Canadian Advantage Limited Partnership (CALP)
so CALP ll filed a 144 for shares in VFIN very interesting
MARK VALENTINE: GO DIRECTLY TO JAIL
The long-arm of the FBI has reached out and grabbed Mark Valentine. Valentine was arrested at the Frankfurt, Germany airport on August 14th; the result of a two-year investigation by U.S. and Canadian law enforcement agencies.
The arrest marks the latest dark chapter for Valentine, whose securities license recently was suspended by the Ontario Securities Commission (OSC). The OSC is examining Valentine’s conduct while serving as Chairman of Canadian brokerage house, See Thomson Kernaghan & Co. Ltd.– Not Exactly Valentine’s Day; and Thomson Kernaghan & Co. Ltd. – Time To Giddy Up and Go.
Stock Patrol started asking questions about those activities in January 2001, when we first noticed that Valentine’s firm, Thomson Kernaghan, had been receiving millions upon millions of shares of Infotopia, Inc. at a deep discount. Those shares were quickly registered, putting Thomson Kernaghan in a position to dump them while Infotopia was projecting profits that were largely illusory, and acquisitions that never came to pass. See Infotopia – Bye Bye Shares.
Now Valentine is facing the possibility of a lengthy jail term as was one of 58 defendants charged in the FBI’s sting operation - dubbed “Bermuda Short.” Other named defendants included stockbrokers, promoters and public companies.
Prosecutors say that the “corporate terrorists” participated in fraudulent schemes – set up by the FBI - involving the sale of $200 million in securities of twenty three publicly traded companies. According to the United States Attorneys Office, no members of the public lost money because the schemes were carefully controlled by the government.
The charges stemmed from two separate, but related, operations. In the first, an FBI agent posed as a trader for a fictitious foreign mutual fund. Using that guise he enticed corporate executives and stockbrokers to sell him large blocks of stock at above-market prices, resulting in huge profits for the sellers. In return, the sellers agreed to pay secret kickbacks to the agent.
In a second scheme, an FBI agent and a member of the Royal Canadian Mounted Police posed as members of a Columbian drug cartel who wanted to launder drug money. They convinced several of the defendants to launder a total of $1.4 million.
The charges against Valentine, and others (including Paul Lemon and Andrew Proctor, directors of Voyager Group, Inc, a Bermuda-based financial services firm) involved a scheme to dump shares of three OTC Bulletin Board companies that Valentine allegedly controlled: C-Me-Run Inc., SoftQuad Software Ltd. and JagNotes.
Authorities say that Valentine and Lemon conspired to sell $29.4 million worth of stock in those three companies through the FBI’s phony mutual fund trader, agreeing to pay kickbacks of $7.8 million to the trader, and his colleagues.
Infotopia investors already are familiar with JagNotes. Valentine and Thomson Kernaghan managed to steer funds toward JagNotes by arranging for Infotopia to purchase “airtime” for its infomercials on that Company’s marginally existent financial news network.
According to the criminal complaint, Valentine and other defendants also persuaded stockbrokers to manipulate stock prices by convincing their customers to buy securities. Those stockbrokers were promised kickbacks in return for their efforts.
U.S. officials intend to move forward with efforts to extradite Valentine. This time his trip is not likely to end at the Frankfurt airport. (8/19/2002)
THOMSON KERNAGHAN & CO. LTD. – TIME TO GIDDY-UP AND GO
“Giddy-up. Let’s get going,” is how former Thomson Kernaghan Chairman Mark Valentine used to exhort his trading team. Now Valentine is gone, banished by the brokerage firm on June 13th, and later suspended by Canada’s Ontario Securities Commission (OTC). See Not Exactly Valentine’s Day and On the Mark.
Thomson Kernaghan & Co. Ltd. isn’t far behind. The brokerage firm that helped finance Infotopia, Inc. (Pink Sheets: IFTA), Joshua Tree Construction, Inc. (OTCBB: JTRE) and a lengthy list of other over-the-counter companies, was suspended by the Investment Dealers Association of Canada (IDA) on July 11th and placed under bankruptcy protection one day later.
The IDA suspended Thomson Kernaghan after discovering that the firm, which had run out of capital, no longer had sufficient cash “to ensure that securities transactions could be completed promptly and effectively.” Spurred on by this discovery, on July 12th the Canadian Investor Protection Fund obtained an order from the Ontario Superior Court appointing Ernst & Young as trustee in bankruptcy for Thomson Kernaghan.
These latest events began to unfold as Thomson Kernaghan was winding down operations and transferring customer accounts to other firms. The firm’s demise followed charges by the OTC that Valentine had created “a culture of conflict and non-compliance” at the brokerage through a series of complicated investments.
Valentine, whose questionable activities allegedly included his involvement in so-called “death spiral” financing for struggling companies, was initially suspended from trading securities on June 18th. That suspension now has been extended until January 31, 2003. Until then, he is barred from trading any securities, except for stocks listed on the New York Stock Exchange and the Toronto Stock Exchange that he trades for his own account. That means he can’t dabble in NASDAQ and Over-The-Counter stocks, which have been the focus of his questionable activities. (7/15/2002)
ON THE MARK
It didn’t take long. On June 17, 2002 the Ontario Securities Commission (OSC) issued an order suspending the license of Mark Valentine, the former Chairman of Toronto-based brokerage firm Thomson Kernaghan & Co. Ltd. That initial Order also barred Valentine from trading securities. (See Not Exactly Valentine’s Day).
The suspension was scheduled to last fifteen days – unless the OSC took further action. It did. On June 24th the OSC filed a series of charges, alleging that Valentine had created ”a culture of conflict and non-compliance” at Thomson Kernaghan through a series of dubious investments. Central to the allegations are a series of transactions orchestrated by Valentine in late March 2002, some of which allegedly were calculated to benefit Valentine at the expense of his clients and Thomson Kernaghan.
Valentine was suspended by Thomson Kernaghan on June 13th, after the brokerage firm’s internal investigation raised concerns about his conduct.
The OSC Order focuses on a series of transactions in March, including suspicious stock transfers involving a company called Chell Group Corp. and Canadian Advantage Limited Partnership (CALP), one of the offshore funds controlled by Valentine. Chell Group is owned by Cameron Chell, “a known associate of Valentine,” and a former registered representative, whose license was suspended by the Alberta, Canada Stock Exchange in 1998.
The March transactions included the transfer of over 1 million shares of Chell Group to Valentine, for no cash. Although Valentine claims that Chell gave him the shares to pay off outstanding debts, the OSC’s investigation did not find adequate documentation to support the existence of those debts.
Valentine was involved with other questionable transactions cited in the OSC Order, including $1.3 million that CALP paid to a Bermuda-based offshore company in exchange for an apparently worthless debenture.
The OSC Order also cites Valentine’s involvement in so-called “death spiral” financing for Jawz, Inc., an Internet-related, NASDAQ-listed company founded by none other than Cameron Chell. As part of this arrangement, funds controlled by Valentine “acquired floorless warrants to purchase shares of JAWZ whereby the funds could receive increasing numbers of JAWZ shares as the price declined.” As the OSC pointed out “[t]his type of financing creates a strong incentive for the … funds to sell securities short in a relatively illiquid market.” That short selling can, in turn, depress the stock price, and thereby increase the number of shares that the funds receive when they convert the debentures.
A conflict was created when Thomson Kernaghan urged customers to buy shares of Jaws, even as Valentine’s funds were shorting the stock. The brokerage firm did not tell its customers that JAWZ had obtained the “death spiral” financing, or that the warrants were held by another Thomson Kernaghan client, which was controlled by the brokerage firm’s Chairman, Valentine.
A hearing has been scheduled for July 2nd, at which time the OSC will attempt to extend the suspension orders against Valentine.
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