SEC bans WAMEX, Absolutefuture promoter DeTrano forever
by Brent Mudry
December 30, 2003
The United States Securities and Exchange Commission has banned convicted New York penny stock promoter Roger DeTrano from the penny stock market for life for his role in manipulating two stocks through offshore accounts at Vancouver brokerage Union Securities. In a recent administrative decision, the SEC rejected the pleas of leniency from Mr. DeTrano, an associate of the alleged Mafia-linked promoter Edward Durante.
In a decision dated Dec. 4, 2003, SEC Administrative Law Judge James T. Kelly notes that Mr. DeTrano pled guilty to conspiracy to commit securities fraud in one stock, WAMEX Holdings Inc., and was fined $494,000 in an SEC civil suit relating to the other stock, AbsoluteFuture.com Inc. (All figures are in U.S. dollars.) In the criminal case, he was sentenced Sept. 20, 2002, in United States District Court for the Southern District of New York, to 70 months in prison and three years of supervised release.
Most of the proceeds from the Union Securities accounts were transferred to an alleged money laundering account at the main downtown Vancouver branch of Bank of Montreal, in the name of Exchange Bank and Trust, a Nevis-based offshore bank headed by Terry Neal. The Internal Revenue Service claims that more than $100-million moved through the EBT account for its assorted clients in a two-year period prior to its being frozen in the spring of 2000.
The SEC's broad ban prohibits Mr. DeTrano from participating in any offering of any penny stock. This includes acting as any promoter, finder, consultant or other person who engages in activities with a broker or issuer for the purposes of the issuance or trading in any penny stock, or inducing or attempting to induce anyone to buy or sell any penny stock.
In the administrative proceeding, Mr. DeTrano, who represented himself, indicated his intention not to call witnesses on his behalf, and he waived his right to an in-person public hearing. The SEC was represented by staff attorneys Linda Bridgman and Tesha Chavier.
Judge Kelly noted that the criminal indictment alleged that from November, 1999, through June, 2000, Mr. DeTrano conspired with others to manipulate the price and volume of WAMEX shares, and he issued false and misleading statements to the public. The SEC evidence included an affidavit of Ms. Chavier, which quoted a statement Mr. DeTrano made under oath with his guilty plea.
"I conspired with others to manipulate the price of WAMEX stock from approximately November of '99 through June of 2000 in Manhattan. WAMEX I knew was a publicly traded stock. I agreed with others, who are my co-defendants, to have issued to me 19-and-a-half million shares of the company and to an entity that I controlled... I understood that the shares would be used approximately to manipulate the market price of the stock, and I agreed with others to issue false and misleading press releases concerning the development of WAMEX. Certain of these press releases were disseminated through e-mail blasts, by public relations firms associated with Mr. Simmons," stated Mr. DeTrano as part of his plea. (Mr. Durante used the alias Ed Simmons.)
Judge Kelly also noted that in the SEC's civil case, Mr. DeTrano was ordered Jan. 22 to pay $494,700, including disgorgement of $401,000 and interest of $94,000. His New York shell company, Commonwealth Partners, shares $198,000 of this disgorgement order jointly and severally. The total fines against Absolutefuture and other defendants reached $3.5-million, led by Mr. Durante, who was ordered to pay $1.97-million, including $1.62-million in disgorgement and $354,000 in prejudgment interest.
"I have considered DeTrano's claim that the (SEC Enforcement) Division is attempting to portray him as the mastermind of two manipulation schemes, with almost no focus on his business associate, who he characterizes as the real architect of the schemes," states Judge Kelly. The judge notes, however, that the SEC gave Mr. Durante a similar lifetime penny stock ban on Aug. 7 in an unrelated case, involving shares of PSA Inc.
Judge Kelly ruled that Mr. DeTrano cannot escape a sanction by asserting that his business associate, Mr. Durante, is even more culpable than he is. The judge also ruled that while Mr. DeTrano has stated he is remorseful, this is not sufficient to present a real issue for a hearing.
The judge noted that Mr. DeTrano's misconduct was not isolated, as the criminal conviction and the SEC injunction show he engaged in two overlapping but separate stock manipulations from November, 1999, through June, 2000. "The violations stopped only when the Department of Justice and the Commission intervened to make them stop," stated Judge Kelly.
In reviewing Mr. DeTrano's case, the judge notes the promoter, now in his late 50s, has spent his entire career in the financial services industry. "There is a genuine possibility that DeTrano will return to that industry following his release from prison and be presented with opportunities to engage in future penny stock offerings and misconduct similar to the violations evidence by this record," states Judge Kelly. "His past misconduct thus provides a basis for inferring a risk of probable future misconduct."
Judge Kelly notes that while Mr. DeTrano speculates that his criminal conviction may make it difficult to get a job in the securities field, this does not minimize the public interest in imposing a penny stock ban against the promoter. The judge also notes that general deterrence must be considered, as a ban against Mr. DeTrano may deter others from engaging in similar misconduct.
THE CRIMINAL CASES
Mr. DeTrano faced three separate criminal cases relating to WAMEX and Absolutefuture.
In the first, he was charged in June, 2000, as part of Operation Uptick, the FBI's biggest assault on Mafia-linked stock promotions, which targeted a total of 120 defendants, including 10 members and associates of the five La Cosa Nostra, or Mafia, families in New York. Mr. DeTrano's indictment noted millions of shares of WAMEX were sold through Vancouver brokerage Union Securities, an innocent conduit. Court records show Mr. Durante later told authorities he made $24-million in WAMEX profits with the help of Mr. DeTrano.
In the second and third cases, unsealed in October, 2001, Mr. DeTrano was charged with securities fraud relating to Absolutefuture and Vinex Wines before and after Operation Uptick. In the wake of Uptick, Mr. Durante flipped, pled guilty on Dec. 7, 2001, and became a star federal operative, helping lure Mr. DeTrano and others, including Union broker Trevor Koenig and former Vancouver offshore accountant Michael K. Graye, in scripted stings orchestrated by FBI agents.
Mr. DeTrano pled guilty in the first case and was sentenced to 70 months, or just under six years, in prison. His charges in the other two cases are believed to have been stayed as part of his plea agreement.
THE SEC CASE
Mr. DeTrano was a defendant in the Absolutefuture and WAMEX cases, two of four SEC cases targeting Mr. Durante and his associates. The four civil cases, launched Oct. 11, 2001, comprised the biggest ever prosecution of defendants doing business through Vancouver brokerage and banking conduits by the SEC, which credited the British Columbia Securities Commission for its assistance. Altogether, the SEC charged that 44 defendants, led by Mr. Durante and Mr. DeTrano, made more than $30-million in illegal profits in manipulations of WAMEX, Absolutefuture, U.N. Dollars Corp. and Ramoil Management Ltd.
In the Absolutefuture complaint, the SEC claims that the public company issued 1.1 million shares to Mr. DeTrano's Commonwealth Partners in December of 1999 and three million shares to four of Mr. Durante's offshore companies: Berkshire Capital Partners Inc., Dottenhoff Financial Ltd., Galton Scott & Golett Inc., all registered in Nevis, and Zimenn Importing and Exporting Inc., registered in the Philippines. The regulator claims that while these 4.1 million shares were purportedly issued to the DeTrano and Durante entities for purported consulting services, this was a sham and the shares were in fact used in the scheme to manipulate Absolutefuture's stock price.
Dottenhoff was first linked to Exchange Bank and Trust in June, 2000, by Stockwatch, the day the FBI launched its Operation Uptick arrest sweep. Stockwatch revealed that similarly-spelled Dotenhoff Financial, an offshore mob-linked client of Vancouver brokerage Union Securities, was likely related to Dobbins & Dotenhoff Ltd., a Nevis account linked by Stockwatch a month earlier to EBT.
"Durante maintained brokerage accounts for all of those entities at Union Securities in Vancouver, Canada. During the relevant period, Durante exercised trading authority in his name and his alias name, Ed Simmons, in the Union Securities brokerage accounts held in the names of those entities," states the SEC in its complaint.
The SEC also claims that between January and April of 2000, Mr. Durante and Mr. DeTrano manipulated Absolutefuture shares by selling the 4.1 million consulting shares and by buying and selling a further 3.3 million shares on the open market. Mr. Durante allegedly conducted his manipulative trading through his Berkshire, Commonwealth Associates, Dottenhoff, Galton and Zimenn accounts, while Mr. DeTrano allegedly participated in the scheme through his company, Commonwealth Partners. The regulator notes the stock rose from a low of 21 cents in December of 1999 to a high of $6 in March of 2000.
"Durante also transferred proceeds of the manipulation scheme to sub-accounts he controlled in an account held by relief defendant EBT at the Bank of Montreal in Vancouver, Canada. In all, Durante transferred approximately $19-million in trading profits from the AFTI and related stock manipulation schemes to the EBT sub-accounts between January and April, 2000," states the SEC.
Unfortunately for Mr. Durante, the BCSC froze the Vancouver bank account, which then had more than $17-million on deposit, in April, 2000, at the request of the SEC, which was chasing cross-border wire transfers of Stephen Sayre, a completely unrelated tout.
In the aftermath of the assorted Durante cases, Union broker Mr. Koenig was arrested at the border, pled guilty in New York in a co-operation deal and has since returned home to the Vancouver area after doing his time. WAMEX executives Russell Chimenti and Mitchell Cushing were also convicted. Mr. Cushing was sentenced in October, 2002, to more than eight years in prison, partly based on the testimony of Mr. Koenig at a jury trial that July. Mr. Graye pled guilty in New York March 27, 2002, in conjunction with his plea in the unrelated 7-Up Canada money laundering case in Toronto.
[ RGM Short Selling Home page ]