David Baines (Vancouver Sun) – December is always the cru-elest month for members of the Vancouver RCMP Integrated Market Enforcement Team. That’s when I do my annual report card on them. They have never received a passing grade from me, and at this stage, I fear they never will.
The Vancouver IMET consists of about 20 people (about a dozen RCMP officers plus civilian members and sup-port staff). The annual budget is hovering around $3 million per year.
It was inaugurated in December 2003, exactly eight years ago. Since then it has laid charges against only three people.
Two of them – forex fraudster Kevin Steele and Victoria stockbroker Ian Thow – were convicted and sent to jail. The third, geologist John Paterson, has been charged with falsifying assay reports, but the case has not yet gone to court.
IMET members also assist other regulators and law enforcement officers in securities matters, most notably the B.C. Securities Commission, the U.S. Securities and Exchange Commission and the FBI.
But the IMET team was created with the goal of investigating and charging people in B.C., and in that regard, its record has been totally inadequate. Sadly, it’s par for the course for the IMET program throughout Canada.
Bob Paulson, who was named the RCMP’s commissioner last month, told another newspaper earlier this week that IMET teams “have their strategy all wrong.”
He suggested that, rather than waiting for cases to be referred to them by provincial regulators, IMET cops should be doing more on-the-ground legwork, including undercover operations.
I disagree completely. The provincial securities commissions should be the first line of attack. They can very quickly and easily issue cease-trade orders, freeze accounts and seize documents. They are also quite good at bringing offenders to administrative hearings and kicking them out of the market.
What they can’t do – and what the RCMP needs to do – is hammer together criminal cases that will put these crooks in jail. It makes sense for them to piggyback on these administrative cases.
It follows that you don’t need people in fake beards to do this type of work; you need people in suits who can do good, solid forensic work.
In my view, IMET has never been able to get people who are sufficiently qualified and motivated, or stay on the job long enough, to deal with securities cases in an efficient manner.
I think the IMET teams should be stripped down to a few supervisors, and the spadework contracted out to private forensic accounting firms that have the expertise and financial motivation to get these things done quickly and efficiently.
I am convinced this would produce better results at lower costs. When you need a new engine, you don’t waste time or money tinkering with the carburetor.
A B.C. Securities Commission hearing panel has found that Coquitlam promoter Dan Scammell and an associate, Casper de Beer, illegally sold $1.2 million in shares of two private companies to 99 investors in Canada and the United States.
In a decision released this week, the panel – headed by BCSC vice-chair Brent Aitken – ruled that Scammell and de Beer sold shares of VerifySmart Corp. and Verified Transactions Corp. from 2006 to 2009 without filing a prospectus or being registered to sell shares in B.C.
The pair claimed they sold the shares under exemptions to prospectus and registration requirements, as provided in the Securities Act, specifically an exemption allowing for the sale of shares to friends, family members and business associates.
However, the panel said the purchasers did not fall into any of these categories.
Penalties will be assessed at a later date.
This stock fiasco first came to light in February 2009, when I reported that Scam-mell was selling seed shares of VerifySmart.
The company was developing software to prevent credit card fraud. Scammell told investors that a high-volume merchant processor had signed on to the company’s technology.
He projected revenues would climb to $200 million by the end of fiscal 2009, and the company’s share would start at five per cent ($10 million) and increase to 10 per cent ($20 million per year).
In March 2009, VerifySmart and a related company, Verified Transaction, entered into a joint-venture licensing deal with a Nevada shell company, Treasure Explorations Inc.
The shell then changed its name to Verify Smart Corp. and embarked on an aggressive promotion.
Among other things, the company hired a California-based stock tout service, Cohen Independent Research Group Inc., to prepare an “independent” research report projecting millions of dollars in net profits and a soaring stock price. But the promised sales never materialized and investors were left with worth-less paper.