B.C. Securities Commission - Street Wire
BCSC Eron figure Graye pled guilty in New York, again soon
B.C. Securities Commission *BCSC
Shares issued 0 May 21 2002 close $.000
Tuesday May 21 2002 Street Wire
by Brent Mudry
Controversial offshore Vancouver accountant Michael K. Graye has quietly pled guilty to a Mafia-linked penny stock manipulation in New York and is expected to plead guilty soon in an unrelated case in Toronto, where he will emerge as the star Crown witness against his co-defendant, Toronto lawyer Thomas Baker, in the $18-million Seven-Up Canada offshore tax fraud and money laundering case, which dates back to 1987.
Mr. Graye has been in custody since his arrest Oct. 4 at Buffalo Niagara International Airport on a sealed United States criminal complaint, just after arriving in New York from Canada. The accountant, who boasts of an address in the secretive offshore haven of Monaco, has been denied bail. Co-accused Roger DeTrano, a New York penny stock promoter, was nabbed the day earlier. The pair were snared in sting featuring career fraudster and Mafia associate Ed Durante. Vancouver broker Trevor Koenig of Union Securities, snared in a parallel but separate Durante sting, pled guilty in late February.
In the U.S. case, Mr. Graye and Mr. DeTrano were snared in a similar sting to that of Vancouver penny stock broker Trevor Koenig of Union Securities, who has been in custody since his arrest on the Labour Day weekend at the border near Vancouver. U.S. authorities claim Mr. Graye and Mr. DeTrano conspired to manipulate the shares of Mr. Graye's Vinex Wines Inc. through a series of secretive offshore accounts in the British Virgin Islands and the Philippines, between January, 2000, and last July.
As FBI agents listened in, thanks to a body-wired co-operating witness, Mr. Graye bragged that his Vinex shares would be registered in the "abyss" to a "BVI corporation." He also boasted that the employees at the BVI company "had been doing this for a long time" and when contacted by anyone asking about him, they "would say that they did not know Michael Graye."
New York prosecutor Michael Kim confirmed to Stockwatch Friday that Mr. Graye pled guilty March 27 in New York to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years. Mr. Graye was recently escorted by the U.S. Marshalls Service to Canada, where he is currently a temporary guest in a Toronto jail. A New York sentencing date has not yet been set, pending Mr. Graye's return from Canada.
"It is anticipated he is going to plead to the Canadian charges," Toronto Department of Justice lead prosecutor Marlene Thomas told Stockwatch. "We have to send him back to New York City by about July 31."
The Crown alleges Mr. Baker and Mr. Graye effectively looted $18-million in a bust-out of four companies they took over in controversial leveraged buyouts in 1987 and 1988: Seven-Up Canada, Agnew Shoes and Pathfinder International, all in Vancouver, and Vancouver Wharves in North Vancouver. Canadian authorities claim Mr. Graye and Mr. Baker siphoned off $18-million from the companies through an offshore account, Mogul Holdings in the Cayman Islands, laundered the money back into Canada, embarked on a big spending spree including ski chalets at Whistler, sports cars and mansions in Toronto, and repeatedly forgot to tell the tax man about it.
After an extensive investigation, Mr. Graye was arrested in December, 1996, in Vancouver by members of the RCMP Commercial Crime Section and promptly whisked off to Toronto for his first court appearance before being released on $1-million bail. Controversial former Vancouver lawyer Martin Chambers is credited with being instrumental in persuading Eron Mortgage head and master fraudster Brian Slobogian to loan Mr. Graye $300,000 of Eron investors' funds to help spring the accountant, a heavy Eron borrower. (Although extensive testimony during the British Columbia Securities Commission's hearing into the $150-million Eron scandal detailed Mr. Chambers's Eron dealings, including his frequent use of an office within Eron's offices, his lawyer David Lunny vigorously protests the linking of his fine client to the Eron affair.)
After the biggest RCMP commercial crime investigation in B.C. history, the police recently charged Mr. Slobogian and second-in-command Frank Biller on a host of fraud-related charges. Both are out on bail, Mr. Biller having been bailed out by former Vancouver Canucks enforcer Dave (Tiger) Williams, now a Howe Street stock promoter. Both Mr. Slobogian and Mr. Biller remain presumed innocent until proven guilty beyond reasonable doubt.
In the Toronto case, Ms. Thomas dropped the bombshell on Mr. Baker, and his defence lawyer Brian Greenspan April 29, when she informed Madam Justice Patricia German of Ontario Superior Court that Mr. Graye was expected to testify for the Crown. The Crown provided disclosure materials to Mr. Greenspan the same day. Mr. Graye has not yet tendered a guilty plea in the Toronto case.
The distressing development came in the middle of the Baker trial, after an estimated 30 days of evidence have been presented since it began March 5. (Mr. Graye was severed from the Toronto trial months ago, due to his arrest and detention in the unrelated New York case.) Ms. Thomas and Mr. Greenspan attended court Wednesday to give an update on the case, as the defence lawyer scrambles to prepare for this surprise shift and discover all he can about Mr. Graye.
The Toronto trial is expected to resume June 17, and Mr. Graye is expected to take the witness stand a week later, on June 24. He will likely testify for four days on direct examination by the Crown, then face a gruelling grilling from Mr. Greenspan.
The blockbuster Baker trial has much ground left to cover. The Crown expects to have four to six weeks of witnesses, besides Mr. Graye, left to call. As the trial will sit in July but take the month of August off, it will likely stretch well into the fall, probably until Thanksgiving. Of course, the Baker-Graye has been marked by several big surprises already, and estimates of such trial durations are an educated guess at best. In addition, Mr. Greenspan has not yet brought his motions, which is usually done before such a trial starts.
The Toronto trial entourage had been set to travel to San Diego this week for a foreign commission, to hear testimony from a Crown witness, who has not yet been identified. The witness is not an official of a financial institution, a former employee of Mr. Graye or Mr. Baker, or an unindicted co-conspirator, but someone who knows a fair bit about Mr. Graye's past affairs. This San Diego trip has been postponed while Mr. Greenspan prepares.
The Canadian court is also awaiting a decision from the Grand Court of the Cayman Islands on a much more important foreign commission. If approved, the Canadian contingent will set up court on Grand Cayman island for about a week, taking documentary evidence and hearing "viva voce," or in-person, testimony from representatives of three different entities, presumably offshore trustees or related financial institutions. The application has been before the Cayman court on several dates, but the offshore court has not given any expected date for its decision. |
