Howe Street News
Canadian Venture Exchange - Street Wire
CDNX finally reveals broker Alter's Trellis clients
Also Trellis Technology Corp (TIS)
by Brent Mudry
The Canadian Venture Exchange exchange has finally lifted the veil of
secrecy on its Alter prosecution, releasing a 29-page decision finding
Wolverton Securities and its former star broker Jack Alter guilty of
trading irregularities in shares of Trellis Technologies in late 1994 for a
group of clients whose identities have only now been revealed. Last fall,
an exchange disciplinary panel ruled that Mr. Alter and Wolverton engaged
in "serious professional misconduct" in the Trellis case.
The secret eight-month-old decision, dated June 20, was released late
Thursday, more than a week after Stockwatch stumbled upon the Alter
prosecution and began making numerous requests for the disciplinary
documents. The decision finally sheds light on who and what was behind
suspicious trading in shares of Trellis, one of the most controversial
promotions on the Vancouver Stock Exchange in 1994 and 1995.
Last October, Mr. Alter was fined $15,000 for helping his band of Trellis
clients circumvent securities regulations with two dozen off-VCT trades in
late 1994. Wolverton was fined $50,000 for this same offence, although
$5,000 of this penalty was a serious slap on the wristing for hiding an
embarrassing Trellis-linked lawsuit, involving promoter Bram Solloway and
his company, Vescan Equities, from exchange officials.
Mr. Alter, 50, quietly left Wolverton, ending a 20-year career with the
brokerage, six days after his penalty hearing, which ended a disciplinary
proceeding which had been shrouded in secrecy from start to finish. He has
yet to register with another brokerage.
While Trellis was a notable VSE trading fiasco in 1994 and 1995, Mr. Alter
is best known for his co-starring role in a much-higher-profile case two
years later, career fraudster Michael Mitton's 1997 debit-kiting and rig
job of H & R Enterprises. The OTC Bulletin Board promotion caused the
collapse of a small New York brokerage and left mutual fund giant Fidelity
Management holding the bag with a $12.7-million clearing house loss.
Mr. Alter's Trellis violations took place in late 1994, although he had
opened accounts for the Trellis players dating back five years earlier.
The key cast of broker Alter's Trellis clients includes, in account-opening
order, Revel Murphy, Paul Deyong's Deyong Management, promoters Sakwinder
Narwal and Nanuk Warman, who both became Trellis directors, Michael Skerry,
Robert "Bob" Jenkins and Perry C. Stone. Mr. Alter also opened accounts for
Trellis, Elite Capital (VCC), Nelson Skalbania's Great Wall Trading and
Friedrich Gruehl's Transcon Bau Gmbh, purportedly a German backer.
Although Mr. Murphy's Alter account was the oldest in the group, dating
back to Dec. 12, 1989, the next account to be opened, on April 12, 1990,
featured perhaps the most interesting client: Mr. Deyong's Deyong
Management.
Mr. Deyong's most recent involvement had been in Marlat Resources, with
controversial former Vancouver lawyer Martin Chambers, a key
behind-the-scenes player in the Eron Mortgage fiasco, and promoter Robert
Bozo Lalich.
Other Marlat players included Trellis president Elroy Fimrite, fellow
Trellis directors Mr. Narwal and Mr. Warman, and promoter Bram Solloway,
who was involved in one company recently promoted by Wally Dekanich, the
small-time stock promoter shot dead in North Vancouver last month.
In June of 1997, a notable client-associate of Mr. Deyong, former Hells
Angel leader Ernie Ozolins, was executed. Mr. Ozolins and his girlfriend
Lisa Michelle Chamberlain were shot to death in his West Vancouver home, a
pricey residence which had been financed by Mr. Deyong. The late Mr.
Ozolins owed DML Investments, one of Mr. Deyong's finance companies,
$317,000 as of April 30, 1998, down from $447,000 a year earlier.
Mr. Chambers is perhaps Mr. Deyong's most intriguing finance client. The
former lawyer had the misfortune of being dragged through the criminal
courts for nine years as an alleged key player in a conspiracy to import
cocaine from Miami to Vancouver. Mr. Chambers was charged in 1981,
acquitted in 1983, ordered retried by the Supreme Court of Canada,
convicted in a second trial in 1987 and sentenced to nine years.
The Supreme Court of Canada threw out the second trial in 1990 and ordered
a third trial, which never took place as the Crown folded and finally
stayed the charges. Mr. Chambers was free on $100,000 bail throughout the
ordeal and spent a total of only two months in jail during the saga.
Although Mr. Chambers maintained his innocence, being a target of a cocaine
smuggling prosecution did not help his career as a lawyer. The Law Society
of B.C. issued a suspension in 1981, after he was charged, and he
voluntarily withdrew as a member in 1984.
In 1990, criminal defence lawyer David J. Martin, who recently represented
Mr. Mitton in the Clay-Tech fraud case and negotiated his guilty plea,
described his client Mr. Chambers as "an industrious fellow" who was
involved in many businesses.
"Many businessmen would wish to accomplish as much as he has done in so
little time," Mr. Martin told late Vancouver Sun reporter Moira Farrow.
In a feature story that Mr. Chambers denounced as "yellow journalism" which
hurt his ability to carry on his business, Ms. Farrow noted that the chief
warden of Pacific Rim National Park said a sheltered coastal cove property
owned by Mr. Chambers and later his associates featured unusually heavy
traffic.
"For 10 years, there's been a regular run of small ships back and forth
between the cove and a ... ship out in U.S. waters," the warden told the
reporter in 1990.
More recently, Mr. Chambers appeared as a major behind-the-scenes player in
Brian Slobogian's massive Eron Mortgage fraud, which was shut down by
regulators in 1997.
Mr. Chambers, described as a "thug" by close business associate Brian
Larsen in the British Columbia Securities Commission's hearing, was a key
Eron borrower dating back its inception in 1993. (Mr. Larsen was the head
of Barclay Capital, which was controlled by Mr. Deyong.)
In a recent court case, Mr. Chambers complained that he has a tough time
making it through the airport in Vancouver after trips abroad without
having his briefcase contents inspected and copied by customs officials as
he describes himself as a "person of interest" to authorities. In another
case last year, Mr. Chambers sued a marine dealer who allegedly refused to
deliver 10 of 15 Yamaha outboard motors he purchased.
Mr. Chambers and the late Mr. Ozolins may be the most noteworthy, but Mr.
Deyong has other interesting clients as well. In recent years, he loaned
money to Barry Mann and controversial financier Michael Graye, both
associates of Mr. Chambers.
In December of 1996, Mr. Graye was arrested in Toronto as he stepped off an
airplane, on charges related to fraud and income tax evasion. After Mr.
Larsen and his "thug" associate Mr. Chambers paid a visit to Eron's
offices, Mr. Slobogian handed over $300,000 of Eron investors' money for
Mr. Graye's bail. Mr. Graye owed one of Mr. Deyong's companies $199,000 as
of early 1998.
Mr. Deyong's other receivables include a Sporan Farms, an affiliate of
Eron's first deal, Harris McLean Financial Group, the now-insolvent Cayman
Islands-based offshore financier of numerous Howe Street deals and a fellow
called N. Newsom, who owed $263,000 as of early 1998, up from $197,000 as
of early 1987. This is presumably Norm Newsom, a Howe Street promoter whose
family is well known to regulators.
Mr. Deyong also lent money to a "Bensberg," which may be Guido Bensberg,
the former associate of Larry Kostiuk who allegedly played a role in Jack
Banks's Gaming Lottery certificate-shuffling scheme, and J. Graham Douglas,
who has been a player in many Howe Street deals, including several of Harry
Moll's.
Besides being a key client of broker Alter in the Trellis affair, Mr.
Deyong also served as a backer of another key Trellis player: Trellis
president Elroy Fimrite.
Several years after the Trellis debacle, two of Mr. Fimrite's private
companies were on the hook to Mr. Deyong for a total of $146,000. Mr.
Fimrite's Kentucky Financial owed $71,000 as of Dec. 31, 1998, while his
J.M.J. Investments owed $75,000.
While Mr. Deyong's expertise as a financier is lengthy and broad, that of a
another key Trellis player, stock promoter Mr. Warman was more abridged.
When Mr. Warman opened his Wolverton account with Mr. Alter in June, 1992,
he was a grill cook at the Keg, flipping burgers, steaks and shrimps. Mr.
Alter told the CDNX disciplinary panel that by 1994, Mr. Warman was moving
up in the world, becoming an accountant and working at KPMG.
Mr. Alter told the panel that in the fall of 1994 he had no clue about
Trellis and he had never even heard of the company. That soon changed. That
September, Mr. Narwal brought Mr. Fimrite to Wolverton for a meeting and
introduced the Trellis president to Mr. Alter.
"Narwal asked Alter if he could use the boardroom at Wolverton Securities
and Alter agreed as Narwal was a good client. Alter hoped the meeting might
result in him obtaining new clients. He testified he did not attend the
meeting," noted the CDNX panel.
By mid-November of 1994, broker Alter opened two accounts for Mr. Fimrite
and the off-VCT Trellis share-shuffling scheme was in full swing.
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