BCSC target P.I. is innocent conduit in new indictment
[2003-12-01 13:53 ET]
BCSC target Pacific International was one of three Canadian brokerages used
by 13 co-conspirators in the alleged ProNetLink penny stock fraud. Ex-Howe
St. figures Marc Rousso and Philippe Hababou are unindicted. No wrongdoing
is alleged against P.I.
B.C. Securities Commission (C-*BCSC) - Street Wire
BCSC target P.I. is innocent conduit in new indictment
B.C. Securities Commission *BCSC
Monday December 1 2003 Street Wire
Also Securities and Exchange Commission (U-*SEC) Street Wire
Also National Bank of Canada (The) (C-NA) Street Wire
by Brent Mudry
In the latest American indictment featuring dubious penny stock dealings
through Canadian brokerages, nine nominees and associates of former Howe
Street figures Marc Armand Rousso and Philippe Hababou have been charged
with securities fraud and an associated money laundering conspiracy relating
to shares of ProNetLink, an OTC Bulletin Board promotion, between 1997 and
2001.
In a 34-page grand jury indictment unsealed Monday in U.S. District Court
for the District of New Jersey, United States Attorney Christopher Christie
claims the ring made illegal profits of at least $33-million through nominee
accounts in Canada and the U.S. (All figures are in U.S. dollars.) The lead
prosecutor, Assistant U.S. Attorney Mauro Wolfe, confirmed that Mr.
Collardeau made a brief appearance in court in Newark on Monday and was
denied initial bail.
Co-defendant Irving Freiberg made two appearances in U.S. District Court for
the Southern District of Florida. After the initial appearance on Monday, he
appeared on Wednesday morning before Judge James M. Hopkins in courtroom No.
4 in federal court in West Palm Beach, at 701 Clematis St. in the Paul G.
Rogers Federal Building. Prosecutor Kerry Baron and interim defence lawyer
Richard Lubin were present and made submissions during this detention and
removal hearing. After hearing submissions and reviewing the indictment,
Judge Hopkins granted bail.
Court records show that at this hearing, Mr. Freiberg was present with his
counsel, was advised of his rights, entered a waiver of removal to New
Jersey and was granted bail. The terms include a $1-million personal surety
bond co-signed by his wife and his mother, who were both present, the
surrender of Mr. Freiberg's passport and his release on electronic
monitoring at his own request. In addition, he was ordered to maintain
employment not involving stocks or the Internet, and to not encumber or
dissipate any of his or his wife's assets, although he may withdraw $5,000
to cover living expenses through Monday, Dec. 1. Mr. Freiberg declined to
comment to Stockwatch, referring calls to his lawyer, who could not be
reached.
Vancouver brokerage Pacific International Securities is noted in nine of 13
specified transactions. The indictment claims the Rousso-Hababou group made
$9.24-million in illegal profits selling shares through a series of accounts
at Pacific International. No allegations of any wrongdoing are made against
Pacific International or any of the other brokerages noted in the
indictment.
The indictment also claims the group used Canadian accounts at two Montreal
brokerages, Desjardins Securities and Financiere Banque Nationale, also
known as National Bank Financial, and at four U.S. houses in New Jersey and
New York: ProNetLink market makers William V. Frankel and Hill Thompson
Magid, and brokerages PaineWebber and Millennium Securities.
The current indictment names Mr. Rousso and Mr. Hababou, who pled guilty in
unrelated previous indictments, as among four unindicted co-conspirators.
Mr. Hababou also testified in the high-profile campaign finance probe of
former high-ranking Democratic Senator Robert Torricelli of New Jersey, who
was never charged with any wrongdoing but was severely admonished by the
U.S. Senate Ethics Committee.
THE PLAYERS
The lead defendant is ProNetLink founder Jean Pierre Collardeau, a French
native living in New York, who served as the company's president and chief
executive officer from July of 1997 until May of 1999. Three other U.S.
residents are named: Fode Diop, a native of Senegal living in Rego Park,
N.Y., Irving Freiberg, of Muttontown, N.Y., and Boca Raton, Fla., and Irving
Stitsky, of Brookville, N.Y.
The indictment notes that Mr. Freiberg controlled Sutton Capital Corp.,
which in turn controlled Stockgenie.com, an Internet tout site. Neither
Sutton nor Stockgenie are named as defendants.
The other defendants include two European residents: Jean Daniel Monbaron,
of Prangins, Switzerland, and Nicole Peignier, Mr. Collardeau's
sister-in-law, of Gennevilliers, France. The list is rounded out by three
French nationals living offshore in St. Martin in the French West Indies:
Martin Meillot, Eric Niger and Muriel Prochasson.
The indictment also names four unindicted co-conspirators: Mr. Rousso, also
known as Marc Armand and Mark Benson, a naturalized American; Mr. Hababou,
also known as Haim Solomon and Malko, a citizen of France and Israel, both
living in New York; Charles Nisenbaum and a party identified as M.B. Mr.
Nisenbaum is a French national living in Miami, New York and Hollywood,
Fla., while M.B., a Belgian, is described as a long-time friend of Mr.
Collardeau who lives in St. Martin.
All defendants remain presumed innocent until proven guilty beyond
reasonable doubt.
COUNT ONE
All nine defendants are charged in Count One, which alleges a conspiracy to
commit securities fraud, mail fraud and wire fraud.
The indictment claims that from July, 1997, to May, 2001, the nine
defendants conspired and agreed with Mr. Rousso, Mr. Hababou, Mr. Nisenbaum,
M.B. and others, in a broad stock fraud scheme relating to ProNetLink,
dating back to the company's inception.
"It was an object of the conspiracy to create ProNetLink as a
publicly-traded company and cause it to issue millions of shares of stock in
the names of nominees of defendant COLLARDEAU and his co-conspirator Marc
Armand Rousso while concealing their beneficial ownership of the stock from
the SEC and the investing public," states the New Jersey indictment.
This alleged conspiracy included the dissemination of false and misleading
statements, and the omission of material facts, to the investing public. The
group also allegedly conspired to sell millions of ProNetLink shares to the
general public through nominee accounts controlled by Mr. Collardeau and Mr.
Rousso.
The alleged conspiracy traces back to 1997, when authorities claim Mr.
Rousso acquired control of a public shell, Prevention Productions, and
installed Mr. Diop as its nominal president and sole director. That July,
Mr. Collardeau founded ProNetLink as a private company. A few months later,
in September of 1997, Mr. Collardeau, Mr. Rousso and unidentified others
allegedly organized a reverse takeover of ProNetLink by Prevention
Productions.
Some time later, Mr. Collardeau and Mr. Rousso allegedly arranged for the
now-public ProNetLink to issue more than 20 million shares, both free
trading and restricted, in the names of co-conspirators and nominees,
including Mr. Diop, Ms. Peignier, Ms. Meillot, Mr. Niger and Ms. Prochasson,
without disclosing to the United States Securities and Exchange Commission
that these shares were owned and controlled by Mr. Collardeau and Mr.
Rousso.
Mr. Collardeau and Mr. Rousso also allegedly arranged for shares to be
issued to such offshore nominee entities as Able Investments Ltd. and
Project Finance Ltd., a pair of Swiss companies controlled by Mr. Collardeau
through co-defendant Mr. Monbaron, and Ildico Ltd., a Bahamian company
controlled by Mr. Rousso. In addition, the conspirators allegedly caused
ProNetLink to issue large share blocks in the name of Robert Sambou, a
fictitious name.
"Initially the conspirators caused most of the free-trading shares of PNLK
stock issued in nominee names to be deposited into accounts at Pacific
International in Vancouver, British Columbia, where conspirator Marc Armand
Rousso had previously established nominee accounts in the names of defendant
FODE DIOP, co-conspirator Philippe Hababou, and Ildico, Ltd.," states the
indictment.
After this initial round, the conspirators allegedly arranged for the
opening of new nominee accounts, between November of 1997 and May of 1998,
at Pacific International, in the names of co-defendant Ms. Peignier,
co-conspirators Mr. Nisenbaum and M.B., and the non-existent Mr. Sambou.
"The conspirators selected Pacific International in part because they
believed that Canadian brokerage firms would scrutinize transactions by
non-U.S. citizens less closely than would United States brokerage firms. In
addition, the defendants believed that by conducting transactions in Canada
they would make the discovery and investigation of their fraudulent scheme
more difficult for U.S. law enforcement authorities," states the indictment.
The ProNetLink ring allegedly arranged for more than nine million shares to
be transferred to these nominee accounts at Pacific International between
November of 1997 and September of 1998.
According to U.S. authorities, nominee accounts were also opened by Mr.
Collardeau and his co-conspirators in 1998 and 1999 at various brokerages in
the U.S., includig PaineWebber, Millennium and Hill Thompson, in the names
of Mr. Hababou, Ms. Peignier, Ms. Prochasson and M.B. More than three
million shares of ProNetLink were deposited into these accounts.
The indictment claims that after Mr. Rousso was arrested in January of 1999
in an unrelated case, Mr. Collardeau and the remaining co-conspirators
continued to arrange for millions of shares to be issued and transferred to
the nominee accounts in Canada and the U.S. These included nominee accounts
opened at Montreal brokerages Desjardins and National Bank Financial between
early 1999 and 2000, in the names of Ms. Peigner, Ms. Meillot, Mr. Niger,
Ms. Prochasson and M.B. Mr. Collardeau and his colleagues allegedly arranged
for large blocks of stock to be deposited into these Montreal accounts.
Stockgenie's touting was an integral part of the ProNetLink promotion,
according to authorities, who claim that in March of 1998, Mr. Freiberg and
Mr. Stitsky agreed with Mr. Collardeau, Mr. Rousso and Mr. Nisenbaum to
promote the stock via the Web site. "FREIBERG and STITSKY knew that
COLLARDEAU and Marc Armand Rousso secretly controlled almost all the
free-trading ProNetLink shares in nominee accounts at Pacific
International," states the indictment.
The alleged touting deal called for Mr. Freiberg and Mr. Stitsky to be
rewarded for their touting efforts by being cut in for a percentage of the
illegal profits generated by selling shares through the nominee accounts.
The touts apparently kept a close eye on the Vancouver trading -- the
indictment claims Mr. Collardeau and Mr. Rousso allowed Mr. Freiberg and Mr.
Stitsky to get daily lists of ProNetLink sales through the Pacific
International nominee accounts.
Authorities claim that in order to hide this deal, Mr. Collardeau and Mr.
Freiberg signed a sham agreement in which Sutton, Mr. Freiberg's company,
would be paid $50,000 for the promotional efforts on the site of its
subsidiary, Stockgenie. The indictment claims that between March and May of
1998, Mr. Freiberg and Mr. Stitsky received $5.8-million as their cut of the
profits from the sale of ProNetLink shares through the group's nominee
accounts including those at Pacific International.
The indictment further claims that the ProNetLink ring sold millions of
shares from the nominee accounts from October of 1997 until 2001, with Mr.
Collardeau and his colleagues placing sell orders which were conveyed to
Frankel, Hill Thompson and other market makers.
The indictment includes a chart of 13 example transactions, dominated by
Pacific International. The first such sale, for 7,500 shares on Nov. 6,
1997, through the P.I. account of the fictitious Mr. Sambou, raised illegal
profits of $33,000. This is dwarfed by the next noted transaction, on April
28, 1998, when Mr. Sambou sold 1,007,000 shares through his P.I. account,
for alleged illegal proceeds of $1.74-million. The previous day, the M.B.
account at Pacific International sold 996,000 shares, for illegal profits of
almost $1.1-million.
May of 1998 was a particularly busy, and lucrative month for the ProNetLink
ring, according to the indictment. On May 1, Mr. Rousso's Bahamian Ildico
account at Pacific International sold 460,000 shares, for illegal profits of
more than $1.57-million. Three days later, on May 4, 1998, this account sold
a further 430,000 shares, for illicit profits of $2.02-million. That same
day, Mr. Hababou sold a modest 25,000 shares through an account in his own
name at Hill Thompson, for profits of $71,000.
On May 13, 1998, Ms. Peignier was a big seller at Pacific International,
selling 475,000 shares for allegedly illegal profits of $1.6-million. A week
later, on May 22, 1998, Mr. Hababou sold a paltry 20,000 shares through
Pacific International, for $90,000 in profits. Mr. Nisenbaum sold 120,000
shares the same day through his P.I. account, for illegal profits of
$508,000.
The next noted trade in this chart is on Aug. 24, 1998, when Mr. Diop sold
290,000 shares through Pacific International, raising $560,000 in profits.
The final three noted trades are all in 1999, at U.S. brokerages. On Feb. 5,
1999, the M.B. account at Millennium made profits of $308,000 selling
210,000 shares. A month later, on March 19, 1999, Mr. Hababou, using the
name Haim Hababou, sold 30,000 shares through Hill Thompson, with profits of
$49,000. The final cited trade was on Oct. 25, 1999, when Ms. Prochasson
sold 61,000 shares through PaineWebber, raising profits of $159,000.
In total, the 13 cited transactions on this chart were dominated by nine
entries for Pacific International, which handled accounts with $9.24-million
of the $9.82-million in total allegedly illegal profits. The Vancouver
brokerage accounts had the corresponding lion's share of the selling
volume -- 3.8 million of the 4.13 million total shares. It should be noted
that this chart, the only one in the indictment, was only intended to serve
as an example, and is far from being a comprehensive summary of all the
ProNetLink trading done by the defendants and their associates.
The indictment claims that once these illegal profits were deposited in the
nominee accounts, the defendants and their co-defendants divvied up the
proceeds. In addition, some of the profits were allegedly used to enhance
the promotion, by financing the operations of ProNetLink, paying
co-conspirators for their continued support and purchasing shares of the
company to give a false appearance of public market activity.
"By the above means, the defendants and their co-conspirators received and
shared in excess of $33-million in illegal profits from the sale of PLNK
stock," states the indictment.
Another key part of Count One, the securities charge, relates to false
regulatory filings allegedly made by ProNetLink head Mr. Collardeau
concealing the fact that he and Mr. Rousso, not their nominees, were the
true beneficial owners of millions of shares.
The indictment also notes that after the SEC began probing the manipulation
of the stock in June of 1998, Messrs. Collardeau, Freiberg, Stitsky and
Nisenbaum all received subpoenas. By that December, all four allegedly
provided false testimony under oath, after Mr. Collardeau and Mr. Freiberg
met with Mr. Rousso to plan this deception.
The promotion apparently continued unabated after this run-in with the SEC.
Amongst other things, the indictment notes that in March of 1999, Mr.
Collardeau arranged for 1.5 million shares to be issue in the name of
Wallflower Investments, a Panamanian company he controlled through front Mr.
Monbaron.
While many of the share transfers were electronic, at least one was done the
old-fashioned way. The indictment claims that on Aug. 9, 2000, Ms.
Prochasson arrived at the airport in Montreal carrying certificates for
700,000 shares of restricted stock, for delivery to Mr. Nisenbaum.
THE OTHER TWO COUNTS
All nine defendants are also named in two other counts. Count Two, for
securities fraud, is very brief, incorporating almost all of the details in
Count One.
Count Three is for conspiracy to commit money laundering. In general, this
count, relating to transactions in the U.S., Canada and abroad, claims the
defendants were involved in moving $33-million across national boundaries. A
related forfeiture demand, besides four properties in Boca Raton and New
York, seeks proceeds held at Wachovia Bank in the U.S., UBS and Swiss Bank
Corp. in Switzerland and a series of offshore accounts at Antilles Banking
Corp. in the Dutch Antilles.
(Readers wishing to see previous stories on Mr. Hababou and/or Mr. Rousso
may refer to Street Wires dated July 7, 8 and 9, 1999, Jan. 1, 2002, and
others, under the symbols NA and/or *BCSC.)
bmudry@stockwatch.com
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