"In another Durante development, regulatory filings show Mr. Durante was involved in another penny stock promotion, not targeted by authorities, which featured Union Securities -- Interspace Enterprise Inc. -- the same month that Exchange Bank's money laundering account was frozen.
According to Interspace's filings, Berkshire Capital entered into a change-of-control on April 12, 2000. (Mr. Durante was not noted.) Two days later, on April 14, Berkshire, represented by Ms. Hobson, abruptly cancelled out. "We regret at this time it is not possible to go forward in a mutually satisfactory fashion and wish you much success with your plans in the future," stated Ms. Hobson.
Within three days, by April 17, the deal was back on track, with Prudential Overseas Company Ltd. having replaced Berkshire Capital. (Other SEC records show Prudential was also controlled by Mr. Durante, as a shell in another offshore enclave, the Turks and Caicos Islands.) Interspace's filings show a "Magaus" Timmerby as president of Prudential Overseas, although other filings suggest his proper name is Magnus Timmerby.
While a number of Interspace's private placement investors favoured such respected national houses as Morgan Stanley, UBS Paine Webber and Salomon Smith Barney, several took a shine to tiny Union in Vancouver. In May, 2001, an account called Progressive Enterprises filed to sell amounts of 225,000 shares and 112,500 shares through Union.
Four months later, that September, two other accounts filed to sell identical amounts of 716,900 shares, Turbo-Call BS Ltd. and Fran-Kelly Co. Inc., both through Union. A few weeks earlier, Union broker Mr. Koenig was arrested at the border, stung in a scripted stock manipulation featuring his turncoat client Mr. Durante as a federal operative.
"
B.C. Securities Commission (C-*BCSC) - Street Wire.
BCSC-known EBT founder Neal indicted by grand jury
B.C. Securities Commission *BCSC
Wednesday January 22 2003 Street Wire.
Also Securities and Exchange Commission (U-*SEC) Street Wire.
by Brent Mudry
Offshore financier Terry L. Neal has been indicted on three tax evasion-related counts in a grand jury indictment handed down Thursday in his hometown of Portland, Ore. Mr. Neal has been indicted one count of tax evasion and two counts of making false statements to the Internal Revenue Service.
The grand jury indictment comes three weeks after Mr. Neal was arrested on Dec. 27 in Portland. Mr. Neal won release on $700,000 bail in a detention hearing on Jan. 9. (All figures are in U.S. dollars.)
In Count One, the United States government claims Mr. Neal filed a false 1994 personal income return in April, 1995, forgetting to report $297,000 in stock sales, $221,000 in capital gains and $1,500 in interest, stemming from his Vancouver accounts at brokerages C.M. Oliver and Yorkton Securities, and at Bank of Montreal. In Count Two, Mr. Neal allegedly stated he had "no" foreign bank or brokerage accounts, in his 1995 return, filed in April, 1996. Count Three relates to the same false statement in Mr. Neal's 1996 return, filed in October, 1997.
Meanwhile, Vancouver's best known money laundering account, Mr. Neal's Exchange Bank and Trust Inc., which also operates at the same branch of Bank of Montreal in Vancouver, has mounted a spirited defence to the first collection suit by the U.S. Securities and Exchange Commission against his bank's star client, career felon Ed Durante, the Mafia-linked fraudster.
On Nov. 4, the SEC launched a landmark bid in the Supreme Court of British Columbia to seize $17.53-million from Mr. Durante, now a federal operative, from Exchange Bank's frozen account at Bank of Montreal, as part of a $39.88-million default judgment won against Mr. Durante, his offshore nominees and EBT on Oct. 10 in U.S. District Court for the Southern District of New York. The Exchange Bank judgment includes $14.7-million in illicit Durante profits and $2.65-million in prejudgment interest.
This case relates to one of four stocks promoted by Mr. Durante: WAMEX Holdings Corp. After his arrest in mid-2000, Mr. Durante pled out and ratted on his Vancouver broker, Trevor Koenig of Union Securities, who in turn was arrested on the Labour Day weekend in 2001 and subsequently joined the choir. Barring any further details, Mr. Koenig faces sentencing Thursday in New York.
The SEC filed a second suit in Vancouver on Friday, the day after Mr. Neal was indicted in Portland on Thursday, stemming from another Durante promotion, U.N. Dollars Corp. This $2.35-million collection suit targets Mr. Durante, his offshore accounts and Mr. Neal's Exchange Bank and Trust.
Exchange Bank has now filed a broad defence, dated Jan. 3, in Vancouver. Vancouver lawyer Stephen Holmes, who has represented EBT since at least its account was frozen in April, 2000, seeks to reject the $39.88-million WAMEX judgment on various grounds.
In addition, Mr. Holmes claims the SEC has its numbers all wrong. "EBT says that the funds it has on deposit for Durante or the offshore entities at its account at the Bank of Montreal in Vancouver amount to far less than the sum of $14,700,000 (U.S.) claimed by the plaintiff by was of disgorgement," states the defence.
"Moreover, EBT says that it is entitled to a set off against any such funds in respect of its fees for account maintenance, review, accounting, legal, administration and other similar charges."
Left unexplained is who really owns this $14.7-million, which represents the bulk of the Vancouver account, if not Mr. Durante. Exchange Bank's defence makes no mention of how much Durante funds it claims to have, or the identities or even number of other clients who have significant funds in its dubious offshore account.
According to Mr. Holmes, Exchange Bank is merely a "private international bank" incorporated and licensed in the Republic of Nauru, the offshore enclave in which the bank's registered and records offices were maintained "at all material times."
"EBT denies that it carried on business at any material time in the Federation of St. Kitts and Nevis, although it admits that from time to time the Nevis American Trust Company Limited, a licensed trust company located in Nevis, British West Indies, provided some accounting and administrative services for EBT." (Mr. Neal also owns Nevis American Trust, which serves as Exchange Bank's parent, if the IRS is to be believed.)
Mr. Holmes hopes to persuade a Canadian judge to reject the New York judgment, as he claims Exchange Bank, a relief defendant, had no clue about the New York action until after the judgment was granted, and it was not even properly served. "EBT says that it did not receive notice of the New York action and was not aware of it, and was thereby denied the opportunity to defend the proceedings against it. As a consequence thereof, EBT says that this court should not recognize the judgment."
Court documents also suggest some lucky Canadian judge will get a crash course in the murky world of offshore accounts. The case is set for hearing from Feb. 24 to 27.
"EBT says that at all material times, it did not conduct business, and had no presence, within the jurisdiction of the New York court. It was not alleged in the New York action that EBT had done any act in relation to the subject matter of the complaint in New York or indeed in the United States of America," states Mr. Holmes.
(According to scores of other documents, some connections to New York are that EBT's star client Mr. Durante, his promoter-associate Roger DeTrano, WAMEX, its former chief executive officer Mitchell Cushing and its former chief administrative officer Russell Chimenti are all based in New York, and Messrs. Durante, Koenig, DeTrano, Cushing and Chimenti are all in jail or custody in New York.)
Meanwhile, Mr. Neal's star client Mr. Durante offered his explanation of how Exchange Bank works last summer, in a June 6 affidavit filed in court. "My name is Edward A. Durante and I am also known as 'Ed Simmons,'" states the fraudster, noting the bogus name he used in WAMEX and other penny stock promotions.
"Using the alias, 'Ed Simmons,' I incorporated several entities located in Nevis, British West Indies: Berkshire Capital Partners Inc., Dottenhoff Financial Ltd., Galton Scott & Golett Inc. and Commonwealth Associates Ltd.," states Mr. Durante. "I hold the certificates of incorporation issued by the Island of Nevis Office of the Registrar of Companies for each offshore entity."
"When I incorporated the offshore entities, I hired Gillian Hobson as my nominee for the entities. Hobson was listed as the sole incorporator on the Articles of Incorporation for the offshore entities and Hobson signed the same. Hobson was listed as the sole director and holder of bearer shares," states Mr. Durante.
Corporate records in Nevis show Berkshire, Dotenhoff, Galton and Commonwealth were all incorporated on Feb. 12, 1999. The busy Ms. Hobson also served as Mr. Neal's front for Exchange Bank and Trust, which operated from the same crowded postbox address in Nevis as Nevis American Trust and many of Mr. Durante's numerous offshore nominees.
"Although Hobson's name appeared on the Articles of Incorporation, she did not control the offshore entities. Rather, I controlled the offshore entities through Hobson," explains Mr. Durante.
"During 1999 and 2000, I engaged in trading of WAMX common stock through brokerage accounts in the names of the offshore entities at Union Securities, a Canadian broker-dealer located in British Columbia. I directed Hobson to sign a form authorizing 'Ed Simmons' to trade in the accounts for Dottenhoff, Galton and Commonwealth Associates and to state on a form for Berkshire that I was the investment adviser on the account," states Mr. Durante.
Court-filed records show Union opened the Dottenhoff, Commonwealth and Galton accounts on Oct. 25, 1999. While Ms. Hobson's signature appears to be legitimate, it is not clear if anyone in Union's compliance department noticed that the official "specimen signature" of Mr. Simmons was for a non-existent person.
Although Union's account opening form for Berkshire Capital notes Mr. Durante's involvement, it is not clear how much, if any, due diligence the brokerage did to check him out. In 1975, Mr. Durante was convicted of felony grand larceny in the U.S. In 1984, he was barred by the National Association of Securities Dealers from any association with any of its members and fined $5,000 for misrepresenting a municipal bond transaction and some discretionary trading. In 1991, the unrepentant Mr. Durante was sentenced to two years in a state penitentiary after he pleaded "no contest" to several counts of grand theft and forgery, stemming from losses suffered by several investors and business partners.
In 1997, Mr. Durante was charged with several counts of fraud in an investigation by the Federal Trade Commission of X.CLUSIV Vending, a dubious vending machine promotion. Mr. Durante faces trial in California on this matter. More recently, in August, 1999, a few months before Union opened the offshore Durante accounts, Mr. Durante popped up as a target of yet another federal agency, the SEC, in a civil complaint regarding the trading in shares of PSA Inc. and other companies in 1998.
In his affidavit, Mr. Durante also describes how he linked up with Exchange Bank and Trust.
"Terry L. Neal is an officer or director, and Hobson is an employee, of EBT. I met Neal through the United States' representative of EBT, Aaron Young," states Mr. Durante.
"Neal assisted me in naming the offshore entities, but Neal did not control, not has he ever had any interest in, the offshore entities. As associates of EBT, Neal and Hobson had the ability to transfer assets in and out of the offshore entities, including EBT's fees for administrative services."
Mr. Durante further confirms that he also directed wire transfers of "assets" among the offshore entities, himself and Union Securities through Exchange Bank. "During 2000, I transferred a portion of my trading profits from my trading of WAMX stock to an account at EBT. The funds I deposited into this account were segregated into subaccounts at EBT in the names of the offshore entities."
"I first learned that EBT holds my trading profits in the names of the offshore entities in an account at Bank of Montreal in Vancouver, British Columbia, when I received a copy of an order freezing the account during the spring of 2000," states Mr. Durante.
In another Durante development, regulatory filings show Mr. Durante was involved in another penny stock promotion, not targeted by authorities, which featured Union Securities -- Interspace Enterprise Inc. -- the same month that Exchange Bank's money laundering account was frozen.
According to Interspace's filings, Berkshire Capital entered into a change-of-control on April 12, 2000. (Mr. Durante was not noted.) Two days later, on April 14, Berkshire, represented by Ms. Hobson, abruptly cancelled out. "We regret at this time it is not possible to go forward in a mutually satisfactory fashion and wish you much success with your plans in the future," stated Ms. Hobson.
Within three days, by April 17, the deal was back on track, with Prudential Overseas Company Ltd. having replaced Berkshire Capital. (Other SEC records show Prudential was also controlled by Mr. Durante, as a shell in another offshore enclave, the Turks and Caicos Islands.) Interspace's filings show a "Magaus" Timmerby as president of Prudential Overseas, although other filings suggest his proper name is Magnus Timmerby.
While a number of Interspace's private placement investors favoured such respected national houses as Morgan Stanley, UBS Paine Webber and Salomon Smith Barney, several took a shine to tiny Union in Vancouver. In May, 2001, an account called Progressive Enterprises filed to sell amounts of 225,000 shares and 112,500 shares through Union.
Four months later, that September, two other accounts filed to sell identical amounts of 716,900 shares, Turbo-Call BS Ltd. and Fran-Kelly Co. Inc., both through Union. A few weeks earlier, Union broker Mr. Koenig was arrested at the border, stung in a scripted stock manipulation featuring his turncoat client Mr. Durante as a federal operative.
bmudry@stockwatch.com
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