Operation 'Bermuda Short' - Conviction Statistics

[sandi66]

Operation 'Bermuda Short' - Conviction Statistics
Compiled by OffshoreAlert, www.offshorealert.com - November 1, 2005
Eleven of the 56 people arrested in Operation
'Bermuda Short' opted for a jury trial. Seven
defendants - 63.6% of those tried - were acquitted
and four - 36.4% - were convicted.
Juries Acquitted Nearly
Two-Thirds of Trial Defendants
36%
64%
Convicted
Acquitted
87.5% Conviction Rate
(of those arrested)
12.5%
87.5%
Convictions
No Convictions

Convictions 49
No Convictions 7
Total Arrested 56
Fugitives 2
Total Defendants 58

Jury Trial Results

Defendant Convicted Acquitted Convicted 4
Jerry Poole Yes No Acquitted 7
Martin Chambers Yes No
Bruce Bertman Yes No
Serdar Kalaycioglu Yes No
Dennis Epstein No Yes
Kenneth Liebscher No Yes
Michael Hepburn No Yes
Charles Arnold No Yes
John Purdy No Yes
Les Price No Yes
James Kelly No Yes
Jury Trial Results
Note: John Purdy was indicted in two separate
cases. He pleaded guilty in one and went to trial in
the other.
Operation 'Bermuda Short' - Conviction Statistics
Compiled by OffshoreAlert, www.offshorealert.com - November 1, 2005
Eleven of the 56 people arrested in Operation
'Bermuda Short' opted for a jury trial. Seven
defendants - 63.6% of those tried - were acquitted
and four - 36.4% - were convicted.
Juries Acquitted Nearly
Two-Thirds of Trial Defendants
36%
64%
Convicted
Acquitted
87.5% Conviction Rate
(of those arrested)
12.5%
87.5%
Convictions
No Convictions

Operation 'Bermuda Short' - Conviction Statistics
Fugitive, 70, believed to reside in Toronto, Canada
Fugitive
Compiled by OffshoreAlert, www.offshorealert.com - November 1, 2005

Defendant Guilty Jury Guilty Not Guilty Prison Home Supervised Fine Restitution Probation
Plea Trial Verdict Verdict Term Detention Release
(Months) (Months) (Months) (Months)
1 Serdar Kalaycioglu No Yes Yes No 324 N/A 36 Zero $6,722,592 N/A
2 Martin G. Chambers No Yes Yes No 188 N/A 36 $20,000 Zero N/A
3 Anthony M. Damato Yes No N/A N/A 108 N/A 36 Zero Zero N/A
4 Kevan Garner Yes No N/A N/A 87 N/A 36 Zero Zero N/A
5 Walter Dorow Yes No N/A N/A 63 N/A 36 Zero Zero N/A
6 Bruce Bertman No Yes Yes No 51 N/A 36 $10,000 Zero N/A
7 Michael T. Reiter Yes No N/A N/A 46 N/A 36 Zero $4,037,696 N/A
8 Geoffrey W. Gazda Yes No N/A N/A 46 N/A 36 Zero Zero N/A
9 James Cary Parrish Yes No N/A N/A 46 N/A 24 Zero Zero N/A
10 Jeffrey Senger Yes No N/A N/A 42 N/A 36 Zero $236,739 N/A
11 Melvin L. Levine Yes No N/A N/A 37 N/A 24 Zero Zero N/A
12 Jerry Poole No Yes Yes No 33 N/A 36 Zero Zero N/A
13 Charles Cini Yes No N/A N/A 30 N/A 36 Zero Zero N/A
14 Lawrence W. Gallo Yes No N/A N/A 27 N/A 36 Zero Zero N/A
15 Bruce D. Cowen Yes No N/A N/A 24 N/A 36 Zero $2,833,888 N/A
16 Daniel Charboneau Yes No N/A N/A 24 N/A 24 Zero Zero N/A
17 Thomas Steinbach Yes No N/A N/A 21 N/A 36 Zero Zero N/A
18 Gordon Novak Yes No N/A N/A 21 N/A 24 Zero Zero N/A
19 Harold A. Jolliffe Yes No N/A N/A 20 N/A 24 Zero Zero N/A
20 Howard E. Kerbel Yes No N/A N/A 18 N/A 36 $20,000 Zero N/A
21 Greg Balk Yes No N/A N/A 18 N/A 36 Zero Zero N/A
22 Barry Berman Yes No N/A N/A 18 N/A 36 Zero Zero N/A
23 Vincent Barone Yes No N/A N/A 18 N/A 36 Zero Zero N/A
24 Dax Ross Yes No N/A N/A 15 N/A 36 $1,000 Zero N/A
25 David Rich Yes No N/A N/A 14 N/A 24 Zero Zero N/A
26 George Doumanis Yes No N/A N/A 14 N/A 24 Zero Zero N/A
27 Michael Puorro Yes No N/A N/A 12 N/A 36 $6,000 Zero N/A
28 Blair Valentine Yes No N/A N/A 12 N/A 24 $5,000 Zero N/A
29 Ray Hutchison Yes No N/A N/A 7 N/A 24 $4,000 Zero N/A
30 Frank Dickey, Jr. Yes No N/A N/A 6 N/A 36 Zero Zero N/A
31 Daniel Bender Yes No N/A N/A 5 N/A 36 $4,000 Zero N/A
32 Paul D. Lemmon Yes No N/A N/A 5 N/A 24 $7,500 Zero N/A
33 Bruce A Biddick Yes No N/A N/A 4 N/A 36 $4,000 Zero N/A
34 John K. Purdy Yes No N/A N/A Time Served N/A Zero Zero Zero N/A
35 Ronaldo Horvat Yes No N/A N/A Time Served N/A Zero Zero Zero N/A
36 Mark Weirtzema Yes No N/A N/A Zero 12 Zero Zero Zero 36
37 Mark Valentine Yes No N/A N/A Zero 9 Zero Zero Zero 48
38 Joseph R. Huard, Jr. Yes No N/A N/A Zero 8 Zero $10,000 Zero 60
39 Cris Sagnelli Yes No N/A N/A Zero 8 Zero Zero Zero 60
40 Michael Vlahovic Yes No N/A N/A Zero 6 Zero $15,000 Zero 36
41 Douglas Rasberry Yes No N/A N/A Zero 6 Zero Zero Zero 36
42 Richard Greene Yes No N/A N/A Zero 6 Zero $10,000 Zero 60
43 Tim Rice Yes No N/A N/A Zero 6 Zero Zero Zero 60
44 Ashley Sosner Yes No N/A N/A Zero N/A Zero Zero Zero 60
45 Andrew K. Proctor Yes No N/A N/A Zero N/A Zero $20,000 Zero 36
46 Marshall Klein Yes No N/A N/A Zero N/A Zero $3,000 Zero 36
47 Mario Turcotte Yes No N/A N/A Zero N/A Zero Zero Zero 24
48 Sheldon Mickelson Yes No N/A N/A Zero N/A Zero Zero Zero 24
49 Richard Carson Yes No N/A N/A Zero N/A Zero Zero Zero 24
50 Dennis Epstein No Yes No Yes
51 Kenneth B. Liebscher No Yes No Yes
52 Michael Hepburn No Yes No Yes
53 Charles Arnold No Yes No Yes
54 Les Price No Yes No Yes
55 James T. Kelly No Yes No Yes
56 Justyn S. Feldman
57 Robert W. Wilder
58 Paul A. deRome Fugitive, 53, once residing in Victoria, Texas, USA
Color Coding Guide
Operation 'Bermuda Short' - Conviction Statistics
Fugitive, 70, believed to reside in Toronto, Canada
Fugitive
Compiled by OffshoreAlert, www.offshorealert.com - November 1, 2005
No Conviction
Conviction
Case dismissed without plea or trial

6267; Fax: [phone]; www.offshorealert.com OffshoreAlerAugust 31, 2005 t
OffshoreAlert
A newsletter covering
international finance
Two career criminals whose undercover
work for the FBI was the mainstay of Operation
‘Bermuda Short’ have been rewarded
with light sentences for a securities
fraud they committed nearly ten years ago.
David William Jones, 44, received a
one-year prison term, while Robert Schlien,
56, escaped prison altogether, receiving just
five years of probation, during sentencing
at the U. S. District Court for the Southern
District of Florida on June 17, 2005. They
must also jointly and severally pay restitution
of $4,591,773. They had each previously
pleaded guilty to one count of conspiracy
to commit securities fraud concerning
criminal activity that ended in February,
1996.
Jones and Schlien had initially each
been sentenced to five years in prison on
March 18, 2005. Jones’ sentence was to run
consecutively with a 33-month prison term
that he was ordered to serve at the U. S.
District Court for the District of Nevada on
May 11, 2004 for other securities fraud
offenses.
However, their Florida sentences were
reduced in amended judgments handed
down by the court three months later due to
what the judge acknowledged was their
“substantial assistance” with the ‘Bermuda
Short’ investigation. Not only was Jones’
prison-term reduced from five years to one
year but he will now serve it concurrently
with his Nevada sentence, not consecutively,
meaning he is due to be released
from the Federal Correctional Institution, in
Miami, on January 21, 2007.
The sentences are mild in comparison
with those given to some of the people
they helped to entrap in the ‘Bermuda
Short’ investigation, even though Jones
and Schlien have considerably worse records
of committing illegal activity.
An indication of the extent of their cooperation
with law enforcement can be
found in a sentencing memorandum filed
on behalf of Schlien in Florida on March
17, 2005 – one day before he was due to
be sentenced.
“Schlien anticipates that his sentencing
will be particularly unique in that the
Court will be provided with a detailed and
exhaustive recitation of Schlien's lengthy
cooperation with the federal government
which has resulted in voluminous arrests,
indictments and convictions,” stated
Schlien’s attorney, Bruce Zimet.
“Schlien's cooperation and role as an
undercover cooperating witness allowed
the government to pursue white collar
criminal conduct as part of an operation
known as “Bermuda Short”.”
Zimet added: “Schlien anticipates that
the Government will file an application
pursuant to Section 5Kl.1 Federal Sentencing
Guidelines, seeking downward
reduction from the guidelines based upon
Schlien's substantial assistance. Additionally
Schlien anticipates that witnesses,
including Special Agents of the Federal
Bureau of Investigation, will particularize
the Herculean assistance provided by
Schlien which has been estimated to include
9,000 hours of work with the Government.
Schlien's hours of commitment
included the undercover white collar securities
fraud investigation initiated through
Schlien (with the assistance of co-defendant
Jones) which lead to unprecedented results
in this district.
“Schlien is unaware of whether the
Government will make a specific recommendation
to the Court concerning the type
or quantum of sentence to be imposed
based upon Schlien's assistance. However
Schlien does have confidence that the Government
will accurately classify Schlien's
cooperation as extraordinary especially
considering the significance of “Bermuda
Short”.”
A few days earlier, Jones’ attorney,
Fred Haddad, made a filing in which he
referred to his client’s “extraordinary assistance
to the United States in the detection
and prosecution of ongoing criminal activity
and the great risk of himself and his
family.”
As previously reported by OffshoreAlert,
Jones and Schlien had committed
securities fraud from 1993 to 1996 that
caused losses to investors of between $20
million and $40 million. In 1998, with law
enforcement breathing down their necks
and both facing lengthy prison terms, particularly
Jones, who was already waiting to
be sentenced for another securities fraud for
which he was convicted in Nevada the previous
year, they agreed to help snare others.
That led to one of the biggest-ever investigations
into white-collar crime, a two-
(Continued on page 2)
You should receive 29
pages of this newsletter
INSIDE THIS EDITION
• ‘Bermuda Short’ Pages 1-2
• SEGOES Page 3
• Jeeves Group Pages 3-5
• Banco Creditanstalt Page 5
• River Capital Page 5
• CSFB (Cayman) Page 6
• Ritz-Carlton (Cayman) Pages 7-9
• Evergreen Security Page 10
• ES Bankest Pages 10-11
• MLATs Pages 12-20
• Extraditions Page 21
• SEGOES Page 21
• Latin America Pages 22-23
• Newt Utopia Pages 23-25
• Insider Talking Pages 26-27
• Investment Funds Pages 28-29
August 31, 2005 Issue 103
Published by KYC News, Inc., 123 S. E. 3rd Avenue, PMB #173, Miami, FL 33131, USA.

Fraudsters receive leniency for undercover ‘Bermuda Short’ work

Two career criminals whose undercover
work for the FBI was the mainstay of Operation
‘Bermuda Short’ have been rewarded
with light sentences for a securities
fraud they committed nearly ten years ago.
David William Jones, 44, received a
one-year prison term, while Robert Schlien,
56, escaped prison altogether, receiving just
five years of probation, during sentencing
at the U. S. District Court for the Southern
District of Florida on June 17, 2005. They
must also jointly and severally pay restitution
of $4,591,773. They had each previously
pleaded guilty to one count of conspiracy
to commit securities fraud concerning
criminal activity that ended in February,
1996.
Jones and Schlien had initially each
been sentenced to five years in prison on
March 18, 2005. Jones’ sentence was to run
consecutively with a 33-month prison term
that he was ordered to serve at the U. S.
District Court for the District of Nevada on
May 11, 2004 for other securities fraud
offenses.
However, their Florida sentences were
reduced in amended judgments handed
down by the court three months later due to
what the judge acknowledged was their
“substantial assistance” with the ‘Bermuda
Short’ investigation. Not only was Jones’
prison-term reduced from five years to one
year but he will now serve it concurrently
with his Nevada sentence, not consecutively,
meaning he is due to be released
from the Federal Correctional Institution, in
Miami, on January 21, 2007.

The sentences are mild in comparison
with those given to some of the people
they helped to entrap in the ‘Bermuda
Short’ investigation, even though Jones
and Schlien have considerably worse records
of committing illegal activity.
An indication of the extent of their cooperation
with law enforcement can be
found in a sentencing memorandum filed
on behalf of Schlien in Florida on March
17, 2005 – one day before he was due to
be sentenced.
“Schlien anticipates that his sentencing
will be particularly unique in that the
Court will be provided with a detailed and
exhaustive recitation of Schlien's lengthy
cooperation with the federal government
which has resulted in voluminous arrests,
indictments and convictions,” stated
Schlien’s attorney, Bruce Zimet.
“Schlien's cooperation and role as an
undercover cooperating witness allowed
the government to pursue white collar
criminal conduct as part of an operation
known as “Bermuda Short”.”
Zimet added: “Schlien anticipates that
the Government will file an application
pursuant to Section 5Kl.1 Federal Sentencing
Guidelines, seeking downward
reduction from the guidelines based upon
Schlien's substantial assistance. Additionally
Schlien anticipates that witnesses,
including Special Agents of the Federal
Bureau of Investigation, will particularize
the Herculean assistance provided by
Schlien which has been estimated to include
9,000 hours of work with the Government. Schlien's hours of commitment
included the undercover white collar securities
fraud investigation initiated through
Schlien (with the assistance of co-defendant
Jones) which lead to unprecedented results
in this district.
“Schlien is unaware of whether the
Government will make a specific recommendation
to the Court concerning the type
or quantum of sentence to be imposed
based upon Schlien's assistance. However
Schlien does have confidence that the Government
will accurately classify Schlien's
cooperation as extraordinary especially
considering the significance of “Bermuda
Short”.”
A few days earlier, Jones’ attorney,
Fred Haddad, made a filing in which he
referred to his client’s “extraordinary assistance
to the United States in the detection
and prosecution of ongoing criminal activity
and the great risk of himself and his
family.”
As previously reported by OffshoreAlert,
Jones and Schlien had committed
securities fraud from 1993 to 1996 that
caused losses to investors of between $20
million and $40 million. In 1998, with law
enforcement breathing down their necks
and both facing lengthy prison terms, particularly
Jones, who was already waiting to
be sentenced for another securities fraud for
which he was convicted in Nevada the previous
year, they agreed to help snare others.
That led to one of the biggest-ever investigations
into white-collar crime, a two-year undercover operation by the FBI and
the Royal Canadian Mounted Police in
which a federal agent set up shop at Jones
and Schlien's office in Boca Raton, Florida
and the trio set about enticing others to
commit securities violations.
Operation ‘Bermuda Short’ culminated
in 23 indictments against 58 people at the
U. S. District Court for the Southern District
of Florida in 2002 for a range of offenses,
including money laundering, securities
fraud, conspiracy to commit securities
fraud, wire fraud and mail fraud. Among
those indicted were Bahamas accountant
Michael Hepburn, Bermuda company directors
Paul Lemmon and Andrew Proctor,
Vancouver-based attorney Martin Chambers,
Canadian broker Mark Valentine and
four principals of Grenada-licensed Meridian
Investment Bank, including former Canadian
Space Agency engineer Serdar
Kalaycioglu. Hepburn was acquitted at trial
but the others were either convicted or
pleaded guilty.
The operation was “designed to
expose and prosecute those who attempt
to engage in the fraudulent purchase
and sale of stock of companies
whose shares trade on the United
States public markets”, stated a U. S.
Department of Justice press release
announcing the indictments in August,
2002.
The role of Schlien and Jones in the
investigation was described by news service
Canada Stockwatch in an account of
the first trial of James T. Kelly, which
ended in a hung jury in October, 2003. He
was acquitted on November 18, 2004 after
a re-trial.
The court heard that FBI Agent Mike
Palasek set up shop at Jones and Schlien's
Boca Raton offices and began spreading the
word that they had $8 million to invest
every month, reported Stockwatch.
“They told people they had connections
to a British fund, that they had made friends
with a British fund manager, known only
by his first name, Nigel,” stated prosecutor
Thomas Hanusik, who then explained how
they enticed various people into alleged
securities fraud through the offering of
kickbacks.
In many cases, those indicted were relative
saints compared with Schlien and
Jones. After one Bermuda Short trial, a juror described the pair as “slime” and
their lack of credibility contributed to
prosecutors' patchy record in securing
convictions.
Both have made a career out of stock
scams. In a 1999 ruling in an administrative
proceeding before the SEC in Washington,
D.C., Administrative Law Judge
Robert Mahony described Schlien as “a
repeat violator of state and federal securities
laws” and noted that Jones “has been
sanctioned several times for violating
state and federal securities laws”.
A turning point for Jones came on
September 11, 1997 when he was convicted
of conspiracy to commit fraud,
wire fraud, securities fraud, and aiding
and abetting by a jury sitting at the U. S.
District Court for the District of Nevada.
The charges concerned a multi-million
dollar stock scam from 1991 to 1995 involving
Las Vegas-based Teletek Inc. and
its subsidiary, United Payphone Services
Inc. Co-defendants were John
Mark Armstrong, Lyle Bettenhausen
Sr., Thomas Calise,
Damon Cozzolino, Sean
Deegan, Edward Donner,
Lawrence Erber, John Greco,
Gerard King, Donald Milne,
Kelvin Nash, Robert Orkin,
and Charles Stember.
Jones began co-operating
with the authorities soon after his conviction
and, as a result, he was not sentenced
for these offenses until May 11, 2004—
after many of the Bermuda Short prosecutions
were completed. He received 33
months in prison, 36 months of supervised
release, a fine of $10,000 and an
order to pay restitution of $1,431,766.
Apart from at least two criminal convictions
against Jones and one against
Schlien, their various scrapes with civil
and administrative authorities have included
Schlien agreeing to an 18-month
ban from the securities industry in 1989
to settle fraud charges filed by the SEC
concerning Fort Lauderdale-based penny
stock firm Profile Investments Corp., of
which he was president, and Jones found
in 1996 to have been involved with receiving
non-disclosed compensation
while he was a stockbroker in 1993.
Bizarrely, in 2002, Schlien and Jones
began operating Financial Fraud Recovery
Consultants Inc., of Boca Raton, Florida,
which purported to help victims of
fraud recover their losses. Others involved
in the company included a former FBI Special
Agent, Joseph Del Campo, and an attorney,
Richard Seay. The business did not
last long, however, and the firm was dissolved
in 2003.
Since assisting with the ‘Bermuda
Short’ investigation, Schlien, in particular,
claims to have undergone a dramatic transformation
in his life. “In addition to
Schlien's cooperation, this Court will be
able to evaluate the profound personal development
Schlien has made in all aspects
of his life,” stated Schlien’s attorney in a
court filing before sentencing.
“Schlien's growth can in part be objectively
measured by his religious evolution,
his spiritual awareness and by his philanthropic
commitment. As the Court will observe,
Robert Schlien is a quality individual.
The dynamics of the judicial system
have in many ways facilitated this quality
person to evolve into a remarkable
human being.”
The attorney added: “A significant
motivation for Robert Schlien's
cooperation with the Government
arose from his genuine remorse for his
misconduct. Robert Schlien paid
$750,000 in restitution monies to the
Government in 1999 prior to any
court order or guilty plea. Schlien's
$750.000 has earned interest in the tens of
thousands of dollars since deposit. Additionally,
Robert Schlien is fully committed
to the complete payment of the remainder
of any additional restitution monies.
“Schlien has recognized and learned
that the materialistic disease that contributed
to his misconduct is often confused as
a barometer of success and happiness.
Schlien has abandoned the late model fancy
foreign cars, multi-million dollar home and
flashy lifestyle that he previously misidentified
as signs of success. Instead, Robert
Schlien rents a modest home in Ft Lauderdale,
drives a used American car and defines
happiness by the benefit he can bring
to the lives of others.
“However, in moving forward Schlien
will not forget his past. Whether forgiven
by his victims or not, Schlien will not rest
until every penny he owes for restitution is
fully paid.”

Miami, Florida, November 1, 2005
Operation Bermuda Short
by Marcos Jiménez,
Former U. S. Attorney for the Southern District of Florida
Operation Bermuda Short, a two-year undercover securities fraud investigation, was
designed to expose and prosecute individuals who attempted to engage in the fraudulent
purchase and sale of stock of U.S. publicly-traded companies. The outstanding efforts of
a team of prosecutors and law enforcement officers resulted in the return of 23
Indictments charging 58 individuals, from the U.S. and elsewhere, with conspiracy,
securities fraud, wire and mail fraud, and/or money laundering. The securities fraud
activities charged in these Indictments involved the securities of 21 U.S. publicly-traded
companies located throughout this country and Canada. Although this investigation was
conducted in such a way that resulted in no actual loss to any investor, the combined
attempted securities sales exposed by this operation totaled over $200 million.
The investigation involved two scenarios. In the first scenario, an undercover FBI agent
(“FBI UCA”) posed as a corrupt securities trader employed by the U.S.-based
representative of a fictitious foreign mutual fund (“the Fund”). The FBI UCA would
represent that the Fund had a number of investors who had invested millions of dollars.
The FBI UCA claimed that he worked with two U.S.-based due diligence officers who
researched and approved which securities the undercover agent, as the Fund’s purported
trader, could purchase on behalf of the Fund and its investors. The FBI UCA also
claimed that a purported manager of the Fund was corrupt and had knowledge of the
undercover agent’s corrupt activities concerning the Fund. Two cooperating witnesses
(collectively the “CWs”), who assisted in the undercover operation, posed as corrupt
stock promoters that presented prospective stock purchase deals to the Fund.
The FBI UCA, along with the CWs, presented themselves as being able to arrange for the
fictitious Fund to pay millions of dollars for large blocks of stock owned by the
defendants and/or their companies at prices significantly above the actual market prices
of the stocks. In return for the Fund purchasing their stock, the defendants agreed to
participate in an illegal kickback scheme in which proceeds from the stock sales to the
Fund would be secretly kicked back by the defendants to the FBI UCA and others
involved in the scheme. The amount of undisclosed kickbacks generally amounted to
several million dollars and were to be paid using offshore corporate entities and bank
accounts. In some instances the defendants, including licensed securities brokers, agreed
to participate in the illegal kickback schemes by agreeing to help manipulate the market
prices of the stocks involved. Specifically, defendants agreed to artificially increase the
market price of a publicly-traded company’s stock by recommending and selling shares
of the particular stock to their customers in exchange for undisclosed payoffs.
The second scenario involved corporate officers, stock promoters and other financial
professionals who laundered, through U.S., Canadian, and off-shore banks, a total of
almost $1.4 million of funds that were represented as proceeds from cocaine distribution
by an undercover FBI agent and an undercover Royal Canadian Mounted Police
(“RCMP”) agent posing as members of a Colombian drug cartel. These money
laundering transactions were agreed upon as the initial part of a longer standing business
relationship where the defendant corporate officers, stock promoters and other financial
professionals would receive many more millions of dollars, represented as cocaine
proceeds, for furthering their securities fraud schemes and other financial fraud.
The undercover investigative phase of Operation Bermuda Short began in 2000 and
continued until 2002. From the outset, the around-the-clock, 7-day-a-week, undercover
phase of the investigation was extraordinarily difficult and delicate because law
enforcement desired to expose millions of dollars worth of attempted fraudulent
securities sales without affecting the securities markets or causing any actual loss to
investors in those markets. To accomplish this task, a team of prosecutors and agents
carefully conducted and supervised the investigation, as well as coordinated efforts with
the U. S. Securities and Exchange Commission (“SEC”) and the NASD. The
investigation generated numerous undercover audiotapes and videotapes, many of them
lasting for several hours, which captured the fraudulent activities which ultimately served
to support the charges brought against the defendants. Ultimately, 58 targets were
charged in 23 Indictments. A nationwide operational takedown to effectuate the arrest of
the charged defendants was undertaken in August 2002. As a result of the team’s tireless
efforts, 55 of the 58 charged defendants were arrested nationwide over the course of 36
hours. Simultaneously with the arrest of these defendants, the SEC filed 4 parallel civil
injunctive actions against certain of the defendants charged and some of the companies
involved in this investigation.
Due to the strength of the cases, the vast majority of the defendants pleaded guilty before
trial. The extraordinary efforts by the team of prosecutors and agents assigned to this
investigation and attendant prosecutions resulted in the conviction of approximately 88%
of all arrested defendants and sentences of as much as 27 years of imprisonment. These
convicted defendants included, among others, numerous officers and directors of
publicly-traded companies, securities brokers and promoters, lawyers, and accountants.
Operation Bermuda Short was the first undercover securities fraud operation in the
Southeast region of the United States and one of only a handful of such operations ever
conducted nationwide. This successful prosecution was one of the first significant
accomplishments of the U.S. Department of Justice’s (“DOJ”) Corporate Fraud Task
Force. Through the tireless efforts of the team of prosecutors and agents assigned to this
operation, 23 indictments were returned charging 58 individuals, from the United States,
Canada and the Caribbean, with securities fraud and related charges. The team undertook
a massive and complicated two-year undercover investigation, prevailed in substantial
and difficult pre and post-trial litigation, and convicted approximately 88% of all of the
arrested defendants. The team’s efforts sent a clear message that the DOJ will not
tolerate corporate fraud and that DOJ will proactively and aggressively prosecute those
who illegally threaten the integrity of this nation’s capital market system.

U.S. Department of Justice
Marcos Daniel Jiménez
United States Attorney for the
Southern District of Florida
99 N.E. 4 Street
Miami, FL 33132
[phone]
PRESS RELEASE
FOR IMMEDIATE RELEASE For Information Contact Public Affairs
August 15, 2002 Jacqueline Becerra, Acting Special
Counsel for Public Affairs, [phone]
Marjorie M. Selige, Public Affairs
Specialist, [phone]
SOUTH FLORIDA SECURITIES FRAUD INITIATIVE ANNOUNCES INDICTMENT
OF 58 INDIVIDUALS AS PART OF A TWO-YEAR UNDERCOVER SECURITIES
FRAUD AND MONEY LAUNDERING INVESTIGATION INVOLVING OVER $200
MILLION IN ATTEMPTED FRAUDULENT SECURITIES SALES
A. OVERVIEW
Marcos Daniel Jiménez, United States Attorney for the Southern District of Florida;
Hector Pesquera, Special Agent in Charge of the Federal Bureau of Investigation (FBI);
David P. Nelson, Regional Director of the Southeast Regional Office of the United States
Securities and Exchange Commission (SEC); James K. Belz, Postal Inspector in Charge
of the United States Postal Inspection Service (USPIS); Gary Clement, Superintendent of
the National Proceeds of Crime Section, Royal Canadian Mounted Police (RCMP); and
Mary L. Schapiro, NASD's (f/k/a National Association of Securities Dealers) President of
Regulatory Policy and Oversight, announced the unsealing of 23 Indictments charging 58
individuals with: conspiracy to commit securities fraud, wire and/or mail fraud; securities
fraud; wire fraud; mail fraud; and/or money laundering. The Indictments unsealed today
result from a two-year, undercover investigation code-named, Bermuda Short, designed
to expose and prosecute those who attempt to engage in the fraudulent purchase and sale
of stock of companies whose shares trade on the United States public markets. The
defendants named in the Indictments include officers of public companies, licensed
securities brokers of SEC registered firms, stock promoters, as well as control persons of
the relevant publicly-traded companies. Although the undercover investigation was
conducted in such a way that resulted in no actual loss to any investor, the combined
attempted fraudulent securities sales exposed by the undercover operation totaled over
$200 million. The securities fraud activities charged in these Indictments involve the
securities of 23 United States publicly-traded companies with principal offices located
throughout this country and Canada.
As alleged in the Indictments, the investigation involved two scenarios. In the first
scenario, an undercover FBI agent ("FBI UCA") posed as a corrupt securities trader
employed by the United States-based representative of a fictitious foreign mutual fund
("the Fund"). The FBI UCA would represent that the Fund had a number of investors
who had invested millions of dollars. The FBI UCA claimed that he worked with two
United States-based due diligence officers whose job was to research and approve which
securities the undercover agent, as the Fund's purported trader, would be allowed to
purchase on behalf of the Fund and its investors. The FBI UCA also claimed that a
purported manager of the Fund was corrupt and had knowledge of the undercover agent's
corrupt activities concerning the Fund. Two cooperating witnesses (collectively the
"CWs") also assisted in the undercover operation, posing as corrupt stock promoters who
presented prospective stock purchase deals to the Fund.
The FBI UCA, along with the CWs, presented themselves as being able to arrange for the
fictitious Fund to pay millions of dollars for large blocks of stock owned by some of the
defendants and/or their companies at prices significantly above the actual market prices
of the stocks. The Indictments allege that, in return for the Fund purchasing their stock,
the defendants agreed to participate in an illegal kickback scheme in which proceeds
from the stock sales to the Fund would be secretly kicked back by the defendants to the
FBI UCA and others involved in the scheme. The amount of undisclosed kickbacks
generally amounted to several million dollars and were to be paid using offshore
corporate entities and bank accounts. In addition, a number of the Indictments charge
defendants, including licensed securities brokers, with participating in the illegal
kickback schemes by agreeing to help manipulate the market prices of the stocks
involved. Specifically, defendants would agree to artificially increase the market price of
a publicly-traded company's stock by recommending and selling shares of the particular
stock to their customers in exchange for undisclosed payoffs. Ultimately, as noted above,
the undercover investigation was conducted in such a way that resulted in no actual loss
to any investor.
The second scenario alleged in three Indictments involved corporate officers, stock
promoters and other financial professionals who laundered, through U.S., Canadian, and
off-shore banks, a total of almost $1.4 million of funds that were represented as proceeds
from cocaine distribution by an undercover FBI agent and an undercover RCMP agent
posing as members of a Colombian drug cartel. These money laundering transactions
were agreed upon as the initial part of a longer standing business relationship where the
defendant corporate officers, stock promoters and other financial professionals would
receive many more millions of dollars, represented as cocaine proceeds.
The Indictments announced today are part of the South Florida Securities Fraud Initiative
involving the coordinated efforts of the United States Attorney's Office for the Southern
District of Florida, the FBI, the SEC, and the USPIS, with the assistance of the United
States Department of Justice - Fraud Section, the RCMP and the NASD - Criminal
Prosecution Assistance Group, to ensure an aggressive and focused attack on securities
laws violators. In this respect, simultaneously with today's announcement of criminal
charges, the SEC has filed four civil injunctive actions against certain of the defendants
and companies involved in the undercover investigation for various violations of the
federal securities laws.
B. INDICTMENTS BY THE UNITED STATES ATTORNEY'S OFFICE
Securities Fraud Indictments
1. U.S. v. Daniel Bender and Bruce A. Biddick, Case No. 02-20538-CR-GRAHAM
On June 20, 2002, a federal grand jury returned an Indictment charging Daniel Bender
and Bruce A. Biddick with one count of wire, mail and securities fraud conspiracy, in
violation of 18 U.S.C. § 371, five counts of wire fraud, in violation of 18 U.S.C. §§ 1343
and 1346, one count of mail fraud, in violation of 18 U.S.C. §§ 1341 and 1346, and one
count of securities fraud, in violation of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5.
Bender was the President, Chief Executive Officer and a Director of Digital Concepts
International, Inc. ("DCII"), the common stock of which was publicly traded on the overthe-
counter market. Biddick was an owner, registered principal and a securities broker at
Centex Securities, Inc., a securities broker-dealer registered with the SEC and the NASD.
The Indictment charges that the defendants conspired to pay a $2 million undisclosed
kickback to the FBI UCA and others in return for their inducing the Fund to pay $5
million for the purchase from DCII of 1 million shares of its stock at an above-market
price. Biddick was to receive $400,000 for his role in arranging the sale. The defendants
agreed to conceal the $2 million undisclosed kickback payment by wiring it to an
offshore bank account. If convicted, the maximum, statutory term of imprisonment is 5
years for conspiracy to commit wire/mail/securities fraud, wire fraud, and mail fraud,
respectively, and 10 years for securities fraud.
2. U.S. v. Douglas Rasberry, a/k/a/ "Doug Rasberry," Michael Vlahovic and Lawrence
W. Gallo, Case No. 02-20637-CR-MOORE
On July 30, 2002, a federal grand jury returned an Indictment charging Douglas
Rasberry, Michael Vlahovic, and Lawrence W. Gallo with one count of wire, mail and
securities fraud conspiracy, in violation of 18 U.S.C. § 371, and Rasberry and Vlahovic
with five counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346, one count of
mail fraud, in violation of 18 U.S.C. §§ 1341 and 1346, one count of securities fraud, in
violation of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5, and one count of money
laundering, in violation of 18 U.S.C. § 1956(a)(2)(A). Rasberry and Vlahovic owned,
through offshore corporate nominees, a significant amount of the common stock of
Uncommon Media Group, Inc. ("UMDA"), which was publicly traded on the over-thecounter
market. Gallo was the Chairman, Chief Executive Officer and a Director of
UMDA. The Indictment charges that Rasberry and Vlahovic conspired to sell to the Fund
between $8,000,000 and $10,000,000 of their UMDA stock at an above-market price and,
in return, would pay an undisclosed kickback of 45% of the stock sale proceeds they
received to the FBI UCA and others. Gallo is alleged to have agreed to participate in the
illegal stock-purchase-kickback scheme in return for receiving a portion of the UMDA
stock sale proceeds for corporate purposes and for his own personal benefit. If convicted,
the maximum, statutory term of imprisonment is 5 years for conspiracy to commit
wire/mail/securities fraud, wire fraud, and mail fraud, respectively, 10 years for securities
fraud, and 20 years for money laundering.
3. U.S. v. Melvin L. Levine, a/k/a/ "Mel Levine," Robert W. Wilder, a/k/a "Bob Wilder,"
and Michael T. Reiter, Case No. 02-20672-CR-JORDAN
On August 8, 2002, a federal grand jury returned an Indictment charging Melvin L.
Levine, Robert W. Wilder and Michael T. Reiter with one count of wire, mail and
securities fraud conspiracy, in violation of 18 U.S.C. § 371, four counts of wire fraud, in
violation of 18 U.S.C. §§ 1343 and 1346, two counts of mail fraud, in violation of 18
U.S.C. §§ 1341 and 1346, and three counts of securities fraud, in violation of 15 U.S.C. §
78j(b) and 17 C.F.R. § 240.10b-5. Wilder was the Chief Executive Officer and a Director
of COI Solutions, Inc. ("COSL"), the common stock of which was publicly traded on the
over-the-counter market. Levine and Reiter were stock promoters. The Indictment
charges that the defendants conspired to pay approximately $11 million in undisclosed
kickbacks to the FBI UCA and others in return for their inducing the Fund to pay
approximately $16 million for the purchase of approximately 1,400,000 shares of
overpriced COSL stock. Levine was to receive $2.4 million and Wilder $500,000 for
their roles in the scheme. The sale was to be facilitated through Hermitage House
Investment Company, Ltd., an offshore entity controlled by Levine. The Indictment
alleges that Reiter participated in the conspiracy by agreeing, among other things, to help
recruit securities brokers who would artificially increase the market price of COSL stock
by recommending and selling shares to their unsuspecting customers in exchange for
undisclosed payoffs. If convicted, the maximum, statutory term of imprisonment is 5
years for conspiracy to commit wire/mail/securities fraud, wire fraud, and mail fraud,
respectively, and 10 years for securities fraud.
4. U.S. v. David Rich, George Doumanis, Thomas Steinbach and Cris Sagnelli, Case No.
02-20452-CR-GRAHAM
On May 21, 2002, a federal grand jury returned an Indictment charging David Rich,
George Doumanis, Thomas Steinbach and Cris Sagnelli with one count of wire, mail and
securities fraud conspiracy, in violation of 18 U.S.C. § 371, one count of wire fraud, in
violation of 18 U.S.C. §§ 1343 and 1346, one count of mail fraud, in violation of 18
U.S.C. §§ 1341 and 1346, and one count of securities fraud, in violation of 15 U.S.C. §
78j(b) and 17 C.F.R. § 240.10b-5. Rich and Steinbach were officers and shareholders of
Integrated Homes, Inc. ("INHI"), the common stock of which was publicly traded on the
over-the-counter market. Doumanis was the owner of S.G. Martin, a registered securities
broker-dealer, and controlled a significant amount of INHI stock. Sagnelli was employed
as a stock promoter. The Indictment charges that Rich, Doumanis, and Steinbach agreed
to pay approximately $4 million in an undisclosed kickback to Sagnelli, the FBI UCA
and others in return for their inducing the Fund to buy 2 million shares of INHI
overpriced stock for a total of $8 million. If convicted, the maximum, statutory term of
imprisonment is 5 years for conspiracy to commit wire/mail/securities fraud, wire fraud,
and mail fraud, respectively, and 10 years for securities fraud.
5. U.S. v. Daniel Charboneau, Michael Puorro, Marshall Klein and Cris Sagnelli, Case
No. 02-20453-CR-MOORE
On May 21, 2002, a federal grand jury returned an Indictment charging Daniel
Charboneau, Michael Puorro, Marshall Klein, and Cris Sagnelli with one count of wire,
mail and securities fraud conspiracy, in violation of 18 U.S.C. § 371, six counts of wire
fraud, in violation of 18 U.S.C. §§ 1343 and 1346, three counts of mail fraud, in violation
of 18 U.S.C. §§ 1341 and 1346, and one count of securities fraud in violation of 15
U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Charboneau was the Chairman, Chief
Executive Officer, and a principal shareholder of FoneCash, Inc. (FCSH), the common
stock of which was publicly traded on the over-the-counter market. Puorro and Klein
were securities brokers employed by National Securities Corporation and Centex
Securities, Inc., registered securities broker-dealers, respectively. Sagnelli was employed
as a stock promoter. The Indictment charges that Charboneau agreed to pay a $2 million
undisclosed cash bribe or kickback to Sagnelli, the FBI UCA and others in return for their
inducing the Fund to buy 4 million restricted shares of FCSH stock for a total of $8
million. The Indictment further alleges that Charboneau agreed to provide the FBI UCA
with 1 million shares of FCSH stock to be used by Puorro and Klein and others to
artificially increase the market price of FCSH stock. If convicted, the maximum, statutory
term of imprisonment is 5 years for conspiracy to commit wire/mail/securities fraud, wire
fraud, and mail fraud, respectively, and 10 years for securities fraud.
6. U.S. v. Bruce Bertman, Ray Hutchison, Jerry Poole, Charles Arnold, a/k/a "Chuck,"
and Cris Sagnelli, Case No. 02-20454-CR-GRAHAM
On May 21, 2002, a federal grand jury returned an Indictment charging Bruce Bertman,
Ray Hutchison, Jerry Poole, Charles Arnold and Cris Sagnelli with one count of wire,
mail and securities fraud conspiracy, in violation of 18 U.S.C. § 371, thirteen counts of
wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346, one count of mail fraud, in
violation of 18 U.S.C. §§ 1341 and 1346, and one count of securities fraud, in violation
of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Bertman was the Chief Executive
Officer and a principal shareholder of A1 International, Inc. ("AWON"), the common
stock of which was publicly traded on the over-the-counter market. Defendants
Hutchison, Poole and Arnold were stock promoters and controlling shareholders of
AWON. Sagnelli was employed as a stock promoter. According to the Indictment, Bertman, Hutchison, Poole and Arnold agreed to pay an approximately $2.5 million
undisclosed kickback to the FBI UCA and others to induce the Fund to buy
approximately 4 million shares of overpriced AWON stock for a total of $8 million. The
Indictment charges that Sagnelli and Poole were to receive a portion of the undisclosed
kickback payment for their role in the stock transaction. If convicted, the maximum,
statutory term of imprisonment is 5 years for conspiracy to commit wire/mail/securities
fraud, wire fraud, and mail fraud, respectively, and 10 years for securities fraud.
7. U.S. v. Greg Balk and Cris Sagnelli, Case No. 02-60164-CR-DIMITROULEAS
On August 8, 2002, a federal grand jury returned a two-count Indictment charging Greg
Balk and Cris Sagnelli with conspiracy to commit securities fraud, in violation of 18
U.S.C. § 371, and with securities fraud, in violation of 15 U.S.C. § 78j(b) and 17 C.F.R. §
240.10b-5. Balk was the President of Balk & Co., a Florida corporation, and controlled a
large number of shares of SeaEscape Entertainment, Inc. ("SEPI"), a publicly-traded
corporation. Sagnelli was a stock promoter. The Indictment charges that Balk and
Sagnelli conspired to pay undisclosed kickbacks of approximately $3.2 million to the FBI
UCA and others in return for their inducing the Fund to purchase approximately $8
million of overpriced SEPI stock. As part of the scheme, Balk caused false
documentation to be prepared to conceal the illegal payments, bribed two purported due
diligence officers of the Fund, and used a shell corporation for the fraudulent stockpurchase-
kickback scheme. If convicted, the maximum, statutory term of imprisonment is
5 years for conspiracy to commit securities fraud and 10 years for securities fraud.
8. U.S. v. Jeffrey Senger, Case No. 02-80093-CR-HURLEY
On May 21, 2002, a federal grand jury returned an Indictment charging Jeffrey Senger
with two counts of wire, mail, and securities fraud conspiracy, in violation of 18 U.S.C. §
371, twenty-two counts of securities fraud, in violation of 15 U.S.C. § 78j(b) and 17
C.F.R. § 240.10b-5, and four counts of money laundering, in violation of 18 U.S.C. §§
1956(a)(1)(A)(i) and 1957. Senger was a manager and securities broker at Baxter, Banks
& Smith, Ltd., a securities broker-dealer. Senger was charged in connection with two
separate wire, mail, and securities fraud conspiracies. The first conspiracy involved a
stock "pump and dump" scheme that resulted in investor losses of about $3 million. The
charges with respect to this conspiracy stem from a historical investigation into
fraudulent activities that came to the attention of law enforcement after the activities had
been committed by the defendant and others. Senger is alleged to have induced brokers at
Baxter, Banks to sell the stock of Lifekeepers International, Inc. ("LIFR"), a publicly
traded company, to their clients by making secret payments to the brokers and paying
undisclosed commissions. Contemporaneously with these sales, Senger is alleged to have
sold his own personal holdings of LIFR stock.
The second conspiracy, which stemmed from the undercover operation, involved
Senger's participation in the sale of stock to the Fund. The Indictment alleges that Senger
had acquired significant amounts of stock of Piccard Medical Corp. ("PMCZ") and
International Stores ("ISTR"), two companies the common stock of which was publicly
traded in the United States. As part of the scheme, the Fund would pay approximately $8
million for an agreed amount of overpriced PMCZ and ISTR stock, respectively. Based
on the overpayment, the FBI UCA and others would receive 50% of each $8 million
stock purchase as an undisclosed kickback. If convicted, the maximum, statutory term of
imprisonment is 5 years for each conspiracy to commit securities/mail/wire fraud, wire
fraud, and mail fraud, respectively, 10 years for securities fraud, and 20 years for money
laundering.
9. U.S. v. Blair Valentine, Case No. 02-80115-CR-HURLEY
On July 16, 2002, a federal grand jury returned an Indictment charging Blair Valentine
with one count of conspiracy to commit passport fraud, in violation of 18 U.S.C. § 371,
and two counts of furnishing false and altered passports, in violation of 18 U.S.C. § 1543.
Valentine was charged in connection with furnishing two false and altered passports to
the FBI UCA and others. The false passports were to be used to facilitate the laundering
of securities fraud proceeds. If convicted, the maximum, statutory term of imprisonment
is 5 years for conspiracy to commit passpost fraud and 15 years for each passport fraud
count.
10. U.S. v. Howard E. Kerbel, Barry Berman, Dennis Epstein, Kenneth B. Liebscher,
Melvin L. Levine, a/k/a "Mel Levine," and Vincent Barone, a/k/a "Vince Barone," Case
No. 02-20547-CR-HUCK
On June 25, 2002, a federal grand jury returned an Indictment charging Howard Kerbel,
Barry Berman, Dennis Epstein, Kenneth B. Liebscher, Melvine L. Levine and Vincent
Barone with one count of wire, mail, and securities fraud conspiracy, in violation of 18
U.S.C. § 371, and, variously, with ten counts of wire fraud, in violation of 18 U.S.C. §§
1343 and 1346, one count of mail fraud, in violation of 18 U.S.C. §§ 1341 and 1346,
three counts of securities fraud, in violation of 15 U.S.C. § 78j(b) and 17 C.F.R. §
240.10b-5, and one count of money laundering, in violation of 18 U.S.C. §
1956(a)(2)(A). Kerbel, Berman, Epstein, and Liebscher were founders and/or officers of
ThermoElastic Technologies, Inc. ("TMRO"), the common stock of which was publicly
traded in the United States on the over-the-counter market. Kerbel, Berman, Epstein, and
Liebscher controlled a significant amount of TMRO stock. Levine was a stock promoter.
Barone was a New York-based securities broker licensed by the NASD. The Indictment
alleges that Kerbel, Berman, Epstein and Liebscher agreed to pay a $1.2 million
undisclosed kickback to Levine, the FBI UCA and others in return for their inducing the
Fund to pay $4 million for the purchase of 20 million shares of TMRO stock. In addition,
the Indictment alleges that the defendants conspired to recruit, through Levine and
Barone, two sets of securities brokers to assist in artificially inflating the market price of
TMRO stock. Barone was to receive $400,000 for his assistance in manipulating the price
of TMRO stock. If convicted, the maximum, statutory term of imprisonment is 5 years
for conspiracy to commit wire/mail/securities fraud, wire fraud, and mail fraud,
respectively, 10 years for securities fraud, and 20 years for money laundering.

11. U.S. v. Mark Weirtzema, Gordon Novak, Charles Cini, a/k/a "Chuck Cini," and
Melvin L. Levine, a/k/a "Mel Levine," Case No. 02-20636-CR-UNGARO- BENAGES
On July 30, 2002, a federal grand jury returned an Indictment charging Mark Weirtzema,
Gordon Novak, Charles Cini, and Melvin L. Levine with one count of wire and securities
fraud conspiracy, in violation of 18 U.S.C. § 371, six counts of wire fraud, in violation of
18 U.S.C. §§ 1343 and 1346, and three counts of securities fraud, in violation of 15
U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Weirtzema and Novak were officers and
shareholders of Rhino Ecosystems, Inc. ("RHNC"), the common stock of which was
publicly traded on the over-the-counter market. Cini was an officer and, through
nominees, the controlling shareholder of RHNC. Levine was a stock promoter for RHNC.
The Indictment alleges that the defendants conspired to pay a $6 million undisclosed
kickback to the FBI UCA and others in return for their inducing the Fund to pay $8.6
million for the purchase of 650,000 shares of RHNC stock. The defendants agreed to
effect the sale through Hermitage House Investment Company, Ltd., a Nevis, West Indies
corporation controlled by Levine. In addition, the Indictment alleges that the defendants
conspired to recruit, with the assistance of the FBI UCA and others, securities brokers to
help artificially inflate the market price of RHNC stock. If convicted, the maximum,
statutory term of imprisonment is 5 years for conspiracy to commit wire/securities fraud,
wire fraud, and mail fraud, respectively, and 10 years for securities fraud.
12. U.S. v. Les Price and Joseph R. Huard, Jr., a/k/a "Joe Huard," Case No. 02-20626-
CR-UNGARO-BENAGES
On July 25, 2002, a federal grand jury returned an Indictment charging Les Price and
Joseph R. Huard, Jr. with one count of wire and securities fraud conspiracy, in violation
of 18 U.S.C. § 371, ten counts of wire fraud, in violation of 18 U.S.C. §§ 1343 and 1346,
and two counts of securities fraud, in violation of 15 U.S.C. § 78j(b) and 17 C.F.R. §
240.10b-5. The Indictment also charges Price with one count of money laundering, in
violation of 18 U.S.C. § 1956(a)(2)(A). Price was the Chief Executive Officer and,
through nominees, a significant shareholder of Medinah Minerals, Inc. (MDMN"), the
stock of which was publicly traded on the over-the-counter market. Huard was a licensed
securities broker and one of the founders and officers of Shamrock Partners, Ltd., a
securities brokerage firm located in Media, Pennsylvania. The Indictment alleges that
Price agreed to pay a $1.5 million undisclosed kickback to Huard, the FBI UCA and
others in return for their inducing the Fund to pay $5 million for 5 million shares of
MDMN stock. The Indictment also alleges that Price and Huard conspired to artificially
inflate the market price of MDMN stock by making illegal payments to securities brokers
who would sell shares to their unwitting clients. If convicted, the maximum, statutory
term of imprisonment is 5 years for conspiracy to commit wire/securities fraud, wire
fraud, and mail fraud, respectively, and 10 years for securities fraud.

13. U.S. v. Joseph R. Huard, Jr., James T. Kelly and Bruce D. Cowen, Case No. 02-
20473-CR-GRAHAM
On May 28, 2002, a federal grand jury returned an Indictment charging Joseph R. Huard,
Jr., James T. Kelly and Bruce D. Cowen with one count of wire, mail and securities fraud
conspiracy, in violation of 18 U.S.C. § 371, four counts of wire fraud, in violation of 18
U.S.C. §§ 1343 and 1346, one count of mail fraud, in violation of 18 U.S.C. §§ 1341 and
1346, and one count of securities fraud, in violation of 15 U.S.C. § 78j(b) and 17 C.F.R. §
240.10b-5. Huard and Kelly were licensed securities brokers and officers of Shamrock
Partners, Ltd., a securities brokerage firm located in Media, Pennsylvania. Cowen was a
Managing Director of a purported New York-based hedge fund called The Lancer Group,
and the Chairman of Capital Research, Ltd. Capital Research is alleged to have engaged
in investment activities for Lighthouse Fast Ferry, Inc. ("LHFF"), the stock of which was
publicly traded on the over-the-counter market. The Indictment alleges that Huard, Kelly,
and Cowen conspired to transfer LHFF restricted stock from The Lancer Group to
Capital Research for purchase by the Fund for a total of $5 million. In return, Huard,
Kelly and Cowen would divert 30% of the stock sale proceeds for undisclosed payments
of $600,000 to themselves and $900,000 to the FBI UCA and others. If convicted, the
maximum, statutory term of imprisonment is 5 years for conspiracy to commit
wire/mail/securities fraud, wire fraud, and mail fraud, respectively, and 10 years for
securities fraud.
14. U.S. v. Anthony M. Damato, Geoffrey W. Gazda and James Cary Parrish a/k/a "Cary
Parrish," Case No. 02-20456-CR-MORENO
On May 23, 2002, a federal grand jury returned an Indictment charging Anthony M.
Damato, Geoffrey W. Gazda, and James Cary Parrish with one count of securities fraud
conspiracy, in violation of 18 U.S.C. § 371, and one count of securities fraud, in violation
of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Damato was the Chairman and a major
stockholder of Eagle Building Technologies, Inc. ("EGBT"), the stock of which was
publicly traded on the over-the-counter market. Gazda was the President, Director, and
Treasurer of GWG Corporation, and Parrish the President and Chief Operating Officer of
Sealant Solutions, Inc. ("SSLU"). The Indictment charges that Damato, Gazda and
Parrish conspired to have EGBT sell restricted stock to the Fund for a total of $4.2
million. The undisclosed kickback was to be paid by Damato transferring $2 million from
the stock sale proceeds to Gazda and Parrish by means of a loan to Gazda's company,
GWG Corporation, which was to be secured by SSLU stock. Gazda and Parrish, in turn,
were to kickback half this loan ($1 million) to the FBI UCA and others in return for their
inducing the Fund to buy the EGBT restricted stock. If convicted, the maximum,
statutory term of imprisonment is 5 years for conspiracy to commit securities fraud, wire
fraud, and mail fraud, respectively, and 10 years for securities fraud.

[sandi66]

15. U.S. v. Paul D. Lemmon and Mark Valentine, Case No. 02-80088-CR-FERGUSON
On May 14, 2002, a federal grand jury returned an Indictment charging Paul D. Lemmon
and Mark Valentine with one count of wire, mail and securities fraud conspiracy, in
violation of 18 U.S.C. § 371, and two counts of securities fraud, in violation of 15 U.S.C.
§ 78j(b) and 17 C.F.R. § 240.10b-5. Lemmon was the founder and Managing Director of
Voyager Group, Ltd., a financial services company based in Bermuda. Valentine was the
Chairman of Thomson Kernaghan & Co., a securities broker-dealer based in Toronto,
Canada. Valentine is also alleged to have owned and controlled a majority of the stock of
C-Me-Run, Inc. ("CMER"), SoftQuad Software Ltd. ("SXML"), and JagNotes.com, Inc.
("JNOT"), three companies the stock of which was publicly traded on the over-thecounter
market. The Indictment charges that Lemmon and Valentine conspired to sell
CMER, SXML and JNOT stock to the Fund for a total of $29.4 million in return for their
payment of an undisclosed kickback of $7.8 million to the FBI UCA and others. In
addition, the Indictment charges that Lemon and Valentine were to cause securities
brokers to receive undisclosed kickbacks in return for their helping to manipulate the
market prices of CMER, SXML and JNOT stock by selling the stock to their
unsuspecting clients. If convicted, the maximum, statutory term of imprisonment is 5
years for conspiracy to commit wire/mail/securities fraud, wire fraud, and mail fraud,
respectively, and 10 years for securities fraud.
16. U.S. v. Paul D. Lemmon, Andrew K. Proctor, Michael T. Reiter and Justyn S.
Feldman, Case No. 02-80087-CR-HURLEY
On May 14, 2002, a federal grand jury returned an Indictment charging Paul D. Lemmon,
Andrew K. Proctor, Michael T. Reiter and Justyn S. Feldman with one count of wire and
securities fraud conspiracy, in violation of 18 U.S.C. § 371, and one count of securities
fraud, in violation of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Lemon was the
founder and Managing Director of Voyager Group Ltd., and Proctor was a Director of
Voyager Group, a financial services company based in Bermuda. Proctor was the
Chairman, Chief Financial Officer and a Director of CT Cosmetics, Inc. ("CCHO"), the
stock of which was being registered to become publicly traded in the United States.
Reiter was a stock promoter and Feldman was a licensed securities broker and Vice-
President of Dalton Kent Securities Group, Inc., a registered securities broker-dealer
located in New York. The Indictment charges that Lemmon and Proctor conspired to sell
CCHO stock to the Fund for a total of $6 million in return for their payment of an
undisclosed kickback payment of $3 million to the FBI UCA and others. Reiter and
Feldman were also to receive undisclosed kickbacks to help manipulate the market price
of CCHO stock in connection with the kickback scheme. If convicted, the maximum,
statutory term of imprisonment is 5 years for conspiracy to commit wire/securities fraud
and 10 years for securities fraud.
17. U.S. v. Paul D. Lemmon, Paul Derome and Andrew K. Proctor, Case No. 02- 80086-
CR-HURLEY
On May 14, 2002, a federal grand jury returned an Indictment charging Paul D. Lemmon,
Paul Derome and Andrew K. Proctor with one count of wire, mail and securities fraud
conspiracy, in violation of 18 U.S.C. § 371, and one count of securities fraud, in violation
of 15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5. Lemmon was the founder and
Managing Director of Voyager Group Ltd., and Proctor was a Director of Voyager
Group, a financial services company based in Bermuda. Derome was the President and
majority shareholder of New Anaconda Company ("NANA"), the stock of which was
publicly traded on the over-the-counter market. The Indictment charges that the
defendants conspired to sell NANA stock to the Fund for a total of $8 million in return
for their paying an undisclosed kickback of $2 million of the sale proceeds to the FBI
UCA and others. If convicted, the maximum, statutory term of imprisonment is 5 years
for conspiracy to commit wire/mail/securities fraud, wire fraud, and mail fraud,
respectively, and 10 years for securities fraud.
18. U.S. v. Walter Dorow, a/k/a "Art Dorow," Frank Dickey, Jr., Dax Ross, Ashley
Sosner, Cris Sagnelli, Richard Greene and Tim Rice, Case No. 02-60165-CR-ZLOCH
On August 8, 2002, a federal grand jury returned a four-count Indictment charging
Walter Dorow, Frank Dickey, Jr., Dax Ross, Ashley Sosner, Cris Sagnelli, Richard
Greene, and Tim Rice with conspiracy to commit mail and securities fraud, in violation
of 18 U.S.C. § 371, and securities fraud,15 U.S.C. § 78j(b) and 17 C.F.R. § 240.10b-5.
Walter Dorow and Richard Greene were also charged with mail fraud, in violation of 18
U.S.C. §§ 1341 and 1346. Dorow was a stock promoter. Frank Dickey, Jr., was the
President and CEO for Equity Technologies & Resources, Inc. ("ETCR"), a publiclytraded
corporation. Dax Ross and Ashley Sosner were licensed and registered
stockbrokers for a Boca Raton, Florida securities broker-dealer. Cris Sagnelli was a
licensed stockbroker in Boca Raton. Greene was an attorney who specialized in the field
of securities laws. Tim Rice owned large amounts of shares of ETCR stock. The
Indictment charges that these defendants conspired to pay undisclosed kickbacks of
approximately $1.3 million in cash and in stock issued pursuant to fraudulent Form S-8
Registration to the FBI UCA and others in return for their inducing the Fund to purchase
approximately $8.5 million worth of overpriced shares of ETCR and Movie-O-Network,
Inc. ("MVEO") stock, another corporation that was contemplated to go public. As part of
the schemes, the defendants bribed two purported due diligence officers of the Fund and
agreed to enlist and make illegal payments to corrupt securities brokers who would, in
turn, recommend and sell shares of ETCR and MVEO stock to their customers, instead of
shares of another company stock, so as to artificially inflate the market prices of ETCR
and MVEO stocks. If convicted, the maximum, statutory term of imprisonment is 5 years
for conspiracy to commit mail/securities fraud and 10 years for securities fraud.
19. U.S. v. James Cary Parrish, a/k/a "Cary Parrish," a/k/a/ "J. Cary Parrish" and
Geoffrey Gazda, Case No. 02-60126-CR-FERGUSON
On June 25, 2002, a federal grand jury returned an Indictment charging James Cary
Parrish and Geoffrey Gazda with one count of wire and securities fraud conspiracy, in
violation of 18 U.S.C. § 371, one count of wire fraud, in violation of 18 U.S.C. §§ 1343
and 1346, and one count of securities fraud, in violation of 15 U.S.C. § 78j(b) and 17
C.F.R. § 240.10b-5. Parrish was the President, Chief Operating Officer and Chief
Financial Officer of Sealant Solutions, Inc. ("SSLU"), the stock of which was publicly
traded on the over-the-counter market. Gazda was a consultant to SSLU and an officer of
GWG Corporation. The Indictment charges that Parrish and Gazda conspired to pay a $3
million undisclosed kickback to the FBI UCA and others in return for their inducing the
Fund to purchase approximately $9 million of overpriced SSLU stock. The kickback
payments were to made through GWG Corporation. If convicted, the maximum, statutory
term of imprisonment is 5 years for conspiracy to commit wire/securities fraud and wire
fraud, respectively, and 10 years for securities fraud.
20. U.S. v. Mario Turcotte, Sheldon Mickelson, Richard Carson and Serdar Kalaycioglu,
Case No. 02-80107-CR-HURLEY
On June 25, 2002, a federal grand jury returned an Indictment charging Mario Turcotte,
Sheldon Mickelson, Richard Carson and Serdar Kalaycioglu with one count of wire fraud
conspiracy, in violation of 18 U.S.C. § 371, and four counts of wire fraud, in violation of
18 U.S.C. §§ 1343 and 1346. Turcotte, Mickelson, Carson and Kalaycioglu were officers
and/or shareholders of Meridian Investment Bank, Ltd. ("Meridian Bank"), an offshore
bank located in Grenada, West Indies. The Indictment further alleges that the defendants
conspired to pay a $10 million undisclosed kickback to the FBI UCA and others in return
for their inducing the Fund to purchase approximately $40 million worth of certificates of
deposits issued by Meridian Bank. The kickback payments were to made through Golden
Eagle, an offshore corporation controlled by Turcotte and Mickelson. If convicted, the
maximum, statutory term of imprisonment is 5 years for conspiracy to commit wire fraud
and wire fraud, respectively.
Money Laundering Indictments
21. U.S. v. John K. Purdy, a/k/a "Jack Purdy," Ronaldo Horvat, a/k/a "Ron Horvat" and
Harold A. Jolliffe, Case No. 02-20642-CR-LENARD
On August 1, 2002, a federal grand jury returned an Indictment charging John K. Purdy,
Ron Horvat, and Harold Jolliffe with one count of money laundering conspiracy, in
violation of 18 U.S.C. § 1956(h), and eight counts of money laundering, in violation of
18 U.S.C. § 1956(a)(3)(B). Purdy, Horvat, and Jolliffe were purported principals of
Bolivian Hardwood Corporation, a privately-held corporation engaged in harvesting
timber in Bolivia with an office in Vancouver, Canada. Purdy was stock promoter
residing in Canada. As part of the investigation, an undercover FBI agent and an
undercover RCMP officer posed as members of a Colombian drug organization. The
Indictment charges the defendants with conspiring to conduct and conducting financial
transactions involving money that was represented by a law enforcement officer, and a
person at the direction of a law enforcement officer, as being the proceeds from the sale
and distribution of cocaine. The Indictment also seeks forfeiture from the defendants of
all property, real and personal, involved in the money laundering offenses and all
property traceable to such property, including but not limited to, a Citibank account under
the name of Jolliffe. If convicted, the maximum, statutory penalty for money laundering
and money laundering conspiracy as charged in the Indictment is 20 years imprisonment,
respectively.
22. U.S. v. Kevan Garner and John K. Purdy, a/k/a "Jack Purdy," Case No. 02-20641-
CR-MOORE
On August 1, 2002, a federal grand jury returned an Indictment charging Kevan Garner
and John K. Purdy with one count of money laundering conspiracy, in violation of 18
U.S.C. § 1956(h), and two counts of substantive money laundering, in violation of 18
U.S.C. § 1956(a)(3)(B). Garner and Purdy were stock promoters and purported principals
of Garner Purdy Venture Capital and Diacom Ventures, Ltd. located in Vancouver,
Canada. As part of the investigation, an undercover FBI agent and an undercover RCMP
officer posed as members of a Colombian drug organization. The Indictment charges the
defendants with conspiring to conduct and conducting financial transactions involving
money that was represented by a person at the direction of a law enforcement officer to
be the proceeds from the sale and distribution of cocaine. If convicted, the maximum,
statutory penalty for money laundering and money laundering conspiracy as charged in
the Indictment is 20 years imprisonment, respectively.
23. U.S. v. Martin G. Chambers, Kevan Garner and Michael Hepburn, Case No. 02-
20669-CR-UNGARO-BENAGES
On August 6, 2002, a federal grand jury returned a five-count Indictment charging Martin
G. Chambers, Kevan Garner, and Michael Hepburn for money laundering conspiracy, in
violation of 18 U.S.C. § 1956(h), and money laundering charges, in violation of 18
U.S.C. § 1956(a)(3)(B). Chambers was purportedly a management and financial
consultant residing in Vancouver, Canada. Kevan Garner was a stock promoter residing
in Canada. He was also purportedly a principal of Garner Purdy Venture Capital and
Diacam Ventures, Ltd. in Vancouver. Hepburn was purportedly a chartered accountant
and a banker for Keywest Swiss Investment Bank Inc. in St. Michael, Barbados. As part
of the investigation, an undercover FBI agent and undercover RCMP officer posed as
members of a Colombian drug trafficking organization. The Indictment charges the
defendants with conspiring to conduct and conducting financial transactions involving
property represented by a person at the direction of, and with the approval of, a law
enforcement officer to be proceeds from the sale and distribution of cocaine. The
Indictment also seeks forfeiture from the defendants of all property, real and personal,
involved in the money laundering offenses and all property traceable to such property,
including but not limited to, a Royal Bank account under the name of Mystar Holdings
Ltd., controlled by Chambers. If convicted, the maximum, statutory penalty for money
laundering conspiracy and money laundering charges as alleged in the indictment is 20
years of imprisonment, respectively.
CONCLUSION
United States Attorney Jiménez said: "The cornerstone of the federal securities law is to
protect the investing public by requiring transparency and full disclosure by publiclytraded
companies. We will not hesitate to prosecute corrupt corporate officers and
directors of publicly-traded companies and corrupt securities brokers and other
professionals who violate their duties and try to take unfair advantage of the market and
the public so as to illegally enrich themselves."
Mr. Jiménez commended the investigative efforts of the Federal Bureau of Investigation,
the United States Postal Inspection Service, the Royal Canadian Mounted Police,
Integrated Proceeds of Crime, "E" Division, Vancouver, British Columbia, Canada and
Royal Canadian Mounted Police, Integrated Proceeds of Crime, "O" Division, Toronto,
Ontario, Canada, as well as the cooperative efforts of the Southeast Regional Office of
the U.S. Securities and Exchange Commission, the Criminal Prosecution Assistance
Group of the NASD, the State of Florida, Office of the Comptroller, Department of
Banking and Finance, and United State Department of State, Diplomatic Security
Service. These cases are being prosecuted by Assistant United States Attorneys Eric I.
Bustillo, Richard E. Byrne, Christopher J. Clark, Rolando Garcia, Richard Hong, Robin
Rosenbaum, Edward Ryan and Roger Stefin, and U.S. Department of Justice, Fraud
Section, Trial Attorney Thomas McCann.

www.offshorealert.com/OAShort.pdf

[sandi66]

Crime-Fighters or Crime-Makers?
Dan Christensen

08-20-2004




An aggressive, successful strategy developed by FBI agents and federal prosecutors in Miami to combat securities fraud faces a strenuous legal challenge before the 11th U.S. Circuit Court of Appeals in Atlanta.

Hanging on the court's decision in U.S. v. Bertman is the government's ability to use undercover stings to police securities fraud. If the 11th Circuit rules in favor of the two defendants who filed the appeal, it could imperil nearly 50 other convictions that came out of the high-profile Operation Bermuda Short.

The defendants, Bruce Bertman and Jerry Poole, were arrested and convicted in February 2003 on multiple counts of conspiracy and fraud as part of the multiagency probe led by the FBI over several years. Bermuda Short focused on fraudulent securities sales in 23 small, publicly traded companies.

At the heart of the appeal are a number of fundamental questions of fairness. One issue is whether mail fraud and wire fraud can occur when the government and its agents -- not the defendant -- creates and controls the scam.

The defendants also argue that they were entrapped by federal agents and that the government did not have the right to target them in an undercover sting because it had no prior evidence to suspect them of wrongdoing.

"Predisposition must exist independent of the government's inducement," Bertman's attorney Steven J. Wisotsky wrote. "When the government first contacted Mr. Bertman, it had no reason to suspect that he was predisposed to commit the offenses."

"There was no evidence or word of mouth that he was corrupt," Wisotsky wrote. "The agents and informers were trolling blind."

But the government insists that's not true. Assistant U.S. Attorney Jonathan D. Colan argued in court papers that when the jury looked at the evidence, it found that the defendants were "predisposed to take part in the crimes."

In his appeal brief, Wisotsky asked the 11th Circuit not only to vacate his client's conviction and 51-month prison sentence, but also to repudiate the practice of using an undercover sting operation to "manufacture" securities crime. He argued that enforcing securities laws is different from enforcing narcotics laws.

"Penetration of the drug underworld has been acknowledged by the courts to be a necessary part of law enforcement operations because of the consensual nature of the crimes and the absence of a victim willing to blow the whistle," Wisotsky, a Nova Southeastern University law professor and appellate counsel at Zuckerman Spaeder in Miami, wrote in his brief.

"That is hardly true of securities frauds, where outraged shareholders and regulatory officials have for decades shown great vigor in exposing the depredations of corporate officials," Wisotsky said. "There is no compelling societal need to manufacture securities frauds in order to prosecute those who rise to the bait."

West Palm Beach solo practitioner Val Rodriguez, who represents Poole, has adopted the same argument. "The appeals court doesn't grant oral arguments in every case," Rodriguez said. "I don't know, but I think they may be concerned about the sting."

Not surprisingly, federal prosecutors vigorously disagree, arguing that the Bermuda Short probe of local stock fraud was "well within the parameters of undercover operations this and other courts have upheld" and justified.

"The government did nothing more than provide a profitable, but illegal opportunity," wrote Assistant U.S. Attorney Jonathan D. Colan of Miami in the government's appeal brief. "Bertman and Poole welcomed the opportunity and suggested key refinements to the scheme."

A spokesman for U.S. Attorney Marcos D. Jimenez declined to comment on the case.

University of Miami law professor Ricardo J. Bascuas, a former assistant federal public defender in Miami who is not involved in the case, sympathizes with Wisotsky but predicts he'll lose the appeal. "He's got a good argument," Bascuas said. "Police officers and federal agents shouldn't be involved in deception and trickery. But it's become so routine through the drug war that we've come to accept it."

As is the custom of the 11th Circuit, the three-judge panel that will hear the case won't be publicly identified until about a week before oral arguments, which are scheduled for Oct. 8.

KICKBACKS FOR STOCK BUYS

Court filings show the Bermuda Short investigation began in May 2000 amid a more general investigation of securities fraud in South Florida, including market manipulation and illegal payments to stockbrokers.

Undercover agents and informants told company executives, brokers and stock promoters that they could arrange large stock purchases at inflated prices in exchange for kickbacks.

Until his conviction in February 2003, Bertman was chief executive of Rockville, Md.-based WorldTeq Group International, which was publicly traded on the over-the-counter bulletin board. Poole had been a licensed stockbroker who'd worked with Bertman in hopes of taking the small Internet and telecommunications firm, then known as A1 Internet.com, onto the Nasdaq. To do that, though, they needed to raise several million dollars in capital.

Bertman, Poole and three other defendants were charged in a 16-count indictment unsealed in August 2002 to coincide with the government's public disclosure of the Bermuda Short investigation.

FBI agent Michael Palasek, who had been a private investment banker at Brown Harriman Brothers in New York City in the late 1980s, was the case agent. He posed as a corrupt securities trader named Michael Patterson who worked at a fictional U.S. firm, Connelly & Williams Associates.

C&W was supposed to be the U.S. representative for an unnamed London-based mutual fund with $800 million to invest, and for a corrupt board member of the mutual fund willing to take kickbacks to arrange big stock purchases. The fund also was fictitious.

The sting was run out of the Boca Raton office of two crooked stock promoters turned government informants -- Robert Schlien and W. David Jones. Before the kickoff, Schlien and Jones signed plea deals admitting they'd run other stock scams worth $20 million to $40 million, according to court records.

Prosecutors say in court papers that the government "did not seek out" Bertman and Poole specifically as targets.

Nevertheless, in February 2001, Poole brought Bertman to Schlien and Jones. In turn, Poole was introduced to informants Schlien and Jones by another cooperating witness who'd heard about C&W's alleged investment opportunity.

Bertman was looking to raise several million dollars to meet the capital qualifications for his company to be listed on Nasdaq. In a Feb. 15, 2001 phone call that was secretly taped, Schlien dangled the bait about the fictitious mutual fund with $800 million to invest in small cap stocks.

According to court papers, Schlien told Bertman that the fund would pay the going retail price for shares of A1 Internet.com -- then about 25 cents a share -- but said that an unspecified "compensation factor" would be required. That factor wasn't explained until later.

"You have a nice company, your company's got revenues. ... The company grew significantly," Schlien said.

"You're saying all the things that are near and dear to a CEO's heart," Bertman replied during the phone conversation. "You've hit all the right buttons."

Schlien told Bertman that his company would get an $8 million infusion of capital. FBI agent Palasek later testified he picked that large amount because he knew it would be "like winning the lottery" for a small-businessman like Bertman.

At a Feb. 21, 2001 meeting in Boca Raton, Schlien told Bertman that he and his cronies expected $3 million of the $8 million to be kicked back to them through an offshore company. Bertman agreed. Bertman was arrested after a test sale of 40,000 shares owned by Bertman was completed at 50 cents a share and he kicked back half the proceeds, or $10,000.

Assistant U.S. Attorneys Christopher Clark and Edward Nucci prosecuted the case.

At trial before U.S. District Judge Donald L. Graham in Miami last year, Bertman testified in his own defense that he considered the share purchase by C&W to have been a legitimate business opportunity. He testified that his company's board of directors authorized the sale of shares to C&W, and that "the payment of a large commission would be expected as part of any bargain that an unlisted bulletin board company could make to raise capital," court papers said.

Bertman also argued entrapment as a defense.

The jury, however, convicted Bertman and Poole of conspiracy, securities fraud and 12 counts of wire fraud. Bertman was acquitted of one count of wire fraud.

Another defendant, stock promoter and A1 Internet.com stockholder Charles Arnold, was acquitted on all counts. Two other defendants never went to trial. The government dismissed all counts in the case against stock promoter Cris Sagnelli in exchange for his testimony. Sagnelli pleaded guilty, however, in another Bermuda Short case, Rodriguez said.

Defendant Ray Hutchison, an A1 Internet.com stockholder, pleaded guilty to conspiracy and got seven months.

Bertman was sentenced to 51 months in prison and fined $10,000. Poole got 33 months. Bertman is in prison. Poole was set for release from prison this week, his attorney Rodriguez said.

www.law.com/jsp/law/LawArticleFriendly.jsp?id=1090180366818

[sandi66]

Subject: File No. S7-30-04
From: David PatchJuly 24, 2004

Commissioners,
I find it ironic that the split between Hedge Fund Registration within the Commission is split by party lines. The SEC is required by law to be fully represented by an equal distribution of parties but its Commissioners are supposed to be focused on Investor Protection and not party lines. Amazingly, it appears politics is a priority over Investor protection.
Should Hedge Funds be registered? Yes. Why? Because it is good for the safety off all who trade in the securities markets. Hedge Funds are not about their particular clients but about the securities these funds trade. Securities we all own. Recent allegations regarding Hedge Fund involvements in market timing is simply the tip of what I expect to be more allegations of fraud regarding Hedge Funds.
Senator Mike Enzi of the Senate Banking Committee made recent public statements where he, as a Republican, was opposed to Hedge Fund registration citing the needs of the SEC to focus on fighting the majority of fraud taking place in our markets. The Senator cited the small percentage of overall enforcement actions taken against Hedge Funds over those taken against Mutual Fund, IPO, and Research related crimes. Unfortunately, the Senator has forgotten the past. Something a member of the Senate Banking Committee should not be doing.
The SEC enforcement actions against our Wall Street firms was originated not by the SEC but by activities taken by the NY Attorney General. The enforcement actions by the SEC regarding Mutual funds was based on the actions taken by the NY and Massachusetts Attorney Generals after the SEC blew off a whistleblower from Putnam. These actions have only taken place because of massive fraud reported after the fact. Does the Senator wish to have a similar circumstance take place regarding hedge Funds? Can our economy afford more losses due to fraud? What about his, and his colleagues, promise to do a better job of forward looking?
Hedge Funds are a growing financial business in our markets. The impacts these funds have on the overall stability of our economy is huge. Recently, the SEC approved a short selling reform package, regulation SHO, to address the issues of abusive levels of settlement failures on the books of our Broker-Dealers. How are these failures attributed to Hedge Funds we do not know because the SEC does not disclose this information? Hedge Funds do use the practice of short selling as part of their arsenal and short selling is what creates settlement failures. Are Hedge Funds associated with the overselling of stocks to levels where, as the SEC claims, settlement failures exceed the entire public float of companies? We should certainly find out. Somebody is doing it through our markets and our Broker-Dealers.
In recent news reports the present markets are considered oversold. It is this overselling that is driving market capitalizations down and reducing our investment portfolios. That affects our liquidity of cash and our ability to boost the economy as investors. Are Hedge Funds creating this overselling for the personal gains of clients? These are the answers the SEC needs to know and understand. We already know that the Wall Street firms have defrauded the Investors by creating false analysis to boost stock prices, how do we know what Hedge Fund Managers will do to make similar profits for themselves and their limited client base? Greed is ceryainly the driving force of Wall Street.
Today the Securities markets have a confidence problem. Every major Wall Street firm has been accused of not 1, nor 2 securities violations but several. They did so for personal wealth and greed. The fact that our securities regulators missed these opportunities before we all suffered is a price Hedge Fund Managers must pay as the industry as a whole can no longer be trusted.
Offshore Hedge Funds have been accused of serious crimes against our Markets. Operation Bermuda Shorts implicated several offshore banks and Fund Managers with trying to manipulate our stocks. Thomas and Andreas Badian of Rhino Advisors have had an SEC civil complaint filed and now have a criminal complaint with the Department of Justice over short selling manipulation. These opportunities were created based on the ease in which short selling is used to manipulate our markets. Without accusing Hedge Funds of similar abuses, it is because of this evidence that their practices must also be carefully scrutinized.
Will Registering Fund Managers eliminate fraud? No, not by itself. But registering is the first step to addressing the potential opportunities of fraud to be apparent in the future. Registering may actually help the Hedge Fund industry as those potentially suspect managers may not open up shop and bring down the reputation of the legitimate managers. Registration is an ounce of protection in an industry now looked at as rigged against us all.
As for Senator Enzi and the Commissioners in dissent over Hedge Fund registration, I am appalled that you have yet to learn from past sins. The Senate Banking Committee and the SEC have yet to provide an ounce of prevention to those of us who have suffered at the hands of securities fraud. While public hearings are constantly being held to address the sins of the past and promises of preventing it in the future, we have yet to see legitimate change. Today, changes are being attempted BEFORE the crimes have overgrown our markets and you choose to publicly shoot down the efforts. The 9/11 Commission findings addresses a lack of Federal Agency cooperation and pro-active measures in preventing terrorist attacks. Similarly the Senate Banking Committee, House Financial Services, and Securities and Exchange Commission lack that same cooperation and pro-active thinking that is needed to protect our markets and our economy.
Our Markets are not about politics but about our nations investors and their financial future. At some point those in Washington should have the courage to put those people ahead of their political agendas. The ounce of protection by having Hedge Funds register far outweighs the cost of future scandals. Is the Senator and these Commissioners in dissent willing to take personal responsibility for the impacts if that scandal happens?
The Industry cannot be trusted as we see it today and Hedge Funds are the first to pay the price for failed Regulatory Agencies and Congressional Oversight Committees. When these agencies start taking responsibility for their positions the Industry could become less regulated. Until then, more is needed not less. Unlike the Congress our retirement portfolios are partially based on a Social Security system we pay into. Since we cant count on that money being there we cannot afford to lose all of our savings in a rigged and poorly regulated market. Congress is screwing up the Social Security system because they do not have to rely on it and presently Congress is helping screw up our securities markets because of their personal politics being put in front of the Investor protection.

74.6.239.67/search/cache?ei=UTF-8&p=Bermuda+Short+Market+Fraud&fr=b1ie7&u=www.sec.gov/rules/proposed/s73004/dpatch6541.htm&w=bermuda+short+shorts+market+marketing+markets+fraud&d=RKDLVt29TpYU&icp=1&.intl=us&sig=MmwVP3djDND5s_iZqFdMPw--

[sandi66]

FBI arrests star Canadian trader

Friday, August 16, 2002

Toronto, Washington and Vancouver — High-flying Canadian stock broker Mark Valentine has been arrested in Germany after a two-year FBI sting operation into stock fraud and money laundering.

The massive undercover operation, code named Bermuda Short, has resulted in charges against Mr. Valentine and dozens of others, including former Vancouver lawyer and financial consultant Martin Chambers and five other Canadian residents.

FBI officials in Miami said Mr. Valentine was arrested on Wednesday at the Frankfurt airport under a provisional warrant, and remains in German custody. FBI spokeswoman Judy Orihuela said officials intend to seek his extradition to the United States.

"We want him extradited," Ms. Orihuela said. "We wouldn't go to the trouble of arresting him if we didn't want him back here."

Late Thursday, an RCMP spokeswoman also confirmed that the RCMP in Toronto have arrested two people in connection with the complex fraud case, but said no details — including the names of those arrested — could be released because the matter is covered by a publication ban.

Details of the investigation were unveiled Thursday by a coalition of law enforcement agencies including the Federal Bureau of Investigation, the RCMP, the U.S. Securities and Exchange Commission, the U.S. Postal Inspection Service and the National Association of Securities Dealers.

In announcing the charges, Marcos Daniel Jimenez, U.S. Attorney for the Southern District of Florida, said the case demonstrates the need to act against corrupt corporate directors and securities brokers who violate their duties and "take unfair advantage of the market and the public so as to illegally enrich themselves."

The 58 individuals charged include executives of public companies, stockbrokers, stock promoters and controlling shareholders of public companies.

The FBI said its undercover probe involved two separate sting operations.

In one, involving 20 separate indictments, the FBI created a fictitious foreign mutual fund and had an agent pose as a corrupt securities trader working for the fund company. He approached business executives and stockbrokers and proposed a scheme in which he would be able to get his fund company to purchase large blocks of stock at prices significantly above market rates, making huge profits for the executives who participated. In return, the undercover agent asked for secret kickbacks of proceeds from the sales.

The illegal kickbacks were to amount to several million dollars in each case, and were to be paid to offshore corporate bank accounts. The FBI said the cases were handled in a way that caused no actual loss to investors, but said they involved $200-million (U.S.) in attempted fraudulent stock sales.

The other schemes saw an FBI and an RCMP agent pose as members of a Colombian drug cartel seeking to launder proceeds from cocaine sales. In total, corporate executives and financial professionals agreed to launder $1.4-million in funds. The FBI said the money was represented as the first part of a long business relationship that would eventually involve many millions more.

Mr. Valentine, former chairman of Toronto brokerage firm Thomson Kernaghan & Co., was charged along with Paul Lemmon, the founder and managing director of Voyager Group Ltd., a Bermuda-based financial services company. They are charged with conspiracy to commit wire, mail and securities fraud.

The case against the men involves three companies in which Mr. Valentine is alleged to have owned and controlled a majority of the shares: C-Me-Run Inc., SoftQuad Software Ltd. and JagNotes.com Inc. All three traded on the U.S. over-the-counter market at the time of the alleged frauds.

The FBI alleges that Mr. Lemmon and Mr. Valentine conspired to sell stock in the three companies for a total of $29.4-million in return for paying a secret kickback of $7.8-million to the phony mutual fund trader and his other phony accomplices within the fund company.

The indictment also alleges that Mr. Lemmon and Mr. Valentine were to cause securities brokers to receive kickbacks in return for helping to manipulate the market price of the three companies by selling their stock to unsuspecting clients.

Mr. Valentine's Toronto lawyer, Joseph Groia, said Thursday he had read the U.S. indictment but would not comment on his client's arrest, nor whether he will oppose extradition. He said Mr. Valentine is hiring a U.S. lawyer to handle the charges, and said he could not comment on any of the FBI allegations.

"At the moment, all we have is very sketchy information, and it's just way too early for anyone to respond," Mr. Groia said.

Mr. Valentine was one of the richest players on Bay Street during the Internet stock boom, and was hired at the then-thriving firm in 1994 at the age of 24. He quickly climbed to the top, and reshaped the firm as a specialized technology brokerage and investment banker.

He has been prominent in the news this spring and summer because he is under investigation by the Ontario Securities Commission for matters relating to his work at Thomson Kernaghan. The OSC said Mr. Valentine had created "a culture of conflict and non-compliance" at Thomson Kernaghan through a variety of investments and financings. He was suspended by the brokerage firm, which is in the process of winding down and going out of business.

Meanwhile Thursday, the FBI and RCMP also named six British Columbia men in other charges related to their Bermuda Short sting.

Les Price of Vancouver is charged with conspiracy to commit wire fraud, 10 counts of wire fraud, two counts of securities fraud and one count of money laundering. At the time, he was chief executive officer and a major shareholder of Medinah Minerals Inc.

The indictment alleges he agreed to pay a $1.5-million kickback in return for inducing the fake mutual fund to pay $5-million for five million shares of his company. He is also accused of conspiring to artificially inflate the market price of Medinah by making illegal payments to brokers who would sell shares to unwitting clients.

In another case, John Purdy and Ronaldo Horvat of Vancouver, and Harold Jolliffe of Duncan, B.C., and Calgary, are charged with one count of conspiracy to launder money and eight counts of money laundering. They were principals of Bolivian Hardwood Corp.

Kevan Garner of Vancouver and Mr. Purdy are charged with one count of conspiracy to launder money and two counts of substantive money laundering. The indictment says the two men were stock promoters and principals of Vancouver-based firms Garner Purdy Venture Capital and Diacom Ventures Inc.

They are accused of laundering funds purported to be the proceeds from the sale of cocaine. The maximum penalty for the charges is 20 years.

Public documents list Mr. Garner as the former director or shareholder of numerous publicly traded companies. This week, a news release announced his appointment as director and CEO of Vancouver-based Whistler Inc., which has said it is developing a range of fuel cell products including a fuel-cell-powered golf cart.

Mr. Garner is also charged along with Martin Chambers of Vancouver in another case involving the same phony Colombian cocaine cartel. Mr. Chambers is charged with conspiracy to launder money and with money laundering. Mr. Chambers was arrested by FBI officials last week while trying to board a flight in St. Louis.

The indictment seeks the forfeiture of all personal property involved in the money laundering, including a Royal Bank account under the name of Mystar Holdings Ltd., which is controlled by Mr. Chambers.

Mr. Chambers, 63, has a long history of legal problems. In 1981, he was charged with conspiracy to import cocaine to Vancouver from Miami. A decade later he and Vancouver financier Paul Deyong were involved in buying and selling large quantities of cigarettes though A.H. Riise Ship Chandlers.

More recently, he was described in court documents as the controlling mind behind six real-estate projects that borrowed nearly $27-million from investors in Eron Mortgage Corp., which had its licence frozen in 1997 by the B.C. Securities Commission.

Criminal charges were laid against Brian Slobodian and Frank Biller, the two principal officers of Eron, after thousands of mainly elderly investors lost $220-million.

www.globeinvestor.com/servlet/ArticleNews/story/RTGAM/20020816/wxmain

[sandi66]

Former exec pleads guilty to securities fraud

October 1, 2003

A former president and chief financial officer at Rhino Ecosystems (Pink Sheets: RHNC) has pleaded guilty to conspiracy to commit wire and securities fraud, said the office of the U.S. Attorney for the Southern District of Florida, explaining Rhino is a Florida corporation with its principal place of business in Woodbridge, Ontario.

The government said Mark Wiertzema held the executive posts at Rhino. The company purportedly developed and began to market a grease-trapping filtration plumbing product called "Rino System" for restaurants and food-processing businesses, the government said.

Wiertzema's indictment resulted from a two-year, undercover investigation code-named Bermuda Short. The investigation was designed to expose and prosecute people who attempt to engage in the fraudulent purchase and sale of stock of companies whose shares trade on the United States public markets.

In the operation, an undercover FBI agent posed as a corrupt securities trader employed by the U.S.-based representative of a fictitious foreign mutual fund. The FBI agent would say he worked with two U.S.-based due diligence officers whose job was to research and approve securities the undercover agent, as the fund's purported trader, would be allowed to purchase on behalf of the fund and its investors.

With two cooperating witnesses, the agent said he could arrange for the fund to pay millions of dollars for large blocks of stock owned by some of the defendants and/or their companies at prices significantly above the actual market prices of the stocks. The Indictments allege that, in return for the fund purchasing their stock, defendants agreed to participate in an illegal kickback scheme in which proceeds from the stock sales to the fund would be secretly kicked back by the defendants to the FBI agent and others involved in the scheme.

In this case, the indictment alleged Wiertzema and his co-defendants agreed to pay about $6 million in an undisclosed kickback to the FBI agent and others to induce the fund to buy about 650,000 shares of overpriced Rhino stock for a total of $8.6 million.

Wiertzema was to receive a portion of the undisclosed kickback payment for his role in the stock transaction, the government said.

The former company officer now faces maximum sentence of five years in prison on the conspiracy count and fine of up to $250,000. His sentencing is set for Dec. 9 before U.S. District Judge Jose Martinez.

Assistant U.S. attorneys Richard Hong and Harry Schimkat are prosecuting the case.

southflorida.bizjournals.com/southflorida/stories/2003/09/29/daily26.html?jst=b_ln_hl