BCSC indirect ally Rafi Khan's Shamrock allies fined
by Brent Mudry
Three key aiders and abettors in Rafi Mohamad Khan's 1995 rig job of L.L.
Knickerbocker Co. Inc. have been fined a total of $85,000 by the United
States Securities and Exchange Commission and suspended for three to six
months. (All figures are in U.S. dollars.)
In consent settlements, the SEC fined brokerage Shamrock Partners, of
Media, Pa., $50,000, its owner James "Jim" Kelly $25,000, its principal
trader John Doyle $5,000 and Stephen Fischer, a helpful trader at another
brokerage, $5,000. Mr. Kelly was given a six-month ban on acting in any
supervisory capacity with any brokerage, while Mr. Doyle and Mr. Fischer
were both banned for three months from associating with any brokerage.
While neither admitting nor denying they did anything wrong, the defendants
agreed to cease and desist from any future securities violations.
The settlements come 10 months after Mr. Khan agreed to a five-year
brokerage ban for his egregious rig jobs of Knickerbocker in 1995 and
Future Communications Inc. in 1993. The controversial penny stock promoter,
who turned over to become a star witness for the U.S. Department of Justice
in the fall of 1998, was not fined a penny for either rig job, a measure of
just how valuable he is to federal officials.
Mr. Khan is a close former associate of notorious boiler-room operator
Irving Kott, the prime target of a high-profile SEC investigation for a
number of years. The SEC won a three-and-a-half-year battle last month to
get a treasure trove of highly sensitive documents related to Mr. Kott and
his associates, held by prominent Vancouver securities lawyer David
Anfield.
While no charges have yet been laid against Mr. Kott, the SEC contends the
boiler-room legend secretly financed his 1993 acquisition of brokerage
Reynolds Kendrick Stratton, based in the Los Angeles suburb of Beverly
Hills, through the manipulation and sale of shares of Synergy Renewable
Resources.
The Synergy shares were held in a safe in Mr. Anfield's office in the
former Vancouver Stock Exchange building, now the operations base of the
Canadian Venture Exchange, before being picked up by Ian Kott, Irving
Kott's son. Mr. Khan was a key broker at RKS, and he and Mr. Kott share a
special fondness for Howe Street, the centre of dealings for the former
VSE.
In the Knickerbocker case, the SEC claims Mr. Kelly, Mr. Doyle and Mr.
Fischer helped Mr. Khan manipulate the stock from $6 to $52 over five-week
period in the summer of 1995. While Shamrock was based in Pennsylvania, Mr.
Khan, after leaving RKS, ran a one-man Southern California branch of
Shamrock from October, 1994, to December, 1996.
In the settlement orders, the SEC found that Shamrock and Mr. Kelly paid
little attention to supervising Mr. Khan, letting their high-producer in
California rig Knickerbocker with unfettered abandon. While Mr. Kelly,
Shamrock's principal, was either clueless or could care less, the
brokerage's main trader, Mr. Doyle, who served as Knickerbocker
market-maker, was quite helpful in Mr. Khan's rig job.
To give the false appearance of a legitimate market for the stock, Mr.
Doyle and Mr. Fischer, a Knickerbocker market-maker at another brokerage,
entered into a friendly flurry of collusive trading. Following Mr. Khan's
script, Mr. Fischer entered bids and bought Knickerbocker shares, which he
promptly resold to Mr. Doyle, helping ramp the stock price up to its peak.
All this is fortunately in the past. Knickerbocker, now trading at four
cents on the OTC Bulletin Board, disclosed on Tuesday that it is in the
final stages of its Chapter 11 reorganization. The retailer lost
$3.4-million on sales $30.3-million last year, after posting a whopping
$11.2-million loss in fiscal 1999, which included $1.08-million in
professional fees for its bankruptcy proceeding.
After the Knickerbocker affair, Mr. Kelly has kept busy in the penny stock
community, along with associate Bruce D. Cowen, the chairman and chief
executive of Capital Research Ltd., of San Juan Capistrano, Calif., the
home of the famous swallows.
In a Sept. 10, 1999, engagement letter with Total Film Group, an OTC-BB
company based in Beverly Hills, Mr. Cowen described his firm's promotional
offerings for penny-stock listings. "Jim Kelly, my partner and I have
developed this comprehensive proposal ... we are a results-driven firm,"
stated Mr. Cowen. "Jim's firm, Shamrock Partners, is currently a
market-maker in your stock," noted the Capital Research head.
In recent years, Capital Research has also been involved with Symposium
Telecom Corp., Lighthouse Fast Ferry Inc., Aura Systems Inc., which feature
similar players and offshore flavours with Total Film. |
