|SEC target Rutledge now chased by Liu too|
2002-06-03 08:23 PT - Street Wire.
by Brent Mudry
In the latest setback for controversial Howe Street promoter Don Rutledge, the United States Securities and Exchange Commission target now faces a $145,500 suit from another controversial West Vancouver penny stock player, May Joan Liu. (All figures are in Canadian dollars unless otherwise noted.) While Mr. Rutledge is a well-known player on Howe Street, the centre of dealings for the former Vancouver Stock Exchange, in recent years he is best known for his legal troubles and as a race-car dad. Through his company Fleming Financial, Mr. Rutledge has been a major sponsor of his son David Rutledge, 22, a rising star on the Toyota Atlantic circuit last year.
In a hand-scrawled statement of claim filed Thursday in the Supreme Court of British Columbia, Ms. Liu claims she made extensive loans to Mr. Rutledge in late 2000, partially secured by a diamond pendant, but he has failed to repay a penny. Ms. Liu also claims Mr. Rutledge and his wife Leslie Rutledge are selling their home in West Vancouver's tony "Olde Caulfeild" neighbourhood, where homes often fetch at least $1-million, which is their "only visible asset," and they have no other assets that can be attached. Ms. Liu has slapped a certificate of pending litigation on the property, located at 4660 South Piccadilly Rd.
The named plaintiffs are Ms. Liu and her company Palisades Financial Ltd., while the named defendants are Mr. Rutledge, Ms. Rutledge and their company 514659 B.C. Ltd. The allegations in Ms. Liu's self-filed and self-styled handwritten suit have not yet been proven in court and no statements of defence have yet been filed.
The unfortunate Ms. Liu reveals that she began bankrolling the Rutledges in November, 2000, which was two months after the SEC launched a well-publicized prosecution of Mr. Rutledge on Sept. 6, 2000, as part of the U.S. regulator's fourth annual Internet sweep of dubious penny stock promotions.
The SEC claims Mr. Rutledge, using nominee accounts at Vancouver brokerages Yorkton Securities and Raymond James & Associates, and co-conspirator Gregory Skufca, a Colorado shell broker, rigged shares of Snelling Travel Inc. on the OTC Bulletin Board in December, 1999, and made at least $500,000 (U.S.) in illicit profits. The SEC credits the British Columbia Securities Commission with playing a valuable role in the investigation.
The U.S. regulator claims Mr. Rutledge and Mr. Skufca rigged trading amid a planned merger with Plus Solutions, ran the penny stock up to a peak of $6.12, aided by a Raging Bull tout paid by Mr. Rutledge, then watched the stock collapse when the deal fell through. (Neither Mr. Rutledge nor Mr. Skufca have yet settled with the SEC.) Two weeks before the SEC launched its prosecution, Stockwatch revealed a $225,000 suit by a Vancouver-area dentist drilled by Mr. Rutledge in the Plus Solutions debacle.
While Stockwatch also chronicled a series of civil suits against Mr. Rutledge, including a $651,000 default judgment in early 1999 related to Fleming's race-car sponsorship, it is not clear whether Ms. Liu paid any heed to Mr. Rutledge's regulatory or litigation troubles, or if she just figured he was a good credit risk. In any event, Ms. Liu claims she loaned a total of $90,500 to Mr. Rutledge between November, 2000.
"The defendants have made no attempt to repay any of the outstanding debt since the initial loan in November 2000 which was suppose (sic) to be for 28 days. Verbal promises have continually been broken," states the suit. On May 3, 2001, when the Rutledges hit up the benevolent Ms. Liu for a further $10,000, bringing the total tab to $90,500, Ms. Rutledge signed a promise to give Ms. Liu a bonus of $50,000 (U.S.) by June 1, 2001, in consideration of all the financial assistance provided.
Ms. Liu also notes the Rutledges gave her a diamond pendant valued at $15,000 to $20,000, as collateral to be returned when the loans are repaid. The financier has been left holding just the bauble, as Mr. Rutledge and his wife have allegedly failed to repay a penny of the $90,500 in loans or the $50,000 (U.S.) paper bonus.
The initial loan was the only one documented in court, while the subsequent loans were scrawled and signed for on this same one-page memo. "This letter is to confirm that I, Leslie Rutledge acknowledge the receipt of CDN$36,000.00 and US$15,000.00 from May Joan Liu against the receipt of US$15,000.00 from LOM-Broker Taylor Housser. The promissory note of CDN$36,000.00 and 5,000 shares of Northcap Holdings (valued at approx. $2.80 - $3.00) will be paid on or before November 30, 2000 to May Joan Liu," states the agreement memo.
Northcap was one of several Canadian Dealing Network promotions in the stable of fugitive Thai financier Rakesh Saxena, currently in $600,000-a-year self-financed house arrest in Vancouver as he fights extradition related to the 1996 collapse of the Bangkok Bank of Commerce, which also featured Saxena ally Adnan Khashoggi, the Iran-Contra figure.
According to Mr. Saxena, another of his disastrous penny stock promotions, WaveTech Networks, also featured Mr. Rutledge and Toronto-based past securities violator Harvey Rubenstein. Last August, Stockwatch revealed that one of Canada's top federal opposition politicians, John Reynolds, a former Howe Street promoter himself, faced a $484,000 debit suit from Vancouver brokerage Global Securities stemming from an unpaid block of WaveTech shares, and the fugitive Mr. Saxena was trying to help Mr. Reynolds out of this debit pickle.
Vancouver Sun reporter David Baines subsequently detailed the case further in a front-page feature entitled, "The Politician and the Fugitive." While such a stigma might have hurt a lesser fellow, Mr. Reynolds went to become interim leader of the Canadian Alliance party, moving in to the residence of Canada's leader of the opposition.
After a leadership race in which he played an important role, although not a candidate, Mr. Reynolds remains one of most powerful Alliance members. To his credit, Mr. Reynolds is now one of the highest profile bashers of Canadian Prime Minister Jean Chretien, who was forced to do a major cabinet shuffle last week amid a continuing series of federal government corruption scandals. (In a completely unrelated case, Mr. Reynolds's status as Global's highest profile client was topped last week by California short Amr Ibrahim (Anthony) Elgindy, indicted in a stock manipulation and FBI corruption case.)
While alleged deadbeat Mr. Rutledge is a current SEC target, his bankrolling benefactor Ms. Liu is also well known to regulators. Ms. Liu, whose maiden name is May Joan Lee, achieved the distinction of being kicked off the VSE a decade ago.
Ms. Liu suffered the misfortune of being flagged by regulators cracking down on a rash of dubious share issuances. Among a series of companies "halted and suspended pending clarification of affairs," were three involving Ms. Liu: Pricam Explorations Inc., First Star Capital Corp. and Boundary Gold Corp.
VSE officials demanded Pricam explain 100,000 shares transferred to Ms. Liu, and directed First Star to explain "the relationship of May Joan Yee (Liu) to the company, and the rationale for a proposed $5,000 per month investor relations contract."
Boundary was even more intriguing. The VSE questioned whether the company had been paid for shares issued to a number of people, including Ms. Liu, and a company controlled by West Vancouver promoter Rene Hamouth. While Mr. Hamouth had been suffering in the aftermath of the Penway Explorers scandal, he and then partner Rajiv Vohra were acquitted of Penway stock manipulation charges in a criminal trial in 1993.
More recently, Boundary alumni Ms. Liu was hired in February, 1998, as a promoter of International Indigo Industries, a disastrous Seattle sunken treasure promotion which featured an intriguing cast of characters. A few months earlier, in November, 1997, Ron Crimeni replaced Harvey Gorsuch as Indigo's president. Both had impressive credentials. Mr. Crimeni was stripped of his broker's licence in the 1970s and later nudged off the VSE, while Harvey Gorsuch played a key role in controversial promoter Brent Pierce's stock market abomination, Ultra Pure Water Systems (Canada).
The glittering star of Indigo was Beverlee Claydon, formerly known as Beverlee Kamerling. Ms. Kamerling, banned by the BCSC in 1989 for 10 years in the Ultra Glow Cosmetics scandal, was subsequently fined $1.1-million by the SEC in mid-1999 for her fraudulent UFT United Fire Technology promotion. The SEC was quite miffed when, two months after she was fined and feigned poverty, Ms. Kamerling dropped $31,000 on a variety of hats and knick-knacks belonging to former Hollywood starlet and JFK mistress Marilyn Monroe at an auction, then starred on the Oprah show, when she gave one of the Marilyn hats to a poorer and handicapped unsuccessful bidder.
All of this is of course just ancient history on Howe Street, where new promotions and new scandals pop up weekly.
In the former category, Ms. Liu has been busy with several other penny stock promos in recent years, including Asdar Corp., renamed Phoenix Life Sciences Ltd. earlier this month, and 2U Online Com Inc. Besides Ms. Liu, both companies share such offshore shareholders as Y.E.N.N. Asset Management and J & S Overseas Holdings Ltd., both of the Cayman Islands, while 2U Online's offshore flavour is boosted by a major shareholder in the secretive enclave of Panama, Compte De Sierge Accomodative Corp.
One of Ms. Liu's loans to Mr. Rutledge, in about May, 2001, is noted as a $2,500 "Asdar cheque." Ms. Liu's close Asdar and 2U Online associate, Joseph Beyrouti of Vancouver, also assisted her in filing the litigation claim against the Rutledge residence on Wednesday.