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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: thewiz who wrote (137)	5/26/1998 9:55:00 PM
From: Adrian du Plessis	Read Replies (1) \| Respond to of 314

OSC - RE: IN THE MATTER OF YBM MAGNEX INTERNATIONAL INC TORONTO, May 26 /CNW/ - The Ontario Securities Commission (the ''Commission'') announced today that it has issued a Notice of Hearing against YBM Magnex International Inc. The hearing will commence at 9:30 a.m. on Thursday, May 28, 1998 in the Commission's main hearing room on the 8th Floor, 20 Queen Street West, Toronto, Ontario, at which time a date will be set for the continuation of the hearing. Copies of the Notice of Hearing and the Statement of Allegations are available from the Commission, 8th Floor, 20 Queen Street West, Toronto, Ontario. IN THE MATTER OF THE SECURITIES ACT R.S.O. 1990, c.S.5, as amended - and - YBM MAGNEX INTERNATIONAL INC. NOTICE OF HEARING (Section 127(1) & (4)) TAKE NOTICE THAT the Ontario Securities Commission (the ''Commission'') will hold a hearing pursuant to section 127 of the Securities Act, R.S.O. 1990, c.S.5, as amended (the ''Act'') at its offices on the 8th floor, 20 Queen Street West, Toronto, Ontario, commencing on the 28th day of May, 1998 at 9:30 a.m. or so soon thereafter as the hearing can be held: TO CONSIDER: (a) whether to extend the Temporary Order dated May 13, 1998 that trading in any securities of YBM Magnex International Inc. (''YBM'') immediately cease until the hearing is concluded in accordance with section 127(7); and (b) whether in the opinion of the Commission it is in the public interest to make an order pursuant to section 127(1) clause 2 of the Act, that trading in any securities of YBM cease permanently or for such period as is specified in the order; (c) such further and other orders as the Commission may deem appropriate. BY REASON of the allegations as set out in the related Statement of Allegations made by staff of the Commission dated May 26th, 1998; AND TAKE FURTHER NOTICE that any party to the proceedings may be represented by counsel at the hearing; AND TAKE FURTHER NOTICE that, upon failure of any party to attend at the time and place aforesaid the hearing may proceed in the absence of that party and such party is not entitled to any further notice of the proceeding. DATED at Toronto this _____ day of May, 1998 ___________________________ Secretary to the Commission TO: Mr. Jacob Bogatin President and C.E.O. YBM Magnex International c\o Joseph Groia Heenan Blaikie Counsel to YBM IN THE MATTER OF THE SECURITIES ACT R.S.O. 1990, c.S.5, as amended - and - YBM MAGNEX INTERNATIONAL INC. STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION Staff of the Ontario Securities Commission (the ''Commission'') make the following allegations: I. BACKGROUND 1. YBM Magnex International Inc. (''YBM'') is a reporting issuer in Ontario, and has been since January 19, 1996. Its shares have been listed and posted for trading on The Toronto Stock Exchange (the ''TSE'') since March 7, 1996. YBM was incorporated in Alberta on March 16, 1994 and its head office is presently located in Newtown, Pennsylvania. There were 44,362,092 shares of YBM issued and outstanding as at April 30, 1998. 2. On May 8, 1998, YBM filed an application with the Commission pursuant to Section 80 of the Securities Act, as amended (the ''Act''), for an order granting a 45-day extension to file and mail to its shareholders its 1997 financial statements. The reason for the request, as set out in a press release dated May 8, 1998, was the possibility that YBM would not receive an audit opinion on its 1997 financial statements from its auditors, Deloitte & Touche LLP (''Deloitte'') prior to the May 20, 1998 filing and mailing deadline. 3. On the morning of May 13, 1998, the TSE announced a halt in the trading of YBM securities pending an announcement by YBM. Later that same day the Commission ordered that trading in any securities of YBM immediately cease for a period of fifteen days from the date of the order unless extended by order of the Commission (the ''Temporary Order''). 4. On May 20, 1998 YBM advised the Commission that it would be unable to file its audited financial statements for the year ended December 31, 1997 within the time limits required by section 78 of the Act as it had yet to receive an audit opinion from its auditors, Deloitte. 5. On May 25, 1998, YBM consented to an extension of the Temporary Order. II. CONDUCT CONTRARY TO THE PUBLIC INTEREST 6. In YBM's capacity as a reporting issuer in Ontario, its financial disclosure fails to meet the standard required of a reporting issuer in this jurisdiction having regard to significant concerns respecting the Company's 1996 and 1997 financial statements, including: - the failure to provide audited financial statements for the year ending December 31, 1997 due to significant unresolved concerns identified by Deloitte; - the significant uncertainty which exists in respect of the financial statements for the year ending December 31, 1996 for which Deloitte issued an unqualified audit opinion but with which it is now determining whether it will continue to be associated; and - the failure to disclose the existence, nature and extent of Deloitte's concerns in a timely manner. 7. By reason of the foregoing, Staff alleges that it is in the public interest for the Commission to order that trading in any securities of YBM permanently cease, or alternatively, cease for such period as may be specified by the Commission. 8. Such further and other allegations as Staff may advise and the Commission may permit. DATED at Toronto this 26th day of May, 1998. -0- 05/26/98 For further information: Larry Waite, Director, Enforcement Branch, (416) 593-8156 Notice of hearing issued; cease trade order extension agreement YBM Magnex International Inc YBM Shares issued 44,222,901 May 13 close $14.35 Tue 26 May 98 News Release Mr. Larry Waite of the Ontario Securities Commission reports: The Ontario Securities Commission has issued a notice of hearing against YBM Magnex International. The Ontario Securities Commission will hold a hearing pursuant to section 127 of the Securities Act, R.S.O. 1990, c.S.5, as amended at its offices on the 8th floor, 20 Queen Street West, Toronto, Ontario, commencing on May 28, 1998 at 9:30 a.m. or so soon thereafter as the hearing can be held: To consider: 1. Whether to extend the temporary order dated May 13, 1998 that trading in any securities of YBM Magnex International immediately cease until the hearing is concluded in accordance with section 127(7); and 2. Whether in the opinion of the commission it is in the public interest to make an order pursuant to section 127(1) clause 2 of the act, that trading in any securities of YBM cease permanently or for such period as is specified in the order; 3. Such further and other orders as the commission may deem appropriate. By reason of the allegations as set out in the related statement of allegations made by staff of the commission dated May 26, 1998; And take further notice that any party to the proceedings may be represented by counsel at the hearing; And take further notice that, upon failure of any party to attend at the time and place aforesaid the hearing may proceed in the absence of that party and such party is not entitled to any further notice of the proceeding. Mr. Guy Scala reports: YBM Magnex International has agreed with the OSC to an extension of the temporary cease trade order originally issued by the Commission on May 13, 1998. In addition, the company and its counsel are continuing to co-operate fully with authorities in both the U.S. and Canada. YBM is taking the necessary steps to finalize its 1997 financial statements and to resolve any other issues with the OSC and the TSE so that trading can resume as soon as possible. YBM continues to carry on its business operations in the U.S. and internationally. (c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com This means that all sides have more time to deal with what has the clear potential of becoming the greatest regulatory embarrassment in the 18 years I've been following Canada's stock markets. How the Alberta and Toronto Stock Exchanges - and the cheer-leading squad of Bay Street brokers, mutual fund managers and advisors - explain this situation and their conduct should continue to amaze and astound even those who think they've seen it all before in the world of junior stock promotions. YBM Magnex has retained a top flight Toronto lawyer, Joe Groia, who used to be the OSC's director of enforcement. This promises to be a classic chapter in the history of North American stock scandals. As well, there is the added bonus of learning about Russian organized crime as the case unravels... And, who knows, one day, the public may even learn how much magnet business was really going on in Russia, the Ukraine and other parts of Eastern Europe.

To: thewiz who wrote (137)	5/27/1998 3:25:00 PM
From: Adrian du Plessis	Read Replies (1) \| Respond to of 314

May 27, 1998 THE NEW YORK TIMES U.S. Raid Helps Crash Former Canadian High-Flyer By ANTHONY DePALMA <Picture: T>ORONTO -- A small cinder-block building in a suburban office park outside Philadelphia is an unlikely setting for a complex tale of international intrigue. But the FBI and other federal agents descended on it earlier this month to haul off boxes of records from the offices of YBM Magnex International, a maker of bicycles and magnets. On the same day, the once high-flying shares of YBM were suspended from trading on the Toronto Stock Exchange, the only place they had been listed. The events have raised questions about the individuals involved in the company and the financial records it kept, and about the reliability of the Toronto exchange, whose previous problems include the Bre-X gold-mining fiasco. An official with the U.S. Customs Service, who spoke on condition that his name not be used, said YBM was being investigated on suspicion of money-laundering and having close ties to members of Russian organized crime. The company's primary manufacturing plant and most of its sales are in Eastern Europe and the former Soviet republics. Separately, YBM's auditors, Deloitte & Touche, have so far declined to certify its financial statements for 1997. Deloitte has asked YBM to commission an independent review because of irregularities in the company's sales records, concerns about individuals involved in the company and serious questions about whether illegal acts had occurred. The Financial Post of Toronto, among other newspapers, has cited a 1995 report by the National Crime Squad of Britain that links YBM to Russian organized crime. According to The Financial Post, the British police identified Semyon Mogilevich, one of YBM's original shareholders, as a director of Arigon Co. Ltd., a Channel Islands concern linked to the Russian mob, which was a predecessor of YBM. The British police report, according to The Post, stated that Canada has been used by Mogilevich "purely to legitimize the criminal organization by the floating on the stock exchange of a corporation which consists of the U.K. and U.S.A. companies whose existing assets and stock have been artificially inflated by the proceeds of crime." YBM has facilities in Kentucky and in Southport, England. Company officials deny that they have been involved in any wrongdoing. Guy Scala, a vice president, said operations were continuing at the headquarters in Newtown, Pa., and at manufacturing plants in the United States and abroad. He expressed confidence that the company would eventually be allowed to resume trading on the Toronto exchange. "I wish I had a crystal ball so I could understand what they're all looking for and where this is going," Scala said. Investors who briefly made YBM one of the hottest stocks on the Toronto market -- and until recently a member of the exchange's leading index of 300 companies -- are uneasy. Particularly worried are the managers of the Canadian mutual funds that hold 40 percent of YBM's 44 million shares, according to Portfolio Analytics Ltd. "There seem to be a lot of allegations flying around now but very few real facts," said Alastair Dunn, a director of Connor, Clark & Lunn Investment Management of Toronto and Vancouver, which manages mutual funds holding about $48 million (Canadian) in YBM stock. "It's obviously a very embarrassing thing to have happened, not only to ourselves but to a lot of other very fine investment managers." Although the Ontario Securities Commission ordered a halt in trading for at least 15 days on the day the FBI agents seized the company's records, the commission said its action was unrelated to the possibility of a criminal investigation. Rather, it was YBM's inability to file its 1997 financial statement that forced the trading halt. Subsequently, the Toronto Stock Exchange decided to remove YBM from the 300-company index. YBM shares had shot up as high as $20.15 (Canadian) in March. On the day trading was suspended, it was valued just over $14. There is no way to know its true current value, but some Canadian mutual fund managers recently organized a conference call to establish a value for carrying YBM stock in their portfolios while trading is halted. They agreed to lower it to a range of $5 to $7 a share. Technimetrics, a listing company, indicates that at least one mutual fund in the United States may also hold YBM stock. Invista Capital Management of Des Moines held 53,000 shares at the end of last year. Invista officers declined to respond to phone calls seeking comment. For Canadian investors who have been burned by other hot stock deals that flamed out, YBM's trouble is an all-too-familiar story. Just over a year ago, thousands of shareholders in Bre-X Minerals of Calgary were wiped out on the disclosure that someone had falsified samples to make its Indonesian gold strike appear to contain huge amounts of gold when in fact there was almost none. Even before the U.S. agents swooped down on YBM's headquarters May 13, there were signs -- widely overlooked by the market and many stockbrokers -- that the company might not be all that it said it was. In February, Adrian du Plessis, who publishes a newsletter that investigates stock offerings in Canada, raised questions about the company's history. After being listed on the Alberta Stock Exchange in 1995, the value of YBM rose rapidly, and in 1996 it was listed on the Toronto Stock Exchange. By March its shares had soared to $20, as it reported rising revenue in North America and a total market value of more than $800 million (Canadian). The stock was heavily promoted by Canadian investment brokerage houses, some of which had substantial holdings. "The fundamentals weren't outlined," du Plessis said in an interview. "It was just a lot of cheerleading." Company audits eventually showed that YBM had vastly inflated sales in North America. But that was not the most worrisome of du Plessis' findings. He determined that Arigon, the YBM predecessor, had "been identified by the European media and intelligence agencies as conduits for the Russian Mafia." YBM officials acknowledge that Mogilevich was one of the 31 original shareholders of the company but deny that he ever had any management responsibilities. FBI officials would not comment on the nature of their investigation of YBM or on the connection of Mogilevich to the company. Nor would the agency confirm any suspicions about Mogilevich's activities, other than to say that "we are aware of him." YBM also confirmed that the British police had investigated Arigon. which it acknowledged was its predecessor, in 1995 on unspecified charges, but that the case had been dismissed. In an earlier statement about the U.S. authorities' search, the company said that along with the FBI, agents from the Immigration and Naturalization Service, the U.S. Customs Service and the IRS had arrived to retrieve documents. According to the search warrant, which was issued in U.S. District Court for the Eastern District of Pennsylvania, the agents seized bank statements, billing invoices, expense-account receipts, customs documents, employee records, tax returns and many other documents relating to YBM as well as to Arigon and other companies connected to YBM.