Penway ex Rizzuto pleads guilty to racketeering
2007-05-04 21:16 ET - Street Wire
by Mike Caswell
The former string-puller and shadowy shareholder behind Penway Explorers Ltd., Vito Rizzuto, has pled guilty to racketeering. The alleged Montreal mafia boss, who helped in the 1981 murders of three top Mafia figures, agreed today to a 10-year sentence with three years of supervised release.
Mr. Rizzuto, 61, made stock market news in 2000 when Revenue Canada alleged he used nominees to buy shares of Penway Explorers Ltd., a former Alberta Stock Exchange listing. In a Tax Court of Canada case, the government claimed he did not report $1.5-million in profits on the stock.
Revenue Canada openly described Mr. Rizzuto as a Mafia boss in court filings. The government sought a $127,000 fine plus unpaid taxes, but settled the case out of court on undisclosed terms.
The Penway civil suit
The tax case resulted largely from testimony in an earlier civil suit.
In 1993 a group of private investors sued brokerage McDermid St. Lawrence Ltd. (now part of Raymond James), claiming a broker ripped them off over an investment they had in Penway. They said the broker, Arthur Sherman, sold their Penway shares for his own benefit between 1986 and 1988. They sought $2.65-million in damages.
McDermid successfully defended the suit, showing at trial that the investors sustained no losses because they were actually nominees for Mr. Rizzuto. Testimony indicated Mr. Rizzuto lent them money to buy Penway shares and showed up at McDermid's office at least once.
The judge also found evidence the stock was manipulated. It had a run from 70 cents to $6 between 1986 and 1987, but collapsed to 30 cents in 1988.
(The McDermid broker, Mr. Sherman, who would have been an important witness for the firm, disappeared in 1988, after the promotion had failed, and was never heard from again. The courts have since declared him legally dead.)
The Penway criminal trial
Around the same time as the civil trial, Toronto prosecutors filed unsuccessful criminal charges against Penway's promoters, alleging they rigged the stock in early 1989.
One of the accused was well-known West Vancouver promoter Rene Hamouth, who is still active in stocks. There was nothing at trial to indicate he had any connections to Mr. Rizzuto, rather he dealt with a Dean Papadakis. In November, 1993, Mr. Justice Adams, who presided over the civil case, included in his reasons for judgment, McDermid's evidence that Mr. Papadakis was Mr. Rizutto's bookkeeper. Mr. Hamouth and his co-defendants were acquitted of market manipulation charges against them by the Crown.
His co-accused were Robert Campbell and Rajiv Vohra. Prosecutors said the three men rigged Penway with matched trades between themselves and others, using bids from more than one brokerage to create an appearance of interest.
The defendants said they were just promoting the stock, and any trading they did was in the name of "maintaining a market."
The judge agreed. "It was Mr. Hamouth's evidence that part of a promoter's job is to make sure that there are bids available in the market to meet offers and offers available to meet bids. I accept this evidence," he said in acquitting the three.
The judge recognized that their trading was distinct from the role of a market-maker, and said affecting the price of a stock may not be an offence unless it is done dishonestly.
Even though the judge found the promoters' to be garrulous, sarcastic and belligerent, he did not see enough evidence to prove they did anything wrong.
Rizzuto's sentencing
Mr. Rizzuto appeared Friday morning in a federal court in Brooklyn to plead guilty to the racketeering charges. Under an agreement with prosecutors, the judge will recommend he serve his 10-year sentence in a jail close to Canada.
According to his 2003 indictment, Mr. Rizzuto helped kill three top Mafia family members, Alphonse Indelicato, Dominick Trinchera and Philip Giaconne. The three were murdered in a New York social club on May 5, 1981.
Mr. Rizzuto's job was to yell "It's a holdup" before his alleged accomplices opened fire, he told the judge Friday.
Mr. Rizzuto was the only Canadian among 28 people arrested in the case. U.S. prosecutors successfully extradited him to New York last August, where he was held without bail. He faced up to 20 years in jail if convicted.
Family history
Mr. Rizzuto was born in 1946 in a small town in Sicily. At age eight his family moved to Canada, where it became known as a prominent part of organized crime in Montreal. Mr. Rizzuto's criminal record, which now spans 35 years, includes arson, drunk driving and tax-related crimes.
In 1972 he was sentenced to two years for setting a fire in a small shopping centre in Boucherville, Que.
In 1977 a judge ordered him to pay $600 or spend a month in jail for violating Quebec tax laws.
In 1996 he was acquitted on drunk driving charges in Montreal.
In 1989 he was acquitted of conspiracy to smuggle 32 tonnes of hashish to Canada.
In 1990 he was acquitted of conspiracy to smuggle 16 tonnes of hashish to Canada.
In 2002 he was arrested for impaired driving while behind the wheel of a Jeep Cherokee belonging to OMG Media Inc., an Ontario company now owned by Torstar Corp.
The government's difficulty in convicting Mr. Rizzuto led Toronto author Antonio Nicaso to compare him with John Gotti, once known as the Teflon Don because criminal charges against him would never stick. Mr. Gotti eventually went to jail after a lieutenant turned on him.
Mr. Rizzuto is the son of Nick Rizzuto, a Mafia boss arrested last November as one of the key targets in Project Colisee. Police say he headed an organized crime group that smuggled drugs and ran an illegal gambling operation.
New York prosecutor Greg Andres declined to comment on today's sentencing. |
