penny-stock firm called Alaska
Apollo Resources. One catchy thing about Alaska Apollo are Form 13D
stock-ownership filings that showed a million shares in the hands of
Gracechurch Securities, a Liberian corporation with a London address. The
owner of Gracechurch, according to the SEC filings, was Douglas H.
Mansfield, a Bahamian investor who paid a fine and settled a 1995
cease-and-desist proceeding by the SEC, without an admission or denial. The
SEC had charged him and four others with using a Florida brokerage firm to
manipulate and dump unregistered shares of a couple of Canadian firms in the
late 'Eighties.
With so many unsolved mysteries, small wonder that officials from the
Manhattan DA's office and Britain's National Crime Squad say that their
investigation is far from over.
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