Vancouver Stock Exchange -
VSE brokerage in another U.S. stock scandal
Vancouver Stock Exchange VSE
Shares issued 0 1899-12-30 close $0
Wednesday Jul 7 1999
See National Bank of Canada (NA) Street Wire
PROCEEDS LAUNDERED THROUGH ATLANTIC CITY, CURRENCY EXCHANGE
by Brent Mudry
In the latest United States penny stock scandal to plague Pacific International Securities, the Vancouver brokerage is named as a key conduit for the co-conspirators in a $5.3-million (U.S.) stock manipulation case. Philippe Hababou, 44, a former New York businessman, and his associates allegedly traded shares through several nominee accounts at Pacific International, then engaged in money laundering by funnelling their ill-gotten profits from the P.I. accounts through an Atlantic City casino and a New York currency exchange firm, according to U.S. officials. Mr. Hababou was charged in Newark, N.J., on June 18 in a 23-count indictment, for his roles in laundering more than $5-million (U.S.) that he and his associates made from their alleged fraudulent stock sales.
U.S. officials note that Mr. Hababou, formerly of the city of New York, France and Israel, represented himself as an investment banker. The penny stock promoter was arrested on Dec. 23, 1998, in Atlantic City by U.S. Marshals enforcing a Feb. 10, 1996, French warrant for his arrest as a fugitive, according to a complaint filed in Newark District Court. If convicted, Mr. Hababou faces prison terms of 10 to 20 years on each count. The alleged securities violator is currently incarcerated in the Monmouth County Jail in New Jersey.
Mr. Hababou was charged in New Jersey two days after U.S. officials across the river in New York named Pacific International in a multicount indictment in another penny stock manipulation case, featuring stock promoter David Houge. On June 16, the U.S. Department of Justice filed a grand jury indictment against two dozen alleged securities violators, including several reputed New York Mafia members. The Houge case featured U.S. boiler rooms set up and run by Dominick Dionisio and Enrico Locascio, associates of the Colombo Organized Crime Family of La Cosa Nastro, and Yakov Slavin, an associate of the Bor Russian Organization Crime Group, according to the FBI. While P.I. was not indicted in either case, U.S. officials describe the roles played by the Vancouver brokerage as a key conduit and depositary in the separate penny stock schemes.
On June 29, two P.I. brokers, Michael Patterson and Dirk Rachfall, were arrested by Federal Bureau of Investigation agents in Seattle for their roles in the Houge affair. After spending a week in jail, the Vancouver brokers appeared in U.S. District Court for the Western District of Washington on Tuesday, wearing handcuffs and blue prison uniforms. The experience behind bars was likely sobering. "I visited a client a few months ago in that same jail; by his third day he already had to pay protection money to be safe," a defence lawyer told Stockwatch, referring to an unrelated case.
In a third case earlier this year, Pacific International broker Jean-Claude Hauchecorne was banned for life by the Vancouver Stock Exchange for 13 securities infractions over his dealings with offshore accounts of several better-known U.S. stock mobsters, Phil Gurian and Phil Abramo. Mr. Hauchecorne survived the harrowing experience of being caught in the middle as his mobster client Mr. Gurian was accused of stealing $1.75-million (U.S.) from his own boss, Mr. Abramo, a reputed Mafia capo in the DeCavalcante family. The ensuing scandal sparked criminal investigations by the FBI, the Royal Hong Kong Police and the commercial crime section of the Royal Canadian Mounted Police, with supporting roles played by police in the Bahamas and Switzerland. The Hauchecorne scenario climaxed in May 1996, when the P.I. broker was confronted by the angry mobsters in a New York hotel room.
By coincidence, this period also marked the end of the year-long scheme in the unrelated Hababou case. In that indictment, U.S. Attorney Faith Hochberg charges that from July, 1995, to June, 1996, Mr. Hababou and his co-conspirators realized more then $5.3-million (U.S.) in dubious profits from artificially high-priced stock.
The Hababou case traces back to 1995, when the former New York businessman and his associates agreed to purchase a privately-owned shell company, which was vended into a public company through a reverse takeover. "The new or 'merged' company would be known as "Prime" and would be able to trade its stock on the Over-The-Counter (OTC) Bulletin Board," according to the indictment. U.S. officials claim that Mr. Hababou, an individual identified as John Doe, and others fraudulently acquired control of Prime's stock, and sold it on the bulletin board market, making misrepresentations. To date, the full name of "Prime" has not been revealed to Stockwatch.
Ms. Hochberg claims that after realizing about $5.3-million (U.S.) from the stock sales, Mr. Hababou, Mr. Doe and their associates "concealed the nature, location, source, ownership and control of the proceeds." Court documents allege that in anticipation of the proposed reverse takeover, Mr. Doe and the others caused 18 million shares of Prime stock to be issued to Mr. Doe's nominees, including Mr. Hababou, in order to ensure Mr. Doe's undisclosed control of the company. To conceal this control, Mr. Doe designated Mr. Hababou and others to act as nominal corporate officers, directors and shareholders.
"Hababou, John Doe and the others then caused the issuance of large blocks of Prime stock in the names of John Doe's nominees, including Hababou, without disclosing to the SEC and investors that John Doe owned and controlled the stock," states Ms. Hochberg. "The conspirators deposited this Prime stock into accounts at Pacific International Securities, a securities brokerage firm with offices in Vancouver, British Columbia," alleges the U.S. Attorney. These "depository accounts" were in the names of Mr. Hababou and an offshore entity, Ildico Ltd.
Mr. Hababou and the others then allegedly sought to sell the Prime shares on the bulletin board market, boosting the stock price by making false statements and factual omissions, according to U.S. authorities. The ring allegedly transferred $4-million (U.S.) of their proceeds from the P.I. accounts to accounts they controlled at Avis Currency Exchange, a New York currency exchange firm, and Boardwalk Regency, which operates Caesars Atlantic City Casino.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
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