AFRAYEM, THE BOYS AT GENEMAX (GMXX)SEEM PURE AS THE DRIVEN SNOW, BUT I'VE GOT SOAP AND YOU NEED A BATH. WHY LOOK. THERE IS GRANT ATKINS, MARCUS JOHNSON AND GORDON BRENT PIERCE FROM GENEMAX CREATING SHAREHOLDER VALUE FOR INVESTORS IN ULTRA PURE WATER SYSTEMS.
Ultra Pure Water Systems (Canada) Inc - Street Wire
Bad accounts nail broker
Ultra Pure Water Systems (Canada) Inc UPW
Shares issued 9,550,000 Mar 14 1995 close $ 1.20
Friday April 21 1995 Street Wire
LAWSUIT OF MERIT
by Brent Mudry
A revealing lawsuit may wash away any lingering illusions over the affairs of Ultra Pure Water Systems. Merit Investments claims the promotion was a well-orchestrated manipulation from the start. A suit filed Wednesday in the BC Supreme Court confirms street rumours the brokerage took a million-dollar hit on the deal. Merit is suing Stephen Taub, a broker still working in its Toronto head office, for $960,000. The firm claims lesser amounts from Ultra-Pure's alleged co-conspirators. If Merit was slow to uncover the scheme, it wasted little time filing the suit. The Alberta stock exchange halted the stock on March 14, and suspended trading on April 3.
Merit's suit traces an alleged wash trading scheme back to Ultra Pure's inception in 1993. The firm claims Ultra Pure president Grant Atkins and Louis Szabo, of the company's Bellingham-based associate, XXth Century Manufacturing, carried out the plan. Harvey Gorsuch was the alleged mastermind, directing several colleagues. Mr Atkins and Mr Gorsuch previously served as directors for Brent Pierce's Cost-Miser Coupons. Mr Pierce's name does not appear on any public documents for Ultra Pure.
The group launched Ultra Pure last spring after a name change of Northern Acquisition, a junior capital pool. Ultra Pure targeted the home water purification market in the US, worth a reported $1.6 billion. Mr Taub opened an account in April 1994 for International Market Trend of Vancouver, headed by Mr Gorsuch. The broker joined Merit just over two years earlier.
A string of other key players opened up Merit accounts soon after, led by XXth Century, Mr Atkins and his brother Dean. Newport Capital of Victoria and Jensen Croft Holdings, registered in The Turks and Caicos Islands in the British West Indies, followed. Both show Lloyd Rodney as the sole director, officer and employee. Jensen Croft and Mr Rodney share the same US post box in the border town of Blaine. Mr Taub also opened accounts for Ultra Pure directors Roy Hunter of Toronto and Marcus Johnson of Bellingham.
Ultra Pure paid $750,000 to Amero-Pacific Investments last May in a royalty deal. Amero-Pacific is also based in The Turks and Caicos. By this time, the stock was $1.85, up from $0.49 two months earlier. Merit claims the group created the illusion of market activity by trading stock back and forth through accounts in several other brokerage houses. Mr Gorsuch allegedly directed the scheme, trading for Grant Atkins and Mr Johnson's accounts. Mr Hunter also followed his instructions.
A third Turks and Caicos transaction triggered alarm bells at the ASE, which halted trading on March 14. Two days later, Mr Atkins reported a proposed $7 million private placement to Kanapali Investments, the third offshore entity. The ASE did not respond to the favourable news. The last trade was at $1.20, down from the stock's November high of $2.15. The exchange suspended Ultra Pure on April 3, leaving Mr Gorsuch and Mr Atkins' group with debit balances totalling $1,031,700.
ASE surveillance chief Tim Daly declined comment, citing the sensitivity of the case. "Our investigation is continuing," he notes. Over at Merit, the situation is receiving the full attention of top management. "All I've been doing is putting some papers together for various people," the firm's compliance officer, Mike Painter, explains. Merit executive v-p Jeff Olin is heading the internal investigation, in conjunction with chairman Barry Kasman.
Ultra Pure Water Systems (Canada) Inc - Street Wire
Brokers clobbered by not-so-pure promoters
Ultra Pure Water Systems (Canada) Inc UPW
Shares issued 9,550,000 Mar 14 1995 close $ 1.20
Thursday April 25 1996 Street Wire
PURE WATER -- DIRTY STOCK
by Brent Mudry
Recently released court documents reveal that Merit Investments' million dollar loss in an alleged fraud and stock manipulation scheme involving Ultra Pure Water Systems is just the tip of the iceberg. A total of seven brokerage firms were left with $2.36 million in unpaid debits when the stock was halted in the middle of its promotion last spring, according to a detailed Alberta Stock Exchange investigation. The probe confirms that controversial promoter Gordon Brent Pierce served as the alleged behind-the-scenes mastermind of the scheme, while Vancouver brokers Daniel and David Hunter played an introductory role which led to Ultra Pure's formation. In addition, the case has generated accusations, unsubstantiated to date, that brokers were given free shares in return for their roles in placing the stock with their clients. "There are allegations all over the street of broker inducements," notes a police officer investigating Ultra-Pure's affairs. One broker has already been fined $30,000 for the stock manipulation, while the Toronto Stock Exchange is currently investigating the conduct of another broker.
The commercial crime section of the RCMP recently capped a 13-month criminal investigation of the case with a coordinated series of searches of 13 brokerage firm offices in Vancouver and Toronto. The searches, aimed at seizing client and trading records concluded on April 4. The brokerages, which all cooperated with attending officers, included Merit, CM Oliver, Whalen Beliveau, Canaccord Capital, Yorkton Securities, Union Securities, Brink Hudson & Lefever, Georgia Pacific Securities, Global Securities, Pacific International Securities, Wolverton Securities and CT Securities Services. No brokers have yet been named as targets of any police investigation.
The ASE's investigation reveals that CM Oliver's Vancouver office took an $803,500 loss on unpaid debits from Ultra-Pure insiders and associates. This ranks the brokerage a close second behind Merit Investments' Toronto office, which lost $941,200. The next biggest loser was Whalen Beliveau, with a total unpaid debit of $235,400. Yorkton edged out Union for fourth place, with losses of $147,300 and $138,600 respectively. First Canada Securities and Pacific International trailed far behind, with losses of about $52,000 and $45,300 respectively. Canaccord and the other brokerages managed to emerge from the halted promotion with no losses. The criminal investigation was launched after Merit and First Canada filed complaints to the RCMP last spring, soon after the brokerages learned of their losses. CM Oliver added its own allegation of fraud three months ago. The RCMP note that Yorkton, Union and Pacific International all declined to file any criminal complaints in the matter.
The Ultra Pure saga began to unravel soon after the ASE promptly halted trading in March 1995 amid a growing wave of debits at member firms. The RCMP opened their own investigation on March 27, two weeks after the trading halt. "It will probably be quite a scandal when all this comes out," says former ASE investigator Barbara Fraser. Ms Fraser notes that Mr Pierce's involvement first came to light in a Stockwatch article in April 1995, which was based largely on a civil suit filed by Merit in the case. The civil litigation made no mention of Mr Pierce's involvement. "The individuals behind it were very much hidden. . . they just didn't show up," notes one regulator, describing Mr Pierce's well-camouflaged involvement in Ultra Pure.
The alleged fraudulent wash-trading and stock manipulation scheme traces back to Ultra Pure's inception in 1993. In its civil suit, Merit claims Ultra Pure president Grant Atkins and Louis Szabo, of the company's Bellingham-based associate, XXth Century Manufacturing, carried out the plan. Harvey Gorsuch was the alleged mastermind, directing several colleagues. Mr Atkins and Mr Gorsuch previously served as directors for Mr Pierce's Cost-Miser Coupons. Mr Pierce's name does not appear on any public documents for Ultra Pure. In a separate case, the BC Securities Commission banned Mr Pierce for 15 years from acting as a director of officer or serving in any other role for a public company. The ban became effective in June 1993, two months after the Vancouver Sun exposed Mr Pierce's involvement in Cost-Miser, which was in violation of a BCSC temporary restraining order.
According to court-filed documents, Stephen Taub, formerly of Merit, was the key broker for the Ultra Pure insiders. Mr Taub left Merit soon after the hefty debit was uncovered, and he joined Brant Securities, another Toronto brokerage firm. The RCMP first interviewed Mr Taub the day after his employer made its complaint to the police. Mr Taub was cooperative, and helped trace out his knowledge of the Ultra Pure affair. According to Mr Taub, he was introduced to Mr Gorsuch and Mr Atkins in mid-1993 by broker-brothers Dan and Dave Hunter, who then worked in Canaccord's Vancouver office. Dave Hunter left Canaccord in January and he has not yet renewed his registration with the VSE.
Mr Szabo helped trace Ultra-Pure's origin back further. The 72-year-old lifetime engineer founded XXth Century (Canada) in 1980 to develop water purification devices. Mr Szabo told police that he first met Mr Pierce in late 1990 or early 1991, and Mr Pierce offered to develop a public company for the technology. Mr Pierce told Mr Szabo that he knew Dan Hunter, who could help find a public shell in which to vend in the technology. Two years later, in the spring of 1993, Mr Pierce allegedly called Mr Szabo to tell him that Dan Hunter had found the right shell: Northern Acquisition, an ASE junior capital pool. According to Mr Szabo, as the year progressed, he met often at his office with Messrs Pierce, Atkins and Gorsuch, to develop financial and business plans.
According to the initial structure allegedly provided by Mr Pierce, the insiders would control 8.9 million of Ultra-Pure's 10.5 million outstanding shares, counting planned private placements and options, as well as earn-out and escrow shares. In this initial plan, the Hunters and their associates were the largest shareholders, with four million shares. Mr Pierce would beneficially own 2.14 million shares and Mr Szabo would own 1.92 million. Mr Atkins and Mr Gorsuch would each own 313,700 shares. Mr Szabo claims he agreed to place his shares under Mr Pierce's control for a year. (The engineer also claims no knowledge of a XXth Century USA account opened with Mr Taub at Merit. The account ostensibly bears the signature "Louis Szabo," but Mr Szabo claims he never signed any such form.)
Ultra Pure began trading on the ASE in March 1994, after a name change from Northern Acquisition. A pre-public private placement of 4.25 million units at $0.20, equal to 8.5 million shares after exercise of warrants, boosted Ultra Pure's total outstanding shares to 15.46 million. Four offshore accounts each bought 900,000 shares in this placement. Jensen Croft Holdings was registered in the Turk and Caicos Islands in the British West Indies, but it used PO Box 546 in St Helier, Channel Islands as its address. This Ryco Trust post box account has been used by participants in private placements in several other VSE promotions, including mysterious Arakis Energy shareholder Anthem International.
Ultra Pure's other offshore investors include Seacon Global Services of Ireland, Clip Foundation of Liechtenstein and Las Mariposas of Grand Cayman Island. The ASE investigation revealed that Mr Gorsuch and Mr Atkins controlled all four of these accounts. The final cornerstone of Ultra Pure's startup came in May 1994, when the company paid Amero-Pacific Investments $750,000 in a royalty deal. Mr Pierce is alleged to control Amero-Pacific, another Turks and Caicos company. By this time, the stock was $1.85, up from $0.49 two months earlier. Merit claims the group created the illusion of market activity by trading stock back and forth through accounts in various other brokerage houses. Mr Gorsuch allegedly directed the scheme, trading for Mr Atkins and numerous other accounts.
The stock hit a peak of $2.15 in November 1994, but everything began to unravel a few months later. One of the first danger signs came on January 30 1995, when a $104,000 cheque that CM Oliver deposited from Amero-Can bounced. Mr Gorsuch allegedly later sent a terse threatening note to CM Oliver broker Nolan Moss. "Brokers face several problems due to the company's trading history if an investigation is commenced," the note stated. "Brokers acceptance of UPW stock for efforts will be exposed through investigation," the message added. In addition, the note alleges assorted other irregularities by unnamed brokers in connection with Ultra Pure. Under the note's "Plan B- Proposal," the writer suggested that an "acceptable resolution" of the debit problem would save everyone from facing an investigation into the allegations.
The situation over at Merit was more serious. In early March, Mr Taub realized that he faced debits of about $700,000 in the Ultra Pure group's accounts. The brokerage received a $70,200 cheque from one account as partial payment, but the cheque was stopped. A replacement money order was received, but more stopped cheques followed. The ASE stepped in to halt trading on March 15 1995. Ironically, it was one of the last alleged brokerage "victims" who responded quickest. First Canada opened an account for numbered company controlled by Mr Gorsuch at the end of February. Soon after the halt, office manager Douglas Corrigan, facing a $52,000 debit, got on the phone. Mr Corrigan called Mr Moss at CM Oliver, who revealed he had a $600,000 debit. The First Canada manager then called Yorkton broker Mickey Magid, who said he faced a $90,000 debit. Mr Corrigan's next call was to Merit chairman Barry Kasman, who told him of the bad cheques that Merit had received. Twelve days later, Mr Corrigan and Mr Kasman called the RCMP.
Although several investigations are continuing, Mr Moss is the first individual to face any penalties from the Ultra Pure saga. The broker, who remains at CM Oliver in Vancouver, agreed on April 8 to a $30,000 fine imposed by the ASE. Mr Moss must also disgorge $3300 in commissions, face "strict" supervision for six months and refresh himself with the official handbook of rules for brokers. The broker agreed that he engaged in deceptive and manipulative trading and handled five dozen trades for Mr Gorsuch, without proper authorization.
Mr Taub, who capped his three-year career at Merit with the million dollar debit, has yet to face any disciplinary proceedings. The ASE has referred its file on the Toronto-based broker to the TSE, which is still conducting its own investigation. Mr Taub has little to say about any secret commissions that brokers may have received in the Ultra Pure deal. "No comment," the broker told a reporter Wednesday. The RCMP have not yet filed any charges in the case, but no brokers are believed to be under investigation.
The defendants in the civil suit, including Mr Taub, deny virtually all of the substantive allegations made against them, in statements of defence filed in court. Mr Gorsuch used a doctor's note to explain his inability to attend a deposition in front of Merit's lawyer last October. The doctor noted his patient had encountered problems with his memory and concentration. "He is undergoing tests to determine the cause of his symptoms," the physician added. George Angelomatis, Mr Gorsuch's lawyer, as well as Mr Pierce's, explained in an affidavit that his client had laryngitis and the flu, according to an associate of the promoter. "It is certainly one of the most interesting cases I've worked on," says an investigator.
Toronto Stock Exchange - In the News
Post says TSE acts on Ultra Pure. . . at last
Toronto Stock Exchange TSE
Wednesday January 29 1997 In the News
Also Ultra Pure Water Systems (Canada) Inc (UPW) In the News
The Financial Post reports in its Wednesday edition that stock promoter Harvey Gorsuch and insiders of Ultra Pure Water Systems cost brokerage house Merit Investment $852,000 in early 1995 after it was stuck with worthless shares in the company, according to the Toronto Stock Exchange. Reporter Dan Westell says the loss arose after broker Stephen Taub, who then worked for Merit, opened four accounts for Mr Gorsuch and associates, all of which Mr Gorsuch controlled, and three other UPW insiders. Shares bought for these accounts just before the Alberta Stock Exchange halted trading on March 14 1995 were never paid for. The TSE says that Merit has been unable to collect the money, even though it sued the participants. Mr Taub was fired on April 24 1995, because of the debits. The TSE has fined Mr Taub $50,000, charged him $10,000 toward the costs of the investigation and suspended him for a month. He now works for Brant Securities. Mr Taub violated TSE rules by not telling Merit that Gorsuch had offered him cheap warrants to sell UPW shares to clients, by not telling Merit he suspected UPW was being wash traded and by not telling Merit Gorsuch was running four apparently separate accounts. A TSE lawyer says the RCMP are investigating UPW trading.
B.C. Securities Commission - Street Wire
BCSC reveals key Stanhiser role in Vantage diversion
B.C. Securities Commission *BCSC
Tuesday September 26 2000 Street Wire
by Brent Mudry
California fraudster Gary Stanhiser succeeded in a highly suspicious asset diversion from Vantage Securities Inc. in March of 1998, a month before the troubled Vancouver brokerage was shut down by the British Columbia Securities Commission, according to commission investigation documents recently filed in court.
In a petition filed Sept. 11 in the Supreme Court of British Columbia, BCSC enforcement director Sasha Angus seeks a court order compelling two small Vancouver law firms, McCullough O'Connor Irwin and Cawkell Brodie, to comply with production demands issued in February of 1999, relating to detailed records of the dubious transfer of 800,679 shares of Advanced Wing Technologies Corp. The deemed, book or original value of the shares is not known.
The BCSC fined Mr. Stanhiser, a former Seventh Day Adventist pastor who fleeced his flock, $100,000 and imposed a lifetime ban in March for his role in masterminding an unrelated offshore private placement investment scheme in which investors lost at least $11-million. The regulator also fined Vancouver brokerage Canaccord Capital a total of $428,000 and Canaccord broker John Brian Johnston a total of $102,000 for their roles in Mr. Stanhiser's Excel affair.
In court-filed documents, the BCSC reveals the Vantage asset diversion has been under formal investigation since May of 1998, the month the troubled brokerage was assigned into bankruptcy.
"Staff of the commission was contacted by counsel for Vantage, Walsh & Co., a law firm in the city of Vancouver, in or about April, 1998, with respect to Vantage's concerns that some of its assets had been wrongfully transferred into another person's name, in or about March of 1998," states Mr. Angus in the petition.
In a freeze order dated April 9, 1998, made public this month, the BCSC notes that Vantage Securities, referred to as VSI, was the registered holder of 800,679 shares of Advanced Wing.
"On or about March 10, 1998, VSI received a request from Richard Bullock, the president of 539951 B.C. Ltd., to provide the shares to Dr. Paul Boyington (a.k.a. Dr. Paul Boynton) and Dr. Harvey Pheifel as security for a loan made by Boynton and Phiefel to 539951," states the freeze order, signed by BCSC chairman Doug Hyndman.
(Mr. Bullock has served stints as directors with various companies listed on the Vancouver Stock Exchange, and stepped in as a director of Ultra Pure Water Systems (Canada) Inc. in May of 1995, two months after the Alberta Stock Exchange halted trading in shares of the controversial promotion of Gordon Brent Pierce and referred the case to the RCMP for a 13-month criminal investigation. Mr. Bullock was not a target in the criminal or regulatory probes of Ultra Pure.)
In the Vantage freeze order, the BCSC notes that Vantage officials advised investigators that the brokerage had not given any security in response to the March 10, 1998, request by Mr. Bullock, and the brokerage's directors did not authorize the transaction.
Mr. Stanhiser stepped forward a week later. "On March 17, 1998, Ron Shimoda, the president of VSI, was approached by Gary Stanhiser and Kim Lieske, the vice-president of business development of VSI, to effect the transfer of the shares," states Mr. Hyndman.
The freeze order notes that while Mr. Shimoda declined to authorize the transfer until he received some advice on the transaction, the transfer mysteriously went through.
"On April 7, 1998, staff of the commission received advice from counsel for VSI that on or about March 17, 1998, the shares were transferred by AWTC (Advanced Wing) into Boynton's name on the basis of an assurance being given by Lieske that Shimoda would authorize the transfer. The authorization was never given by Shimoda," states Mr. Hyndman.
"The shares were delivered by VSI to the law offices of Getz Karby, legal counsel to Richard Bullock, with instructions that Bullock and Stanhiser have authority over the shares," states the commission. In the April 9, 1998, freeze order, the BCSC ordered that Getz Karby hold the shares, including any shares in the process of transfer by a transfer agent or otherwise.
In a subsequent investigation order dated May 28, 1998, Mr. Hyndman appointed BCSC investigators David Zwarich, George Coleman and Gerry Halischuk to handle a broad probe into Vantage's affairs. "The staff of the commission are concerned that assets of VSI may have been wrongfully transferred," states Mr. Hyndman in the order, which appointed the trio to investigate any transaction involving the assets of Vantage dating back to June 1, 1997.
After McCullough O'Connor Irwin and Cawkell Brodie declined to comply with formal production demands made by Mr. Zwarich in February of 1999, the BCSC headed to court two weeks ago in a bid for a court order.
The Feb. 16, 1999, demand to lawyer Douglas Irwin of McCullough O'Connor Irwin seeks copies of all correspondence, instructions, notes, memoranda or other records relating to the sale or transfer of shares of Advanced Wing by, or on behalf of, Vantage Securities from Jan. 1, 1998, to April 30, 1998.
The Feb. 15, 1999, demand to lawyer Ken Cawkell of Cawkell Brodie seeks copies of all directors' resolutions passed by the board of Vantage Corporate Group Inc. or Vantage Securities from Jan. 1, 1998, to April 30, 1998, and copies of all meeting minutes for all board meetings of the two Vantage companies in the same period. The demand also seeks copies of all directors' resolutions drafted by Cawkell Brodie for Vantage Corporate or Vantage Securities in the same period.
Both law firms have asserted solicitor-client privilege on behalf of the Vantage companies as their reasons for not complying with the production demands.
(Readers wishing more details of the Stanhiser case may refer to a Street Wire dated Sept. 20.) |
