B.C. Securities Commission *BCSC
Fri 18 Jan 2002 Street Wire
Also Canadian Venture Exchange (*CDNX)
Also National Bank of Canada (The) (NA)
by Brent Mudry
The British Columbia Securities Commission's investigation and prosecution
of Vancouver brokerage Pacific International Securities, a scandal-plagued
Vancouver brokerage controlled by National Bank of Canada, appears to be
the broadest probe of any Canadian brokerage in recent history. Since
launching its landmark prosecution last July, the BCSC has already produced
more than 60,000 pages of disclosure in several paper dumps, and P.I. and
nine former or current officers or directors seek much more detail of the
regulator's case against them.
Lawyers for P.I. and its executives, including founder Max Meier, senior
executive Larry McQuid, president Jean-Philippe Bachellerie and National
Bank Financial president and chief operating officer Germain Carriere, a
director of P.I. since May, 1998, squared off against commission counsel
earlier this week in a two-day application hearing, demanding more detailed
particulars of the charges they face. A panel decision is expected within
three weeks, while the 34-day hearing is set to run from Sept. 23 through
Jan. 24, 2002.
The BCSC has portrayed Pacific International as a haven for stock crooks,
rolling out the welcome mat for numerous securities violators and felons,
particularly in the lightly regulated but heavily prosecuted OTC Bulletin
Board market. While the brokerage attracted and serviced, knowingly or not,
such Mafia associates or mob-linked clients as Phil Abramo, Phil Gurian and
Joe Garofalo, its standout star client, at least in the bad-boy category,
is Shalom Weiss, fined $100-million (U.S.) and sentenced to 845 years in
jail four years ago on racketeering and money-laundering charges.
The regulator's extensive P.I. probe spans back at least two years prior to
its formal notice of hearing, issued July 10, 2001, according to hearing
documents. In a Nov. 30 affidavit, Stephanie Hooper, P.I.'s legal and
compliance assistant, confirms that the brokerage has received a whopping
173 "Requirements to Produce," which are basically regulatory subpoenas,
since June 17, 1999, the start of the investigation period. Of these formal
document demands, 110 were issued by the BCSC and 63 were issued by the
former Vancouver Stock Exchange.
The production costs to P.I. have been significant. "I have personally
spent 1,908 hours of time on behalf of Pacific producing the information
required ... of these hours, approximately 466 hours were spent ...
(responding to) the VSE, and approximately 1,442 hours were spent ...
(responding to) the BCSC," states Ms. Hooper. This is the equivalent of 48
40-hour weeks, basically a full-year of full-time work digging out,
assembling, copying and forwarding the stacks of documents.
In addition, Pacific International had to hire part-timers to help Ms.
Hooper cope with the regulators' requests, for a total of 450 hours and a
total cost of $7,800. Besides its on-site documents, P.I. had to retrieve
an estimated 287 boxes of records and a further 90 closed client account
files from its off-site storage company, Iron Mountain, formerly FACS
Records Centre.
The P.I. record records-puller estimates the brokerage produced the
equivalent of 45 standard-size records boxes to the Vancouver regulators,
90 per cent of which went to the BCSC. "Additionally, it is Pacific's
standard practice to keep a copy of the information provided," states Ms.
Hooper. As a result, she and her part-timers photocopied an estimated 82
boxes worth of information. Ms. Hooper figures that with 2,000 pages per
box, at a cost of 25 cents per page, it cost $500 per box, or $41,000 in
total, for this big job.
These figures suggest P.I. produced 90,000 pages in response to the
regulators' requests, of which 82,000 pages went to the BCSC and 8,000
pages went to the VSE.
This was just the grunt work done by the worker bees at Xerox heaven,
although P.I.'s executives also kept busy. Mr. Bachellerie, the brokerage's
president and COO, figures he personally spent 126 hours, the equivalent of
more than three weeks full-time, producing, assisting in producing and
reviewing the scads of paper. Richard Thomas, P.I.'s vice-president of
compliance, figures he has personally spent 62 hours doing the same sort of
work.
Once all this paper was packed up and carted off to the BCSC and the VSE,
the regulators' worker bees, senior investigators, lawyers and accountants
doubtlessly spent untold hours poring through the four dozen boxes.
Then much of the paper got copied, scanned, formatted, collated and
shuffled back to P.I.'s lawyers.
After receiving the notice of hearing last July, the defence lawyers made a
series of disclosure and particulars requests.
In the first paper dump, on Oct. 15, 2001, P.I. and its officers and
directors received 4,154 documents, for a total of 26,267 pages, supporting
the BCSC's allegations. In the second dump, the BCSC disclosed a further
5,903 documents, for a total of 34,080 pages. The grand total to date is
10,057 documents, or 60,347 pages. Presumably, all of this was copied at
least three times, as at least three law firms have been retained by the
defendants.
While this might appear to be a baffling swamp of paper, the defence
lawyers claim they need more details before they can mount a proper defence
to the regulator's serious allegations.
After this week's hearing, the BCSC panel must mull whether further dumps
of disclosure are necessary and warranted.
(c) Copyright 2002 Canjex Publishing Ltd.
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