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Dimples Group Inc
DDD
Shares issued 13493850
1899-12-30 close $0
Monday Apr 27 1998
RETIRED REGULATOR TO TELL ALL HE KNOWS
by Brent Mudry
While B.C. Securities Commission founding chairman Jill Bodkin raised a few eyebrows by supporting fugitive Thai financier Rakesh Saxena in his extradition battle two years ago, the spotlight is now shifting to another former top regulator at the B.C.S.C. Officials with the United States Securities and Exchange Commission are eager to chat with Rupert Bullock, former B.C. Superintendent of Brokers, to hear all he knows about the Dimples Group stock market scandal. Mr Bullock, who faces cross-border subpoena from the S.E.C., may prove to be a very helpful witness on the Dimples Diapers affair. He served as a Dimples director during 1991, 1992 and 1993, a period in which promoters Robert Reid and Douglas Elliott allegedly orchestrated a large scale stock fraud. Rupert Bullock ended a six-year stint as Superintendent of Brokers in early 1986, and joined Dimples five years later, first as a director and then as its director of regulatory affairs, responsible for the company's "conduct of public disclosure and regulatory matters," according to a press release he signed in March 1992. With a two-week trial just ten weeks away, the S.E.C. is putting its four-year-old Dimples suit in high gear. On Friday the U.S. securities regulator filed a petition in B.C. Supreme Court to compel evidence from Mr Bullock, Vancouver Stock Exchange executives Warren Funt and John Forbes, and eight Vancouver brokerage firms used in the Dimples fraud, especially Yorkton Securities. The S.E.C. faces a discovery deadline of May 15, in final preparation for the July 6 trial. The sole named defendants are Mr Elliott, Mr Reid and Dimples Group. The S.E.C. claims that Mr Elliott and Mr Reid engaged in a classic "hype and dump" stock fraud by taking control of Dimples, pumping the stock with a promotion of false press releases and selling millions of shares to "reap millions of dollars in illicit profits." "After the scheme collapsed, hundreds of shareholders throughout the United States were left "holding the bag" in the form of worthless shares of Dimples stock," states the S.E.C. in a request for international assistance motion filed by co-lead prosecutor Karen Kwong in U.S. District Court, Northern District of California, on March 23. The stock soared from 98 cents in August 1991 to $8.75 in March 1992. U.S. officials claim hundreds of American investors were defrauded.
Besides the S.E.C., the Dimples case was also investigated by the RCMP, the York Regional Police near Toronto and the V.S.E. "In addition, Dimples' founders and certain third-parties have provided evidence to Canadian authorities indicated that Reid and Elliott engaged in an allegedly illegal scheme to seize control of Dimples and inflate its stock that involved the forgery of legal documents," states Ms Kwong. Mr Funt, the VSE's v-p of compliance, and Mr Forbes, the executive v-p of compliance, will now get a chance to outline, explain and detail Dimples' disclosures to the VSE and the exchange's investigation of the case. "The Vancouver witnesses contacted by the commission to date have indicated that they will only appear at depositions pursuant to a court order," notes the S.E.C. U.S. prosecutors notes that Mr Bullock, a former officer and director of Dimples, may be helpful, as he can provide "testimony regarding his involvement in drafting Dimples' numerous press releases, the basis for assertions in the press releases relating to revenue projections and Dimples contacts with officials from the Vancouver Stock Exchange and the Royal Canadian Mounted Police during 1991 and 1992." The S.E.C. also expects V.S.E. compliance executive Mr Funt to testify on the exchange's investigation of Dimples and its negotiations with the defendants "and other Dimples personnel" regarding Dimples' disclosure of sales and inventory information," as well as the V.S.E.'s decision to halt trading in Dimples. Fellow exchange executive Mr Forbes is expected to authenticate reports provided to the S.E.C. detailing Mr Reid's trading.
The S.E.C. also seeks extensive trading and account documentation from Yorkton, Brink Hudson & Lefever, Canaccord Capital, First Canada Securities, First Marathon Securities, Georgia Pacific Securities, McDermid St. Lawrence Chisholm and C.M. Oliver, as well as Royal Bank of Canada and Royal Trust. U.S. officials claim Mr Reid maintained at least one account with Royal Bank in 1991-92, and this account received more than $2-million in proceeds from his Dimples trading. Court filings indicate Yorkton was the major Vancouver house involved in the Dimples fraud. Yorkton handled six accounts in Mr Reid's name, two in the name of his wife Carolyn Susan Reid and a total of five other accounts for LBR Investments, Steger Finanz, Banque Genevoise de Gestion, CLIP Foundation and 354 Holdings, which are alleged Reid nominee accounts. Mr Elliott also traded through one Yorkton account in the name of his wife Veronica Lynn Elliott.
In the made-in-Vancouver promotion, Mr Reid used at least 20 different accounts and nine brokerages for his trading, according to records provided by the B.C.S.C. and V.S.E. to the S.E.C. Mr Reid "may have realized $4.8-million (U.S.) in illegal profits from this trading," states the S.E.C. U.S. officials seek detailed records from two Reid accounts at Canaccord and one at LOM Western Securities, which was handled by broker Mark Tompkins and one LBR account at First Canada, handled by broker David Corrigan. Mr Reid used two accounts at First Marathon, and at least one each at Georgia Pacific, McDermid, Brink Hudson and C.M. Oliver. Mr Reid refused to identify any brokerage accounts he maintained during his Dimple period. "They're all a matter of record with the B.C. Securities Division of the Vancouver Stock Exchange as a result of any insider trade, which was handled by the ex-superintendent of brokers, Rupert Bullock. I don't have them," stated the promoter. Despite his 13-plus accounts at Yorkton, Mr Reid pleaded the Fifth when asked if he had any account at that firm.
Of the assorted Vancouver Dimples brokers, U.S. officials have shown a particular interest in brothers Dan and David Hunter. "Do you know an individual named Dan Hunter?," asked Christopher Cooke, the co-lead prosecutor, in a discovery examination of Mr Reid last October. "I plead the Fifth," the promoter replied. In his three-hour interview, Mr Reid invoked the Fifth Amendment, preferring not to incriminate himself by answering questions, scores and scores of times. Mr Reid also invoked the Fifth when asked if he was aware of Monterey Financial, which is a Hunter family holding company. Mr Reid's plead-the-Fifth routine response also followed questions on Steger Finanz AG, which invested alongside Yorkton in a Dimples private placement. By coincidence, Steger Finanz also invested in an unrelated V.S.E. company, John Kaweske's ID Biomedical, while Steger Trust AG invested in Harry Moll's Neuro-Navigational, both during the Dimples period.
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
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