THERE IS THAT GUY CARMINE BUA AGAIN->B.C. Securities Commission (C-*BCSC) - Street Wire
BCSC Eron figure Chambers loses new bid for trial delay
B.C. Securities Commission *BCSC
Monday July 28 2003 Street Wire
by Brent Mudry
Former Vancouver lawyer Martin Chambers has lost another bid to delay his Bermuda Short money laundering trial in Miami, despite defence concerns about the size and nature of RCMP disclosure documents which his lawyers hope may support his main defences of entrapment, "outrageous government misconduct" and manufactured jurisdiction.
After a brief hearing Friday in United States District Court for the Southern District of Florida, Judge Ursula Ungaro-Benages declined to budge on the date for the 10-day trial, set to start Aug. 19 after pretrial voir dire evidence motions on Aug. 18.
Meanwhile, Miami court filings released Friday suggest that Howe Street promoter Kevan Garner, an associate of Mr. Chambers who pled guilty, had direct dealings with both controversial Toronto lawyer Simon Rosenfeld and San Diego penny stock lawyer Carmine Bua. Although Mr. Rosenfeld was charged in the Canadian arrest operation of Bermuda Short, little is known about his case due to broad publication bans in Canada. There are no allegations against Mr. Bua.
In an entirely unrelated case Friday in the Supreme Court of British Columbia, Brian Slobogian, charged as the alleged mastermind in the $150-million Eron Mortgage fraud, was cross-examined in front of Associate Chief Justice Patrick Dohm in the final stages of negotiations for a legal aid package, expected to be in the hundreds of thousands of dollars, for his upcoming Eron trial, which may not start until late 2004. (All Eron figures are in Canadian dollars.) Defence counsel told the court that Mr. Slobogian has no funds for his defence, as he is bankrupt, he makes $2,000 a month and any earnings over that amount must be handed over to his trustee.
Evidence at the British Columbia Securities Commission's Eron hearing showed that Mr. Chambers was a significant borrower and he often worked out of a small personal office within Eron's offices. None of the Eron charges relate to Mr. Chambers's deals, and there is no suggestion of wrongdoing on his part. Similarly, neither Mr. Slobogian nor any other Eron associates had any involvement in Mr. Chambers's Bermuda Short case.
Mr. Chambers, Mr. Garner, his promoter-partner John (Jack) Purdy, offshore banker Michael Hepburn and several other associates were charged last August in separate money laundering indictments in Operation Bermuda Short, a joint RCMP-FBI undercover sting. The two-pronged operation -- one for alleged bribing of fictitious mutual fund officials, the other for alleged drug money laundering -- was unveiled Aug. 15, 2002, with the unsealing of 23 indictments and arrests of 58 targets, including 20 Canadians.
All parties remain presumed innocent until proven otherwise. A number of targets have pled guilty, some have been acquitted at trial, a few have had their charges dropped or stayed, and most remaining defendants, including Mr. Purdy, Mr. Chambers and Mr. Hepburn, maintain their innocence. Mr. Purdy was acquitted Feb. 28 in his first Bermuda Short trial, while he faces a second trial in September on a second indictment for a different time period of the operation.
The Chambers status conference on Friday featured Assistant United States Attorney Allan Kaiser, with AUSA Richard Hong appearing by phone, Miami defence counsel Gerald Houlihan and Maria Elena Perez, and lead defence attorney Donald Re of Los Angeles appearing by phone. Co-defendant Mr. Hepburn appeared with his attorney Sam Rabin, while Mr. Chambers missed the brief hearing due to a doctor's appointment relating to his diabetes.
The key issue in Mr. Chambers's delay, or continuation, application is the status of hundreds of pages of RCMP disclosure evidence won under the first Purdy application since Mr. Purdy, an associate of Mr. Chambers, made Canadian history winning a precedent-setting similar case on May 9 in B.C.'s Supreme Court. (After losing in the Court of Appeal for British Columbia, the government may take the Purdy case to the Supreme Court of Canada.) Mr. Chambers's lawyers are not expected to receive this disclosure packet until the first week of August, just weeks before trial.
Prosecutor Mr. Kaiser told the court that the Canadian packet given to Judge Ungaro-Benages for her review on Wednesday, consisting of about 19 tabs in a two-inch binder, will be the same as the packet being prepared for defence counsel. Defence attorney Mr. Houlihan suggests this may be short, as he presented a motion from Mr. Purdy's counsel indicating they received 600 pages of Canadian documents, and he knows they received 75 more pages since. (A standard two-inch pack of photocopier paper contains 500 pages.)
While Judge Ungaro-Benages received her Canadian disclosure packet in a sealed ex parte production by the U.S. prosecutors a few days ago, Canadian authorities need more time to prepare the similar binder for the defence, as all documents must be closely reviewed and redacted, or censored, for privacy interests of unrelated parties, concerns of secret sources and continuing investigations, and other issues.
The Miami judge told defence counsel that in her review of the Canadian materials, she could not see anything helpful to Mr. Chambers's defences. Mr. Houlihan argued unsuccessfully that the relevancy of these materials can only be determined in the context of the 160 hours of audio and videotapes from the undercover operation, which the judge has not heard yet.
By the time of the next status conference, on Aug. 6, the defence should have received the Canadian disclosure package and reviewed it enough to make at least a preliminary assessment of relevance to Mr. Chambers's trial defences. If any proverbial smoking guns emerge, the defence may make another continuation bid at this conference, just 13 days before trial. Judge Ungaro-Benages, however, has repeatedly shown her determination in recent weeks to proceed to trial without undue delay, and not be bogged down by continuances.
Meanwhile, the prosecution has clarified some key evidence noted against Mr. Chambers's co-defendant Mr. Hepburn at the previous case status conference a week ago.
"To the extent that the United States suggested that Michael Hepburn was directly advised by law enforcement agents that the proceeds to be laundered were derived from the sale of cocaine was in error. A further review of the taped conversations in this matter does not reflect any direct reference being made by the agents to Mr. Hepburn about cocaine," state prosecutors Mr. Kaiser and Mr. Hong in a July 22 letter to defence attorneys Mr. Re and Mr. Rabin.
The prosecutors, however, stress that they intend to rely on the circumstantial evidence, both physical and taped, to demonstrate Mr. Hepburn's knowledge and/or "deliberate ignorance" (or willful blindness) regarding the proceeds representing cocaine transactions. The brief letter does not describe this evidence further.
On July 23, the day after this clarification letter, prosecutor Mr. Hong filed the government's fourth supplemental discovery response, confirming again that Mr. Garner may be called as a star witness. Attached to this brief filing is additional discovery material, the broadest outline of other alleged players yet made public.
Two police documents were filed: the FBI postarrest interview report on Mr. Garner, dated Aug. 14, and an FBI report on an second interview done three weeks later, on Sept. 5. The former report, called the first FBI report in this story, was previously filed in the Purdy case this spring, while the latter, called the second FBI report in this story, has now been filed for the first time.
Both cover similar events, but the second report offers a number of new details, including new names. While both interviews were conducted by the FBI, a key Vancouver Bermuda Short officer, Detective Brad Desmarais of the RCMP's Integrated Proceeds of Crime Section, also attended both.
Readers should be aware that both reports consist of details provided by Mr. Garner to the FBI in interviews. None of this information has ever been proven in court. Mr. Garner, who pled guilty, testified at the first trial of Mr. Purdy, who was acquitted.
The initial portion of the second report, roughly two-thirds of a page, is blacked out, although the reason for this redaction is not clear.
After this portion, the report notes that Mr. Garner was asked to retrace the steps he took when he received $500,000 in cash in April, 2002, from the undercover RCMP officer in Bermuda Short, codename Bill McDonald.
The background is provided in the first report, in which Mr. Garner confirmed that in February of 2002, he flew to Ft. Lauderdale with his partner, Mr. Purdy, to meet with Mr. McDonald, who was pretending to be interesting in buying one of Mr. Purdy's boats in San Francisco. At this meeting, on a yacht docked in a Ft. Lauderdale marina, the RCMP undercover agent introduced himself as an associate of an FBI undercover agent posing as the head of a Colombian drug trafficking organization.
"GARNER soon realized that the financing was in the form of large amounts of cash from drug proceeds. GARNER and PURDY advised McDonald that they would attempt to find a way to handle the cash and the meeting was concluded," states this first report. "PURDY later explained to GARNER that he had engaged in other transactions with McDonald through RON HORVAT and HAROLD JOLLIFFE."
"Sometime later, GARNER and PURDY, in their attempt to find a way to legitimize the large amounts of cash that they would be receiving from McDonald, contacted KEITH KING at H.E. Capital, located in the Bahamas. GARNER then scheduled a meeting with McDonald and KING in the Bahamas." Keith Leslie King, an alleged former South African fraudster, is no stranger to Howe Street or Mr. Purdy. Mr. King's Howe Street promotion, Redmond Capital, operated from the office building that Mr. Purdy and his close business associate, Donald Sheldon, own together, and is now pledged as part of Mr. Purdy's Florida bail.
It should be noted that no charges were laid against Mr. King in the Bermuda Short case, and these statements are directly from the interview of Mr. Garner, unproven in court. After a later hour-long lunch meeting in the Bahamas, Mr. Garner says Mr. King told him privately that he was not interested in being involved, for three reasons, "danger, danger, danger." Mr. Garner then flew back to Vancouver.
In this first FBI report, Mr. Garner notes that some time later, he was given the opportunity to buy a penny shell, American Toy Vending. "GARNER figured that this would be a way to launder the cash by purchasing the shell with McDonald's cash and reselling it. GARNER also viewed this as an opportunity to make a profit."
During April, 2002, Mr. Garner flew to Miami and met with Mr. McDonald, the undercover RCMP officer, on the same yacht. "While onboard the yacht, GARNER took possession of a large duffle bag containing $500,000 cash consisting of five, ten and twenty dollar bills," states the report.
In the second report, Mr. Garner fills in a few blanks. He says that after picking up the half-million-dollar duffle bag, he split $25,000 with Mr. McDonald later that day and took the rest to his hotel room. He then leased a large safety deposit box at Intervault in Ft. Lauderdale where he stashed the cash until it was spent.
In this second interview, Mr. Garner told the FBI that he then met with Craig Shaber, a San Diego-based shell broker, who sold him the American Toy Vending shell for $260,000 cash. Mr. Garner says Mr. Shaber provided him with the share certificates, a power of attorney and the companies books and records. According to Mr. Garner, Mr. Shaber took the cash and flew back with it to San Diego in his private jet.
"The following Sunday after receipt of the $500,000, GARNER visited an associate, KEITH KING, who was staying in the same hotel, and gave him $60,000. GARNER asked KING to open a trust account with an attorney by the name of CARMINE BUA," states this second report. Mr. Garner says this trust account was to be used for the purpose of paying about 56 shareholders of American Toy, the shell he had just bought from Mr. Shaber. In cleaning up this shell, each of these shareholders were to receive $1,000 for the purchase of their shares in excess of 500 shares.
"Sometime later, GARNER gave CHAMBERS approximately $4,000 for the purpose of setting up an International Business Corporation," states the interview report. Such structures, called IBCs on the Street, are generally private shells registered in secretive offshore havens.
Mr. Garner then says he spent $10,000 on legal and accounting work, as well as public press releases. "GARNER then flew back to VANCOUVER where he met with PURDY and gave him $10,000. GARNER could not give a reason as to why he gave PURDY $10,000, other than the fact that PURDY was his business associate," states the interview report. Mr. Garner also told the FBI that he spent $62,000 in Vancouver on personal bills and expenses.
After a short stay at home in Vancouver, Mr. Garner then flew to Hamburg, Germany, on May 20, 2002, to meet with "Key Jessel" and "Kent Couillard," who represented a German company which was going to merge with American Toy. (The FBI document notes this individuals are spelled "ph.," or phonetically. The correct spelling is not confirmed.)
"GARNER explained that KING launders money for many Americans, and that FRED SHARPE sets up all of the corporations for KING. SHARPE was present when GARNER gave KING the $60,000 in cash. SHARPE advised GARNER to deposit the cash in a trust account with attorney BUA," states the FBI report.
Despite the spelling in the report, this party is Frederick L. Sharp, a familiar face on Howe Street who also serves as a guest columnist for Offshore Business Canada, a monthly glossy magazine, and a shareholder of Corporate House SA, an offshore services provider. According to Corporate House's home page, "we also have close relationships with financial firms such as H.E. Capital S.A., financial managers in the Dominican Republic and The FN Group, corporate service providers in Nevis."
Both H.E. and FN, or First Nevisian, are Mr. King's companies. Mr. King carries some baggage. After authorities in the Isle of Man declared in December, 1995, that he was not a "fit and proper person" to serve as an officer or director of any company in the secretive offshore enclave, he subsequently set up First Nevisian Stockbrokers Ltd. in another offshore enclave, Nevis, and later set up shop on Howe Street in Vancouver.
In the FBI interview, Mr. Garner also says that Mr. King asked him if Mr. McDonald, the undercover RCMP officer, had given him the cash, and Mr. King advised Mr. Garner that he was not really set up to launder that kind of money.
The interview report also notes that Mr. Garner was asked by the FBI about his conversations with Mr. Purdy about the laundering of Mr. McDonald's cash. The report notes that Mr. Garner was then "partners" with Mr. Purdy in a company called Whistler Inc., and Mr. Purdy bought $20,000 worth of American Toy shares from Mr. Garner.
Mr. Garner told the officers that Mr. Purdy had originally told him that he had met Mr. McDonald in Miami, and that Mr. McDonald had a large amount of cash which was the proceeds of gambling. "PURDY asked GARNER to talk to KING," states the report.
The report notes that Mr. King agreed to fly to the Bahamas to meet with Mr. McDonald, and then Mr. King returned to Ft. Lauderdale to continue talks with Mr. Garner.
"GARNER recalls having conversations with SHARPE about the fact that the money was proceeds from drug activity. While in Ft. Lauderdale, KING advised GARNER that he was not sure if he could handle the money for McDonald and referred GARNER to SIMON ROSENFELD, a lawyer out of Canada. GARNER contacted ROSENFELD, and ROSENFELD flew down to Ft. Lauderdale the next day," states the FBI report.
"GARNER advised ROSENFELD that the money which was being provided by the UCA (the undercover agent Mr. McDonald) was drug proceeds. ROSENFELD advised GARNER that he did not care where the money came from, but that he would only take possession of it in Canada."
Mr. Garner also told the FBI that some time later he flew back to Vancouver, where he met Mr. Purdy and told him that Mr. McDonald's money, originally held out as gambling proceeds, was really from drug proceeds. "Well, what do you think?" Mr. Purdy reportedly replied, according to Mr. Garner. Mr. Garner then discussed with Mr. Purdy buying the American Toy shell.
"Sometime later, after having purchased the shell with the cash received from the UCA, GARNER met with CHAMBERS in Vancouver. GARNER advised CHAMBERS that the UCA had large amounts of drug proceeds in the form of cash. CHAMBERS told GARNER that he could launder that money in a flash, and that, through MICHAEL HEPBURN, he could easily do $500,000 per week," states the Garner interview report.
"CHAMBERS and GARNER then flew down to Ft. Lauderdale to meet with the UCA where he took possession of $500,000 and laundered it for the UCA. Sometime later, CHAMBERS flew down again to Ft. Lauderdale, where he took possession of $200,000 from the UCA. Upon CHAMBERS arrival in Vancouver, he confronted GARNER and told him that he needed to return the UCA's money because it was affecting his abilities to obtain more money from the UCA," states the report.
This was the end of the Sept. 5 interview, as it was time for Mr. Garner to be led back to his cell at the Federal Detention Center in Miami.
While virtually all of the Bermuda Short targets were arrested on U.S. soil, Mr. Rosenfeld was arrested in Canada. The Toronto lawyer and his associate Sotirios (Sam) Phronimadis were each charged June 4, 2002, in Toronto with two counts relating to money laundering, while a third money laundering count was added for Mr. Rosenfeld on July 5, 2002.
In conjunction with the U.S. arrest operation, Canadian police, led by the RCMP, raided Mr. Rosenfeld's Toronto law office on Aug. 14, seizing 15 boxes of documents, and his home, seizing one box, based on a search warrant issued the day before by Mr. Justice Scott of the Ontario Court of Justice.
As with virtually all raids on Canadian lawyers' offices, the seized boxes were sealed in court amid concerns of solicitor-client privilege, which can only be waived by clients. On Jan. 21, after a hearing on Jan. 13, Judge Nordheimer of the Ontario Superior Court of Justice ordered the appointment of a court referee to review the seized documents, while Mr. Rosenfeld was ordered to provide a sealed affidavit identifying, to his best abilities, the names and last known addresses of the clients whose documents might be involved in the seizure.
Mr. Rosenfeld's biggest claim to fame, at least in penny-stock circles, is a $2.82-million penny stock fraud judgment the United States Securities and Exchange Commission won against him in March of 2001. The combined judgment against Mr. Rosenfeld gave him full credit for his key role in the "pump and dump" promotion of Synpro Environmental Services, a Nasdaq Small Cap Market stock, between 1991 and 1994. The SEC claims Mr. Rosenfeld, the former president, treasurer and director of Synpro, violated a number of securities regulations in the fraudulent scheme.
Three years before embarking on the fraudulent Synpro pump and dump, Mr. Rosenfeld was a key player in another troubled penny stock promotion, Al Shefsky's Silversword Corp., which he departed in 1990. He was not the most distinguished Silversword player, however. That title goes to Howe Street player Terrance Philip Ramsden, also known as Terrence Ramsden, the controversial flamed-out expatriate British horse racing gambler and penny stock promoter now based in the offshore haven of Gibraltar. A decade ago, Mr. Ramsden achieved the rare distinction of joining the select list of penny stock players deemed unfit for even the former Vancouver Stock Exchange, which was dubbed at the time as the Scam Capital of the World by Forbes magazine.
Mr. Rosenfeld's co-accused Mr. Phronimadis, also faces charges in several unrelated Canadian cases.
In mid-May, Mr. Phronimadis and Toronto penny stock financier Murray Dennis MacDowell of Northern Bancorp Inc. were charged in a $1.9-million (Canadian) Toronto brokerage fraud case.
These charges came the day after Mr. MacDowell was arrested as a key figure in an Olympics-size cocaine conspiracy, a week after a large yacht stuffed with 1-1/2 tons of cocaine was seized in international waters off Costa Rica, en route to Vancouver.
It should be noted that while Mr. Phronimadis is a co-accused with Mr. MacDowell in the recent brokerage fraud case, and with Mr. Rosenfeld in the money laundering sting, there is no connection between these two cases. Similarly, there is no suggestion that either Mr. Phronimadis or Mr. Rosenfeld are involved in any drug case.
Mr. Phronimadis is no stranger to police. On Oct. 24, 2002, he was arrested and charged by the Commercial Crime Section of the RCMP in New Brunswick, stemming from a government business development grant fraud. Mr. Phronimadis, the president of now defunct Atlantic Furniture Manufacturing Inc., was charged with two counts of fraud and four counts of uttering a forged document.
Meanwhile, Mr. MacDowell has also had the misfortune of being targeted by an alleged Russian-Canadian extortionist, who remains in custody on extortion and weapons charges dating back to last summer.
In all these assorted cases, all accused parties remain presumed innocent until proven guilty beyond reasonable doubt.
Similarly, it should be noted that no charges were ever laid against Mr. King, Mr. Sharp, Mr. Shaben or Mr. Bua, and there are no allegations of wrongdoing against them.
Mr. MacDowell's world came to a crashing halt on May 21 when he was arrested in Toronto in a co-ordinated international predawn arrest operation, which nabbed six targets in greater Toronto, two co-conspirators in Colombia, and later that day, a Victoria man. The arrests capped an 18-month RCMP-led international probe which featured authorities in Canada, the U.S., Costa Rica and Colombia. The arrest operation came a week after a dramatic high-seas takedown on May 15, when a U.S. Navy destroyer intercepted the Sin Rumbo, a 52-foot yacht, stuffed with 1,360 kilograms, or 1-1/2 tons, of cocaine, in international waters 1,100 miles southwest of Costa Rica in the Pacific Ocean.
The captain, Wesley James Trimble, 52, of Vancouver Island, was charged in Costa Rica, where he will be processed. The RCMP estimates this is the fifth largest single cocaine seizure in Canadian history with a street value, in pure form, of $136-million, or closer to $400-million, when cut to street-level grade.
"The RCMP also note that this is the largest seizure in the last 10 years where the major players of a criminal organization have been successfully linked to the seizure and have been brought before the courts. This is a difficult link to make since the key players in drug trafficking networks take great pains to insulate themselves from the drugs," stated RCMP Corporal Michele Paradis in a release.
bmudry@stockwatch.com
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