Subj: Clearly Canadian's Mason faces serious BCSC charges
Date: 11/4/00 11:42:07 PM Eastern Standard Time
B.C. Securities Commission - Street Wire
Clearly Canadian's Mason faces serious BCSC charges
Tue 31 Oct 2000 Street Wire
See Clearly Canadian Beverage Corp (CLV) Street Wire
by Brent Mudry
In one of the highest profile prosecutions of a prominent Howe Street stock
promoter mounted in recent years, the British Columbia Securities
Commission has launched its case against Doug Mason, claiming the founder
and long-time head of Clearly Canadian Beverage used secret offshore
accounts to trade in shares of Clearly Canadian and four other Vancouver
companies worth more than $2.3-million.
Mr. Mason is the fourth target stemming from the same investigation, a
probe of share dealings in the secretive offshore enclave of Jersey kicked
off in the wake of the collapse of controversial Vancouver promoter Terry
Alexander's Arakis Energy.
While Mr. Mason is presumed innocent until found guilty of the serious
Securities Act violations alleged by the BCSC, regulators hope to use the
case to further demonstrate international co-operation on investigations of
improper use of offshore havens.
The BCSC's launch of formal proceedings against Mr. Mason comes a week
after a senior Jersey police officer told an international money laundering
conference in Vancouver, hosted by the RCMP, that "Jersey is not a secrecy
jurisdiction."
"We don't tolerate criminal conduct in Jersey, but if we're not told about
it we cannot do anything about it," David Minty, Detective Inspector of the
Financial Crimes Unit of the States of Jersey Police, told regulators,
police and lawyers at the event, noting he openly welcomes requests for
investigatory assistance.
(It should be noted that Mr. Minty made these comments in general, without
referring to any specific case, and Mr. Mason is accused of Securities Act
violations, not breaches of the Criminal Code of Canada.)
"The perception that Jersey is a poorly regulated and supervised
jurisdiction is different to the reality," Det. Minty told Stockwatch. "The
chances of being caught in Jersey are very high," he stated.
The BCSC credits Jersey with its strong support of the offshore Howe Street
probe, which has gained significant results to date.
Target No. 1, Mr. Alexander, was fined $1.2-million and banned for 20 years
in a consent settlement with the BCSC in February of 1999.
Target No. 2, prominent and now-disgraced Vancouver securities lawyer
Michael Seifert, was fined $450,000 by the BCSC and effectively kicked out
of the securities industry in a consent settlement with the BCSC last
December.
In an agreed settlement, Mr. Seifert was levied the hefty fine and banned
for 12 years from making any filings to the commission or the new Canadian
Venture Exchange, for his key roles in offshore share stuffing and
shuffling in Mr. Alexander's Arakis, then one of the biggest stock
collapses in Canadian history, and several other promotions on the former
Vancouver Stock Exchange.
Although Mr. Seifert admitted his culpability in a signed settlement 10
months ago, the Law Society of B.C. has not yet issued any citation, as it
is still reviewing and investigating the case. Mr. Seifert's settlement
with the BCSC is believed to be the harshest non-criminal prosecution of a
securities lawyer in Canada.
Target No. 3, Vancouver promoter David Michael Patterson, was fined $50,000
and banned for 15 months in a consent settlement with the BCSC on Oct. 17.
Mr. Patterson admitted he failed to file insider disclosures for trades he
made through a British Virgin Islands company in Donner Minerals Ltd. and
three other Vancouver companies.
Target No. 4, Mr. Mason, was first revealed to be under investigation by
the BCSC on July 7 by Stockwatch, after the BCSC went to court in a bid for
a court order compelling Mr. Seifert's law firm, Maitland & Co., to produce
a secret Forthdale Investments client file on Mr. Mason.
In its formal notice of hearing, served on Mr. Mason Tuesday, the BCSC
cites the promoter for undisclosed share dealings in five companies he
served as president or chairman: Clearly Canadian, covering the period from
December of 1987 to present, Consolidated Venturex Holdings Ltd., from June
of 1990 to present, SWI Steelworks Inc., formerly known as ESC Envirotech
Systems Corp., Waterfront Capital Corp., from August of 1996 to present,
and Columbia Yukon Explorations Inc., from January of 1997 to present.
The BCSC claims that on March 12, 1991, Mr. Mason purported to settle,
declare or establish a trust named The Piper Trust. Ryco Trust Executor &
Trustee Company Limited, of 2 Bond Street, St. Helier, Jersey, was the
first named trustee of The Piper Trust. That same month, Ryco, as trustee
for The Piper Trust, acquired all of the issued and outstanding shares of
Forthdale Investments Ltd., a company incorporated under the laws of the
Republic of Ireland.
Ryco Trust was sold to Integro Societe de France on Jan. 14, 1994, and Ryco
changed its name to Integro Trust (Jersey) Ltd.
The BCSC claims that Mr. Mason gave instructions or directions to Integro,
either directly or indirectly, as trustees of the Piper Trust respecting
the trading activities of Forthdale and had control or direction over the
shares held by Forthdale periodically in listed companies in B.C.
The regulator also claims that the purported settlement, declaration or
establishment of the Piper Trust failed to create a valid trust and Mr.
Mason at all times retained the beneficial ownership of the assets
purportedly held by the Piper Trust and Forthdale. The BCSC alternatively
claims that the beneficiaries of the Piper Trust were nominees acting on
behalf of Mr. Mason, who retained a direct or indirect beneficial interest
in the assets of the Piper Trust and Forthdale.
The BCSC claims that between Nov. 1, 1994, and Dec. 29, 1994, Forthdale
held and traded, a number of shares of Clearly Canadian through an account
maintained at Pacific International Securities. Using this account,
Forthdale privately bought 150,000 shares from Mr. Mason for $309,000 and
then sold shares in 18 trades for proceeds after commissions of $296,551.
In a second Vancouver brokerage account, at Haywood Securities, Forthdale
was also active trading Clearly Canadian shares from Jan. 14, 1997, to the
present. Using this Haywood account, Forthdale bought 200,000 shares
privately for $460,000 from Centrum Bank of Liechtenstein, sold about
89,000 shares in 16 trades for proceeds after commissions of $172,229.
The BCSC claims Mr. Mason failed to file Clearly Canadian insider reports
revealing his interest in the Forthdale trades in these two accounts.
Mr. Mason also allegedly concealed his activity trading shares of
Consolidated Venturex through Forthdale, from Feb. 29, 1996, to the
present. Through the Haywood account, Forthdale bought 550,000 shares, all
but 20,000 from Mr. Mason, in three trades for a total value of $230,500.
The Haywood account also sold 33,000 shares in 5 trades for proceeds after
commissions of $14,964.
The promoter allegedly also forgot to mention his Forthdale trading in ESC
Envirotech shares since Jan. 17, 1995. Through the Pacific International
account, Forthdale bought 180,000 shares privately from Mr. Mason for
$147,000. This account also received 120,000 shares from an unnamed
business associate of Mr. Mason, and sold 24,000 shares in two trades for
net proceeds of $11,980.
Through the Haywood account, Forthdale was also busy trading Envirotech
since Nov. 10, 1995. In exchange transactions, Forthdale bought 1.55
million shares from Mr. Mason in four trades for a total value of $397,000.
The account also received a further 5,000 shares and sold 55,000 shares in
three trades for net proceeds of $17,658.
The BCSC also alleges that Forthdale secretly traded shares of Waterfront
Capital since Nov. 21, 1996. The account bought 229,000 shares in 12
exchange trades for $59,000.
The regulator further claims the promoter secretly traded Columbia Yukon
shares since March 10, 1997, in the Haywood account. The account purchased
300,000 shares in exchange transactions for a total of $209,000.
Besides this alleged reporting violations, the BCSC claims Mr. Mason sold
shares through the exchange without changes of beneficial ownership,
control of direction, although the regulator makes no direct reference to
any alleged stock manipulation. The brokerages used were Yorkton
Securities, Global Securities, Pacific International and Haywood.
Among the most egregious alleged violations involve Mr. Mason's huge
unreported distribution of Envirotech shares from a control position.
The BCSC claims that Mr. Mason indirectly or directly owned 4.19 million
shares of Envirotech in his own name, in the name of companies controlled
by him, and in the name of Forthdale, which was 21.95 per cent of the
issued and outstanding shares of the company. In a two-week period in
November of 1996, Mr. Mason sold 631,500 shares in 14 trades without making
"control person" disclosures of his intent to sell.
Mr. Mason maintains his innocence of all allegations made by the BCSC.
(Readers wishing more details of the BCSC's Mason investigation may refer
to Street Wires dated July 7, July 12 and July 13, under the symbols CLV,
SSW and BCSEC.)
(The SEC's scrapped probe of Clearly Canadian and its insiders is noted in
a Street Wire dated Feb. 16, 1996, under the symbol CLV.)
(The BCSC's Seifert prosecution is noted in Street Wires dated Dec. 17,
1999, under the symbol BCSEC. The OTC Bulletin Board affairs of Mr. Seifert
and his U.S. counterpart, New York lawyer Joseph Sierchio, are noted in a
Street Wire dated Dec. 20, 1999, under the symbol BCSEC.)
(The BCSC's Patterson prosecution is noted in Street Wires dated Dec. 21,
1999, Feb. 9, 2000, and Aug. 16, 2000, under the symbols BCSEC and DML,
while the recent $50,000 fine and ban is noted in bulletins dated Oct. 13
to Oct. 17.)
(Mr. Alexander's Arakis scandal is noted in numerous bulletins under the
Canadian symbol AKSEF.)
(Mr. Alexander's Delgratia scandal is noted in numerous bulletins under the
symbol DELGF, including Street Wires dated May 21, 1997, Dec. 16, 1997,
April 8, 1998, Dec. 15, 1998, Dec. 17, 1999, Jan. 31, 2000, Feb. 1, 2000,
and Feb. 2, 2000 )
(c) Copyright 2000 Canjex Publishing Ltd. stockwatch.com
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