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Gold/Mining/Energy : YBM Magnex Intl Sees Revenue Growth 30-35%/Yr In MagnetOp -- Ignore unavailable to you. Want to Upgrade?

To: LaFayette555 who wrote (60)	5/14/1998 12:42:00 PM
From: thewiz	Respond to of 314

According to my broker, the FBI paid a visit to YBM today. I can't imagine it was a social call. Looks like a rocky road ahead. Nothing to do now but sit back and wait (and hope)!

To: LaFayette555 who wrote (60)	5/14/1998 1:30:00 PM
From: Adrian du Plessis	Read Replies (1) \| Respond to of 314

Hi Francois, I salute the men and women of the FBI, the Ontario Securities Commission, the auditors Deloitte & Touche and any other individuals or agencies who combined to prevent an already dangerous situation from continuing to threaten the public. A very big thumbs down to Canada's mutual fund managers/advisors and brokerage analysts who, once again, can be shown to have failed to properly concern themselves with the interests of public investors and the integrity of the marketplace. Their "due diligence" is a misnomer. Bay Street has lost its bearings. FYI, here is the first of what's sure to be a stream of new stories about the Magnex affair: (NB The Globe and Mail of this date also contains a Magnex article, it's not available on-line, however): Thursday, May 14, 1998 YBM hit on FBI probe OSC issues cease-trade order as auditor Deloitte & Touche raises fears of illegal activities By SANDRA RUBIN The Financial Post ÿThe Ontario Securities Commission struck hard against YBM Magnex International Inc. yesterday, slapping a cease trade order on the U.S. company after learning the FBI has been questioning its executives in connection with an investigation. ÿThe OSC also said it has turned down YBM's request for a 45-day extension to file its 1997 financial statements. ÿYBM, whose shares trade only on the Toronto Stock Exchange, applied for the filing extension on Friday, saying auditors Deloitte & Touche LLP had requested an independent review of the firm's Eastern European operations. ÿAbout 80% of YMB's sales are in Russia and Ukraine, and involve a complicated series of barter transactions brokered by a middleman, rather than straight cash. ÿBut from the five-page cease trade order issued late yesterday, it's clear that mounting tensions between the firm and its auditors went far beyond one area of business operations. It seems these tensions erupted into outright war. ÿDeloitte told YBM in March it had serious reservations about the validity of certain transactions and reiterated in a letter April 20 that it was "extremely concerned with respect to certain 1997 contracts, entities and individuals involved with YBM." ÿIt recommended an in-depth forensic investigation, and said it would decide whether it was willing to continue being associated with the firm only after seeing the results. ÿYBM went ahead and released its first quarter 1997 results a week later. Deloitte was apparently so furious it suspended its entire audit. It said it feared some of the potential problems may have a direct impact on the quarterly earnings. ÿNeither fact was disclosed to investors. ÿYBM, a TSE 300 company, has a significant institutional shareholder base and is held by many North American mutual funds. ÿOne analyst, who asked not to be identified, said last night he nearly "had a heart attack" when he learned of the regulator's charges. ÿ"It's not pretty at this point," he said. "Obviously, I'm a little tense over the whole thing. We've got it ranked as a 'buy'. ÿ"We took management in good faith when they told us it was just Deloitte being overly conservative and cautious in respect to their audit. This is [baloney]. They should have told us the audit had been suspended." The company's chairman told Deloitte in a letter dated Tuesday that the reason the auditor's concerns were not disclosed to investors or regulators was that "none of the matters raised were supported by underlying facts or appropriate confirmation." ÿYBM vice-president James Held did not return a phone call last night. ÿThe OSC's order shows that Deloitte also expressed fears of criminal activities to the chairman in a letter last week. ÿ"Deloitte advises ... that one or more illegal acts may have occurred which may have a material impact on the 1997 financial statements." ÿThe OSC said in its order that it learned from YBM's counsel yesterday that FBI agents had been in its Newtown, Pa., offices "to talk to YBM executives in connection with an investigation." ÿSome people said they want an explanation before jumping to any conclusions. ÿ"I've met with company management and they seem to be on the level," said Eric Viveiros, an analyst with CTI Capital in Montreal. "We'll just wait and see -- that's the only thing financial analysts can do." ÿThe OSC's order means there will be no trading in YBM shares for at least 15 days and, if the order is made permanent, the stock will not trade again on the TSE. ÿTwo months ago, YBM shares (ymb/tse) were trading at $20.15, and the company had a market capitalization of nearly $1 billion. The shares were up 85› at $14.35 yesterday when it was halted at mid-morning. The shares had swung between $12.90 and $14.35 in early trading.