TORONTO — A Bay Street investment adviser who helped raise capital for treasure hunters searching shipwrecks off Cuba has been accused of manipulating trades of the company's shares to boost their value.
And in a separate set of allegations, RCMP have laid fraud charges against adviser Robert Zuk and another man over an alleged cheque-kiting scheme that cost a major Canadian bank more than $157,000.
Ontario securities regulators allege that Mr. Zuk made trades between August 1999 and November 2001 to create “a misleading appearance” of the value and market activity for shares of Visa Gold Explorations Inc., the focus of a police raid of more than a dozen brokerages in June 2003.
Five other traders or sales representatives who assisted Mr. Zuk face allegations by Ontario Securities Commission staff that they profited from the trades and should have known the trades would misrepresent the true value and interest in Visa Gold stock.
OSC staff are seeking a permanent ban on securities trading by all six men named in the statement of allegations.
The commission's evidence was accumulated during a separate RCMP fraud investigation of Mr. Zuk, 42, and Paul Viveiros, 36, who have each been charged with fraud over $5,000 and possession of proceeds of crime over $5,000.
The Mounties allege that between May and July 2001, Mr. Zuk and Mr. Viveiros kited cheques between a business account at their company, Westbrooke Financial Corp., and one of Mr. Zuk's personal chequing accounts. Cheque kiting is a fraudulent act in which cash is recorded in more than one bank account, when in reality the cash is either non-existent or in transit.
Mr. Viveiros surrendered to authorities Tuesday morning and was scheduled to appear at a bail hearing. An arrest warrant was issued for Mr. Zuk, whose lawyer has told RCMP he will surrender to police Wednesday morning, said RCMP Const. Judy Laurence.
None of the allegations in either case have been proved. The commission has scheduled an April 15 hearing on the Visa Gold matter.
Mr. Zuk was hired by Visa Gold six years ago to help take the company private so it could raise funds to buy and equip a salvage boat and cover costs to explore historic shipwrecks and recover artifacts within Cuba's territorial waters.
When shares of Visa Gold hit the Canadian Dealer Network on Aug. 25, 1999, Mr. Zuk controlled a substantial majority of the shares, which began trading on the CDNX, the TSX Venture Exchange's predecessor, in October 2000.
Over 14 months, Mr. Zuk was an active trader in Visa Gold shares who used at least 27 accounts at 11 brokerages to “create a misleading appearance as to the volume of trading in Visa Gold's common shares and as to the market price for those shares,” the OSC alleges.
The value of Visa Gold's stock fell from a peak of $2.05 in 1999 to three cents before its last trade on Dec. 19, 2002. In that time, its market value fell from about $30 million to below $900,000.
Trading in its shares was permanently ceased on May 28, 2003. Days later, about 30 investigators from Toronto police, the Ontario Provincial Police, RCMP and the OSC raided Bay Street brokerages searching for evidence of suspicious trades involving Visa Gold's shares.
The OSC alleges Mr. Zuk used manipulative trading techniques, including “wash trading,” the use of accounts at several brokerages to create the appearance of active trading to boost the price of a stock.
It also alleged match trading, which involves entering an order to buy or sell shares with knowledge that an offsetting order of substantially the same size and price has been, or will be entered, and high-close trading — trades at or near the end of the day that result in a higher closing price.
“Obviously, the commission's staff take these matters seriously, especially when it has to do with registrants,” said Wendy Dey, a spokeswoman with the OSC, Ontario's securities regulator. “It goes to the integrity of our market.”
OSC staff allege that Derek Reid, Matthew Coleman, Ivan Djordjevic and Daniel Danzig, who were registered brokers, were involved in some of those wash, match or high-close trades. In addition, Mr. Reid and Dane Walton are alleged to have carried out trading for their brokerage firms on a prearranged basis with Mr. Zuk.
Each of them worked at different brokerage houses during the trading period. Three of them — Mr. Danzig, Mr. Djordjevic and Mr. Coleman — are currently employed at Desjardins Securities Inc., the OSC said.
Mr. Reid is a former Brant Securities Ltd. trader now employed by Union Securities Ltd. Mr. Walton was employed by Taurus Capital Markets Ltd. and is now registered as a salesman at Canaccord Capital Corp., the OSC said.
As for Visa Gold, the company raised capital from its initial public offering and made its biggest find in 2000: the recovery of the brigantine Palemon, which sank in 1839. Among relics brought ashore from the wreck were cannonballs, jewellery and perfume bottles.
The former Woodbridge, Ont.-based company has gone out of business.
© The Globe and Mail
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