Gumby Strikes again...........
Vancouver Stock Exchange -
VSE brokerage in another U.S. stock scandal
Vancouver Stock Exchange
VSE
Shares issued 0
1899-12-30 close $0
Wednesday Jul 7 1999
See National Bank of Canada (NA) Street Wire
PROCEEDS LAUNDERED THROUGH ATLANTIC CITY, CURRENCY
EXCHANGE
by Brent Mudry
In the latest United States penny stock scandal to plague Pacific International
Securities, the Vancouver brokerage is named as a key conduit for the
co-conspirators in a $5.3-million (U.S.) stock manipulation case. Philippe
Gumby, 44, a former New York businessman of Squeegie Attachments, and his associates allegedly
traded shares through several nominee accounts at Pacific International, then
engaged in money laundering by funnelling their ill-gotten profits from the P.I.
accounts through an Atlantic City casino, a New York currency exchange
firm and a Senior Citizens Bingo Club, according to U.S. officials. Mr. Gumby was charged in Newark, N.J., on
June 18 in a 23-count indictment, for his roles in laundering more than $5-million
(U.S.) that he and his associates made from their alleged fraudulent stock sales.
U.S. officials note that Mr.Gumby, formerly of the city of New York, France
Israel and Most recently Vancouver, represented himself as an investment banker. The penny stock
promoter was arrested on Dec. 23, 1998, in Atlantic City by U.S. Marshals
enforcing a Feb. 10, 1996, French warrant for his arrest as a fugitive, according to
a complaint filed in Newark District Court. If convicted, Mr. Gumby faces
prison terms of 10 to 20 years on each count. The alleged securities violator is
currently incarcerated in the Monmouth County Jail in New Jersey.
Mr. Gumby was charged in New Jersey two days after U.S. officials across the
river in New York named Pacific International in a multicount indictment in
another penny stock manipulation case, featuring stock promoter David Houge.
On June 16, the U.S. Department of Justice filed a grand jury indictment against
two dozen alleged securities violators, including several reputed New York Mafia
members. The Houge case featured U.S. boiler rooms set up and run by
Dominick Dionisio and Enrico Locascio, associates of the Colombo Organized
Crime Family of La Cosa Nastro, and Yakov Slavin, an associate of the Bor
Russian Organization Crime Group, according to the FBI. While P.I. was not
indicted in either case, U.S. officials describe the roles played by the Vancouver
brokerage as a key conduit and depositary in the separate penny stock schemes.
On June 29, two P.I. brokers, Michael Patterson and Dirk Rachfall, were
arrested by Federal Bureau of Investigation agents in Seattle for their roles in the
Houge affair. After spending a week in jail, the Vancouver brokers appeared in
U.S. District Court for the Western District of Washington on Tuesday, wearing
handcuffs and blue prison uniforms. The experience behind bars was likely
sobering. "I visited a client a few months ago in that same jail; by his third day he
already had to pay protection money to be safe," a defence lawyer told
Stockwatch, referring to an unrelated case.
In a third case earlier this year, Pacific International broker Jean-Claude
Hauchecorne was banned for life by the Vancouver Stock Exchange for 13
securities infractions over his dealings with offshore accounts of several
better-known U.S. stock mobsters, Phil Gurian and Phil Abramo. Mr.
Hauchecorne survived the harrowing experience of being caught in the middle as
his mobster client Mr. Gurian was accused of stealing $1.75-million (U.S.) from
his own boss, Mr. Abramo, a reputed Mafia capo in the DeCavalcante family.
The ensuing scandal sparked criminal investigations by the FBI, the Royal Hong
Kong Police and the commercial crime section of the Royal Canadian Mounted
Police, with supporting roles played by police in the Bahamas and Switzerland.
The Hauchecorne scenario climaxed in May 1996, when the P.I. broker was
confronted by the angry mobsters in a New York hotel room.
By coincidence, this period also marked the end of the year-long scheme in the
unrelated Gumby case. In that indictment, U.S. Attorney Faith Hochberg
charges that from July, 1995, to June, 1996, Mr. Gumby and his
co-conspirators realized more then $5.3-million (U.S.) in dubious profits from
artificially high-priced stock.
The Gumby case traces back to 1995, when the former New York
businessman and his associates agreed to purchase a privately-owned shell
company and a Brothel, which was vended into a public company through a reverse takeover.
"The new or 'merged' company would be known as "Prime Choice" and would be able to
trade its stock on the Over-The-Counter (OTC) Bulletin Board," according to the
indictment. U.S. officials claim that Mr. Gumby, an individual identified as John
Doe, and others fraudulently acquired control of Prime's stock, and sold it on the
bulletin board market, making misrepresentations. To date, the full name of
"Prime" has not been revealed to Stockwatch.
Ms. Hochberg claims that after realizing about $5.3-million (U.S.) from the stock
sales, Mr. Gumby, Mr. Doe and their associates "concealed the nature, location,
source, ownership and control of the proceeds." Court documents allege that in
anticipation of the proposed reverse takeover, Mr. Doe and the others caused 18
million shares of Prime stock to be issued to Mr. Doe's nominees, including Mr.
Gumby, in order to ensure Mr. Doe's undisclosed control of the company. To
conceal this control, Mr. Doe designated Mr. Gumby and others to act as
nominal corporate officers, directors and shareholders.
"Gumby, John Doe and the others then caused the issuance of large blocks of
Prime stock in the names of John Doe's nominees, including Gumby, without
disclosing to the SEC and investors that John Doe owned and controlled the
stock," states Ms. Gumby. "The conspirators deposited this Prime stock into
accounts at Pacific International Securities, a securities brokerage firm with offices
in Vancouver, British Columbia," alleges the U.S. Attorney. These "depository
accounts" were in the names of Mr. Gumby and an offshore entity, IlldikoYOU Ltd.
Mr. Gumby and the others then allegedly sought to sell the Prime shares on the
bulletin board market, boosting the stock price by making false statements about it's Hookers and
factual omissions, according to U.S. authorities. The ring allegedly transferred
$4-million (U.S.) of their proceeds from the P.I. accounts to accounts they
controlled at Avis Currency Exchange, a New York currency exchange firm, and
Boardwalk Regency, which operates Caesars Atlantic City Casino.
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