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National Bank of Canada (The) - Street Wire
BCSC target Pacific Int'l served dastardly Davis
National Bank of Canada (The) NA
Shares issued 190,566,755 Oct 16 2002 close $ 30.60
Thursday October 17 2002 Street Wire
See B.C. Securities Commission (*BCSC) Street Wire
by Brent Mudry
One notorious American client of Pacific International Securities, a
controversial Vancouver brokerage currently fighting a landmark prosecution by
the British Columbia Securities Commission for attracting and servicing more
than its Howe Street share of crooks, securities violators and other
riff-raff, was recently sentenced to 30 months in prison for masterminding a
penny stock fraud and money laundering, and ordered to forfeit $308,500 in
ill-gotten gains. (All figures are in U.S. dollars.) This is on top of
$3-million in disgorgement orders won by the United States Securities and
Exchange Commission against the P.I. client and his wife four years ago.
Barclay Davis, 55, of Las Vegas, described as a "serial stock manipulator" by
the SEC five years ago, was sentenced Sept. 26 by Judge Lloyd George of United
States District Court for the District of Nevada for his 1993-1997 rig job of
Combined Companies International Corp. The fraudulent promotion included
bribed brokers, false audit reports, income tax returns and bank loan
documents, Form S-8 share issuances to bogus consultants and illegal use of
nominee accounts. The prosecution followed an extensive investigation by the
Las Vegas Field Office of the Internal Revenue Service.
"In order to arrive at the 30-month sentence of imprisonment, the court also
made findings under the United States Sentencing Guidelines that the criminal
activity involved more than minimal planning, that Davis was a leader in the
criminal activity, and that Davis had obstructed justice by planning to have a
witness injured to prevent the witness from testifying against him," states
the U.S. Department of Justice in a press release.
On Oct. 7, the BCSC began an eight-week hearing into Pacific International's
alleged "cultural of non-compliance," claiming the Vancouver brokerage's
business was dominated by non-resident clients, mainly Americans seeking to
bypass U.S. laws, rules and regulations, and allowed itself to become little
more than a massive stock and money laundering conduit for criminals and other
dubious clients. The hearing, set to run through the end of January, is
scheduled to resume Oct. 21 after lawyers work out the procedure for entering
1,107 documents, comprising more than 22,000 pages, into evidence.
After Pacific International broker Jean Claude Hauchecorne was banned for life
in 1998 for servicing New York Mafia clients Phil Abramo and Phil Gurian, a
series of events in the summer of 1999 prompted the BCSC to mount an extensive
two-year investigation of Pacific International, believed to be the most
comprehensive probe conducted into any brokerage in Canada in recent history,
if not ever.
Pacific International's summer of 1999 was quite a time, with a pair of its
brokers, Dirk Rachfall and Michael Patterson arrested for dealing with other
mob-related clients and the brokerage itself named as a conduit in three U.S.
indictments in three days, all duly revealed and chronicled by Stockwatch.
After its two-year probe, the BCSC launched its prosecution against Pacific
International on July 10, 2001, with a notice of hearing noting by name 15
more dubious clients, led by Shalom Weiss, recently extradited from Austria to
Florida after fleeing an 845-year sentence imposed three years ago. Although
Pacific International has not yet fully unveiled its defence, it blames the
BCSC for failing to stem or reverse the constant stream of dirty clients to
the brokerage. Defence counsel claim the BCSC should have protected Pacific
International and the public from its own dubious clients.
One of these intriguing Pacific International clients is Mr. Davis, the
well-known serial stock manipulator. According to a BCSC hearing exhibit, the
SEC sent an investigatory assistance letter to the BCSC on May 9, 1997, in
connection with a probe into the trading of shares of Twenty First Century
In this letter, the SEC told the BCSC that Twenty First Century was owned by
Mr. Davis, a Las Vegas stock promoter under continuing investigations by the
SEC and the United States Department of Justice, and that the SEC had obtained
information indicating a possible effort by Mr. Davis to manipulate the stock,
which was boosted by false press releases and financial statements.
"A significant number of trades in securities of Twenty First Century were
executed through four British Columbia brokerage firms, including Pacific
(International). The SEC was trying to determine if those accounts had been
used to facilitate the manipulation of Twenty First Century stock," states the
hearing exhibit. In its investigative request, the SEC sought documentation
for various accounts at the four Howe Street brokerages, including accounts at
Pacific International in the names of Mr. Davis and two other notorious penny
stock players, La Jolla Securities and Richard Gladstone.
Pacific International now claims the BCSC should have kicked out Mr. Davis,
one of its star U.S. clients.
"The BCSC took no steps to advise Pacific about the SEC's concerns as
described in the May 9, 1997, letter. The BCSC took no regulatory action in
relation to the matters described in the May 9, 1997, letter other than to use
its powers of compulsion to obtain the information sought by the SEC and to
provide the information it obtained in response to the SEC. The documents used
to compel the information did not specify any reason for compelling it and did
not describe the concerns of the SEC," states a document recently prepared by
Pacific International's counsel.
"There was no determination of wrongdoing on the part of Pacific by the SEC or
the BCSC in relation to the matters described."
While Pacific International now points the finger at the BCSC, there was ample
unflattering documentation of Mr. Davis and his dubious promotions on the
public record before this SEC request, and piles more in the following 18
In fact, the red lights should have been flashing strong in the compliance
department of any brokerage handling trading in shares of Twenty First
Century. On Feb. 10, 1997, a full three months before the SEC sent its
investigative request to the BCSC, the U.S. regulator issued and broadly
publicized an abrupt 10-day temporary trading suspension of the company's
While the SEC has imposed just 11 such halts this year, including another
related to Mr. Davis, two last year and 11 in 2000, the regulator has a
long-distance knack for sniffing out promotions linked to Howe Street, the
centre of dealings for the former Vancouver Stock Exchange. The SEC has halted
numerous Howe Street promotions in the past seven years, including eConnect,
anthrax exploiter 2DoTrade Inc., mob plays WAMEX Holdings Inc. and U.N.
Dollars Corp., Harry Moll alumni Randall Andrus's Ikar Mineral Corp., VSE
graduate Solucorp Industries Ltd., Rachfall-Patterson deals Orlando Super Card
Inc. and Legend Sports Inc., Amquest International Inc. and Garcis USA Inc.
In its halt notice, the SEC noted that Twenty First Century Health "holds
itself out" as a new products development company in the field of
health-related hygienic, home diagnostic, nutritional supplement and medical
The SEC noted it ordered this trading suspension due to questions raised
regarding the "adequacy and accuracy" of publicly disseminated information,
including Twenty First Century's financial condition, the "existence,
effectiveness, and marketability" of a blood-sugar testing device it claimed
to have licensed, the size of the market for this device, and the "ownership,
value, and business of certain companies purportedly acquired by TFCH." The
U.S. regulator announced that it determined it an immediate trading suspension
was both in the public interest and necessary for the protection of investors.
Such trading halts are rare, but rarer still are the occasions in which the
SEC imposes a second halt just before or after the first 10-day halt expires.
This has happened just three times in more than five years, and Pacific
International client Mr. Davis was involved in two of these three extended
On Feb. 27, 1997, 10 weeks before its letter to the BCSC, the SEC imposed its
second halt on Twenty First Century. This time, the U.S. regulator gave more
details and named names.
The SEC questioned "the accuracy of TFCH's public announcement that it
'welcomes' the commission's inquiry, offers 'full co-operation' and states
that the company officials would be able to provide the Commission with the
information it requires within nine days, when Joe Davis, who is TFCH's
president, Loretta Davis, who was its founder and formerly its president, and
Barclay Davis, who formerly was its secretary and director but who continues
to act on behalf of TFCH, have all stated through counsel that they refuse to
testify in the investigation in reliance on their Fifth Amendment privileges
This was an exciting time for Mr. Davis, according to public records easily
available to anyone having any interest in him.
In August, 1996, nine months before the SEC letter Pacific International now
complains about, Mr. Davis joined another, much more notorious fraudulent U.S.
penny stock promotion which featured Howe Street accounts: Systems of
Excellence, a bribed-broker rig job. At least five SOE defendants, including
mastermind Sheldon Kraft, 52, a New York promoter, have pleaded guilty to
criminal charges in the case.
The SOE defendants included notorious Florida penny stock broker Jerome
(Jerry) Edward Rosen, a key player in Canadian career fraudster Michael
Mitton's 1997 H & R Enterprises debacle. Mr. Rosen used an unidentified
Canadian brokerage as a money laundering conduit to split bribes from SOE
president Charles Huttoe with key SOE promoter Mr. Kraft. (Mr. Huttoe was
later sentenced to 46 months in jail.)
(Mr. Rosen is an A-list player in dirty penny stock circles. In another case,
he harassed market maker John J. Fiero, the president and sole owner of Fiero
Brothers Inc., a key player in the Mafia-linked short-attack collapse of
brokerage Hanover Sterling. Mr. Fiero gained national prominence in Gary
Weiss's Dec. 16, 1996, Business Week cover expose, The Mob on Wall Street,
which detailed the collapse of Hanover Sterling and featured Pacific
International clients Mr. Abramo and Mr. Gurian.)
The SEC launched its first Systems of Excellence complaint on Nov. 6, 1996,
and named Mr. Davis and his wife Loretta Davis on a list of relief defendants
of nominees and associates in an amended complaint, which was announced Dec.
12, 1996, and filed Jan. 29, 1997.
The Systems of Excellence scam featured a troubled cast of characters,
including Thomas Clines, 71, of Huddleston, Va., who briefly became president
of SOE after trading was suspended in October, 1996. Mr. Clines was convicted
in 1990 of four felony tax evasion charges in federal district court in
Maryland, including willfully failing to declare more than $260,000 in profits
from "secret arms shipments to the Nicaraguan contras during the Iran/Contra
affair," according to the SEC.
The Systems of Excellence case traces back to early 1995, when SOE president
Mr. Huttoe met broker-promoter Mr. Kraft, who had been described to him as a
"power stockbroker" capable of aggressively marketing penny stocks to other
brokers and to investors. Mr. Kraft agreed to work his magic on the markets,
greasing his network of dirty brokers, and soon brought in Mr. Rosen as the
third key conspirator. (Mr. Kraft, a broker at Commonwealth Associates and
then M.H. Meyerson during the Systems promotion, had worked with Mr. Rosen in
the early 1990s at Emanuel & Co. in New York.)
The SEC notes that in early 1996, Theodore Melcher Jr. of SGA Goldstar
Research, which published the daily tout sheet SGA Goldstar Whisper Stocks,
came on the scene at Systems of Excellence. "Rosen convinced Huttoe that
Diversified could help promote SOE stock, especially by reason of Radcliffe's
relationship with Melcher ... Melcher had an agreement with Radcliffe to cover
Radcliffe-promoted companies in Melcher's SGA Goldstar Whisper Stocks
newsletter," states the SEC. Mr. Melcher later pled guilty and was sentenced
to 12 months in jail and two years probation.
Against this backdrop, the SEC sent its investigative assistance request to
the BCSC in May, 1997, targeting Twenty First Century and Mr. Davis.
The case against Mr. Barclay quickly blossomed into a major prosecution,
featuring actions by the IRS, the Justice Department and the SEC.
The first big hammer fell on Sept. 17, 1997, when Mr. Davis was indicted for
tampering with a witness. "The defendant sought to physically harm Merle
Finkel, a 67-year-old accountant, and thereby prevent him from testifying in
DAVIS' anticipated federal trial," states a detention motion brought by the
U.S. Attorney for the District of Nevada. Mr. Davis knew Mr. Finkel was
co-operating with federal officials and had provided incriminating evidence
against him. (Mr. Finkel, SOE's auditor, pleaded guilty to conspiracy to
commit securities fraud and bank fraud, but died before sentencing.)
"Incredibly, on September 15, 1997, just three days prior to his indictment,
DAVIS solicited the commission of another physical attack. In a tape-recorded
conversation, DAVIS set forth in detail the manner in which he wanted a
Florida stock trader and his associate to be assaulted, in retaliation for
what he perceived to be the harmful effects of their trading activity upon the
price of a particular stock. Davis furnished detailed physical descriptions of
his intended victims, provided their address, and discussed the financial
arrangements necessary to accomplish his planned attack," state U.S.
authorities in the motion.
The indictment notes that federal agents met with Mr. Davis and his attorneys
in February, 1997, and formally notified him that he was the target of a
current federal grand jury investigation in Las Vegas. Mr. Davis was told
authorities were probing his role in numerous offences, including conspiracy,
securities fraud, bank fraud and money laundering, in relation to penny stock
companies over which he exercised direct or indirect control.
Mr. Davis was also told that Mr. Finkel, who had done accounting work for the
companies, had flipped and finked on him, and was wired during several
conversations between the pair. In addition, the federal agents informed Mr.
Davis they had enough evidence to indict him unless he also flipped and copped
According to authorities, Mr. Davis turned down the offer, and began plotting,
between June, 1997, and September, 1997, to harm the fink, Mr. Finkel.
Unfortunately for Mr. Davis, the business associate he plotted with was also
wired by the feds. As authorities listened in, Mr. Davis solicited the
participation of his associate in a plan to have a third party assault Mr.
Finkel, or worse.
Key excerpts of the plot are detailed in court documents.
"Well, to put -- totally put the lights out, that could be a bigger problem in
the end. But an accident with a -- severe injury, that's -- could send the
right message and, you know, in other words, I don't know... But what -- so --
but the point is, is that to perfect their case they'd have to have him there
to testify. And if -- and if something horrible happened, then you know, I
don't know where the case goes. In other words, without his testimony ...,"
Mr. Davis told his wired associate.
"You don't think that Oscar thing will come back and bite us in the behind,
you said 'Oscar, I'll go with Oscar to LA,'" replied the associate. "No,
Guatemalan, Oscar has seen him, so he knows," responded Mr. Davis.
"It's a question of when he leaves this office he walks out of the door, then
he starts heading down the stairs," said Mr. Davis. "Right," replied his
"So if Oscar is in this back corridor -- comes up behind him, foot in the
back, he goes tumbling down the stairs, 'Que Sara Sara (sic),'" Mr. Davis told
Mr. Davis then got to the specifics. "So a message to Finkel of serious
injury, concussion, a head injury where he can't remember, you know, like a
phone call to him in the hospital, saying, 'I heard you lost your memory, I'm
sorry that you're,'" stated Mr. Davis. "Send him a greeting card, whatever,"
his associated replied.
Mr. Davis discussed luring Oscar (Mr. Finkel) to fly into Los Angeles, picking
him up, taking him to some offices at "Sepulvida," then rigging the slip and
fall at the end of the business day.
"And you know, Finkel just needs to fall down the stairs. He slipped and fell,
have a witness there to say that they saw him take a slip and that's the end
of that. It's the perfect setting the stairs are far enough down, he takes
that flight of stairs, he's going to end up with broken bones, scratched head,
whatever it is, and that will put ...," Mr. Davis told his wired associate.
U.S. prosecutors argued that Mr. Davis presented a "serious threat" to the
safety of the government's witnesses and others in the community. They
described his plot against Mr. Finkel as "a callous plan."
"To date, the defendant has solicited the commission of violent assaults
against two individuals. The first, designed to prevent a witness from
testifying against him, represents the most serious threat imaginable in our
system of justice. The second, calculated to further his economic position by
violence, represents a pathological willingness to inflict suffering. Both are
indicative of the defendant's complete disregard for the legal process, and
are reflective of his callous willingness to cause grave harm to others in
furtherance of his own interests," the prosecutors told the judge.
While it is unclear what kind of know-your-client due diligence Pacific
International did on its fine client Mr. Davis, he is well known to various
authorities. In March, 1990, he was charged in California Superior Court with
the felony offence of grand theft by false pretences. After posting bail, he
failed to appear in court, and was arrested on a bench warrant in 1994. That
July, he pled guilty to reduced charges and was fined $5,000 and given a
three-year probation order. (He was still on probation when the SEC sent its
letter to the BCSC seeking a search of Pacific International's client
"From all information available to the government, it does not appear that the
defendant has any regular employment or legitimate income, his only source of
funds coming from various questionable stock promotions with which he has been
involved. In fact, DAVIS has had no regular work history since 1984. It was
then that DAVIS left the United States to live in Mexico, returning six years
later," states a 1997 court filing.
In a March 3, 1997, deposition, Mr. Davis testified that he had no employment
during his six-year stint in Mexico, and he claimed his purpose for being
there was "fishing." Mr. Davis also testified that he had no employment from
1990 through 1992 after he returned to the U.S., and he admitted not having
filed federal tax returns from 1990 through 1994.
The prosecutors also argued that Mr. Davis posed a serious flight risk, as he
routinely "utilized offshore and foreign accounts to avoid seizure of his
assets by the government, and to provide a ready source of funds with which to
support his family if he opted to flee the country once again."
In one taped conversation, Mr. Davis told an associate all he had to do to get
his profits from one deal, involving Laser Tech stock, was to call in wiring
instructions to the Bahamas. The U.S. government could not trace any asset in
Mr. Davis's own name. His primary residence in Las Vegas and his Rolls Royce
and Bentley were all in his wife's name. The couple's Hawaiian home was
purchased through an offshore entity in the Turks and Caicos Islands, which
featured Ms. Davis as president and a Hong Kong bank as a reference bank.
"Additionally, the defendant recently has maintained and utilized Canadian
brokerage accounts, amassing substantial funds in them," the prosecutors told
the court. The judge was shown Canadian brokerage account opening forms and
After this unflattering bail hearing in September, 1997, the worst was yet to
come. In co-ordinated actions three months later, on Dec. 22, 1997, Mr. Davis
was charged with conspiracy to commit securities fraud and bank fraud, and
money laundering, he pled guilty and agreed to co-operate with federal
officials, and the SEC launched a broad complaint against him.
The SEC complaint targeted Mr. Davis and one of his companies, World
Syndicators Inc., in three fraudulent penny stock promotions: Systems of
Excellence, Combined Companies International Corp. and Bio-Tech Industries
Inc., formerly Twenty First Century Health, the company named in the SEC's
letter to the BCSC. (Twenty First and Combined Companies were both halted
twice by the SEC in mid-1997.)
The criminal case centred largely on Mr. Davis's Combined Companies
International promotion, dating back to April, 1993. The criminal information
claims he conspired with an accountant to cook the books, with an associate to
concoct $2-million in fictitious account deposits, and with the accountant to
create fraudulent purported copies of 1990, 1991 and 1992 federal income tax
returns in the name of a relative. Mr. Davis also engineered the issuance of
hundreds of thousands of bogus "Reg S-8" shares, which he deposited in nominee
accounts, and he and other promoters greased dirty brokers with bribes to buy
the worthless stock for their clients.
"The defendant Davis, certain stock promoters and others were also able to
fraudulently manipulate the market price of CCIC stock by bribing stock
brokers to recommend the purchase of CCIC stock to unsuspecting investors,"
states the criminal information. "In exchange for payments of CCIC stock,
cash, vehicles and securities issued by other entities, made by the defendant
Davis and others, certain stock brokers touted CCIC in order to entice their
customers to purchase the stock."
"Beginning in or about March 1995 and continuing until at least in or about
January 1997, the defendant Davis discreetly sold shares of CCIC stock through
the nominee accounts that were under his control into the already inflated
market for CCIC stock," states the criminal information.
"The defendant Davis then transferred the trading profits from these sales to
nominee bank accounts that were maintained for his benefit by a
co-conspirator. After receiving a portion of the proceeds as compensation, the
co-conspirator then transferred a portion a portion of the remaining funds to
other bank accounts under the defendant's control and used the remainder to
pay certain expenses incurred by the defendant Davis."
In March, 1998, another Combined Companies associate was nailed in
co-ordinated actions. Raymond F. Simmons, who helped rig the company's
fictitious asset by posing as an offshore banker, was cited by the SEC the day
after being criminally indicted on one count of conspiracy to commit
securities fraud, two counts of wire fraud, and one count each of money
laundering and making false statements.
In December, 1998, Mr. Davis and his wife settled with the SEC in its
prosecution of Systems of Excellence, Combined Companies and Bio-Tech
Industries, previously known as Twenty First Century Health. In the consent
settlement, Mr. Davis was banned for life from participating in any offering
of any penny stock, and ordered to disgorge $1.54-million. The SEC also won
disgorgement orders of $878,000 against World Syndicators and $662,600 against
Ms. Davis. "These amounts represent the total illegal profits derived from the
conduct alleged in the complaints," stated the SEC.
However, payment of these disgorgement amounts, except for certain assets
surrendered to the court-appointed receiver, was waived "in light of their
(Mr. and Ms. Davis) demonstrated inability to pay based on the sworn
representations in their statements of financial condition."
Meanwhile, Mr. Davis, a star client of Pacific International and other
Vancouver brokerages, faced a long wait between his guilty plea, in December,
1997, and his sentencing three weeks ago, as he co-operated with authorities,
presumably helping rat out and root out other crooks and fraudsters.
In such guilty pleas, convicts like Mr. Davis are usually expected to be good
boy scouts and refrain from further bad behaviour.
This January, however, Mr. Davis and his wife were named by the SEC, fresh on
the scent of another unfolding penny stock fraud, in yet another complaint,
relating to a company called New Energy Corp. Among the defendants is BLD
Trust, a revocable family trust created on March 15, 1999, by Mr. and Ms.
Davis, who are its sole trustees. "BLD Trust received New Energy shares from
Colt and Geneva's nominee, and sold shares during the manipulation," states
(Geneva Financial Ltd. is an offshore company in Nevis with offices in Panama,
while its president Marcelino Colt lives in Panama and Mexico and also uses
various other names, including Marcelino Colt Vasquez, Marco Antonio Patterson
and Marco Antonio Patterson Garcia.)
The SEC claims that between Jan. 3 and Jan. 14, Mr. Davis and his wife caused
their BLD Trust to sell at least 10,000 shares of New Energy at $7.70 to $9.30
per share, for proceeds of about $79,000. A few weeks later, the quick-moving
officials at the SEC moved in with their New Energy complaint.
Meanwhile, back in Canada, regulators in B.C. are prosecuting Pacific
International for its dealings with numerous dubious U.S. clients, including
Mr. Davis, dating back years and years. Pacific International claims the BCSC,
not the brokerage itself, should have chased Mr. Davis and his ilk off Howe
(c) Copyright 2002 Canjex Publishing Ltd. stockwatch.com
It will be interesing, in the long haul, to see if Anthony@Pukerific and some of his friends and associates fall out of this tree also..........