YBM's investment clubs liked Bay Street brokerages
2003-04-25 20:47 ET - Street Wire
Also Street Wire (C-*OSC) Ontario Securities Commission
by Brent Mudry
In the latest YBM embarrassment for Bay Street, the landmark indictment of reputed Russian mobster Semion Mogilevich reveals that several Mafiya associates and related investment clubs sold millions of dollars worth of shares of YBM Magnex International through accounts at Toronto brokerages Griffiths McBurney & Partners and the former First Marathon Securities, who both served as YBM underwriters. One key figure, Alexei Viktorovich Alexandrov, a Prague-based close associate of Mr. Mogilevich, is a reputed major figure in Russian prostitution rings.
In one of the U.S. Justice Department's most significant attacks ever on Eastern European Mafiya organizations, Mr. Mogilevich, former YBM president and chief executive officer Jacob Bogatin, former YBM chief operating officer Igor Fisherman and Anatoly Tsoura were indicted Thursday on 45 counts related to racketeering, securities fraud, wire fraud, mail fraud and money laundering, all stemming from their YBM roles.
According to the indictment, Mr. Mogilevich, Mr. Fisherman and Mr. Bogatin generated proceeds of more than $15-million selling YBM shares through several investment clubs: the Anix Investment Club, at First Canada Securities, the Arion Investment Club, at First Marathon Securities, and the Poseidon Investment Club, at Griffiths McBurney in Toronto and Dean Witter Reynolds in Pennsylvania. (All figures are in U.S. dollars.) In addition, an unidentified unindicted co-conspirator sold millions of dollars of YBM shares through Griffiths McBurney.
There is no suggestion, of course, that any of these brokerages had any idea that any of their clients were anything but fine upstanding businessmen.
The most significant investment club trading was done by Arion, which opened its accounts at First Marathon in May, 1996. "Proceeds derived from the sales of YBM stock through Arion totaled approximately $12-million, which monies were concealed in foreign bank accounts held in the name of an unindicted co-conspirator, a close associate of defendant Mogilevich," states the indictment. These proceeds were dominated by wires of $7.3-million on Feb. 4, 1997, from the First Marathon account to an account at MKB Bank in Budapest, Hungary.
Poseidon was perhaps the most intriguing investment club for the Russian YBM fans. "There were approximately 30 members of PIC (Poseidon), the membership of which was limited to defendants Mogilevich and Fisherman, the Arigon shareholders, and nominees controlled by the defendants," states the defendant. Arigon, an offshore company incorporated in the Channel Islands in May, 1990, and owned 40 per cent by Mr. Mogilevich, who controlled and directed its operations, was the original vend-in successor to YBM.
While Poseidon was one of 48 accounts opened by Mr. Bogatin at Dean Witter, at the direction and with the assistance of Mr. Mogilevich and Mr. Fisherman, Poseidon's account at Griffiths McBurney was busier, according to the indictment. The court document notes "V. Alexandroff" was the key party on the Poseidon account at Griffiths McBurney.
Mr. Alexandroff is well known to law enforcement figures on both sides of the Atlantic, according to New York journalist Robert Friedman, a top expert on Russian organized crime and the author of "Red Mafiya: How The Russian Mob Has Invaded America," a definitive book released in hardcover in 2000 and in paperback last year.
"Another key (YBM) stockholder was Mogilevich associate Alexei Viktorovich Alexandrov, aka 'the Plumber.' His nickname stemmed from handling 'leaks' and planting disinformation for Mogilevich's organization. He was also Mogilevich's contact with the Hungarian National Police, and the source of derogatory information on Mogilevich's competitors," states Red Mafiya.
"Based in Prague, the Plumber was also responsible for procuring Russian women for Mogilevich's sex market. Like many of Mogilevich's colleagues, he is well educated, holding degrees in economics and engineering, as a classified FBI document reveals. The FBI also reports that he has an address in Los Angeles."
Mr. Friedman, who profiled YBM in his book, assisted in part by former Canadian stock sleuth Adrian Du Plessis, who broke the YBM story in Canada, has been a thorn in the side of Mr. Mogilevich and other Russian Mafiya figures for years. He has written about the Russian mob in such publications as Vanity Fair, the New Yorker, The Village Voice, Details and New York magazine.
In June, 1998, a month after YBM was raided by federal agents, Mr. Friedman was forced to hurriedly relocate underground amid intelligence of a $100,000 bounty placed on his head. The journalist later learned the man behind the anonymous death threat was believed to be none other than Mr. Mogilevich.
"It was after I had written a long expose of his criminal career in The Village Voice that he put out a contract on my life, a threat that was picked up during a telephone intercept by the Central Intelligence Agency, according to the New York Times. A European law enforcement official told the Times that the contract was for $100,000," states Mr. Friedman in his book. "At least one key witness in the murder plot was killed before he could testify against Mogilevich, the Sunday Times of London reported."
This marks a strong contrast with the image Mr. Mogilevich, called "the Brainy Don" as he holds an economics degree and favours bright associates, likes to present in the media, that of a misunderstood Ukrainian-born entrepreneur who is unfairly harrassed by the FBI and authorities in numerous other countries.
While Mr. Mogilevich's associate Mr. Alexandroff was the key contact on the Poseidon account at Griffiths McBurney, the indictment more than $3.2-million in other YBM proceeds in accounts of an unnamed unindicted co-conspirator also serviced by the Toronto brokerage. These proceeds were generally wired to five nominee accounts at Chase Manhattan Bank in Buffalo, N.Y., in the names of N.Y. Cotton Corp., United Norland Investment Corp., M. Finance Corp., Independent Group Inc. and Whitley International Corp. (By coincidence, co-defendant Mr. Fisherman, YBM's COO, had once been a consultant to Chase Manhattan Bank in New York, according to Mr. Friedman.)
The indictment also notes that Griffiths McBurney serviced a nominee account in the name of Sandorne Bodonyi. On Feb. 9, 1998, a few months before the raid, proceeds of $1.9-million were transferred to another Bodonyi nominee account shared with Andrew Gaspar.
Another charge of the indictment relates to a false audit confirmation mailed to Parente Randolph Orlando and Carey of Pennsylvania, YBM's auditor at the time, purportedly from Mr. Gaspar in Los Angeles, "pertaining to a 'commission.'"
In an unrelated transaction, the indictment alleges that Mr. Fisherman, YBM's COO, offered cash bribes of $500,000 to accountants in March, 1994, to prepare and issue a false audit favourable to Magnex RT, a Hungarian YBM subsidiary. The offer was refused.
The indictment makes no mention of which accountants or accounting firm was offered the big bribe, or when and how it was ever reported to authorities.
Coopers and Lybrand, which had an office in Budapest, was contacted between September, 1993, and March, 1994, to serve as an independent auditor and to certify Magnex RT's financials for the years 1992 through 1994, according to the indictment. "Coopers declined to serve as Magnex RT's auditors. Coopers did conduct a valuation of machinery and equipment and other assets of Magnex RT in or about June, 1994."
Parente was retained by YBM from February, 1995, to March, 1998, as the independent public accounting firm to audit and certify YBM's financials for the years 1992 through 1996.
The indictment also gives a few intriguing insights into the hours leading up to the massive FBI raid on YBM's headquarters at 10:15 a.m. on May 13, 1998. At 4:50 p.m. the previous evening, Mr. Bogatin had a telephone conversation with a "stock broker in Toronto," in which the YBM CEO "provides false assurances regarding YBM's ongoing audit and promoting YBM's financial expectations." The number noted is actually area code 514, for Montreal, and is currently the number used by Pembroke Management, a Canadian fund manager specializing in small-cap stocks. There is no suggestion of any wrongdoing on the part of Pembroke.
Especially intriguing is a fax sent at 9:18 a.m. the following morning, less than an hour before the raid. The fax, from Budapest, provided authorization to transfer $28-million from a YBM bank account at Royal Bank of Canada in Toronto to an account in Budapest. It is not known if this wire transfer was ever completed.
bmudry@stockwatch.com |
