TSX-V member Union's Koenig coming home soon
TSX Venture Exchange *TSX
Thursday January 23 2003 Street Wire
by Brent Mudry
Trevor Koenig, once one of Howe Street's best producers, will be coming home soon. The convicted penny stock broker, who ran a White Rock satellite branch for Vancouver brokerage Union Securities, was sentenced Thursday in New York to 22 months imprisonment and payment of $885,000 in restitution to victims of WAMEX Holdings Inc., the rig job featuring his New York Mafia-linked star client Ed Durante, who used offshore accounts to rig the stock. (All figures are in U.S. dollars.)
"It does send out a good message, particularly regarding intermediaries in the largely unregulated OTC Bulletin Board market," Steve Wilson, executive director of the British Columbia Securities Commission, told Stockwatch. "Hopefully this will serve as quite a deterrent."
Under American federal sentencing rules, Mr. Koenig, in jail since his border arrest on the Labour Day weekend in 2001, gets at-par credit for his time already served, less a 15-per-cent discount as a good-time credit. This reduces his sentence to 18.7 months, and with 17 months served to date, puts his release date at about March 15.
Mr. Koenig's $885,000 monetary penalty, the equivalent of $1.35-million (Canadian), will go to the United States Securities and Exchange Commission's restitution fund for WAMEX investors.
After several delays, Mr. Koenig faced a brief sentencing hearing late Thursday before Judge William Pauley III in United States District Court for the Southern District of New York in Manhattan. Assistant U.S. Attorney Michael Kim, the lead prosecutor, declined to comment, while Mr. Koenig's New York lawyer Stuart Rubin was unable to provide immediate comment.
Mr. Koenig, who will be sent back to Canada when he gets out of jail, also faces three years of supervised release, during which he is requested to refrain from breaking any laws. As a major condition during this period, Mr. Koenig must also continue co-operating with the U.S. government in criminal investigations.
As is usual in such cases, Judge Pauley was handed a file detailing just how helpful Mr. Koenig has been in ratting out other penny stock crooks and securities violators. Such files, however, are sealed to preserve the integrity of continuing and future investigations and prosecutions.
Judge Pauley is already familiar with Mr. Koenig's strong co-operation, having heard the Union broker sing last June in a criminal trial. The judge presided over the WAMEX trial, in which Mr. Koenig testified, and helped send to jail, Mitchell Cushing, the former chief executive officer of WAMEX Holdings. Mr. Koenig testified for several hours about New York Mafia-related trading in WAMEX shares he handled at the tiny and profitable, but troublesome, White Rock border branch of Union Securities. Two other WAMEX defendants: chief administrative officer Russell Chimenti and New York penny stock promoter Roger DeTrano, pled guilty earlier.
In the biggest known Mafia incursion into the Canadian securities industry in recent years, in June, 2000, Union Securities emerged as a major conduit in what U.S. authorities called the largest stock fraud case in U.S. history, an overall case involving more than 100 defendants, including at least 11 members and associates of five different organized crime families. Trading in shares of WAMEX was abruptly halted by the SEC, in conjunction with the predawn arrests of Mr. Cushing and Mr. Chimenti at their homes in the New York area. WAMEX shares last traded a $1.62 just before the raid, down from a peak of $22.50 that February.
In April, 2000, two months before WAMEX promoter Mr. Durante was snared in the FBI sweep, the BCSC, at the request of the SEC, abruptly froze an $18-million offshore bank account at the main downtown Vancouver branch of Bank of Montreal, belonging to Terry Neal's Exchange Bank and Trust. The regulators hit a gold mine. The SEC was chasing eConnect tout Stephen Sayre, a moonlighting tree trimmer, and within weeks, BCSC investigators linked EBT to a number of securities violators, notably Mr. Durante, who used the account as a money laundering conduit for proceeds of dubious stock trading through a series of Vancouver brokerages.
Despite the account freeze, the FBI arrests and mounting securities regulations, Mr. Koenig continued doing business with Mr. Durante, who had rolled over and agreed to rat on his associates as a federal informant. In the fall of 2000, Mr. Koenig, WAMEX promoter Mr. DeTrano and former Vancouver offshore accountant Michael K. Graye were all snared in scripted FBI stings featuring Mr. Durante. The criminal complaints remained sealed until Mr. Koenig was arrested in late August, 2001, and Mr. Graye and Mr. DeTrano were arrested that October. All three subsequently pled out and co-operated.
Mr. Koenig's $885,000 contribution to the WAMEX restitution fund is overshadowed by the $39.88-million the SEC hopes to collect from Mr. Durante in the WAMEX case. The U.S. regulator recently launched a landmark bid to seize $17.53-million from Mr. Durante from the frozen EBT account at Bank of Montreal, although Mr. Neal claims the felon-turned-fink had just a fraction of this amount on deposit with his fine offshore bank.
In related cases, Mr. Neal was indicted last week for personal income tax evasion and is under criminal investigation for providing offshore services to such fine clients as Mr. Durante, while Vancouver-based offshore financier Jerome Schneider, who sold the EBT shell to Mr. Neal, was indicted Dec. 19. His co-conspirator, Los Angeles attorney Eric Witmeyer pled guilty last Friday and joined other co-operators. Mr. Schneider's arraignment and initial appearance was set for Thursday in San Francisco, but this has been rescheduled to Jan. 30.
bmudry@stockwatch.com
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