Stock Promoter's Divorce Reveals Life of Luxury

By David Baines
The Vancouver Sun
May 13, 2006

From 1986 to 1997, Vancouver businessman Mark Harris worked in phone rooms that used high-pressure methods to sell stocks, most of dubious value, to people all over the world.

For more than a decade, Vancouver businessman Mark Harris made a fortune running boiler rooms -- high-pressure telephone stock sales operations -- in Europe and Asia. Unfortunately for his net worth, his wife Lori made a career out of spending it.

From 1986 to 1997, Harris worked in phone rooms that used high-pressure methods to sell stocks, most of dubious value, to people all over the world. Initially, he manned the phones himself, but eventually became involved in setting up and overseeing the sales operations.

For various reasons, some of them regulatory, he moved often -- from Spain to Hong Kong, Macau, back to Hong Kong, then to the Philippines, California and finally Vancouver. Throughout most of this period, he worked closely with Bryant Cragun, owner of a boiler room operation that was rather grandly called Oxford International Management.

Wherever he went, Lori followed. It was a nomadic existence, but it had its rewards. In his peak earning years, he made more than $500,000 US a year.

Neither of them was shy about spending it. They employed a maid, a gardener, a chauffeur, even a dog-walker. Every year, for Lori's birthday, they went to Italy. During the beach season, they spent weekends on Boracay Island, about 90 minutes from Manila.

Aside from the occasional modelling job, Lori Harris did not work. She took Spanish lessons, she played tennis, she flew to Hong Kong to have her hair done. But mostly she shopped.

She bought Versace, Dolce & Gabbana and other expensive designer clothes. When her credit card at Saks Fifth Avenue exceeded her limit, she simply opened another account and purchased an $8,000 full-length mink coat. She shopped so much that she hired a personal shopper to help her.

In 1995, the couple began construction of a mansion on an acre of land in Osoyoos. The project, originally budgeted at 3,000 square feet and $500,000, ballooned to 6,000 square feet and $3 million, including an outdoor dining area modeled after the Four Seasons Resort in Bali and five Versace carpets costing more than $100,000.

In 1997, Harris returned to Vancouver to provide investor relations services for many of the same companies he had been selling by phone. Business was initially good, but by 2000, the market had collapsed. His income was decimated and his marriage in a shambles. In 2002 they separated.

Unable to agree on a division of assets, the couple went to court. In a 10-day trial earlier this year, and in a 14-page decision released just days ago, their private lives were laid bare, providing unique insight into the controversial and lucrative business of boiler room operators.

Not mentioned are the people who bought stock from Harris's telemarketers. According to newspaper accounts, court records and securities filings, many of them lost substantial amounts of money.

One was Guy Fletchere-Davies, a 62-year-old carpet manufacturer in Melbourne, Australia. He told the Wall Street Journal in August 2000 that he bought shares of Ziasun Technologies Inc., which traded on the dreadful OTC Bulletin Board in the U.S., and several other junior stocks, from the Manila office of Oxford International Management, where Harris ran the telemarketing operation.

Fletchere-Davies said his brokerage account was passed around among several Oxford salespeople, then to a successor firm. In late 1999, "the phone calls stopped and the paperwork dried up." Ziasun collapsed and he lost $150,000.

By this time, Harris had left Oxford and at Cragun's behest he had set up an investor relations business, Veritas Marketing & Communications Group Ltd., with offices in Vancouver and Solana Beach, Calif., to help promote Ziasun and other stocks that Oxford was selling.

Oxford and Veritas have since shut down and Cragun has reportedly retired, but Harris continues to provide investor relations services through a private firm, Skylla Capital Corp., which operates out of a corner office in Park Place in downtown Vancouver.

Skylla is the grotesque six-headed monster in Greek mythology that swooped down on passing ships and sea creatures, but Harris denies that any of his business activities have been predatory: "Every company I have been associated with was fully registered and all the companies we recommended were legitimate," he said in an interview this week.

Harris is now 49, but his boyish good looks make him appear much younger. He dresses and speaks in a casual but calculated way. His cell phone rings incessantly. For the most part, he ignores the calls to focus on a Vancouver Sun reporter who, uninvited and unannounced, has dropped into his office.

According to the divorce action, Harris was born and raised in Calgary. He dropped out of school in Grade 11 and worked at a steel mill, as a truck driver, at McDonald's, and as a car salesman.

In 1986, he met and married Lori, seven years his junior. He began training as a stockbroker, then a friend offered him a job with a firm called Indigo Investments in Torremolinos, Spain.

"He immediately began work as a telemarketer persuading prospective clients to purchase stock in companies," Judge Linda Loo noted in her judgment.

It was clear that he had an aptitude for the job. He made $5,000 in his first month. The following year, he got a better job as "telemarketing sales manager" for a firm called Equity Management Services in Marbella, Spain. It paid $10,000 per month plus a percentage of the business that the phone room generated.

However, the judge noted, "the job ended abruptly after about a year when the payroll failed to materialize." Harris told The Sun he's "not 100 per cent sure why it shut down." But in the fluid world of boiler rooms, such businesses disappear and reappear with alarming frequency and speed. In this instance, the phone team was offered similar work in Hong Kong starting the following week.

Within five months, Harris was back making $10,000 per month, but once again, the job suddenly ended, this time when the Hong Kong Securities and Exchange Commission intervened. Why the commission intervened is not explained.

Harris found work in a similar operation in Macau, but the couple found the living and working conditions disagreeable, so they decided to use their savings to travel throughout Europe and Asia.

In 1990, Harris returned to Hong Kong and teamed with Bryant Cragun, a former senior vice-president with Goldman Sachs, in another telemarketing operation. Within months, however, Hong Kong regulators once again stepped in and the phone room was shut down. Once again, no reason is given. Harris told The Sun that, to meet capital requirements, the firm had posted shares of an OTC Bulletin Board company rather than a NASDAQ company, and the authorities refused to accept them.

The following year, in April 1991, Cragun established another telemarketing business in the Philippines, Oxford International Management, which styled itself as a "U.S. equity fund manager." He hired Harris to manage the phone room, with huge success.

Within four months, Harris was making $10,000 US per month, plus a percentage of sales. By 1993, the firm had grown to 50 employees and he was making more than $250,000 US per year. By 1995, the firm had offices in Spain, Brussels, Taipei, Indonesia and Bangkok, and he was making $500,000 US annually.

Life was good. The couple travelled extensively. Each Christmas they stayed at the Four Seasons Hotel in Bali. During the summer, they spent weekends on Boracay Beach, where Harris invested $200,000 in an aquasports business which provided them with boats and jet skis, but generated nothing in the way of profits. They also invested $85,000 in an Indian cuisine restaurant in nearby Subic Bay.

Lori was, by all accounts, an excellent hostess. She entertained Harris's business colleagues at Boracay Beach and helped arrange Oxford's annual Christmas party, which was attended by up to 400 guests. She also attended dinner meetings with Mark's clients and prospective clients.

"He considered his wife an asset because together, they were an attractive, well-dressed couple," Loo noted. But other than spending money, the judge said, "she took almost no interest in her husband's work or their finances."

In an interview this week, Lori Harris said she understood her husband was involved in "venture capital," but didn't know any details. "I knew it was telemarketing, but I didn't know the stocks or the names of the companies he was promoting," she said.

Oxford had a stable of junior companies that it organized, financed and promoted to retail investors. Among them were Ziasun Technologies Inc. and Chequemate International Inc.

Both were listed on the OTC Bulletin Board, a trading forum that is virtually unregulated. In fact, prior to 1999, bulletin board companies didn't even have to issue financial statements.

Ziasun and Chequemate financed their businesses by selling large blocks of stocks to foreign purchasers under a U.S. securities rule known as Regulation S.

Under this rule, issuers can avoid going through the onerous process of a registered stock offering by placing the shares with "accredited investors" outside the country. The condition is that these shares cannot be sold back to U.S. investors for at least a year.

Cragun, as an officer and director of Ziasun and Chequemate, arranged for these companies to sell large blocks of unregistered stock to Oxford and related boiler rooms, which marked up the share price and hyped them to investors in foreign jurisdictions.

Problem was, neither Oxford nor its employees were registered to sell stock in Ireland, Switzerland, Australia or any of the others countries where the purchasers were located. Also, the companies were long on puffery and short on substance, which made them exceedingly risky investments.

According to a June 2002 article in the St. Louis Post-Dispatch, one of Oxford's clients was Australian rancher Wally Peart. Starting in 1994, he bought seven stocks from Oxford, including Chequemate, for a total investment of $130,000 US. Little did he know, but all of the companies had close ties to Cragun and associates.

Peart told the newspaper that, on Oxford's advice, he never sold any of the shares, ostensibly to maximize long-term gains. "Everything seemed to work OK, and they often invited me to visit them in Manila," Peart is quoted as saying. "However, in 1999, it all folded and my retirement fund disappeared."

Harris rejects the characterization of Oxford as a "boiler room." He said the firm made sure it was licensed in every jurisdiction in which it sold stock. However, when asked if the firm was licensed to sell stock to Australian investors such as Peart, he replied: "I can't answer that question. I don't know exactly."

He also said the companies that Oxford recommended were all legitimate companies and a lot of Oxford clients made money. "I bought IBM and lost a lot of money on it. It's all based on timing," he said.

He also said neither he nor Cragun have ever been accused of wrong-doing. Cragun told the Wall Street Journal that the U.S. Securities and Exchange Commission spent five years investigating his role in selling Regulation S shares overseas and it "never filed anything against me."

A large chunk of money supplied by investors like Peart found its way back to B.C.

The Harris's bought the acre of land in Osoyoos and began constructing their mansion. It had seven bathrooms and marble tiling throughout, even in the mechanical and laundry rooms.

They paid $35,000 for chandeliers, $40,000 for a wrought iron staircase and $25,000 for a desk for Mark's home office. In all, they spent $225,000 on furnishings. The total cost was more than $3 million. "It is the most expensive house in Osoyoos," the judge observed.

But the gravy train was coming to a halt. By 1996, Oxford had over 10,000 clients, but according to Loo, the stock market had turned and Harris "was forced to deal with unhappy investors."

Cragun opened an investment banking business in San Diego and invited Harris to join him. In October 1997, Mark and Lori moved to Del Mar, just outside San Diego, and rented a 3,200-square-foot ocean-view home for $4,750 a month. They also bought a Porsche 911 for $96,000 US and a 540 BMW for $65,000 US.

Within a few months, Cragun decided he wanted Harris to help him support the public companies that he was promoting. So Harris incorporated Veritas Marketing & Communications with offices in Vancouver and Solana Beach, Calif. He commuted back and forth, spending Tuesdays to Friday in Vancouver, and Saturday to Monday in Del Mar.

Veritas provided investor relations services for several companies, including Ziasun. At its peak, it had 20 employees, but it was not a lucrative enterprise. Harris was paid in shares, which initially soared in value, but by the time they became free-trading, the share price had collapsed. Ziasun, for example, rose to $30, but plunged to 30 cents by the time they were cleared for trading.

In 2001, Harris's total income slumped to $10,000, but Lori could not adjust to this new financial reality. As Judge Loo remarked: "Her passion for high-end designer fashions continued undeterred." Among the items she bought, over her husband's objections, was an $8,000 full-length mink coat from Saks. The following month, in September 2002, they separated.

"There is no doubt that Ms. Harris has a clothes-buying habit," the judge observed.

Since their separation, Lori has been living in the Osoyoos mansion, but Judge Loo has ordered that it be sold and net proceeds divided between them. She also ordered Mark to pay $150,000 spousal support in two equal instalments in January 2007 and January 2008.

It is not clear what Lori will do. "Mr. Harris has suggested avenues Ms. Harris might explore, such as being a veterinary assistant, because she loves animals, or being a personal shopper, because she has exquisite taste and enjoys interacting with people," Loo noted.

However, she added, Lori "has taken no real steps towards finding work or training because she claims she is too emotionally distraught...."

In 2003, Mark returned to Marbella, Spain, to set up offices for another telemarketing firm called Global Capital Asset Advisors. At about the same time, he began a common-law relationship with Jonni-Colleen Sissons, then a broker with IPO Capital Corp.

In January 2004, Sissons gave birth to their son in Malaga, Spain, and they have since returned to Vancouver. Sissons is now registered with Northern Securities and Mark is pursing his investors relations business through Skylla Capital.

He refuses to say who his clients are: "I have been advised by my lawyer not to say anything further to you."

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