ThermoElastic foursome plead guilty -- two head to trial
2003-03-20 20:46 ET - Street Wire
Also Street Wire (C-BEO) Belmont Resources Inc
by Brent Mudry
Veteran Howe Street promoter Kenneth B. (Ken) Liebscher and Toronto penny stock consultant Dennis Epstein face bad news on the eve of their Bermuda Short trial, set to start Monday in Miami. All four of their co-defendants will have pled guilty and agreed to fully co-operate with tough U.S. authorities, including testifying against the holdout pair.
Mr. Liebscher and his associates were arrested Aug. 14 and 15 as part of Operation Bermuda Short, a joint FBI-RCMP undercover sting operation in which the Canadians allegedly agreed to bribe corrupt officials of a fictitious mutual fund. Within days of his bad luck down south, and arrest, Mr. Liebscher was forced to resign as director-in-good-standing of several Canadian penny stock companies: Belmont Resources Ltd., Consolidated ETC Industries Ltd. and Montoro Resources Inc., none of which were related to any alleged wrongdoing.
Co-defendants Howard E. Kerbel, a Toronto lawyer, and Barry Berman, a retired Toronto dentist, pled guilty on March 14. According to recent filings in United States District Court for the Southern District of Florida, two others: Vincent (Vinny) Barone, a New York broker, and promoter Melvin L. Levine, of Pompano Beach, Fla., are scheduled to plead guilty on Friday.
The six were all players in ThermoElastic Technologies Inc., a promotion on the loosely regulated but heavily prosecuted OTC Bulletin Board. The ThermoElastic defendants face a combined 15 counts of wire fraud, mail fraud and securities fraud.
The indictment claims the defendants agreed to sell 20 million shares of ThermoElastic at 20 cents a share, or $4-million, to undercover agents posing as corrupt mutual fund officials, in return for a hefty 30-per-cent kickback. (All figures are in U.S. dollars.) The stock was to come from ThermoElastic and International Corporate Structures Inc., an offshore Barbados company controlled by Mr. Kerbel on behalf of Mr. Berman, Mr. Epstein and their colleague.
"Defendants Howard E. Kerbel and Barry Berman agreed to recruit two sets of securities brokers, through defendant Melvin L. Levine and defendant Vincent Barone, respectively, to assist in artificially inflating the market price of TMRO stock by making illegal payments to securities brokers who would recommend and sell shares of TMRO stock to their unwitting customers rather than shares of another company's stock," states the grand jury indictment.
Mr. Kerbel and Mr. Berman allegedly agreed to grease Mr. Barone with two million shares, which in turn the fund would buy from the dirty broker. "Barone agreed to take the $400,000 as a fee for his assistance in artificially increasing the market price of TMRO stock through illegal means," states the indictment.
Recent court filings reveal that of 58 Bermuda Short co-defendants arrested in mid-August on 23 indictments, Mr. Barone is believed to have been the first, or among the first, to consider pleading out and ratting on his colleagues. A letter sent by Assistant U.S. Attorney Richard Hong on Aug. 16, two days after Mr. Barone's arrest, confirms preliminary talks were already in progress.
"This letter confirms the understanding and agreement between this office and your client, Vincent Barone, named as a defendant in the above-captioned case," states Mr. Hong in the letter to defence lawyer Bo Hitchcock of Fort Lauderdale, Fla.
"Through counsel, your client has expressed an interest in proffering to the government his factual account of this matter and his knowledge of other criminal activity, with an eye toward negotiating a resolution of his criminal activity. Accordingly, I am writing to clarify the ground rules for the proffer."
After months of talks, Mr. Barone's plea agreement was in the finalization stages earlier this week. (Mr. Kerbel's plea deal came much quicker by comparison -- his initial letter was dated Jan. 24, while his plea was entered on March 14.)
While the prospect of having all four co-defendants plead guilty cannot be a happy event for Mr. Liebscher and Mr. Epstein, who maintain their innocence, it should be noted that several of their rat associates have some significant baggage, which defence counsel will no doubt use to try to discredit them in the eyes of the jury.
Mr. Kerbel, the Toronto lawyer, was suspended for 18 months by the Law Society of Upper Canada on Aug. 1, 1995, and reinstated in 1997, after being found guilty of professional misconduct. Although law societies in Canada and the U.S. rarely discipline big fish, Mr. Kerbel's offence was relatively modest, relating to $7,500 in fees allegedly taken that were owed to his former law firm. (All Kerbel figures are in Canadian dollars.)
"The facts of this case for the most part do not indicate any improper dealings with clients other than some irregular billings and no client lost any money since any billing irregularity by corrected by the solicitor's employer," states the law society decision. "The solicitor for his part submits that most of the problems arose from files that he brought into the new firm from his old firm -- files that the solicitor says he was owed fees on personally."
Despite the modest dollar amount, the panel felt the case was significant. "What we are dealing with in this case is an improper accounting of funds to his firm which funds the solicitor received and retained. It is of little consequence that the solicitor felt entitled to the money. The solicitor at the very least over a period of about three years misled the firm to advantage himself materially," states the decision.
"A lengthy suspension is required not only because the facts demand it, but also to signal to the profession that the Law Society will deal harshly with solicitors who betray the trust of their associates."
Prosecutor Mr. Hong notes that besides this case, the U.S. government "is unaware of any other criminal record for Kerbel."
However, this was actually the third time that Mr. Kerbel, called to the bar in 1971, was disciplined by the law society. In 1988, he was reprimanded for "improper borrowing," while in 1980 he was reprimanded and ordered to costs for "failure to meet financial obligations."
Mr. Berman also has some baggage of a more serious nature, although his criminal record is not a public matter in Canada.
"In 1997, Berman plead guilty (and) was convicted of a Canadian fraud charge relating to his misuse of a trust account relating to Track Investment Corp. The allegation was that Berman used trust money that should not have been used," states Miami prosecutor Mr. Hong in a court filing.
"Berman was sentenced to probation and community service. This conviction, however, was not recorded in the Canadian criminal records." |
