|B.C. Securities Commission (C-*BCSC) - Street Wire|
BCSC-known Purdy faces more unflattering tales
B.C. Securities Commission *BCSC
Thursday February 6 2003 Street Wire
by Brent Mudry
In the latest revelations about John (Jack) Purdy, the U.S. government has filed previously secret RCMP and FBI intelligence reports on the Howe Street stock promoter, his alleged money laundering colleagues and his assorted associates. The move comes as Mr. Purdy, facing his Bermuda Short trial set to start Feb. 18, demands to know how much dirt might be thrown at him in court. Mr. Purdy and his alleged money laundering associates remain presumed innocent, of course.
Meanwhile, other Bermuda Short money laundering developments feature co-defendants Ronaldo (Ron) Horvat and Kevan Garner. Mr. Horvat now claims he was roughed up by the FBI during his border arrest last August, causing him to blurt out silly statements about gun running and drug dealing which a judge really ought to ignore.
Mr. Purdy's partner Mr. Garner, who pled guilty on Dec. 6 and agreed to rat on his associates, has had his sentencing delayed from Feb. 10 to March 26. "Defendant is co-operating with the United States Government in the Southern District of Florida, and also with the Canadian Government in Vancouver, Canada," states Mr. Garner's Miami lawyer Bruce Fleisher in a recent filing as part of a sealed motion. "The co-operation will not be completed until after the current (Feb. 10) sentencing date."
GARNER'S POST-ARREST COMMENTS
The latest Purdy revelations come in filings made this week by Assistant United States Attorney Richard Hong, the lead prosecutor, in U.S. District Court for the Southern District of Florida in Miami. "This evidence shows the context and background, as well as defendant John K. Purdy's motive, intent, plan, knowledge, or absence of mistake or accident," states Mr. Hong. "The foregoing explains the chain of events, motive, plan, knowledge, and forms an integral and natural part of an account to complete the story for the jury."
It should be noted that this documents contain allegations or suggestions of criminal or questionable activity which have not yet been proven in court, and Mr. Purdy has not yet filed a response to the unflattering material.
The first document is the FBI report for Mr. Garner's Bermuda Short arrest. The FBI notes Mr. Garner was arrested Aug. 14 without incident in Fort Lauderdale, Fla., and transported to Miami for processing, where he was greeted by Supervisory Special Agent Ross Gaffney, one of the top FBI Bermuda Short officials, and a fellow Vancouverite, Detective Brad Desmarais of the RCMP's Integrated Proceeds of Crime Section. After being advised verbally and in writing of his rights, Mr. Garner had quite a chat with the FBI and RCMP officers.
Mr. Garner was asked about his involvement in laundering $500,000 cash which was provided to him last April by an RCMP undercover agent, or UCA. (All figures are in U.S. dollars.) "GARNER advised that during February of 2002, he flew to Ft. Lauderdale with his partner, JACK PURDY, in order to meet the UCA who at the time was known as Bill McDonald. GARNER had been advised by PURDY that MCDONALD was a possible source of financing for a vessel which was located in San Francisco," states the FBI arrest report
At the meeting, on a yacht docked in a Ft. Lauderdale marina, the RCMP undercover agent introduced himself as an associate of an FBI undercover agent posing as the head of a Colombian drug trafficking organization. "GARNER soon realized that the financing was in the form of large amounts of cash from drug proceeds. GARNER and PURDY advised McDonald that they would attempt to find a way to handle the cash and the meeting was concluded," states the report. "PURDY later explained to GARNER that he had engaged in other transactions with McDonald through RON HORVAT and HAROLD JOLLIFFE."
"Sometime later, GARNER and PURDY, in their attempt to find a way to legitimize the large amounts of cash that they would be receiving from McDonald, contacted KEITH KING at H.E. Capital, located in the Bahamas. GARNER then scheduled a meeting with McDonald and KING in the Bahamas."
Keith Leslie King, an alleged former South African fraudster, is no stranger to Howe Street or Mr. Purdy. Mr. King's Howe Street promotion, Redmond Capital, operated from the office building that Mr. Purdy and his close business associate, Donald Sheldon, own together, and is now pledged as part of Mr. Purdy's Florida bail.
In other court filings a week ago, the U.S. government, based on RCMP information, notes that fraudster Frank Salerno, a relatively small fish in penny stock circles, may be a star federal witness as to Mr. Purdy's role in a broker bribery and pump-and-dump scheme of Mr. King's Redmond Capital. There is no suggestion that Mr. Sheldon knew of the alleged nefarious dealings going on in his building or elsewhere.
Mr. King carries some baggage. After authorities in the Isle of Man declared in December, 1995, that he was not a "fit and proper person" to serve as an officer or director of any company in the secretive offshore enclave, he subsequently set up First Nevisian Stockbrokers Ltd. in the even murkier offshore enclave of Nevis, and later set up shop on Howe Street in Vancouver.
No criminal charges have been filed regarding Redmond Capital. No allegations of wrongdoing have been made against Mr. King, and there is no suggestion he knew what Mr. Purdy and Mr. Salerno were up to.
Mr. King's H.E. Capital S.A. has been involved with a number of Vancouver-linked penny stock promotions in recent years, including Sonoran Energy Inc., formerly known as Showstar Online.com Inc., Blade Internet Ventures Inc., Direct Response Financial Services Inc. and 1st Genx Inc., previously known as E-Vegas.com.
In Showstar, the company announced a "binding letter of agreement" in February, 2001, to acquire Redmond Capital's RedCell Batteries Inc. and Sirius Animation Inc. divisions. As of last August, H.E. Capital was one of Sonoran's biggest shareholders, with 426,000 shares, a 7.1-per-cent stake.
In Blade Internet, H.E. Capital bought a modest 50,000 shares for $100,000 in a Regulation D offering last July. Among a large smattering of offshore accounts, larger Howe Street-related Blade shareholders included J. Graham Douglas's Antares Investments, with 625,000 shares, and three parties with 250,000 shares each: accountant Logan Anderson, Caisey Harlingten, an associate of David Lynn Hunter, and Aberdeen Holdings, presumably Anthony Hislop and Ian Brown's Belize-based holding company. (Mr. Anderson was a close associate of controversial former Howe Street promoter Harry Moll.)
In Direct Response, H.E. Capital and Mr. King's FN Stockbrokers Ltd. were key players in a reorganization last April.
In E-Vegas.com, H.E. Capital committed to a $500,000 line of credit, upon which the company had drawn advances of $150,00 by March, 2001. E-Vegas was the promotion of Kelowna-based Antal "Tony" Markus and his fellow Vancouver promoters Ed Gallagher and Erwin Liem.
Meanwhile, according to what Mr. Garner told the FBI after his arrest, Mr. King showed an abundance of caution in the Bermuda Short sting.
"During the meeting in the Bahamas, McDonald explained to KING and GARNER that he had large amounts of cash that he needed to clean, and that the source of the cash was cocaine. However, GARNER is not certain if KING understood or heard McDonald's explanation as to the source of the cash," states the FBI report.
After this hour-long lunch meeting, "KING advised GARNER, in private, that he was not interested and that there were three reasons, danger, danger, danger. GARNER then flew back to Vancouver," states the FBI.
Mr. Garner notes that sometime later, he was given the opportunity to buy a penny shell, American Toy Vending. "GARNER figured that this would be a way to launder the cash by purchasing the shell with McDonald's cash and reselling it. GARNER also viewed this as an opportunity to make a profit."
During last April, Mr. Garner flew to Miami and met with Mr. McDonald, the undercover RCMP officer, on the same yacht. "While onboard the yacht, GARNER took possession of a large duffle bag containing $500,000 cash consisting of five, ten and twenty dollar bills," states the post-arrest report.
"Sometime later, before going back to Vancouver, GARNER met with an individual by the name of CRAIG SHABER and purchased the AMERICAN TOY VENDING corporate shell. SHABER sold the shell to GARNER in return for $260,000 cash and returned to San Diego with the cash in the private jet. GARNER advised that he spent the remainder of the cash on personal bills and expenses."
"GARNER returned to Vancouver with the shell, however, quite some time passed, and he was not able to resell it. GARNER attributes his difficulty in selling the shell to the condition of the market. After numerous phone calls from McDonald about the whereabouts of the cash, GARNER received a visit from a Hispanic-looking individual who advised GARNER that he owed Ricardo money and demanded that GARNER pay his debt," states the FBI report.
The Hispanic chap introduced himself as an associate of Ricardo, the undercover FBI agent posing as a Colombian cocaine kingpin, and advised he was going to stay in town until Mr. Garner paid the money. Mr. Garner also continued to receive numerous calls from the undercover RCMP agent.
"However, GARNER was never able to return the money. GARNER spoke to PURDY on many occasions about his situation and explained to PURDY that he was being visited by Ricardo's associates."
During the post-arrest interview, the FBI and RCMP officers questioned Mr. Garner about how he spent the half-million dollars. Mr. Garner explained that he stashed the cash in a safe deposit box in Intervault, in Fort Lauderdale, handed $260,000 in person to Mr. Shaber, the San Diego shell man, and spent the rest of the money by sending wires through Western Union.
According to Mr. Garner, one wire, for $60,000, was used to pay each of the 56 shareholders of American Toy $1,000 in return for a percentage of their shares, while he left $20,000 cash in a safe inside his hotel room. Mr. Garner told the officials he spent the rest of the money on travel, personal bills and expenses.
Mr. Garner then signed three search consents authorizing the FBI to search his hotel room, his brief case and the safe deposit box. Mr. Garner was shipped back to Ft. Lauderdale for his first night in jail. Meanwhile, FBI officers searched his hotel room at the Sheraton Yankee Clipper Hotel in Fort Lauderdale and seized $18,000 in cash.
Meanwhile, Mr. Horvat now claims he had a much rougher time during his arrest, and he wants a judge to disregard any silly things he blurted out in shock and distress.
In court filings, Mr. Horvat notes that he has worked in the lumber industry for a decade, and in September, 2000, he began working in sales and marketing for Bolivian Hardwood Corp., a Canadian company which harvests and imports South American lumber for the North American market. "Mr. Horvat reported to co-defendants Jack Purdy and Harold Jolliffe, the principals of Bolivian Hardwood," states his Miami lawyer Howard Srebnick.
Mr. Srebnick claims the only thing his client did wrong was accept a bag stuffed with $55,000 in cash, which authorities claim was represented as drug money, and deposit it into a Miami account for his boss Mr. Jolliffe.
Mr. Srebnick states in a court filing that his client Mr. Horvat was actually arrested on July 15, a month before the big wave of Bermuda Short arrests on Aug. 14 and Aug. 15. The defence lawyer may be a bit confused, as the arrest report, dated Aug. 14 at Blaine, Wash., was transcribed on Aug. 15.
According to Mr. Horvat, he was lured from his home in Canada by an undercover RCMP officer, who offering to pay him a daily $400 consulting fee for meeting people in the U.S. who operated a wood products business. The undercover officer claimed he was eager in investing in the business and he wanted Mr. Horvat to check it out for him.
"This was a ruse," states Mr. Srebnick.
"When Mr. Horvat arrived at the Canadian-U.S. boarder (sic), his van was suddenly stopped by U.S. Customs officers. The officers arrested Mr. Horvat and, in the process, they aggravated Mr. Horvat's fractured arm by employing handcuffs. Mr. Horvat was placed alone in a room to wait," states the criminal defence lawyer. According to Mr. Srebnick, when the FBI officers arrived, they refused to tell him any details about his case unless he agreed to waive his right to silence, which he did.
What Mr. Horvat said was quite unfortunate, and he now wants to have his statements ruled inadmissible. Mr. Srebnick claims his client was "placed in a state of shock by his situation." "Mr. Horvat, in pain and bewildered, gave in. Therefore, the statements were not given freely and voluntarily."
The FBI's arrest report fills in the details.
"Horvat was informed that the charges brought against him stemmed from an investigation involving securities fraud and money laundering. Horvat stated he had no idea why the charges were being brought against him," states the FBI.
"Horvat asked if the charges had anything to do with a $50,000 cash transaction in Florida which he made at the request of his boss. Horvat stated that the transaction had something to do with a deal in the forestry industry."
"On several occasions during the transportation to the INS (Immigration and Naturalization Service) detention center (in Seattle,) Horvat discussed aspects of the $50,000 cash transaction in Florida. Horvat stated that he thought it was odd the transaction was in cash rather than a check," states the FBI report.
"Horvat asked what would occur if he made a transaction with funds from illegal activity (Horvat provided gun running and drug dealing as examples) but was unaware the funds were derived from illegal activity."
Mr. Horvat now hopes to have his statement thrown out, especially the parts about the theoretical gun-running or drug-dealing money.
(c) Copyright 2003 Canjex Publishing Ltd. stockwatch.com
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