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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: Winer who wrote (181)	6/12/1998 1:48:00 PM
From: Adrian du Plessis	Read Replies (1) \| Respond to of 314

OSC sets hearing date YBM Magnex International Inc YBM Shares issued 44,222,901 May 13 close $14.35 Fri 12 Jun 98 News Release Mr. Dan Iggers of the OSC reports The hearing on the merits respecting the notice of hearing in the matter of YBM Magnex issued on May 26, 1998, will proceed on Aug. 10, 1998 at 10:00 a.m. in the large hearing room of the commission on the 8th floor, 20 Queen Street West, Toronto, Ontario. (c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com

To: Winer who wrote (181)	6/14/1998 9:39:00 PM
From: Adrian du Plessis	Read Replies (1) \| Respond to of 314

YBM Magnex: Part 5 - The melting pot starts to bubble... In the securities business, as in other social realms of human activity, there are prevailing subcultures. Those entrepreneurial characters who populate the world of penny stocks tend to behave in a particular fashion, and follow certain patterns, that differ, say, from the processes and interactions of executives of blue chip companies. It's expected that chartered accountants typically operate in a different milieu, and maintain a different mindset, to the everyday gangster. White collar scam artists and street criminals may share certain sociopathic traits in common, but they will usually frequent different watering holes and exhibit different taste in haberdashers. Habit and custom die harder than Bruce Willis. (Although, as the continuing debasement of Canada's senior financial market, the Toronto Stock Exchange, may be used to illustrate, certain traditional lines of distinction are becoming blurred. For example, Bay Street securities analysts and fund managers were once considered to possess greater integrity than penny stock touts hustling on the "wild west" exchanges in Calgary and Vancouver. Today, case histories show, a more significant difference may be in the number of decimal places contained in the hyperbolic share valuations pitched by these increasingly homogenous stock market barkers.) Alarmed by the unusual corporate affairs of YBM Magnex, as documented on the public record, I'd prepared an initial article to alert investors to concerns that the brokerage analysts and money managers were not highlighting. Canada Stockwatch published the first article questioning YBM's activities on March 10 1998. This event stimulated a response from the company and its supporters that added a refreshing dimension of personality to the paper trail. Early on the morning of March 11 1998, an unidentified male telephoned the Vancouver office of Stockwatch to ask who had written the YBM article published the previous day. (John Woods, taking a cue from such publications as The Economist, prefers the focus to be on the content of Stockwatch rather than on any individuals who contribute to his service and eschews bylines in most cases.) The caller was told my name and hung up. Later on that same morning, James Held, vice-president of business development and investor relations for YBM Magnex, spoke to a Stockwatch representative of his dismay: "We were really surprised by the article you published yesterday, really taken aback by it. There was no indication who wrote the article. I don't know why it was published at this time because this is basically old news." Held expressed the opinion: "It seems there must be a motive for this." Jim Held, identified by the company as an Allentown, Pennsylvania-based chartered accountant, had been the Chief Financial Officer of YBM Magnex before taking on the investor relations role - a job switch not often seen. Held's successor as CFO, Daniel Gatti of Woodlyn, Pa., had previously been audit manager of the Pennsylvania firm of Parente, Randolph, Orlando, Carey & Associates (the accountants who had been doing YBM's books prior to Deloitte & Touche being asked to conduct an independent audit following concerns raised by Ontario securities regulators). Gatti's old firm was handling the accounting duties and a Philadelphia law firm, Wolf Block Schorr & Solis-Cohen LLP, took care of YBM's Form 40-F regulatory filing in 1996. (Lawyer Richard A. Silfen was identified as the contact person at Wolf Block et al.) Held told Stockwatch the March 10 1998 article was fundamentally off-base: "We're probably undervalued. In the U.S. there are companies with no earnings (trading) at 50 - 60 times projected earnings. Absolutely amazing." The CFO-turned-investor relations flak continued: "We just think the timing of this article, we don't understand it. It's almost as if there's a reason for it. And it depressed the stock and I wanted to get your opinion on it." Held seemed perturbed that Stockwatch was alone in raising concern over the company's financial irregularities - and that these matters had not been viewed as similarly negative by commentators up to this point. It's understandable that, after a comfortable positioning in the junior stock-peddling culture of Bay Street analysts, YBM would be jolted by such critical analysis. And Jim Held wasn't finding any satisfaction in his call to Stockwatch. He noted: "Actually, the facts that you have in here is what we put in a press release. And in fact almost everything else in here where I am quoted came from press releases. So I can't dispute the content that's in here. What I'm disputing is the timing and the wording." He stressed how thorough Deloitte & Touche had been in its review of the company's business and how the article amounted to insinuations about YBM Magnex based on findings that were almost five months old, or, in his estimation -- "ancient history". "And I think if you read this (Stockwatch article), it's very, very misleading. Very negative," continued Held. "You know what happened to the stock yesterday. High of over $20 and it was down to $18.10 this morning, so we're very concerned about this. I mean, you're on our mailing list. We send you our press releases, you and John Woods, and we allow you your definition of information to the investing public. Just the tone of it is very negative." Held was invited to fax over to Stockwatch any press releases or explanation that would make the company's position known and was promised the material would be reviewed. "Okay, I will. Just like we discussed here", the YBM spokesman agreed. Held's promised fax has yet to arrive. One fax that wasn't long in coming, however, was a two page missive authored by "Private Investor", a YBM backer listing a phone/fax number in Saskatchewan @ (306) 664-1991. After the close of trading on March 11, this letter addressed to myself was sent to Stockwatch. The pseudonymous letter-writer, obviously unaware that I don't work there, began: "As you didn't show up for work today you were probably out looking for a job with the National Enquirer." I had heard this trite line numerous times when investigating Vancouver penny stock promotions - it was almost reassuring to find that I was entering familiar territory looking at a TSE 300 company. "Your tabloid article on YBM yesterday really makes Canada Stockwatch look like a 'Mickey Mouse' operation," wrote (306) 664-1991. The writer shared Jim Held's view on the article's content and timing: "All the facts in your hyped-up article are about six months old - have you been sleeping for the past six months?" "Private Investor" went further than Held in articulating another predictable charge -- that the article was motivated by "dummies" engaged in short-selling (a practice in which a person, through a specially set-up account, sells shares in a company in the expectation that the stock will drop in price; if the stock does drop, the short-seller closes the transaction by purchasing shares they'd previously sold - in selling high and then buying low they can pocket the difference as profit just as if they had first bought low and then sold high in the traditional sequence). The letter-writer(s) closed with a supposed warning: "Perhaps the OSC should look into your trades and the staff of Canada Stockwatch during this period - what a good idea I think I'll phone them first thing in the morning." While the content of the body of this letter was typical of the milder forms of abuse one receives when investigating questionable penny stocks, the writer did add something original -- a sign, perhaps, of the character of those hitched to the higher investment grade qualities of a TSE star. The "dummies" letter was cc'd -- not only to John Woods of Stockwatch, but also to brokerage analysts Kaan Oran, of First Marathon Securities, Rob McConnachie, at Scotia Capital Markets, Peter Sklar, with Nesbitt Burns and Mike Middleton, of Griffiths McBurney Partners. One day, I figured, someone would ask these YBM brokerage boosters if they'd received this letter. And, I strongly hoped that this "Private Investor" had taken the time to call the OSC. The January 31 1997 edition of Investor's Digest, a Canadian securities trade paper, contained an interview with Allan Jacobs, a ballyhooed portfolio manager with Toronto-based Sceptre Investment Counsel. The largest holding of a Sceptre mutual fund under Jacobs' management was YBM Magnex International. He explained that one of the key things he liked about YBM was its "strong, entrepreneurial management." The next article I prepared looked at this under-recognized element of YBM's history (in the context of a more extensive review of plans by the VSE to begin listing the lowest grade of shell company - known as a "blind pool"). Following is the feature originally published by Stockwatch on March 16 1998: Lowering standards YBM Magnex International Inc YBM Shares issued 44,222,901 Mar 13 close $19.00 Mon 16 Mar 98 Street Wire See Vancouver Stock Exchange (VSE) Street Wire SHELLS AHOY By Stockwatch Business Reporter If one sea of shells is good, are two seas twice as good? Apparently the answer is yes. Just enough years have passed for the wheels at the Vancouver Stock Exchange to forget how trafficking in shell companies gave both the exchange and BC a very bad name. That name, invented by Forbes magazine and carried around the globe, was Scam Capital of the World. It was the shell creators' horrible legacy. Even local market supporters such as ex-Superintendent of Brokers Rupert Bullock eventually grew publicly critical of the flood of worthless paper then swamping the VSE. Finally, after a vigorous campaign and a tongue-lashing by the exchange's most influential member, then president Donald Hudson reluctantly turned off the river of rubbish. Unfortunately, it was too late. As years of shell trafficking culture begat years of jokes and scams, the VSE lost much of its Canadian market share. Long before Michael Johnson became president and brought his talk of "zero tolerance" to the exchange, its importance, relative to the country's other exchanges, had dwindled. In the early 1980s, before the shell makers ran amok, the VSE had 40 to 50 percent of Canada's overall share trading volume and between six and 11 percent of total value. By 1995 these numbers had fallen in half, as the VSE accounted for 20 to 25 percent of overall volumes and only three to four percent of value. Even in the boom times of recent years, while other markets have hit successive record highs, the VSE's composite index has remained one of the worst performers in the world. VSE president Michael Johnson says in speeches that his exchange is not in competition with others, such as the similarly speculative Alberta Stock Exchange, and that each of Canada's exchanges has its own special niche. The VSE's chosen niche happens to be a two-step affair: (1) financing mineral exploration, and (2) quickly seeing exploration successes off to other exchanges. Bre-X Minerals, and other business killing calamities such as Hixon Gold, have evidently caused a 180 degree change in heart - not to mention change in revenue -- at the Vancouver Stock Exchange. In an effort to win back some of the non-niche business that pours steadily elsewhere, especially over the Rockies to the ASE, the VSE now proposes to return to the shell game in a big and better way. Although senior Vancouver Exchange officials are in no-comment mode, a major back room lobby has been underway since last May to adopt Alberta's junior capital pool program locally. For obvious reasons, nobody on the lobbying team that must convince the BC Securities Commission this is a good idea, refers to this line of business as trafficking in shells. The Alberta experiment with JCPs, formerly "blind pools," began auspiciously in 1986 with Audit Resources. Audit was a shell company that shared brokers and promoters with VSE-listed Hi Peg Resources. Both companies were fraudulent vehicles that met sorry ends, bringing down with them an Alberta brokerage firm, First Commonwealth Securities, and a good old boy from Arkansas, Floyd Leland Ogle, who did jail-time for his part in manipulating Audit shares on the ASE. Nonetheless, since the days of Audit the JCP program has brought the Alberta exchange and its members many dollars and, it appears, turned the once sleepy little bourse into the envy of Howe St. By giving shell makers a way to peddle their wares in BC, the VSE reckons it should be able to accommodate a sea of asset-bereft companies that could not possibly satisfy today's modest listing standards. Unofficially, a JCP is a legally incorporated entity that has nothing going for it except a gleam in somebody's eye and a stock structure that lends itself to rigging. Such a structure, in the view of the VSE, will provide promoters with the means to go hunting for new ideas that they can then list on the exchange. Simply remove the rig-word, replace "promoter" with "entrepreneur," "idea" with "business opportunity," and you have the exchange's back-room lobby position. Indeed, the lure of junior capital pool dollars is a powerful magnet for the VSE. Its pitch is that using the Alberta experience over the past three years, the VSE can expect to increase its listing base by 150-165% per year. They even have pictures. Eyeing the success of their counterparts at the ASE, the VSE takes the position that shell quality can be maintained by ensuring that management has a successful history of involvement with public companies. In essence, the VSE believes, the successful track records of JCP directors will be the only assets upon their listing of these good-for-business shells. A look at how this formula has succeeded with Alberta JCPs makes for a powerful argument in their favour, says the VSE. Or does it? One of the latest stock market winners to come bobbing out of the ASE's sea of shells is a marvel called YBM Magnex International, originally incorporated as Pratecs Technologies, and now touted by First Marathon Securities and Griffiths McBurney Partners. On July 18, 1994 Pratecs became a junior capital pool corporation under the regulations of the Alberta Securities Commission. On July 27, just nine days later, Pratecs entered into a letter of intent to merge with YBM Magnex and its subsidiaries. Under Alberta rules a JCP has up to 18 months to complete its "Major Transaction" and gain assets but the quick-out-of-the-blocks team at Pratecs/YBM were on course before their shares began public trading on the ASE on August 3, 1994. YBM's history exemplifies the VSE's point -- benefits of having directors on board with a background in junior public companies. While most of the original Pratecs directors were initiates to the local world of penny stock promotions, the company started out with two directors that boasted a public company track record and remain with YBM today as the magnet/bicycle/diesel oil and more venture climbs to the $1 billion market cap level on the TSE. YBM director Michael Schmidt is described in the company's literature and on its web-site as an "independent businessman." An original director of Pratecs, Mr Schmidt, a resident of Burnaby, BC, honed his public company skills through handling investor relations for a Saskatchewan-rooted, VSE-listed scam called Technigen Corp. Technigen was a VSE high-flier that reached $16 a share in 1987 based upon the company's false claims to have sold more than $100 million in computerized golf-driving ranges to a Swiss entity, Corporacion Relacio S.A. It turned out that the Swiss company was really the front for a Panamanian-registered shell whose only known representative was an ex-convict stock swindler from Maple, Ontario, named David Charles Stuart. Mr Schmidt appeared at Technigen's 1987 AGM at a Vancouver hotel most upset with press reports questioning the company's legitimacy. At that time he presented himself as an independent shareholder. Technigen's president, Larry Nesis, was subsequently banned from the BC market by securities regulators over his golf machine lies. Mr Schmidt became Technigen's investor relations representative after the stock promotion was exposed publicly as a fraud. By the time he joined Pratecs' board years later, Technigen stock was trading OTC in the US for pennies a share. YBM's other experienced director with an acceptable track record upon the JCP being listed is Kenneth Davies, a citizen of the world identified by the company as "Principal Montello Resources Ltd." In 1993 Mr Davies and his wife, Ann, were the original shareholders of something called the International Diamond Syndicate which failed to sparkle in efforts to locate or develop diamond prospects in the Northwest Territories through arrangements with various VSE listings. Also in the early 1990s, Mr Davies, along with his daughter Jeannine, was aboard VSE-listed Golden Rainbow Resources which failed in ugly fashion to become a producer and marketer of "quality hair care and beauty aid products." During this time, the entrepreneurial Mr Davies billed himself as the representative of Pacific Coast Fish Oil, Processing and Sales Inc. of Blaine, Washington and a specialist in "Real Estate Acquisition, Financing & Development." YBM Magnex specializes in sales of products to unidentified end-users in Eastern Europe (and, in particular, Russia and the Ukraine). Perhaps the experience most relevant to Kenneth Davies' YBM post, and certainly the only one mentioned by YBM on its corporate web-site, is his years acting as a consultant to controversial Montello Resources. Mr Davies was involved with ASE-listed Montello in the early 1990s when the company was hyping plans to acquire an interest in an airplane manufacturing entity in Europe identified as Promovia SA. Financing for Promovia, described as a maker of trainer jets and other aircraft, was to be helped along by Salim Rana, an associate of Mr Davies who was also involved with Golden Rainbow's botched hair care enterprise. (At last public report, the shell-makers associate, Mr Rana, was under R.C.M.P investigation in connection with an alleged theft and fraud involving GHK Resources Ltd. - see Stockwatch dated April 12 1996). The Promovia affair (with a daisy-chain of links stretching from Tortola to Dublin and beyond, including Swiss nominees Incagest and Univalor SA) proved to be extraordinarily messy and required lengthy public explanations by the company when it became grounded. By 1993 Montello's stock was two cents. The company was suspended by the ASE and trading was not allowed to resume for a full year. The dubious aircraft interests were sold to a former Montello principal "for nominal consideration" and the company took up mineral prospecting. Since returning to public trading in 1994, Montello has kept a lower profile and stock price and Kenneth Davies has added YBM to his resume. As shell directors and company employees, Mr Schmidt and Mr Davies successfully passed the regulatory scrutiny of two stock exchanges and one securities commission, and the due diligence process of two blue chip brokerage firms. Whatever experienced directors a JCP can initially attract, a successful shell like Pratecs/YBM can entice even more high profile figures to its board once the promotion is up and running. In the tradition of past juniors, such as Harvard International, the french fry finagle that had Canada's ex-Prime Minister John Turner on board as it fried investors, the magnet merchants have attracted ex-Ontario premier, David Peterson, to their stable. In April of 1996, Mr Peterson was granted options on 50,000 YBM shares exercisable at $3.23 each. At today's close, Mr Peterson is a soon-to-be magnet millionaire with a paper profit of more than $800,000. When such huge rewards and prestigious players can come from shell creation, it is small wonder that a forgetful VSE wants back in the game. According to Michael Watson, the acting executive director of the BC Securities Commission, his organization has had detailed discussions with, and received official submissions from the VSE on its proposed shell venture in December. "They have made a proposal and we've responded, outlining some things that caught our attention." Mr Watson said of his views that "concerns" would be too strong a word. (c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com Whether it was because Jim Held, YBM's CFO-turned-IR-spokesman, was away for a few days, or that this article raised temperatures in company headquarters higher than had the first Stockwatch piece, a quick response was heard from YBM president and CEO Jacob Bogatin. End of Part 5 For more on this story and other stock market news and analysis, visit the Investigative Research & Analysis web-site at imagen.net

To: Winer who wrote (181)	6/25/1998 5:37:00 AM
From: Adrian du Plessis	Respond to of 314

YBM Magnex: Part 8 - Politicians, promoters and the proletariat YBM Magnex: Securities Industry Due Diligence in a post-Bre-X Market - Part 8 - Politicians, promoters and the proletariat Nesbitt Burns' brokerage analyst, Peter Sklar, was still turning out YBM share recommendations with a positive spin -- even as the company's stock price was showing signs of crumbling on the TSE amid questions being raised in the public sphere. If the YBM philosophy is to view challenges "not as impediments, but as opportunities", then Sklar's published reports of April 29, May 8 and May 11 1998 may serve as text-book lessons in this school of thought. Readers of the Sklar reports were instructed that "positive earnings surprises are possible" with YBM Magnex. "Margins (for YBM's reported first quarter 1998 financials) were positively impacted by sales of magnetic applications such as oil filters, continued use of scrap magnets for production, and the sale of magnetic by-product powder," advised the Nesbitt Burns analyst. On May 11 - after YBM had announced that it was seeking a 45-day extension to file audited 1997 financial statements - Peter Sklar offered his sympathetic interpretation: "In the context of YBM's recent history, we can understand that D&T (auditors Deloitte & Touche) would take a conservative approach to YBM's audit and request that the Board conduct an independent review of certain aspects of Eastern European operations. The company experienced a long regulatory delay when it cleared a prospectus in 1997, the Ontario Securities Commission has continued to review the company subsequent to the prospectus clearance, and a recent article in a publication called `Canada Stockwatch' raised issues regarding the company's disclosure of Eastern European sales. The (YBM) press release (of May 8) indicates that in connection with the review no matters have arisen that would likely have a material adverse effect on the company's financial position. We continue to believe that there are not any irregularities with YBM's 1997 financial statements, and are continuing to rate the stock a 4 with a $24 target price." Also on May 11, YBM Magnex officials, favoured securities analysts and other institutional supporters chatted with each other in a private conference call. One of the enduring myths of Canada's stock markets - in addition to an urban legend of "full, true and plain disclosure" by market participants - is that of the existence of a "level playing field" for investors. On this field (of organizers' dreams), the small, retail, investor is said to have a chance of experiencing fair play equal to that of the big player. In today's market, overwhelmingly influenced by pension and mutual funds, even the pretense of such fairness has been tossed aside like an errant base pitch. Money managers, advisors, brokerage analysts and others on the institutional side are routinely invited to the company insiders' mound and are privy to information of which the average person in the stands may have only an inkling (or no awareness at all) when making their personal investment decisions. In the case of YBM Magnex, Stockwatch's Brent Mudry has reported that, after the conference call, a partner with Toronto-based Marquest Investment Counsel was angry with the company's auditors. Marquest's Gerry Brockelsby told Stockwatch that Deloitte & Touche wanted YBM directors "to sign off on a whole litany of issues." Brockelsby believed: "The company should first fire them (Deloitte & Touche), then sue them. it is absolutely outrageous." Chanting a standard analyst's refrain, the Marquest manager opined that YBM's lowering stock price was "really a buying opportunity." Wayne Deans, a prominent YBM supporter at Vancouver's Deans Knight Capital Management, wouldn't discuss the public company's confidential telephone call: "I don't want to comment on it. it's a private matter." Steve Laciak, who replaced Kaan Oran as First Marathon's YBM analyst, exclaimed: "Boy, you guys (Stockwatch) have been butchering it (YBM)!" Laciak eplained to Mudry, a reporter with the stock market news service: "Why should I talk to you about when I will be covering it? It's none of your business." YBM's stock price, already softened by events reported and unreported, fell $2.40 a share on Monday May 11 to close at $14.60. (The shares had peaked at an intra-day mark of $20.15 on March 10 1998 after closing at an all-time high of $19.90 on March 9.) On May 12, hours after an article in The Financial Post had informed the broader public for the first time that YBM's reported sales in Russian and the Ukraine "involved a complicated series of barters", Nesbitt's Peter Sklar wrote: "The company held a conference call on May 11. Notwithstanding that YBM management indicated that they have been advised by the Board that their review to date has not uncovered any matters which would have a material adverse effect on its reported financial position, we believe that investors left the conference call without as much clarity regarding the delay as we had hoped for with respect to these concerns. Although management addressed all concerns, the discussion was complex and unfortunately, the answers did not lend themselves to simple, straightforward explanations." At least the institutional players who were party to the conference call with YBM could ponder the implications of the "complex" matters discussed. The average investor owning shares of YBM Magnex directly did not even have access to those "answers" that could not be explained in "simple, straightforward" terms. Another analyst, Eric Viveiros with CTI Capital Inc. in Montreal, told The Financial Post: "I talked with management after they released the news and I was quite comfortable with their explanation. They said they don't expect to use a lot of the 45 days and it could even be all settled before May 20." (Viveiros had earlier touted YBM as a "spectacular growth story.") Whatever was picked up by Sklar and his industry peers through the private tete-a-tete or other closed-door communications, the Nesbitt Burns analyst concluded: "Our fundamental view of the company has not changed and we do not believe that there are any irregularities whatsoever with the company's financial statements. However, we believe that the company has entered into a period of uncertainty until D&T provides an unqualified audit opinion. We have lowered our rating from a 4 (Nesbitt's highest ranking) to a 3 which we consider to be a neutral rating (meaning "hold" not "buy"). We view this rating as prudent until the 1997 financial position of the company is supported by a signed, unqualified audit opinion. When D&T is able to provide a signed, unqualified clean audit opinion on YBM's financial position, we would expect to resume our 4 rating on the stock, provided that no material adverse information comes to light as a result of the audit process." Also on May 12, YBM's Calgary legal counsel, the firm of McLeod & Company, sent a letter to Canada Stockwatch that was indicative of a continuing concern with my published coverage of the company's unusual affairs. At this stage, the North American public was in the dark about YBM's mafiya origins and links (through Arigon et al), and the average investor lacked information about the very serious concerns of auditors Deloitte & Touche. (YBM had even failed to disclose to investors the fact that its 1997 audit had been suspended). The company's shares were still trading publicly - but without disclosure of these and other significant facts. Management of the TSE 300 star was annoyed by those questioning the company's affairs -- principal among those targeted was myself. The, on the morning of Wednesday May 13 1998, the cavalry appeared. At precisely 10:30 a.m. Eastern Standard Time on May 13 YBM found itself facing a new problem - one far greater than it was encountering with independent critics in Canadian financial circles. And at 10:53 a.m., 23 minutes after U.S. criminal investigators armed with a search warrant arrived at YBM's door, trading in YBM shares was halted on the TSE. Last trade was at $14.35. (Ontario regulators later stated that the trading halt - which subsequently turned into a suspension - followed provincial regulators becoming aware of the serious audit concerns raised by Deloitte & Touche and related public disclosure issues. The timing of the halt in connection with these matters was coincident with the U.S. raid.) The morning after dozens of government agents, coordinating efforts under the U.S. Attorney's Office Organized Crime Strike, executed a raid of YBM's Pennsylvania headquarters, The Bucks County Courier Times, (the local paper for the suburban Philadelphia community where the action occurred), recounted details of this strategic strike. Reporter Bill Yingling wrote: "Yesterday's operation was swift and subtle. Sources said that plain clothes investigators gathered at the Newtown Township Municipal Complex on Route 413 at about 10 a.m. In addition to those from the U.S. Justice Department and Customs, agents that took part in the raid were from the FBI, Immigration and Naturalization Service (INS), the State Department and the IRS. A short time later, accompanied by uniformed Newtown Township police officers, they swept in on the YBM Magnex headquarters at 110 Terry Drive. The team reportedly brought a white cargo van. During much of the afternoon, a white cargo van was parked outside the building, backed up to one of the loading docks. Police cars roamed throughout the industrial park, and witnesses said they saw investigators on the roof of the building taking photographs. Agents at the front door referred all queries to the U.S. Attorney's Office in Philadelphia and declined to allow anyone to enter the building." Less than 24 hours before the raid began, YBM president and CEO Jacob Bogatin had told Canada Stockwatch: "We don't have any issues (of concern) inside company, we have issues outside company." Bogatin chastised a reporter over the publication's previous critical coverage of YBM: "I hope your company (Stockwatch) will stop to punish YBM." Within days of the Pennsylvania raid finishing -- it lasted, officially, from the morning of May 13 until 4:20 p.m. EST on May 14 - news of Russian mafiya figures, including godfathers Mogilevich and Mikhailov, and their association with YBM's founding businesses, (Arigon, Arbat and Magnex Rt), appeared in journals around the world. YBM's own release following the raid had made no mention of any mafiya connections. On May 14 it was claimed: "At this point in time, the company is unable to ascertain the ambit of the investigation arising from this search or its impact, if any, upon the company's ongoing business and affairs." But once the Russian mob links had been exposed in newspapers across Canada and the U.S., and details of a 1995 U.K. police investigation into Arigon et al (which identified Semion Mogilevich as "one of the world's top criminals") had appeared in London's venerable broadsheet, The Observer, as well as The Vancouver Sun, YBM's brass, including the company's chief, Jacob Bogatin, were left to try and defuse the public alarm. Bogatin, however, stopped making public statements after The Village Voice cover story on Mogilevich, titled "The World's Most Dangerous Gangster", was published on the magazine's web-site on May 19 1998. The Mogilevich cover feature, written by the Voice's Israeli specialist Robert I. Friedman, contained these words about Bogatin: "The president and CEO of YBM is Jacob Bogatin, a professor of physical metallurgy. In May 1996, he contacted the FBI in Philadelphia to find out why the INS (Immigration and Naturalization Service - one of the U.S. agencies involved in the May 1998 YBM raid) had denied visas to YBM employees arriving from Hungary and the Ukraine. When he was rebuffed, he had intermediaries step forward and pester the FBI. The State Department has banned Mogilevich himself from obtaining a U.S. visa because he's on the department's watch list of international organized-crime figures. Nevertheless, he has surreptitiously entered America under aliases and on visitor visas issued in Tel Aviv to visit Elson and Ivankov." (Monya Elson, currently in custody in New York facing multiple charges of murder and extortion, operated out of an apartment in Brighton Beach -- a Brooklyn neighbourhood that's gained notoriety as a base of Russian organized crime. Vyacheslav Ivankov is a mafiya godfather currently doing time in a New York prison for the extortion of two Russian brokers on Wall Street). According to Friedman: "Bogatin admitted during a telephone interview that Mogilevich owns his company. When asked if he knew that numerous law enforcement agencies here and abroad considered Mogilevich to be a leader of one of the most ruthless organized-crime families in recent times, Bogatin replied, `We have an investors relations guy. You want to talk with him about this stuff.' He added that he had read allegations in the Eastern European press that his boss was a Mafia don, but didn't believe them. YBM vehemently denies that it is connected to Russian organized crime or has engaged in any criminal activities. Bogatin is no stranger to the mob, however. His brother, David, a top Russian crime figure who once served in North Vietnam for the Soviets in an anti-aircraft unit, is now serving an eight-year term in a New York State prison for a multimillion-dollar gasoline tax fraud scheme." On May 13 1992 David Bogatin, a Russian native and American citizen residing in Brooklyn, N.Y., was sentenced to two and two-thirds to eight years in state prison and ordered to pay US $3.1 million in restitution and fines for his role in one of the biggest gasoline bootlegging operations in America. The New York Times reported that Bogatin, then 46, was the first person ever returned to the U.S. under terms of a 1927 extradition treaty with Poland. Facing up to eight years in jail, David Bogatin had jumped bail in 1987 and moved to Poland where he set up the first bank allowed to sell shares on the Warsaw Stock Exchange. It wasn't until 1992 that Bogatin's history was exposed by a Polish newspaper, Gazeta Wyborcza, prompting a run on his institution - the First Commercial Bank of Lublin. A classic operator, Bogatin calmed some depositors down with his personal reassurances and encouraged others by proposing to hold a lottery -- with cars and apartments offered as prizes to those who kept their money in his bank for an additional year. After publicity in the Polish media, he was extradited to the U.S. where, according to the N.Y. Times, he appeared in court "wearing a pin-stripe suit and handcuffs." The Times noted: "Prosecutors said Mr. Bogatin and others in a network of Russian and Eastern European immigrants acted with Michael Franzese, an admitted captain of the Colombo organized crime family who was given a 10-year sentence after being convicted on Federal racketeering charges for the scheme." Prosecutors characterized Bogatin as an indefatigable businessman. (David Bogatin's partner-in-crime, Michael Franzese, defected from the Italian mafia while serving his prison term and provided U.S. intelligence agencies with information on how American-based mafia families were assisting Russian ‚migr‚s engaged in crimes that included gas tax schemes, securities fraud, money laundering, drug-smuggling, gambling, extortion and murder. A U.S. Senate Governmental Affairs committee before which Franzese testified on May 15 1996 heard from a Russian convict/informer that three NHL hockey players - Alexander Mogilny, Vladimir Malakhov and Alexei Zhitnick - had been targets of extortion and threats of violence.) Since publication of The Village Voice article, Jacob Bogatin has made no public comment. (The duties of spokesperson for YBM, historically carried by, either, VP of Business Development and Investor Relations, Jim Held, or, CEO and president, Bogatin, have been assumed by the company's VP of Marketing and Sales, Guy Scala of New Hope, Pa.) Another enterprising relative of Jacob Bogatin's, his 26-year-old nephew, Michael Kogan, has been identified by The Bucks County Courier Times as the principal of a brokerage firm that has recently run afoul of securities regulators in two U.S. states for failing to have proper registration. After working for YBM for two months, beginning in July 1996 Kogan headed a securities firm, called Jefferson, Gersch Inc., housed under the same roof as YBM's Newtown, Pa. headquarters. Jefferson Gersch was incorporated in by Jennifer L. Dombrowski, an assistant at the Philadelphia law firm of Wolf, Block, Schorr and Solis-Cohen. According to reports of the past few days, after a six month period the brokerage moved out of the YBM Magnex building (where Kogan was subletting space from his uncle's public company). In 1998, following citations and fines levied in Pennyslvania and Maryland, Michael Kogan told the Courier Times that Jefferson Gersch was being closed in all states where it was registered (a list that stretched from California, to Washington, Texas, Delaware, Florida, Maryland, Massachusetts, New Jersey and New York.) Roza Kogan, alongside Semion Mogilevich and others, was listed as a shareholder of the private entity, YBM Magnex, Inc., at the time that company and its assets (including Arigon, Arbat and Magnex Rt) were being vended into a public shell, Pratecs Technologies, on the Alberta Stock Exchange in 1994/95. Roza Kogan received 286,000 (pre-consolidated) shares of the public YBM/Pratecs as part of that major transaction. Any family relationship between Roza Kogan and Michael Kogan, or Kogan's uncle Jacob Bogatin, has yet to be determined - the existence of Kogan's brokerage firm under YBM's roof is only the latest in a string of unusual disclosures that adds to the questions enveloping YBM Magnex International. To help it defend its position, and, most particularly, to make its case before the Ontario Securities Commission (a hearing into the company's audit disclosure troubles is scheduled for August 10 1998), YBM has retained the services of Bay Street litigator, Joseph Groia. Groia, a tenacious and skilled lawyer with the firm of Heenan Blaikie in Toronto, is the OSC's former general counsel. Since leaving his post as head of enforcement for that provincial regulatory agency in 1990, Groia has professed his kinship with non-establishment clients and expressed a driving commitment to defending the dispossessed. Somehow, Groia has ended up acting for YBM Magnex - a strongly establishment-oriented public company listed on Canada's most senior stock exchange, the TSE. Prior to the FBI, IRS et al raid, YBM's shares were included in the exclusive TSE 300 index. YBM's establishment directors include David Peterson, the former premier of the province of Ontario and Robert Owen Mitchell, vice-president of First Marathon Securities, Canada's largest independent-owned brokerage house. The company's stock has been benefited from the support of analysts working for Bay Street's senior brokerage firms, including Nesbitt Burns - a subsidiary of one of Canada's largest financial institutions, The Bank of Montreal. Almost 45% of the company's shares are held by Canada's established pension and mutual funds. In any event, one does not often encounter the dispossessed in the senior ranks of North America's financial markets. In the former Soviet Union and countries of Eastern Europe, a standard definition of the dispossessed would, similarly, not include high-flying stock promoters, brokerage company principals, industrialists or millionaire ex-politicians. The 1997 book, Vodka, Tears and Lenin's Angel, by journalist Jennifer Gould, recounts the author's years living and working in the former Soviet Union after the collapse of communism. One chapter, entitled "The Dispossessed", is about: men and women imprisoned still for crimes of commerce that are now legal - prisoners like Alevtina Gulyolova, a grandmother sentenced to seven and a half years in jail for such crimes as selling ten pairs of Yugoslavian underwear for a profit of US $97; Russian children living on the streets or in train stations, stealing to survive or selling their bodies as prostitutes and being forced to give a cut to mafiya gang members; other children, orphans and the unwanted, being sent to psychiatric wards or labour camps under a system that cannot cope. Other non-establishment figures in Russia, visible in the news of this past month, would include the coal miners and their families stranded in the Arctic town of Vorkuta. Vorkuta's miners - 200 of whom trekked 2,000 kilometres to Moscow to launch a vigil last week outside Russia's White House - are among the country's workers who have not been paid any wages for periods of up to one year. It's possible that, despite the presence of lawyer and ex-premier David Peterson on its board and a host of other establishment ties in Canada, YBM Magnex may be conferred some outsider status due to its Russian mafiya origins and links. In Russia and other regions bound in the orbit of the former Soviet Union, at least, such a view would be illusory. For, as details contained in the final parts of this series on the YBM scandal help illustrate, in this turbulent "Wild East", in ways, the mafiya is the establishment. End of Part 8 For more on this story and other stock market news and analysis, visit the Investigative Research & Analysis web-site at imagen.net