– Sierra Leone Mercenary Backer. From Sandline to Blackwater to Federal “Contractors”
– Tony Blair interceded in, and testified on his behalf, for his trial
– Changed the history of Thailand
– Created the biggest extradition case in Canadian history
– Philosopher, Marxist, weapons financier, lover, rabble-rouser
– Involved in dot.com tech companies
– Rogue illuminati – didn’t play with the main crowd. Very independent.
– Connected to almost every major dynasty group globally
– Called: “The most interesting man in global power plays”
Rakesh Saxena, center, a former adviser to the Bangkok Bank of Commerce, is helped to sit in a wheelchair by prison officials upon his arrival at criminal court in Bangkok, Thailand Friday, June 8, 2012. Saxena, 60, an Indian national, was sentenced to 10 years in prison and ordered to pay US$41 million in fines and compensation for embezzlement that helped spark the 1997 financial crisis. (AP Photo/Apichart Weerawong)
Adnan Khashoggi, Rakesh Saxena and the Spiderweb
Dr. Alexander von Paleske – On a noticeboard of a Canadian website I found the information, that Rakesh Saxena, an alleged world class megacrook was released from prison in Vancouver/Canada in December 2006. He was put into prison, pending extradition to Thailand in March 2006, 10 years after Thailand requested the extradition. �Saxena who� may many ask, and why does an extradition take more than 10 years. Let�s see.
Rakesh Saxena is part of a spiderweb of private armies, merchants of death, financial artists and politicians. Names that are popping up among others are Adnan Khashoggi, Tim Spicer, Rakesh Saxena, Tony Buckingham,Simon Mann, Nick du Toit, Raoul Berthaumieu (Berthamieu, alias Lee Sanders), Regis Possino, Sherman Mazur, Eeben Barlow , Lafras Luitingh, Victor Bout (Butt), Sanjivan Ruprah and the companies Executive Outcomes, Sandline and General Commerce Bank.
Meet Adnan Khashoggi
Let�s have a closer look and start with a veteran of arms and shady deals, a close friend of the bin Laden family for decades, an uncle of the late Dodi Fayed, the last partner of Diana Princess of Wales and brother-in-law of the owner of Harrod�s Supermarket in London, Al Fayed, his name: Adnan Khashoggi, once called the richest man on earth. Khashoggi�s origin is Saudi Arabia, his favourite place to live is Marbella in Spain and his favourite businesses are arms deals and the stock market, especially in Vancouver/Canada.
At present, however, he likes more the sand of the beaches of the United Arab Emirates, a better, because safer place to be, when arrest warrants and extradition requests are piling up.
He was involved in the Iran Contra-Affair in the 80s, in which the Pentagon sold weapons to Iran and the profits were used to buy weapons for a CIA sponsored group in Nicaragua, the Contra Rebels. Everything illegal of course, but an army man by the name of Oliver North was day and night putting documents into the shredder, when the scandal was about to be made public. It is good to have such trustworthy people in your house.
Khashoggi was also involved in the Bank of Credit and Commerce International (BCCI), a massive washing machine for illegal money from the Medellin drug cartel, Manuel Noriega, and other drug lords. The bank was forcibly closed in 1992 after investigations by a committee of the US senate, in which Senator John Kerry featured prominently.
However Khashoggi, likeable as he is, had and has friends all over the world, so let�s forget about the BCCI-Affair and move on to Thailand, to the Bangkok Bank of Commerce. The CEO of that bank was in the 90s Krirkkiat Jalichandra. A promsing young man of Indian origin, by the name of Rakesh Saxena was introduced to him on a golf course.
A duo infernale
Saxena was wanted in India for culpable homicide, who cares, was a communist before, while studying in India, who cares and according to the slogan, who is not a communist at age 20 hasn�t got a heart, and who is still a communist age 40 hasn�t got a brain, and Saxena had brains, he forgot Marx and Engels and concentrated on fraud and corruption the big way and advised his �brother in fraud� Jalichandra accordingly both together a �duo infernale�, so to speak. Money was pumped into a labyrinth of fake companies and �small gifts� in cash and kind were handed out to politicians and friends, a non repayable loan was allegedly given to Saxena�s friend Adnan Khashoggi, amounting to only 134 million US Dollars, peanuts, so to speak.
However such big fraud, that triggered eventually the Asian Banking Crisis in 1997 cannot go on forever one time the bubble has to burst and in 1996 the scheme collapsed, however Saxena, clever as he was, left in time the sinking ship and fled to a much cooler place, Canada.
Not forgetting, allegedly to take some pocket money with him, only the laughable sum of 88 million US Dollars laughable, because the damage he and Jalichandra allegedly caused amounted to more than three billion US Dollars. Jalichandra was not so lucky, he got arrested and has been sentenced to 30 years in prison one year ago. Thailand wanted Saxena extradited, but Saxena did not want, had money enough to hire the best of the best of lawyers and he convinced the Government of Canada, a banker is a banker, that it would be cheaper to put him in self paid house arrest, than into a prison. So he is still in Canada but not resting, to the contrary. He is as busy as ever.
Rakesh Saxena and a Mercenary
First to knock on his door was Tim Spicer, the mercenary, Ex-Lieutenant Colonel, OBE, hated by the Irish because soldiers of his unit, when he was stationed in Northern Ireland, killed an innocent Irishman by the name of McBride. These soldiers were later convicted for murder. However Spicer campaigned and lied for them, so that they were early released and then reinstated in the British Army, they are now on patrol in Iraq, where killing of innocent civilians is rather a day- to- day event.
Spicer needed money, Saxena had money for his adventure in Sierra Leone.
Tony Buckinghams company Sandline, of which Spicer was the chief executive until 2000, offered their service, in exchange for diamond mining rights, to ousted President Kabbah with old apartheid soldiers of the infamous 32.Buffalo Battalion, Koevoet, 44 Parachute Brigade and the Reconnaissance Commandos. All well well known killer units, their motto: shoot to kill, and their battleground in those days were the newly independent state of Angola with the refugee camps of SWAPO and the illegally occupied Namibia as well as other neighboring countries like Botswana, Mozambique, Zambia, and Zimbabwe..
The unit, named Executive Outcomes, was founded and headed by Eeben Barlow, former member of the 32.Buffalo Battalion and then of the Civil Cooperation Bureau (CCB) the latter an South African apartheid death squad, which can take credit for countless extra judicial killings inside and outside South Africa including hundreds of captured SWAPO freedom fighters allegedly killed with poison, delivered by a Dr. Wouter Basson and the bodies thrown out of a plane over the Atlantic Ocean.
Saxena and the Arms to Africa Affair
Saxena offered 10 million US Dollar, he had mining interests there as well, bought with money from the Bangkok Bank of Commerce, and with Saxenas/Bangkok Bank of Commerce money Spicer bought tons of weapons in Bulgaria and elsewhere. This was the start, of what was later called the Arms to Africa Affair. Active in this scheme there were also Simon Mann and Nick du Toit, both in prison now, one in Zimbabwe, the other one in Equatorial Guinea after the failed coup attempt last year.
This military intervention was in flagrant violation of an UN arms embargo, who cares, and with the approval of the resident British High Commissioner, Penfold. When the things came out, it nearly brought down the Blair Government.
And Khashoggi and Saxena were not just watching, what was happening in Africa, they had also had serious business to do, Khashoggi in America and Saxena in Canada, before both joint forces and went to Vienna Austria.
Khashoggi, Men from Mars and Deutsche Bank
In 2001 Khashoggi, via his company Ultimate Holdings, based on the Bahamas with a complicated lending scam allegedly pumped up the stock of a Nasdaq bubble company by the name of Genesis Intermedia, in which Ultimate Holdings was the majority shareholder.
The company was built around a book by a John Gray, �Women are from Venus and Men are from Mars�.He forgot to add that arms dealers and mercenaries are from hell. Involved in that scam were Deutsche Bank in Toronto and a slew of criminal stockbrokers and after the scam collapsed in 2001, Khashoggi and his friend El Batrawi were 130 million US Dollar richer, broker houses filed for bankruptcy , the damage amounting to more than 300 million US Dollars.
Deutsche Bank has now settled out of court and has paid 350 million US Dollars, still denying any responsibility, of course.
A friend is a friend
Meanwhile Saxena in Canada was busy as well. He appointed the leading opposition MP in the Canadian Parliament, John Reynolds as board member in a flimsy company called WaveTech while fighting at the same time an extradition request from Thailand in the courts of Canada. We in Africa call that corruption. A friend, even when bought, in need is a friend indeed.
And he was involved in a scandal around a company in South Africa in 2004 , called Platinum Asset Management. PAM, that later on moved to Botswana and was exposed in August 2005 here by me and the local weekly paper “Sunday Standard”.
Vienna and the Big Fraud
However shared success is doubled success, so he went to good old Europe in 2000 with his friend Khashoggi. Khashoggi in person, and him being under house arrest via the phone. They linked up with a Filipino by the name of Amador Pastrana.
Pastrana had already earned himself the reputation as being a king of the boiler rooms earning him more than a billion Dollar.
Boiler rooms are cramped small offices, from where selling of shares to unsuspecting clients is organised. They apply high pressure sales pitches on their victims. Those clients have money but no banking experience, they are neither banker nor broker The shares they sell to pensioners, and medium income earners are worthless, artificially pumped up Penny stocks and the clients never see their money again. The most effective and sophisticated fraud scheme to date.
Saxena, Khashoggi and Pastrana bought together the General Commerce Bank AG in Vienna, formerly WMP Bank and allegedly turned it into a boiler room, the fraud organised there amounts, according to press reports, to roughly one billion US Dollar.
With them the US-convicted criminals Regis Possino, Raoul Berthamieu (alias Berthaumieu, alias Lee Sanders) and Sherman Mazur.
In 2001 the Bank was closed.
.1 billion in one year.
Now Saxena can rub his hands. Not only that he is back in his self paid house arrest in a posh suburb of Vancouver, it gives him also a chance to go back into business in a country, which he called last year �full of unintelligent idiots�.
The extradition request of Thailand has expired now after 10 years. The government of Thailand was overthrown by a military coup last September, thus giving Saxena plenty of new arguments in his legal battle.
Saxena’s colleagues seem to do well.
Sherman Mazur has started a company, Accu Poll Holdings, in which his children are the majority shareholders. They intend to sell polling machines to the government. A lot of shares have already been sold, via boiler rooms of course, at highly inflated prices.
Regis Possino was collecting investor’s money for his company “Geneva Equities”in Asia last year, calling it a “roadshow”. He netted 28 million US Dollars.
Geneva Equities was before connected to a company by the name “L-Air”, supposed to fly between Canada and Belgium. However their planes never made it to the runway, only the money of the investrors flew away – forever-.
And Raoul Berthamieu alias Lee Sanders seems to be still in business with his company Pacific Federal SA. If you put the name in a search engine, plentiful warnings, not to do business with this company, are appearing. Who says, that crime does not pay? Saxena et al?????
Massenvernichtungswaffen f�r den Iran
sfux – 16. Apr, 08:05 Article 7053x read
5 Kommentare – Kommentar verfassen
bob (Gast) – 5. Jun, 12:19
WHOIS information for: quoteplatform.com:
Rakesh is at it again in thses new web sites hope you get him
44 Pandora Road
WHOIS information for: uniqueanalysis.org:
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Created On:30-Apr-2007 03:14:38 UTC
Last Updated On:25-Apr-2008 18:17:46 UTC
Expiration Date:30-Apr-2009 03:14:38 UTC
Sponsoring Registrar:Tucows Inc. (R11-LROR)
Status:CLIENT TRANSFER PROHIBITED
Status:CLIENT UPDATE PROHIBITED
Registrant Name:Rakesh Saxena
Registrant Organization:Rakesh Saxena
Registrant Street1:44 Pandora Road
Registrant Street2:West Hampstead
Registrant Postal Code:N/A
Registrant Phone Ext.:
Registrant FAX Ext.:
Admin Name:Rakesh Saxena
Admin Organization:Rakesh Saxena
Admin Street1:44 Pandora Road
Domain name: QUOTEPLATFORM.COM
Saxena, Rakesh email@example.com
44 Pandora Road
Admin, Domain DomainSupport@homestead-inc.com
3425 EDISON WAY
MENLO PARK, CA 94025
+1.8007972958 Fax: +1.6503647329
Registration Service Provider:
Homestead Technologies, Inc, firstname.lastname@example.org
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sfux – 5. Jun, 21:36
Thank you very much.
Bill Ohare (Gast) – 12. Jun, 10:59
New places for Rakesh
jeff (Gast) – 28. Okt, 12:39
Rakesh Saxena�s latest company vehicle is Quote Platform Syndicate Inc Ltd. A company incorporated in the United Kingdom registered company number 06433400. It was incorporated on the 21/11/2007.
The Company has as its director Rakesh Saxena and the Company Secretary is Amrit Sarup who is Mother to Rakesh and his half-brother Deepak Sarup. Amrit Sarup is 82 years old and has been variously described as a legal consultant or legal scholar although she is not a lawyer.
The Company�s address is 44 Pandora Road, West Hampstead, London, NW 6 1TR. This property is registered as belonging to Deepak Sarup
The house is registered in the name of Title absolute 1 (27.11.2000) PROPRIETOR: DEEPAK SARUP of 44 Pandora Road, West Hampstead, London NW6 1TR. 2 (27.11.2001) The price stated to have been paid on 20 October 2001 was �400,000. It was bought for cash and has no charges against it.
Mr Deepak Sarum works for the Siam Commercial Bank as a Vice President.
Rakesh Saxena has been busy promoting the Quote Platform Syndicate through business networking websites. There are two OTCBB corporations that have publicly claimed to have raised substantial sums out of the efforts of Quote Platform Syndicate Inc. The first is 3P Networks Inc. (US OTC:TPNW.PK .3P Networks. The shares are quoted at 2 cents and there have been no filings of any kind that can be looked up on the OTCBB website.
The other is Spirit Exploration Inc. [www.spirit-exploration.com] On this website is the story that.
�December 10, 2007, Victoria, BC: Spirit Exploration, Inc. (SPXP: Pink Sheets) Spirit announced the completion of the underwriting syndicate securing $20m in asset backed notes. Quote Platform Syndicate is working with Spirit in this transaction. The notes will be for a 5 year term and are comprised of 20,000 units with an issue price of US$1,000 per unit. The Notes are secured by the Company�s Muluncay concession in Ecuador. This financing will be closed upon completion of final documents in December 2007�.
However, the registration statement that had been submitted to the SEC by Spirit Exploration Inc has now been withdrawn.
Is it the usual case with anything connected to Rakesh Saxena on the OTCBB, much is claimed but not substantiated by an examination of the facts?
Are the Thai authorities asset recovery division interested in where the money came from to purchase for cash 44 Pandora Road London in Deepak Sarum�s name? Was it provided by Rakesh Saxena and is that why he is using this property for Quote Platform Syndicate Inc Ltd?
Posted by Newsworthy, on 09/03/2008 at 01:38
Company Directors Report
QUOTE PLATFORM SYNDICATE INC LTD (06433400)
Appointment Date: 21/11/2007
Date of Birth: 04/12/1926
Address: 44 PANDORA ROAD, WEST HAMPSTEAD, LONDON, NW6 1TR
Present Appointments: 1
Resignations since June 1996: 1
Appointment Date: 21/11/2007
Date of Birth: 13/07/1952
Address: 3080 RIVER ROAD, RICHMOND, BRITISH COLUMBIA, V7C 5N2
Present Appointments: 1
Resignations since June 1996: 0
Report Generated: 30/08/2008
QUOTE PLATFORM SYNDICATE INC LTD
Previous name: None
Registered Number: 06433400
Incorporation Date: 21/11/2007
Registered Office: 44 PANDORA ROAD
Latest Filed Accounts: None
Date Accounts Lodged: None
Accounts Ref. Date: 30/11
Latest Annual Return: None
Issued Capital (GBP): None
Company Status: Not Analysed
Principal Activities: The company has yet to file any accounts at Companies House.
Principal UK SIC Code: Not known
CCJs since January 1992: Number of exact unsatisfied CCJs: None
Number of probable unsatisfied CCJs: None
Number of possible unsatisfied CCJs: None
Holding Company: None
Ultimate Holding Company: None
Registered to. North Shore Trading Corp
3080 River Road
Richmond. British Columbia
Shares taken 1000.
Posted by Newsworthy, on 08/31/2008 at 02:24
Siam Commercial Bank has appointed two new senior executives to help oversee its internal reforms, including the half-brother of Rakesh Saxena, a former executive of the defunct Bangkok Bank of Commerce who is now fighting extradition from Canada.
However Deepak Sarup, a former auditor with Deloitte Touche Tohmatsu, insisted that he was much different from his sibling.
‘We are very different, with different interests, different friends … I’ve never done anything wrong professionally in my life,’ Mr Sarup said.
Posted by Newsworthy, on 08/31/2008 at 02:04
The Quote Platform website is registered at 44 Pandora Road West Hampstead London NW6 1TR. That property is registerd to the person named below.
The house is registered in the name of Title absolute
1 (27.11.2001) PROPRIETOR: DEEPAK SARUP of 44 Pandora Road, West
Hampstead, London NW6 1TR.
2 (27.11.2001) The price stated to have been paid on 20 October 2001 was
�400,000. It was bought for cash and has no charges against it.
Amrit Sarup is Rakesh Saxena’s Mother. He uses her bank account in Barclays Bank UK and in another in Vancouver to process all of his cash dealings on the Pink Sheets etc.
The Thai authorities are trying to sequester his assets world-wide but as yet have not moved against those being held in the names of his mother or close family associates, the proving of the connection is the key.
Until they take these other assets and freeze the bank accounts it will be business as usual for Rakesh Saxena.
Posted by Newsworthy, on 08/29/2008 at 23:00
sfux – 29. Okt, 22:00
THANK you very much Jeff!!!
Rakesh Saxena (born July 13, 1952, at Indore, Madhya Pradesh, India) is an Indian financier and trader in the derivatives market. On October 29, 2009, he was deported to Thailand after fighting the longest extradition battle in Canadian history, which lasted 13 years. He is accused of embezzlement in 1994-1995. He is widely reputed to have been engaged in dozens of high risk ventures and deals throughout the world over the previous three decades.
Rakesh Saxena studied in India at St. Stephen’s College and in Britain. He graduated with a Master of Arts degree in English Literature. He worked in a foreign exchange and money market brokerage company, where he concentrated on complex financial transactions and foreign exchange speculation, first in Delhi, Bombay, Sri Lanka and Singapore, and then for the Oriental Bank of Commerce in Delhi, before the Indian government nationalized it.
In the mid-1970s, Saxena moved to Hong Kong, where he met his wife, a Thai national. In Hong Kong, he first worked as a foreign exchange dealer in Kowloon, and then joined Wocom Commodities. He moved his base to Bangkok in 1985 where the Bank of Thailand had announced the opening up of the forex markets. He then shifted focus to the derivatives arena.
In Bangkok, Saxena dealt in speculation on buying and selling companies and wrote a financial column in the Bangkok Post, spoke in seminars of foreign exchange trading and formed numerous contacts in the business community. Among his interests were mines in Sierra Leone, companies in Australia, Belize, Canada, Cayman Islands, Russia, Thailand, Hong Kong, Israel, Cyprus and the Virgin Islands, and a number of Swiss bank accounts.
Extradition to Thailand
On October 31, 2009, when the Supreme Court of Canada denied the final Appeal of Mr. Saxena, he was immediately handed over to Thai authorities who flew him to Thailand, where Mr. Saxena is now awaiting trial on Fraud charges.
A Marxist Millionaire
As a student, he embraced Marxism, and Saxena’s consulting work continues to be informed by Marxist political theory.
Saxena sees no contradiction in being a wealthy Marxist. He is a theorist, not an activist, he said. “I’m not a Che Guevara,” he said. “I’m not going to go sit in the jungle fighting. My analysis is basically a Marxist analysis of risk. I’m not a capitalist. I make money through sheer brain power.”
However, reliable sources suggest that Saxena was (and remains) an active member and ideologue of the extremist Naxalite movement in the 1970s and he has continued to support far-left parties in Nepal and in India, including the Maoist Communist Parties of India and Nepal.
Bangkok Bank of Commerce
In 1989, Saxena became advisor to Krirk-kiat Jalichandra, new senior vice-president of Bangkok Bank of Commerce. The bank tried hostile takeovers against many of the large Thai companies that traded publicly on the stock exchange. According to later investigation, it also gave cheap loans to various public officials and politicians in India, Russia, Thailand, Sinagapore, Saudi Arabia and Lebanon.
Bangkok Bank of Commerce collapsed in 1996 and the Bank of Thailand took it over. The collapse contributed to the Asian financial recession, economic and political crisis and the 1997 devaluation of the baht. Saxena was at his residence in Prague or Zurich at the time the story broke, and he never returned to Thailand.
In June 1996, Thai authorities charged Saxena, Krikkiat Jalichandre, Rajan Pillai and Adnan Khashoggi and a number of other people with embezzling money estimated to be worth $US2.2 billion (or according to other estimates, $US88 million). Saxena himself had allegedly siphoned off £300 million in 1992-1993 through a string of derivative transactions. Saxena said that he was just an advisor and a trader and that the collapse of the real estate markets was the real trigger of the recession. His relationship with Russian tycoons and Arab sheikhs continues to be a subject of speculation.
Detention in Canada
The Royal Canadian Mounted Police arrested Saxena on July 7, 1996, at Whistler, British Columbia, on behest of the Thai police. He was initially imprisoned for 2–3 days in a Canadian pre-trial centre. Saxena resisted extradition, claiming that he would be killed if he would return to Thailand.
In February 1998, Saxena was put on bail of $2.5 million because he was regarded as a flight risk. British Columbia Supreme Court overturned this ruling on June 24, 1998, allowing him to resist extradition in Vancouver, under his own guards in an effective house arrest at his own expense. On September 4, 1998, Thailand asked authorities in 22 countries to freeze his assets, which, at the time, amounted to $135–300 million. Thailand also filed a civil suit against him.
In September 2005, the lower Canadian court ruled that Saxena should be extradited but the government of Canada did not enforce this ruling. Saxena further delayed his extradition with appeals. On October 21, 2005, the Canadian court postponed Saxena’s extradition once again until January 2006.
On March 3, 2006, Saxena lost his B.C. Court of Appeal bid to overturn the federal justice minister’s order that he be surrendered to Thai authorities, despite his contention that he could be killed or tossed in an inhumane prison cell in Thailand. Saxena’s lawyer appealed. One of the possible reasons cited for him being released was the recent coup d’état in Thailand, which ousted the internationally recognized government, thus causing significant turmoil for the crown.
Saxena filed his appeal to the Supreme Court of Canada through the offices of Amandeep Singh, known for representing clients in such internationally intriguing cases as the Extradition of Omid Tahvili, a fugitive who was on the Interpol’s Top Ten Most Wanted persons list and part of the defence of the Air India Bombing Trial.
On October 29, 2009, the Supreme Court of Canada denied Saxena’s hearing request regarding a lower-court decision upholding his extradition. The Supreme Court gave no reason for its decision. Later that day, Saxena was turned over to Thai authorities and left Canada for Thailand.
Business with Sierra Leone
A military coup ousted president Ahmad Tejan Kabbah of Sierra Leone in May 1997. Kabbah fled to Guinea and set up a government in exile. Around July 1997 he contacted British mercenary Tim Spicer of the Sandline International to organize a counter-coup. Saxena agreed to finance the countercoup in exchange for diamond exploration permits.
According to the British Parliament’s Report of the Sierra Leone Arms Investigation, Saxena would raise the money so that Sandline could hire soldiers and buy equipment. In return, Kabbah would give Saxena’s companies permits for diamond exploration and promises of further business. Saxena would pay Sandline for their operations. However, someone leaked the relevant documents to The Globe and Mail. In an interview the same year Kabbah denied knowledge of any negotiations with Saxena.
According to Spicer, who testified for the Report, Saxena did not give them the funds he had promised; reports have contradicted Spicer on this issue. Sandline bought more weapons from Bulgaria but they were too late – Nigerian-lead troops loyal to Kabbah had already seized the capital. As a result, Saxena did not receive the permits. Later British government investigation confirmed that Kabbah had not told the whole truth. In later interview Saxena claimed that he wanted to help for “ideological reasons” and the last thing on his mind was owning mines in Africa.
General Commerce Bank
Rakesh Saxena was, until recently, allegedly fraudulently active in Britain (West Shore Ventures), South Africa in 2004 (Platinum Asset Management) and then Botswana (Investor Relations), South Africa (Phoenix Capital Partners), as the Sunday Standard and had revealed in August 2005. It is now known whether Saxena owned the African companies or not.
Adnan Khashoggi, Oleg Boiko, Rakesh Saxena, Amador Pastrana, and Regis Possino, a lawyer believed to be the chief architect of the General Commerce Bank transaction, together acquired General Commerce Bank, in Vienna, Austria, from where they allegedly organized international stock and bond deals. Associated with Possino were Sheman Mazur and Raoul Berthamieu, from the U.S. Possino and Khashoggi were credited with raising over $65 million for Genesis International, prior to the selling of the shares being halted by the SEC. Neither Possino nor Khashoggi were implicated in any wrongdoing in that regard.
Victims came from many countries, including Australia, Britain, and South Africa. Again Saxena’s exact role has never been determined in many of these transactions. His name never showed up in any ownership documents. The Austrian government has not charged him with anything. One reason may well be that, in many instances, it is believed, that parties involved in international deals pay Saxena simply to have him on side. Saxena is not averse to shorting stocks. According to one of India’s biggest power brokers, Chandraswami (also Nemi Chand Jain), Saxena is not averse to greenmail-type attacks on deals in progress, and due to his extensive knowledge of the markets (financial, economic and political), his reach is daunting, but his name is not on the paperwork. One senior Indian cabinet minister also alleged that Saxena is making options and futures prices on speculative Indian shares from offshore jurisdictions and that he is the price maker “of last recourse” for speculators in Mumbai.
Reports suggest that Saxena from his residence conducts several questionable and high-profile deals around the world, primarily deals in the exotic world of third world debt and derivatives; many such deals are, until now, outside the regulatory umbrellas and are likely to remain so for many more years.
Mr. Saxena and his company Westshore Ventures were sued by Pacific Energy & Mining Company and Tariq Ahmad of Reno, Nevada in the United States District Court for the District of Nevada for fraud and conspiracy to defraud Pacific Energy of over 1.5 million dollars. Pacific Energy had also filed a criminal complaint with the Federal Bureau of Investigation, however, the proceedings were stopped due to the extradition of Mr. Saxena to Thailand.
Since Mr. Saxena’s extradition to Thailand, no additional securities frauds have been perpetrated by Mr. Saxena.
In August 2006, the Thai government set up a new team to seize the rest of Saxena’s assets overseas, targeting those in Canada. Then Minister Chidchai Wannasathit ordered the Anti-Money Laundering Office and the Royal Thai Police to help the Attorney-General in this task. Canadian Appeals court denied his request for bail. [Bail was granted later].
Rakesh Saxena was also a defendant in number of Civil Lawsuits in United States, including in the United States District Court for the District of Nevada; he won those cases or those cases simply faded away.
Charges Against Saxena
Saxena has been accused of many things but has not convicted of anything yet.
In India, Saxena has been accused of culpable homicide, extortion, uttering death threats and cheating in the death of biscuit tycoon Rajan Pillai. Those allegations were laid after the tycoon’s widow accused Saxena and three others of conspiring to kill her husband. Pillai was introduced to Saxena by some prominent Indian power brokers, including Chandraswani. The tycoon’s widow, former model Nina Pillai, was considered very close to Saxena by people who saw her often at Saxena’s Bangkok residence. Former bank officials in Thailand have claimed that Nina Pillai continued to be financed by Saxena after her husband’s death.
The Government of Thailand accuse Saxena embezzling $88 million from the Bangkok Bank of Commerce (BBC) and sought his extradition from Canada. The bank had separately filed civil proceedings against Saxena. He has filed a counter-suit.
The collapse of the BBC was one of the first dominoes in a financial crisis that spread across Asia, shaking the world economy in 1997. While some blame Saxena for sparking the inferno – The Wall Street Journal described him as the “Mrs. Leary’s cow of the global financial crisis” – he is not facing court action on that score. He is also linked to some of the major hedge fund problems of the late 1990s, particularly problems linked to third world bonds and leveraged currency and interest rate derivatives on such bonds and to problems now associated with Russian and East Europe privatizations of the Yeltsin era.
No charges were laid in the ill-fated Sierra Leone affair. The British Parliament’s Report of the Sierra Leone Arms Investigation concluded that the purchase of weapons with Saxena’s money only technically broke a United Nations embargo and that Canada was not yet enforcing the embargo.
- ^ Jump up to: a b “Fugitive Saxena returned to Thailand, ending 13-year judicial marathon”. Vancouver Sun. October 29, 2009. Archived from the original on November 1, 2009. Retrieved October 30, 2009.
- Jump up ^ “Thai fugitive’s appeals push extradition case to deadline”. The StarPhoenix/The Province. December 23, 2008. Archived from the original on September 27, 2011.
- Jump up ^ “Saxena in Thailand”. The Nation. Archived from the original on November 14, 2012. Retrieved November 8, 2009.
- Jump up ^ “Fugitive financier awaits extradition judgement”. CBC News. November 10, 2000. Archived from the original on November 14, 2012. Retrieved October 30, 2009.
- Jump up ^ http://www.singhthindlaw.com/
- Jump up ^ http://www.listzblog.com/top_ten_most_wanted_world_criminals_list.html
- Jump up ^ Nathan Vardi (April 25, 2008). “In Pictures: The World’s 10 Most Wanted”. Archived from the original on November 2, 2012. Retrieved October 26, 2012.
- Jump up ^ “Fugitive Thai banker faces trial”. BBC News. October 30, 2009. Archived from the original on June 28, 2012. Retrieved October 26, 2012.
- Jump up ^ “Fugitive Banker Fighting Extradition From Canada to Thailand for 13 Years Loses Battle”. Fox News. October 29, 2009. Archived from the original on November 21, 2014. Retrieved October 26, 2012.
- Jump up ^ http://www.canada.com/theprovince/news/unwind/story.html?id=16c88a84-7b9d-47c2-b5b6-50d3f581168a
- Jump up ^ “Thai Fugitive Saxena Loses Canada Extradition Appeal”. Bloomberg. October 29, 2009. Archived from the original on October 26, 2012.
- Jump up ^ “Saxena denied”. Bangkok Post. October 30, 2009.
- Jump up ^ Amy Sawitta Lefevre (June 8, 2012). “Indian financier Rakesh Saxena jailed over 1990s crisis-era fraud in Thailand”. Bangkok. Reuters. Archived from the original on July 27, 2013. Retrieved November 21, 2014.
History and mystery
by CHRIS CAREY with JUSTIN MCLACHLAN
(Editor’s note: In the course of our investigations, we come across people whose names pop up frequently in connection with questionable companies, or who always seem to have other issues surrounding them. We think that covering in detail the backgrounds of these people will help make investors smarter. We created Sharesleuth.com to introduce you to some of them, and now we are adding a second page, Sharesleuth.com Matrix, to allow you to track them. Starting with this story, we will add summaries of individuals and companies that appear in Sharesleuth stories to a searchable database that readers can use to learn more about them and to see how what links they might have to others in the database.)
In December 2001, the Nasdaq stock exchange delisted the shares of Global Capital Partners Inc., citing its ties to people with serious criminal or regulatory histories.
Nasdaq investigators concluded that two convicted felons, Regis Possino and Sherman Mazur, had acquired a substantial, undisclosed interest in the company, which operated brokerages in the United States and Europe. Global Capital’s chairman and chief executive, Martin A. Sumichrast, was a direct participant in the financing deal that led to their involvement.
According to Nasdaq’s findings, Sumichrast created a separate entity that bought newly issued shares from Global Capital, using money that ultimately came from companies connected to Possino and Mazur. Global Capital (Pink Sheets: GCPL.PK) later bought millions of dollars of stock in obscure public companies tied to Possino or Mazur. Nasdaq said the brokerage also sold a stake in an online subsidiary to a company headed by one of their associates, another financial felon. In addition, investigators said, Global Capital participated in a dubious $27.5 million divestiture that led it to inflate assets and earnings and to file what it called “materially misleading” financial statements for at least three quarters.
No regulatory charges were filed in connection with the deals. Nor were investors ever told the full reason for the delisting. By appearances, Global Capital’s shares were removed solely for failure to meet the exchange’s minimum share price.
Global Capital gave up its brokerage license in 2002 and faded from view. Since then, Sumichrast has worked as a consultant for other publicly traded companies. He also led an investor group that packaged four U.S. shell companies for reverse mergers with China-based partners. The first of those shells became China Fire & Security Group Inc., which was the subject of a previous Sharesleuth investigation.
A second shell company, International Imaging Systems Inc., was transformed last fall into China Bio Energy Holding Group Co. (OTCBB: CBEH.OB). A third, Forme Capital Inc., combined in March with a Chinese supermarket chain and has changed its name to QKL Stores Inc. (OTCBB: QKLS.OB). The fourth shell, Southern Sauce Co. (SOSA.OB) announced last month that it had completed a reverse merger with a Chinese company that specializes in ceramic valves and other products.
In our report on China Fire, we noted that some of the investors in the shells had previously been connected to stock manipulation schemes. Since then, we have turned up information linking Sumichrast to a succession of white-collar criminals.
Our research also shows that Sumichrast and several of his partners in the shell and reverse-merger deals have a mutual history at other public companies. One of those is in liquidation, and another is facing delisting from the American Stock Exchange. We think that anyone considering investing in China Bio Energy, QKL Stores or the Chinese valve maker should know the backgrounds of the people who have helped create them.
It’s possible that China Fire, China Bio Energy, QKL Stores and the Chinese valve maker are perfectly legitimate companies that had the misfortune of doing business with Americans who have questionable pasts. But we wonder why, if those and other Chinese companies are so promising, they escaped the attention of bigger, more reputable U.S. investment firms. We also wonder why the more we investigate these Chinese reverse-merger deals, the more people we find with criminal or regulatory pasts. We will continue to dig deeper and report on what we find.
(Disclosure: Mark Cuban, the majority member of Sharesleuth.com LLC, has no position in any of the stocks mentioned in this story. Chris Carey, editor of Sharesleuth.com, does not invest in individual stocks and has no position in any of the stocks mentioned here.)
Sharesleuth’s latest reporting found that Sumichrast’s ties to past fraud schemes or individuals who committed fraud were more extensive than we first realized. We found that:
- Sumichrast was a director and shareholder of A1 Internet.com Inc., a public company that was one of Global Capital’s investment banking clients. A1 and Global Capital also were partners in an online venture designed to link businesses with buyers and investors. A1 Internet’s second-largest stockholder, Larry W. Kerschenbaum, pleaded guilty to conspiracy to commit securities fraud in connection with his sale of A1 shares. Federal prosecutors charged that, from 1999 to 2001, he bribed two Global Capital brokers to recommend and sell his shares to their clients. The stock sales began while Sumichrast was on A1 Internet’s board and while he was running Global Capital (then called Eastbrokers International Inc.) Three other people associated with A1 Internet, including its chief executive officer, were later convicted or pleaded guilty in a separate fraud case involving sales of the company’s stock. ((To read more about Global Capital and A1 Internet, click here))
- Sumichrast was one of four people who provided short-term “bridge loan” financing to e-Net Inc. in 1996, just before a planned stock offering underwritten by a corrupt brokerage called Stratton Oakmont Inc. Global Capital’s corporate predecessor, Czech Industries Inc., had raised $15 million through that firm the previous year. Stratton Oakmont’s owners would later go to prison for a variety of offenses, including manipulating share prices in at least 34 public offerings. The Czech Industries deal was among them. In some of the offerings, Stratton Oakmont’s owners and their associates used bridge loans to put shares and warrants in the hands of front people who agreed to sell the securities back to them upon demand. e-Net did not go forward with its stock sale. According to an account in the Washington Post, regulators balked at Stratton Oakmont’s involvement, and were concerned that the four bridge lenders were getting securities valued at $7 million for a $1 million loan that was to be repaid in less than a year. e-Net went public the following year in an offering underwritten by Barron Chase Securities Inc., a firm whose president later went to prison for his role in yet another fraudulent stock offering.
- Sumichrast appears to have been involved in the creation of a company called American Corp., which filed for a public offering in September 2002. SEC documents show that the major shareholders were Sumichrast’s sister-in-law, Stacey L. Rennix; his business partner, Ralph O. Olson; two former Global Capital insiders and Thomas T. Prousalis Jr., the lawyer who acted as securities counsel for e-Net, Czech Industries and a handful of other companies in their Stratton Oakmont offerings. American Corp.’s last SEC filing on its proposed stock sale was in August 2003. Prousalis was indicted five months later in connection with another stock deal – the same one that landed the president of Barron Chase in prison. Prousalis pleaded guilty in the middle of his trial and was sentenced to 57 months. According to coverage of the case in the Washington Post, prosecutors had asked to present evidence that Prousalis was a participant in the planning of six fraudulent public offerings, including the e-Net and Czech Industries deal. They said that Jordan Belfort, one of the founders of Stratton Oakmont, would testify against him.
Five members of the group that invested in Sumichrast’s Chinese reverse-merger deals were involved in a California company called House of Taylor Jewelry Inc. (Pink Sheets: HOTJ.PK), either as officers, directors, shareholders or investment bankers. The “Taylor” in the corporate name is actress Elizabeth Taylor, who licensed a line of jewelry to the business and became its biggest shareholder. Former supermodel Kathy Ireland also licensed a line of jewelry to the company.
Lomond International Inc., a company run by Sumichrast and Olson, helped create House of Taylor in May 2005. SEC filings don’t specify the role that Lomond played in the company’s formation. They do show that Lomond got 900,000 shares of stock, making it the sixth biggest holder. House of Taylor’s shares have skidded from a high of $7.50 in January 2006 to less than a penny today. Its stock was delisted from the Nasdaq exchange in April. Taylor and Ireland have terminated their licensing deals with the company, and its main lender is liquidating its assets.
Sharesleuth’s investigation found that Lomond International and two other early House of Taylor investors transferred at least 1.6 million of their shares in 2005 to recipients whose names never appeared in the company’s SEC filings. They included two people with long ties to Irving Kott, a Canadian financier and stock promoter with two fraud-related convictions. That discovery continued a pattern that we had noted in our earlier story.
Some of those House of Taylor shares also wound up with a company whose signatory was Sumichrast’s sister-in-law, and to four inscrutably named limited liability companies – each of which used a drop box at a different Mailboxes Etc. store as its business address.
SEC filings show that a company headed by stock promoter Stephen E. Apolant got shares in House of Taylor a few weeks before its formal creation. At the time, Apolant was a defendant in an SEC fraud case involving a “pump and dump” scheme at another public company.
At least five members of Sumichrast’s investor group also were involved in a company called Recom Managed Systems Inc. The shares of that company, now known as Signalife Inc. (AMEX: SGN), peaked at $8.90 in April 2004 and have been on a long decline ever since. The stock now trades for 18 cents and the company is facing delisting from the American Stock Exchange.
A former chief executive of Recom, Stephen O. Sparks, testified in a court case that Lomond International worked to manipulate Recom’s stock. Sparks said that during his time at the company in 2002 and 2003, Lomond International traded in Recom’s shares to boost the price and volume, and touted the stock to market makers and other investors.
Lomond International is the same entity that Sumichrast and Olson used to buy stakes in the shell companies they merged with Chinese partners.
Sparks also testified in his deposition that many of Recom’s activities were secretly orchestrated by Mitchell J. Stein, a California financier and attorney. He said that Stein – who was not listed among Recom’s officers, directors or control persons — made hiring and spending decisions, represented the company at key business meetings, issued press releases about its activities and directed certain individuals to trade in its shares.
A second company run by Sumichrast and Olson received a consulting contract with Recom in March 2003. SEC filings show that the firm, Crown Reef Holdings Inc., was supposed to advise Recom on strategic planning, marketing and other subjects. It was paid with 800,000 shares of stock, the sale of which generated well over $2 million.
Sharesleuth noted one other common link between House of Taylor and Recom. Both companies had been shells controlled by California businessman Sim Farar or his sons. Farar is a prominent Democratic Party fundraiser who helped raise millions for Sen. Hillary Clinton in her unsuccessful run for the presidential nomination.
The members of the investment group that controlled the shells that became China Fire, China Bio Energy and the newly public grocery chain include:
- Sumichrast, a partner in Lomond International and several other investment and consulting companies based in Charlotte, N.C.
- Olson, Sumichrast’s partner in the investment and consulting companies. He is a former investment banker for Global Capital and was vice president of one of its brokerage subsidiaries in Englewood, Colo.
- Raul C. Silvestre Jr., an attorney in Westlake Village, Calif., and president of Castle Bison Inc., an investment company. He previously was secretary and treasurer of Recom, and also served as its securities counsel.
- John Scardino, a real estate developer based in Westlake Village. He shares office space with Silvestre.
- Ariel Coro, manager of Menlo Venture Partners LLC, an investment company in Agoura Hills, Calif.
Vision Capital Advisors LLC, a hedge fund in New York, invested in all four of the group’s shell or reverse-merger deals. Its Vision Opportunity China Fund (AIM: VOC.L) put roughly $10 million into both China Bio Energy and QKL Stores, and put more than $15 million into Southern Sauce. Vision declined through its attorney to answer questions posed by Sharesleuth.
SEC filings show that Lawrence Chimerine, an economic consultant and a former director of Global Capital, invested in the first three shells that merged with Chinese companies. So did the wives of Cary W. Sucoff and Harvey R. Kohn, who run Equity Source Partners LLC, a broker-dealer and investment banking firm in Jericho, N.Y. The fourth Chinese company has yet to file the type of SEC form that would show whether those people invested in that deal.
Chimerine also is a director of House of Taylor. He joined its board in September 2005. Sucoff and Kohn provided investment banking services to House of Taylor and helped it raise money through a private placement.
We’ve created a flow chart that shows how members of this network moved between companies and how some of those companies interacted with one another. To see the chart, click here.
The SEC recently signed off on China Bio Energy’s registration statement covering the resale of 2.84 million shares held by Sumichrast’s investor group and several other parties that got stock through the reverse merger. China Bio Energy’s stock has traded in low volumes on the Over the Counter market. Nevertheless, its share price has risen sharply over the past few months, climbing from a base of $4.25 in early May to a recent peak of $9.25. At Wednesday’s closing price of $6.25, the nearly 1.3 million shares and warrants that Sumichrast’s investor group held after the reverse merger would have a market value of $8.12 million. The group bought control of the shell for $405,000.
QKL Stores filed a registration statement in May. Its plan covers the sale of roughly 12.2 million shares, including 1.5 million shares originally held by members of Sumichrast’s investor group. QKL Stores’ stock is lightly traded, but has nearly doubled since May. At Wednesday’s closing price of $5.95, the shell group’s stake would have market value of $8.92 million. The group bought control of the shell for $650,000.
China Fire started out on the Over the Counter market and moved to the Nasdaq in July 2006. It appears that China Bio Energy and QKL Stores are headed down the same path. Securities and Exchange Commission filings show that the reverse merger deals for each of those companies contain a provision that grants their private placement investors an additional 1 million shares if they fail to gain a listing on the Nasdaq, the American Stock Exchange or the New York Stock Exchange by certain target dates.
Our initial story on China Fire noted that Sumichrast had been chief financial officer of Czech Industries at the time when its public offering was used a fraud vehicle by Stratton Oakmont. It also noted that Sumichrast had numerous ties to associates of Irving Kott. One of Kott’s criminal convictions involved his secret ownership interest in J.B. Oxford Holdings Inc., a now-defunct brokerage company based in Beverly Hills, Calif.
The 48-count indictment in that case alleged, among other things, that two of Kott’s associates were given allotments of stock in Stratton Oakmont’s fraudulent offerings in return for J.B. Oxford clearing trades for Stratton Oakmont and several related brokerages. The allotments included shares and warrants in the Czech Industries offering.
Czech Industries originally owned hotels and other businesses in Eastern Europe. The company changed its name to Eastbrokers International Inc. in December 1996, to better reflect a new focus on the securities business. It renamed itself Global Capital in 1998. For the purpose of clarity, we will refer to the company by that name for the rest of this story.
After regulators shut down Stratton Oakmont, Global Capital hired two other investment firms to raise capital through stock placements. Those firms were Walsh Manning Securities LLC and JB Sutton Group LLC. The two principals of Walsh Manning – Frank J. Skelly and Craig Gross – had worked at Stratton Oakmont. They would be indicted on fraud charges in 2002 in connection with their activities at Walsh Manning. Authorities also charged Kenneth S. Greene, one of the founders of Stratton Oakmont, along with an employee of JB Sutton and two other men. Prosecutors alleged that, from 1995 to 1997, the men secretly acquired discounted stock in public companies through private placement deals, then sold them at artificially inflated prices through Walsh Manning, JB Sutton and another brokerage.
Although Global Capital was not one of the companies whose shares were covered by the indictment, SEC filings show that Skelly, Gross and another defendant in the case had acquired its stock and warrants through private placements as well. Walsh Manning went out of business. Skelly and Gross were convicted in 2004 and were sentenced to 57 months in prison. Global Capital later bought JB Sutton.
J.B. OXFORD CONNECTIONS
The FBI and the SEC raided J.B. Oxford in the fall of 1997. The brokerage was sold the following year, and its new owners agreed in a $2 million settlement with the Justice Department to cut all ties to Kott, who had been listed in the firm’s records as a consultant.
Global Capital maintained relations with some of the old operators, however. When it bought its first U.S. brokerage, its partner in the purchase was John Paul Devito, a vice president of J.B. Oxford. He later became a vice president of Global Capital and a member of its board.
In May 2001, Global Capital hired Stephen M. Rubenstein, who had been J.B. Oxford’s chief executive officer. Three months later, Global Capital got a financial consulting contract from Intasys Corp., a Montreal company with ties to Kott.
In September 2001, Global Capital issued a “strong buy” recommendation on Intasys’ stock, with a 12-month price target of $8 a share and a 24-month target of $18. At the time, the company’s stock was trading for around $2.
In January 2002, Global Capital announced a recapitalization and restructuring led by Sam Luft, one of Intasys’ directors. Another Intasys director was slated to become president of the reconstituted company. In March 2002, however, Global Capital gave up its brokerage license, and Sumichrast resigned as chairman and chief executive.
The following month, Lomond International took over Global Capital’s consulting deal with Intasys, along with the Intasys stock it had received as payment.
In February 2004, Lomond International participated in a reverse merger deal alongside Harold Wine, a longtime associate of Kott and a onetime investor in J.B. Oxford. They said in a joint filing with the SEC that they had acquired their shares through a “call option” agreement with the owners of the shell company, Tele-Optics Inc.
One of the sellers who signed that agreement was John F. LaSala, a former partner in a south Florida brokerage firm called Sheffield Securities Inc. He pleaded guilty in 1990 to participating in a manipulation of penny stocks. His two co-owners also pleaded guilty.
SEC filings show that LaSala or his wife, Alicia M. Lasala, were shareholders of two of the shell companies that Lomond International used in its Chinese reverse merger deals. Those shells became China Fire and China Bio Energy.
Tele-Optics became Velocity Asset Management Inc. (AMEX:JVI). SEC filings show that when that company later raised capital through a private placement, the investors included Silvestre, Scardino and Marvin H. Fink, a former Recom executive who has invested alongside them in the shells that merged with Chinese companies.
Sumichrast has declined to answer questions submitted by Sharesleuth.. His attorney, Ellyn S. Garofalo, contacted us in early June and said that some of the things we had previously written about her client were incorrect. She warned that any false statements about him could be met with legal action. However, she did not respond to follow up calls requesting clarification on what information she believed was inaccurate.
Garofalo also was Kott’s defense attorney in his criminal proceedings.
HOUSE OF TAYLOR
Although the star power of Elizabeth Taylor and Kathy Ireland has helped generate billions of dollars in sales of perfume, clothing and other products, it did little to boost House of Taylor’s jewelry business. The company reported sales of $5.61 million in 2005 – its first year in business — and a net loss of $3.53 million.
House of Taylor’s sales jumped to $31.8 million in sales in 2006, the year the stock moved from the Over the Counter market to the Nasdaq. The company formally introduced its Taylor and Ireland lines at trade shows in the spring and summer of that year. However, SEC filings show that $22.4 million of its revenue came from the sale of loose diamonds rather than finished jewelry, and that a single customer was responsible for nearly half of those purchases. The company posted an $8.35 million loss for the year.
House of Taylor has yet to file its annual report with the SEC for 2007. In its request for an extension, it said unaudited figures showed gross revenue of $21.6 million – a decline of more than 30 percent — and a loss of $14.8. It added that, allowing for returns of $12.5 million and “sales return allowances” of $8.9 million, its net revenue last year was just $200,000.
Other SEC filings show that through the first nine months, loose diamonds still accounted for more than 70 percent of House of Taylor’s revenue. Bob Rankin, the company’s chief operating officer and chief financial officer, declined to talk to Sharesleuth.
FOLLOWING THE SHARES
When we searched SEC filings to see what became of the House of Taylor shares held by its creators, we found that a large amount of stock appeared to have been transferred to other investors through private transactions. We also found that the account in SEC filings of how House of Taylor was fashioned from a shell company called Nurescell Inc. left out some pertinent details.
Here’s our summary, which focuses on a few key dates:
On Feb. 16, 2005, a pair of limited liability companies headed by Justin Farar and Joel Farar paid $500,000 for nearly all of Nurescell’s stock. The two entities — 2FeetCan LLC and 412S LLC — also provided $70,000 in loans to Nurescell. The loans were repaid on April 25, 2005, with each of the limited liability companies getting 810,038 additional Nurescell shares. After that transaction, they collectively held 2.86 million shares.
Less than a week later, the limited liability companies filed matching forms with the SEC saying that they had entered into “put/call” agreements covering half their holdings. Put/call agreements give one party the option to sell, or put, shares to another at a predetermined time and price. If the party holding the shares does not exercise that option, the other party still can exercise its right to buy, or call, the shares.
The filings said the option deals were signed May 1, 2005 and became exercisable on Oct. 26, 2005. The price per share was 3.5 cents. At the time, the number of shares covered by the deals equaled 48 percent of the company’s outstanding stock. The two limited liability companies provided no information on the other parties to the put/call agreements, nor did anyone else file forms disclosing their participation in them.
On May 20, 2005, Nurescell morphed into House of Taylor. It issued 12 million shares of stock to a company owned by Elizabeth Taylor, 7 million shares to a company owned by Kathy Ireland and just over 8 million shares to members of a Los Angeles family, the Abramovs, who contributed their jewelry manufacturing business to the venture. After the deal, the company had 33.7 million shares of stock outstanding.
Jack Abramov became House of Taylor’s chairman and chief executive, and Monty Abramov became vice president and design director. Martin Sumichrast took on the title of advisor to the chairman.
The SEC filing on the reorganization and merger included a list of new House of Taylor stockholders. It showed Lomond International with 900,000 shares and an entity called MAC385 LLC with 600,000 shares. Its Nevada corporation filing lists Sim Farar as managing member. Although Justin Farar and Joel Farar had been Nursecell’s biggest shareholders, and had signed the deal that turned that company into House of Taylor, the documents made no mention of the shares that they held in the new entity, or of anyone who had agreed to purchase their shares.
However, subsequent SEC filings by individuals and companies selling House of Taylor shares offer some clues about what happened to that stock.
Crown Reef Holdings, the Sumichrast company that previously had a consulting deal with Recom, reported in February 2007 that it planned to sell 209,538 House of Taylor shares with an estimated market value of $808,816. Crown Reef said in its sale form that it bought the House of Taylor shares on Oct. 26, 2005, from a limited liability company that had acquired them on April 25, 2005. The October date matches the exercise date of the put/call agreement that the Farar brothers’ limited liability companies disclosed in their earlier SEC filings. The February date matches the date on which they canceled outstanding debt in exchange for 1.62 million shares of stock.
An entity called Manchester Holdings filed a form in February 2006 disclosing plans to sell 380,000 House of Taylor shares with an estimated value of $1.9 million. Its form listed Sumichrast’s sister-in-law, Stacey Rennix, as the signatory. Manchester Holdings said it bought 466,336 shares on Oct. 26, 2005, from a limited liability company that had acquired them on Feb. 16, 2005. The October date matches the exercise date of the put/call agreement, and the February date matches the date when the Farar brothers bought their initial stake in the company.
At the time that Manchester Holdings bought the shares, Rennix was employed as a paralegal. A comparison of the handwriting on Manchester Holdings’ initial SEC filing and a Crown Reef filing shows that they were filled out by the same person, and that the writing appears to be Sumichrast’s.
Sharesleuth also found forms covering the proposed sale of 275,000 shares filed by a Canadian company called Hareton Sales and Marketing Inc. Hareton’s initial filing said it bought its House of Taylor shares on Oct. 26, 2005 from a limited liability company that acquired them on Feb. 16, 2005. Those dates coincide with the exercise date of the put/call agreement and the original acquisition of shares by the Farar brothers.
Hareton’s president, Mitchell S.T. Wine, was an investor in J.B. Oxford and served on its board from 1993 to 1998. SEC filings show that, in the mid-1990s, Hareton also purchased shares or convertible notes in Hariston Corp. and Metanetix Corp., later known as Consolidated Pacific and Western Resources Corp. Both companies had close ties to Kott and to J.B. Oxford, which marketed their shares to customers.
Mitchell Wine’s mother, Esther Wine, submitted an SEC form covering the sale of 50,000 House of Taylor shares purchased on Oct. 26, 2005. She is married to Harold Wine, who had invested alongside Sumichrast’s Lomond International in an earlier reverse merger deal. Harold Wine’s history with Irving Kott dates back more than two decades.
In 1983, the Quebec Securities Commission halted trading in the shares of a company called Belgium Standard Ltd. because of concerns that a group of individuals and companies connected to Kott acted improperly in a stock offering that gave them control of Belgum Standard.
Wine was chairman of Belgium Standard’s board. The securities commission identified him as one of the participants in the scheme. The other parties cited in the case included Wine’s main business, WSP Marketing International Ltd., and Dominique Schittecatte, who was secretary-treasurer of two companies owned by Kott’s wife and sons.
According to news accounts, Kott was a consultant to Belgium Standard through a Montreal company called Janus Corp. A securities commission investigator testified in the case that Wine told him he had owned Janus, but sold it to Kott. After a hearing, the securities commission imposed a trading ban on certain shareholders. According to coverage in Toronto’s Globe and Mail, the list included Wine, Schittecatte, Kott and companies under their control. The ban was lifted in 1985.
SEC filings show that Harold Wine and WSP were investors in J.B. Oxford in the mid-1990s, at the same time that Kott was working as a purported consultant there. The company providing the consulting services was headed by Schittecatte.
In his criminal case, Kott pleaded guilty to concealing the fact that he provided much of the $6.5 million in financing J.B. Oxford received from a Swiss investor in the mid-1990s. The investor got securities that were convertible into a majority stake in the company. J.B. Oxford documents filed as part of another court case show that Harold Wine provided financing to the brokerage through that same Swiss investor, Felix Oeri. Wine remains chairman of WSP International. Canadian corporation records also list him as a director of Hareton.
Manchester Holdings listed its address as the office of Eugene M. Kennedy, a lawyer in Fort Lauderdale, Fla. He prepared the SEC filing for Lomond and Harold Wine in their Tele-Optics share purchase, and was listed as Lomond’s legal representative when it bought a controlling interest in the shell company that became China Bio Energy.
When House of Taylor expanded its board of directors to five members from two in September 2005, the new appointees included Larry Chimerine and Frank M. Devine, both of whom had been Global Capital directors.
House of Taylor raised nearly $6.5 million in August 2005 in a private placement intended to expand the company’s sales, marketing and brand-building. The placement agent for the financing was Laidlaw & Co (UK) Ltd.. SEC filings show that Cary Sucoff was one of Laidlaw’s investment bankers and received House of Taylor warrants as compensation for his services.
House of Taylor raised an additional $11.7 million through another placement in May 2006.
Sucoff and a partner, Harvey R .Kohn, left Laidlaw and set up their own firm, Equity Source Partners. It became a consultant to House of Taylor. Sucoff added a note to his registration report with the Financial Industry Regulatory Authority last month, disclosing that it was investigating him for several possible violations, including conducting private securities transactions outside of his regular business activities. He told Sharesleuth the investigation had nothing to do with Sumichrast or any of the companies with which Sumichrast has been associated. Sucoff added that his wife and his partner’s wife were passive investors in the shell companies that Sumichrast packaged for reverse mergers with Chinese partners.
Chimerine did not respond to a request for comment.
Sharesleuth’s search for the undisclosed recipients of House of Taylor stock turned up filings that showed 613,836 shares were transferred on Nov. 16, 2005 to four limited liability companies – Acimal Productions LLC, Lopab Investments LLC, Onrose Investments LLC and Nitsaw Company LLC. The four acquired their shares on the same date and almost always filed to sell their shares on the same dates. However, each entity listed a different business address. Sharesleuth determined that all four addresses — two in New York City, one in South Orange, N.J. and one in South Hills, N.J.- were drop boxes at what were then Mailboxes Etc. locations. None of their SEC filings included the name of a manager or beneficial owner. Each bore only initials on the signature line, and those were illegible.
All four of the limited liability companies were incorporated in Delaware, and all four used the same registered agent to handle their formation. None of the filings in that state included the names of the companies’ owners or managers.
The limited liability companies sold their House of Taylor shares through Spencer Edwards Investments Inc., a small brokerage in Englewood, Colo. So did Manchester Holdings, the company headed by Sumichrast’s sister-in-law.
We asked Gordon D. Dihle, chairman and chief executive of Spencer Edwards, what steps the firm took to determine the identity and background of the owners of those limited liability companies – a requirement under the Financial Industry Regulatory Authority’s so-called “Know Your Customer” guidelines. He declined to say.
“I really can’t comment on customer accounts,” he said. After a few more questions, he hung up on us.
Spencer Edwards has figured into at least three SEC cases in the past seven years. The SEC brought a cease-and-desist action in September 2004 that included Spencer Edwards, its then-President Edward H. Price and two of its brokers as defendants. The SEC alleged that they enabled four officers of a company called Starnet Communications International Inc. to enrich themselves by selling millions of dollars of stock without registering the shares or making the required disclosures. The SEC found that Price failed to exercise reasonable oversight and barred him from associating with any broker-dealer in a supervisory capacity. The commission found that the brokers, Eugene C. Geiger and Thomas A. Kaufmann, willfully violated federal securities regulations. It barred them from the industry and ordered them to pay nearly $1 million each in disgorgements and fines.
Geiger also was the subject of two other SEC proceedings stemming from alleged securities frauds conducted by his clients while he worked at Spencer Edwards. The public companies at the center of those cases were Golden Eagle International Inc. and AbsoluteFuture.com.
New Century Capital Consultants, the company run by stock promoter Stephen Apolant, said in an SEC filing that it received 62,500 House of Taylor shares on May 1, 2005 as repayment for a debt. A check of the address that New Century Capital listed on its SEC filings showed that it also was a Mailboxes Etc. location.
The SEC filed a civil fraud case against Apolant in 2004, alleging that he participated in a scheme to manipulate the shares of a New Jersey company called Spectrum Brands Corp. (not to be confused with Spectrum Brands Inc., a Fortune 500 company with a similar name). The SEC said Spectrum tried to capitalize on terrorism fears in the fall of 2001 by claiming to market an ultraviolet flashlight that could kill germs, including anthrax, in seconds. The company’s shares more than tripled, to a high of $14, after it publicized the product.
The SEC also said in its complaint that Spectrum was secretly controlled by a group that included several convicted felons, one of whom was identified by federal prosecutors as an associate of the Colombo organized crime family.
Apolant is contesting the charges against him. The SEC reached settlements with Spectrum and five other individual defendants in the case, and won judgments against two more. Prosecutors brought criminal charges against four of the defendants, two of whom had already been convicted in a prior racketeering case. All four went to prison.
Another company, CSH Advisors Inc. of Manhasset, N.Y., filed a form with disclosing the planned sale of 62,500 House of Taylor shares. CSH said it bought the shares directly from the company in November 2005. The form was signed by Stephen Schaeffer Jr., CSH Advisors’ president. He works from the same offices as New Century Capital, according to an employee there. And a recent SEC filing by another public company listed Schaeffer as a director of New Century Capital, with power over the shares it held.
Sharesleuth’s analysis of the SEC filings by Manchester Holdings and the four mysterious limited liability companies that got House of Taylor stock showed that they usually submitted notices of planned share sales on the same dates. Manchester and the four limited liability companies first filed sales notices on Feb. 28, 2006. They also filed notices on May 22, 2006, Aug. 17, 2006 and Nov. 13, 2006. The latter three dates came just before the release of House of Taylor’s quarterly earnings.
The closing price of the company’s stock on Aug. 17, 2006, was $1.18 a share, and the trading volume was 7,400 shares. The following day, the stock rose 42 percent, to $1.61, and volume jumped to 53,000 shares. The next trading day was Aug. 21, 2006. House of Taylor announced earnings, saying that revenue for the first half of the year had doubled, and that the company had made significant progress toward rolling out its branded jewelry to retailers. Its stock closed that day at $2.01, with 109,500 shares changing hands. The price reached $2.25 the next day. Sharesleuth noted that on that day, House of Taylor was featured by three stock promotion websites – Stockguru.com, Bellwetherreport.com and Streetinvesting.com.
When Manchester and the four limited liability companies filed to sell more House of Taylor shares in November 2006, the price again rose, along with the trading volume. In a little more than a week, from Nov. 12 to Nov. 21, the stock went from $1.86 to a high of $2.90.
RECOM MANAGED SYSTEMS
One of Sumichrast’s first consulting clients after he left Global Capital was Recom Managed Systems, a small public company that had been in bankruptcy. It emerged as an empty shell in 2001 with the help of a cash infusion from a company run by Sim Farar. That company, Vanguard West LLC, initially held 85 percent of Recom’s stock. SEC filings show that some of those shares were later transferred to Farar’s sons, Justin and Joel.
In September 2002, Recom acquired the technology for its heart-monitoring device from a company controlled by Mitchell Stein’s wife. The sale documents in SEC filings identified her as Tracey Hampton. Her company, ARC Finance Group LLC, got 84.5 percent of Recom’s stock, with Vanguard West retaining a 9.75 percent interest.
Stein previously had been a director of another public company called eMedsoft.com Inc. He also headed a limited liability company that was its biggest shareholder. eMedsoft later became Med Diversified Inc. It filed for bankruptcy in 2002, following the collapse of its main lending source, National Century Financial Enterprises Inc. Five former National Century executives were convicted of fraud charges this year. Some of them were among Med Diversified’s largest shareholders.
Stephen Sparks became Recom’s president and chief executive. Raul Silvestre, one of Sumichrast’s partners in the later Chinese reverse-merger deals, was appointed secretary and treasurer. He held those positions only briefly, but continued to function as the company’s securities counsel.
Crown Reef Holdings, run by Sumichrast and Ralph Olson, signed a consulting agreement with Recom in March 2003. Its compensation was a warrant to buy 900,000 shares at 50 cents a share (adjusted to reflect a 3-for-1 split in April 2003).
It is unclear what benefit Recom derived from the consulting deal. At the time, the company had no revenue and less than $200,000 in cash. It would report no sales in 2003, 2004, 2005 or the first nine months of 2006, despite claiming to have gained Food and Drug Administration approval to market its heart monitor.
To date, the company has reported just $190,170 in revenue, with all of that coming in the final quarter of 2006.
Recom’s stock was trading at a split adjusted price of around $1 a share when the company signed its deal with Crown Reef. The price nearly tripled in the next month, and continued on an upward path, peaking at $8.90 a share in April 2004.
Crown Reef ultimately took possession of 800,000 Recom shares, through a cashless exchange of its warrant. According to SEC filings, it began selling those shares in March 2004.
Stephen Sparks, Recom’s former chief executive, testified in his deposition that Olson had been actively trading in the company’s stock to support its market price, and that Silvestre was aware of those activities. “Raul made phone calls to me — when we see his phone records, we’ll see this — many, many, many times a week, sometimes 10, 15 times a week,” he said in the deposition, a transcript of which was obtained by Sharesleuth. “And it was usually early in the morning and he’d call and he’d say “Watch this. Ralph’s in there. Watch, it’s going to go up. It will be $2.40.” I’d say “Geez, what are you guys doing?”
According to the deposition, Silvestre responded: “Don’t worry about it. Everything’s cool.”
Sparks said he also was alerted to Olson’s activities by a broker at one of Recom’s market makers, Brookstreet Securities Corp. According to the deposition transcript, the broker referred to the entity doing the trading as Lomond International.
“On many occasions Harry Radie would say ‘Lomond’s in there propping the stock up,” he testified. “He’d get a lot of calls from Ralph and he said he refused to even take calls from Ralph anymore because the guy called him almost every day and said ‘Last day for cheap stock.’ ”
A HIDDEN HAND
Sparks testified in his deposition that Mitchell Stein brought him to Recom as president and chief executive. Sparks said he had been involved in numerous other business ventures with Stein, and that Stein at one point promised to split 8 million shares of Recom’s stock with him if he helped make the company a success.
Sparks stepped down as chief executive in September 2002. He was replaced by Marvin Fink, a former aerospace and electronics executive who ran the company until March 2005. Sparks remained on Recom’s board of directors for much of 2003, and continued to play an active role in the company’s fundraising and development.
Recom sued Sparks in 2004, alleging fraud and extortion. It said he had threatened to cause trouble for the company and demanded additional cash or securities as compensation. Recom’s complaint said that Sparks threatened to “go to the regulators” and that he “had notes and information that would not look good for the Company” if his demands weren’t met.
Sparks filed a counterclaim, detailing some of his allegations. He said that Stein prepared overly positive press releases to attract investors and to boost Recom’s stock. Sparks claimed that some of the releases that Recom issued were not only optimistic but false.
Sparks said in his deposition that Stein issued several press releases about developments at Recom without the advance knowledge of the company’s officers or directors, even though they were quoted in them.
The dispute between Sparks and Recom was ultimately settled and the suits were dismissed.
Fink left Recom in early 2005. His departure also ended in litigation. Fink sued the company, Stein, ARC Finance Group and Hampton the following year, alleging that they were blocking his efforts to sell 2.1 million shares of by refusing to remove restrictions on them.
THE CONSULTING CONTRACT
Sparks testified in his deposition that neither he nor Fink ever understood how Crown Reef Holdings came to be hired as a Recom consultant, or what specific services Olson and Sumichrast provided to the company. Sparks said that, in his capacity as a Recom director, he repeatedly tried to learn more abut Olson’s activities.
“What does Ralph do? I don’t know how many times I asked that question,” he said in his deposition. “Marvin couldn’t answer that question, so we would both ask Raul… The answer was Ralph trades the stock and talks to market makers, and it’s perfectly legal what he’s doing.”
Sparks said Silvestre also traded in Recom’s stock, sometimes at the direction of Stein. According to the deposition, Sparks himself got one very specific trading order from Stein – buy 7,500 shares of Recom’s stock the next trading day, exactly 31 minutes after the market opened.
Silvestre declined to comment on the claim that Lomond International was involved in the manipulation of Recom’s shares. He told Sharesleuth that he didn’t know what services Sumichrast and Olson provided the company under their consulting agreement.
“That was between them and the CEO,” he said.
Sharesleuth found SEC filings by Crown Reef Holdings that list the sale of 500,000 Recom shares it received through its consulting agreement. Two of the filings covering 200,000 shaes included brokerage statements listing the actual trades. They show that Crown Reef steadily sold its Recom stock, usually in lots of 500 to 1,000 shares, from March 2004 to September 2004.
At the start of that period, Recom’s stock was trading at around $4.60 a share. By early April, it was over $6, and by mid-April, the shares were above $8. The brokerage statements show that Crown Reef’s sale of the 200,000 shares generated proceeds of more than $1.2 million.
Crown Reef did not list proceeds from the sale of the other 300,000 shares. But based on the price during the periods it was selling, that stock would have generated at least $1 million more. We could find no disclosures on the sale of the final 300,000 shares.
In February 2005, Recom awarded a new business advisory contract to Lomond International. The deal gave Lomond or its assignees a warrant to buy 500,000 additional shares at $2 a share. Recom said the warrant was for help in developing strategic relationships with medical device companies that might be interested in its heart-monitoring products.
Recom changed its name to Signalife in November 2005.
SEC filings indicate that ARC Finance disposed of only a small percentage of its shares over the years, even as the price sank. According to a December filing, ARC still owned 22.6 million shares, down from the 22.9 million it held when the stock was at its peak.
Signalife did not respond to numerous requests for comment.
AN UNDISCLOSED LAWSUIT
The heart monitors that Recom and Signalife have marketed are based on the inventions of Budimir S. Drakulic, who was hired as vice president and chief technology officer in October 2002. Court records show that at the time Drakulic joined the company, he was liable for a judgment of $805,900, plus interest, won by a former girlfriend who claimed that he defrauded her and her brother out of money they loaned to him.
According to the lawsuit, he told his then-girlfriend that some of the borrowings were going toward a research project for the Air Force that would bring in millions of dollars over the next decade. The technology on which Recom’s heart monitor is based grew out of work that Drakulic did for the Air Force.
Recom and Signalife have never disclosed the judgment against Drakulic in their SEC filings. He remains Signalife’s chief technology officer. According to the company’s most recent proxy filing, Signalife pays $180,000 a year for his consulting services to another entity called B Technologies Inc, and pays him $70,000 a year directly.
Drakulic has made no payments to the people who won the fraud judgment against him.
GLOBAL CAPITAL AND NASDAQ
After we posted our story on China Fire, we received copies of Nasdaq’s letters to letters to Global Capital. They documented additional ties between Sumichrast and people with criminal or regulatory histories. Nasdaq investigators found that Possino and Mazur, the two convicted felons mentioned previously, had likely acquired, “directly or indirectly, a significant undisclosed interest in Global Capital.” At one point, that stake was equal to 18 percent of the brokerage company’s outstanding common stock.
Global Capital did a $2 million financing transaction in November 1999 in which Belle Holding Inc., a separate company set up by Sumichrast, bought a new series of preferred stock. It got the money by issuing notes to a California company called Corona Corp., headed by lawyer Reid Breitman. Under their deal, the notes could be converted into the stock that Belle Holdings bought.
Global Capital explained in an SEC filing that Sumichrast took a personal stake in the financing at the insistence of Corona, to ensure that management’s interests were aligned with Corona’s interests.
The Nasdaq letters said Corona raised the cash for its end of the deal by selling its own notes to Corporate Financial Enterprises Inc., a company controlled by Possino, and to American Equities LLC. The latter company also was headed by Breitman, and employed Sherman Mazur.
In March 2000, Global Capital raised another $2 million through the same mechanism. Sumichrast contended in a later lawsuit that Breitman had concealed the true source of Corona’s funds. But Nasdaq noted that it was Mazur who had introduced Breitman and Possino to Global Capital.
Mazur had pleaded guilty in 1993 to tax fraud and bankruptcy fraud charges in connection with the collapse of the real-estate investment company he ran. He was sentenced to six years in prison and fined $250,000.
Possino is a disbarred lawyer who was convicted in 1978 of offering to sell 350 pounds of marijuana to undercover police officers. He was convicted in 1995 of one count of wire fraud in connection with a scheme to use inflated stock to help prop up an insurance company’s finances.
Nasdaq said Global Capital agreed in December 1999 to exchange shares in one of its affiliates, EBOnline.com, for shares of four small public companies. They were: Integrated Communications Networks Inc., eSat Inc., Digs Inc. and ECS Industries Inc. SEC filings show that all four of those companies counted Possino or members of Mazur’s family among their biggest shareholders.
Nasdaq said the buyer of the EBOnline shares was a Swiss entity called Forte Ltd. and that the signature on the agreement appeared to be that of Raoul Berthaumieu, who served prison time in the 1990s for a check-kiting scheme.
Sharesleuth’s investigation found that on Feb. 10, 2000, an investor relations firm called Access1 Financial issued a “strong buy” report on Global Capital, with a 6-month price target of $22. At the time, its shares were trading for around $6. SEC filings and state corporation records put Access 1 Financial at the same business address as Possino, Breitman and Mazur. Corona also listed that address, a converted art gallery in Santa Monica, Calif., as its home.
Access 1 Financial was headed by onetime securities analyst Mark Bergman. The SEC later brought fraud charges against Access 1 and Bergman in connection with a glowing but baseless report on another company. Authorities said that report — issued two weeks after the one on Global Capital — helped facilitate a $15 million pump-and-dump scheme.
The Nasdaq letters noted that, in March 2000, Global Capital bought more than $5.1 million in stock in Digs, ECS Industries, Omni Nutraceuticals Inc. and Hartcourt Companies Inc. As in the previous transaction, all four companies had ownership ties to Possino or Mazur. Nasdaq said Global Capital bought most, if not all, of the shares in private transactions from sellers linked to Possino, Mazur or Breitman.
The shares of all four companies were nearly worthless by the end of 2000.
A SIGNIFICANT DAY
The Nasdaq letter highlighted a series of transactions that occurred on a single day – March 20, 2000. That was the day that Global Capital bought its shares in Digs, ECS and Hartcourt. It also was the day that Global spent $905,000 for a roughly 50 percent interest in WMP Bank, a brokerage house in Austria. Nasdaq’s investigators suspected that Global Capital bought the stake in the Austrian brokerage from a company connected to Possino and a stock promoter named Ramon D’Onofrio, who had at least five criminal convictions related to fraud schemes. The selling company’s name was listed as Braemar Management Corp. Nasdaq noted that a British Virgin Islands company called Braemar Management Ltd. was a major shareholder in Hartcourt and another public company with ties to Possino.
The investigators said that on the same date that Global Capital bought its interest in the Austrian brokerage, entities connected to Possino and D’Onofrio purchased 325,000 shares of Global Capital’s stock, representing roughly 3 percent of the shares outstanding.
The Nasdaq investigators also raised questions about Global Capital’s June 2000 sale of its European brokerage operations, which included the newly purchased interest in WMP Bank. Global Capital received no cash for those businesses. Instead, it got $2 million in shares of an Austrian real estate company that traded on the Vienna Stock Exchange, and $25.5 million in notes. “This transaction resulted in Global including on its balance sheet a major asset – notes received as consideration for the sale – that the staff believes were of no value,” Nasdaq wrote. “As a result, Global disseminated for three quarters materially misleading financial statements.”
The Nasdaq report found that the three offshore companies listed as the buyers of the European operations had little substance, and were essentially shell companies with no other business operations. Indeed, the purchasers notified Global Capital before the due date for the first payment on the notes that they would default. In the fiscal year that ended March 31, 2001, the company wrote off the full value of the notes.
NO REGULATORY ACTION
Neither the SEC nor the National Association of Securities Dealers took action against Global Capital, its employees or anyone else involved in the activities outlined in the Nasdaq letters. Nasdaq, which has been granted certain self-regulatory powers by the SEC, declined to comment on the specifics behind Global Capital’s delisting. It cited a policy against discussing individual companies. Nor would a spokeswoman say whether the findings in the report had been forwarded to the SEC, the NASD or law enforcement agencies.
The Nasdaq report said the sale of Global Capital’s European operations provided further evidence of Possino’s influence on the company. It said Possino and others with regulatory histories wound up running WMP Bank, rechristened General Commerce Bank.
GENERAL COMMERCE BANK
After the ownership change, General Commerce began cold-calling foreign investors and peddling shares in small U.S. companies, at least two of which were linked to Possino. That prompted regulators in Australia and Belgium to add the company to their warning lists of “boiler-room” style operations offering securities without proper licenses.
The Nasdaq letters identified the other key people involved in the operation of General Commerce as Berthaumieu, Adnan Khashoggi and Rakesh Saxena.
Berthaumieu has more recently been linked to an investment company called Pacific Federal S.A.. Securities regulators in Great Britain, Belgium and Spain warned that Pacific Federal was offering investments in those countries without authorization.
Khashoggi, who made a fortune as an arms dealer, became a defendant in an SEC fraud case in 2006. The complaint alleged that from 1999 to 2001, Khashoggi participated in a $130 million stock-manipulation scheme involving GenesisIntermedia Inc., a company in which he was a major shareholder. The SEC won a default judgment against him.
Saxena is wanted in Thailand on charges that he embezzling more than $80 million from the Bangkok Bank of Commerce, which collapsed in 1996. Saxena fled to Canada. Although he was apprehended, he has been fighting extradition, and is living under house arrest in a high-rise condominium in the Vancouver area.
The Nasdaq letters said Khashoggi agreed in October 2000 to invest $7 million in Global Capital, and that Mazur and Saxena were middlemen in the deal. It added that Global Capital called off the stock sale after it was disclosed prematurely.
General Commerce collapsed in 2001. None of the people mentioned above has been charged with any wrongdoing in connection with its activities, or those of WMP Bank.
James McNair contributed information to this report. SaarResearch.com provided fact checking services.
published July 23, 2008
Give War a Chance: the Life and Times of Tim Spicerby Pratap Chatterjee, Special to CorpWatch
June 9th, 2004Tim Spicer was driving around Vancouver, Canada, with Rakesh Saxena, an Indian-born Thai businessman one day in the summer of 1997, when his companion stopped at the local police station to “check-in.”Saxena had invited Spicer, an ex-member of the Scots Guard, an elite regiment of the British military, to talk about some diamond and bauxite concessions he had invested in Sierra Leone. One year prior, a coup had deposed President Ahmed Tejan Kabbah, and Saxena wanted to hire a private military company to help him recover his mining concessions.
More on Mercenaries
“It transpired that the Thai government were trying to extradite him from Canada to face charges of embezzlement, and while the deportation order was pending he had had to surrender his passport and check in with the police every day,” wrote Spicer in his autobiography, “An Unorthodox Soldier.”
“It was beginning to appear that Mr Saxena had a somewhat questionable reputation in some of his dealings with national governments. You meet a lot of strange people in this business, (but) Saxena was not a proven villain,” he added.
Strange or villianous, Tim Spicer’s business partners over the years, have found themselves in hot water from Canada to Papua New Guinea and Zimbabwe, although he has always somehow managed to avoid prosecution.
Weeks after the driving trip, Saxena’s problems got worse – he was arrested with a false passport belonging to a dead Serbian – and put in jail for trying to flee the country, but Spicer, who was the chief executive officer of a British military company called Sandline, went ahead with the project with the $1.5 million that Saxena had helped him get.
“There were 35 tons of military hardware in the belly of the Boeing 727 as it came in to land. The aircraft was operated by Ibis Air, a familiar sight in the war zones of the dark continent. The cargo doors opened and Nigerian troops unloaded crates of AK-47 assault rifles,” wrote Nicholas Rufford in the Sunday Times. “For Lieutenant Colonel Tim Spicer, a former Guards officer turned freelance adventurer, the moment for action had arrived.”
In addition to the Bulgarian guns and ammunition that Sandline shipped to Kabbah’s forces as well as trained some 40,000 militia fighters, the Kamajors or “hunters,” in collaboration with the Nigerian army, which then successfully toppled the government in March 1998.
At least 200 people, many of them civilians, were killed when local militia men and Nigerian military forces drove out a military leader who had seized power. Missionaries and other Europeans were held hostage and thousands of civilians fled the fighting.
The Vancouver Sun says that many Canadians were shocked that someone who was the subject of an extradition hearing could plot coups in Third World countries, but Saxena coolly noted there was nothing in the terms of his bail that prevented him from engaging in such dealings.”Obviously, if the Canadian government passes a law saying it can’t be done, then it can’t be done,” he told the newspaper.
For Spicer, who has served the British government in at least two major occupations (the Falklands and Northern Ireland), the job was also not ethically troubling. (He claims that he was unaware that it was specifically illegal under British law and United Nations resolution 1132 to supply arms to the Kabbah supporters.)
“Sandline has five basic operating principles: we only work for legitimate governments, we will do nothing illegal, even for those governments; we will do nothing against key Western nations’ foreign policies; we apply First World standards to all our military work, including respect for human rights; and we ensure client confidentiality,” says Spicer in his autobiography.
Spicer claims he is in the business of keeping the peace, rather than in out-sourcing war, reflecting on his student days when he had long hair, wore a shirt made out of the North Vietnamese flag, and joined demonstrations against the war in Vietnam.
But over the years, as he learned to soldier in Britain, serving three times in Northern Ireland, a year in Germany, briefly in the Gulf War and finally as a spokesperson for the United Nations peace-keeping force in Bosnia, he realized that he could make a lot of money out of “peace-keeping.”
His first stint in this business ended in disaster. Papua New Guinea’s former army commander General Jerry Singirok, who initially recruited him to help invade the island of Bougainville, to rescue a copper mine which had been shut down by a local rebellion, says that Spicer first paid a covert visit to as part of a group representing the Australian government’s aid agency, AusAID.
Singirok told a conference in May 2004 that Spicer had been able to visit many centers and was “given the freedom to get an overview of the military situation,” and even carry out a few dummy runs over the island in a CN35 Casa aircraft.
Prior to the planned assault on Bougainville, there were 85 Sandline recruits conducting training exercises in East Sepik province.” When I pulled the plug on 16 March 1997, two gunships armed with missiles had been scheduled to arrive,” Singirok said.
Instead Spicer says he found himself staring into the barrel of a gun pulled by a Papua New Guinean soldier, part of an angry group who wanted to know why the government was spending so much money on foreign “mercenaries.”
Spicer was eventually rescued by the intervention of diplomats at the British embassy and Tony Buckingham, another ex-SAS man who was Spicer’s financial and business patron at Sandline.
Spicer has always been able to get himself out of these political messes but not all his business partners have been so lucky. Simon Mann, one of the co-founders of Sandline who helped ship the Bulgarian arms to Sierra Leone, is currently jailed in Zimbabwe and facing charges of plotting a coup against the government of Equatorial Guinea. He was arrested in March 2004 when traveling through Harare with a group of South African commandos and a stash of weapons in a Boeing 727.
(Mann says he was on his way to guard diamond mines in the Congo but the police say he was working for Eli Calil, a Chelsea-based tycoon accused of plotting a coup to put his friend Severo Moto into power in return for oil concessions in Guinea.)
Spicer officially quit working for Sandline and its associated companies in September 2000 but the company continued to operate until April 16, 2004, when a note appeared on the website: “Sandline International wishes to announce that the company is closing down its operations forthwith. The general lack of governmental support for Private Military Companies (PMCs) willing to help end armed conflicts in places like Africa, in the absence of effective international intervention, is the principal reason behind Sandline’s decision. Without such support the ability of Sandline (and other PMCs) to make a positive difference in countries where there is widespread brutality and even genocidal behaviour is irretrievably diminished.”
One would imagine that would have been the end of the story but less than seven weeks later Spicer re-appeared in the public eye, with a $293 million contract in Iraq – with some of the very same employees and consultants – Major General Jeremy Phipps and Sara Pearson.
Rakesh Saxena, Thailand’s most-wanted fugitive, is the subject of the longest-running extradition case in Canadian history.
Over the past 10 years, the infamous financier with the cola-bottle glasses and roguish appearance has blazed a fantastic trail of intrigue and outrage through Canadian courts.
On paper, his legal exploits would take a truck to carry. Highlights of his extradition capers include:
Beating not one but two federal extradition orders to Thailand.
Plotting a counter-coup in Sierra Leone.
Allegedly threatening former business associates, including accountant Les Hammond, who was placed under police protection.
Demanding — successfully — that Canada return $100,000 he was using to bribe Thai police officials.
Allegedly scheming to obtain a false Yugoslavian passport while on bail.
Suing former lawyer Russ Chamberlain for $12 million over a procedural disagreement.
Negotiating a notorious house-arrest arrangement, complete with private guards, approved by B.C. Supreme Court judge Wally Oppal, now B.C.’s attorney-general.
Today, Saxena lives in a glass-and-marble mansion on Richmond’s riverfront under self-financed house arrest, at a cost of $50,000 per month.
He is wanted in Thailand on charges he embezzled $88 million from the Bangkok Bank of Commerce as part of a larger $2.2 billion bogus bank-loan scandal.
The alleged swindle not only collapsed the bank, it triggered an Asian financial crisis in 1997 that reportedly cost Thai taxpayers $7 billion.
In the Thai capital of Bangkok, three special government prosecutors are dedicated to bringing Saxena home.
“It’s still our No. 1 priority,” Piyatida Jermhansa says in an interview with The Province. “We understand that it is your law which provides these delays, your courts of appeal, your minister of justice, and after that he has several kinds of rights.
“We respect the sovereignty and criminal justice of Canada, but we would like to get him back after our long pursuance of the extradition matter.”
Back in Canada, Indian-born Saxena, 54, says he is innocent, claiming to be the victim of politically motivated charges.
“The case started because at one stage I indirectly controlled 25 per cent of the [Thai] parliament,” he says in an interview with The Province.
“When the government changed, certain MPs revealed things.”
Intellectual and intense, Saxena works the international money markets through the night, pausing at times to absorb passages from such books as Lenin, Hegel and Western Marxism, and Communism and Agrarian Reform in Iraq.
While in Thailand, he mixed business and pleasure with some of the country’s leading political and business leaders.
He dismisses the case against him as a “mixture of half-truths and stories,” and says he has “information that would be quite damaging to some powerful people” in Thailand.
He says the evidence against him is contrived.
“You should not start extradition with some police documents that were obtained outside the prosecutorial system,” he complains.
He says he is a scapegoat for the sins of former cronies and fears both for his personal safety and his ability to obtain a fair trial in Thailand, adding it would take 10 years for his case to go to trail in Thailand.
“I was not a signing authority, I was not an advisor, except for six months,” he maintains. “I was trading on insider knowledge, which was not a crime at the time.”
Saxena was awaiting word on whether the Supreme Court of Canada would give him a final hearing when the Thai government was overthrown in a military coup last September.
The coup prompted Canada’s justice minister to indefinitely suspend his extradition order, even though Thailand has given assurances that he will be treated fairly.
“Mr. Saxena will be tightly protected against anyone who might want to harm him when he steps on the land of Thailand,” prosecutor Poravich Makaravatana told The Province.
Frustrated by Canada’s slowness, Thailand has adopted a new approach.
Last August, officials set up a money-laundering task force that targeted Saxena’s overseas assets.
In November, the team reportedly seized Saxena’s $3 million beach house in Thailand’s Chon Buri province.
“Nobody has ever come after my assets,” says Saxena. “It’s all a bunch of lies. It’s all fantasy land. It’s political . . .
“The land is still under my possession.”
One of Saxena’s Vancouver lawyers, Amandeep Singh, says he does not buy the assurances from Bangkok.
“We’re talking about a military dictatorship . . . there’s no constitution, none of those guarantees exists any more,” he says.
Saxena’s legal team presented two key arguments in its successful submission to the federal justice minister.
One was that under the Charter of Rights and Freedoms, Saxena cannot be extradited to a country under military dictatorship.
The second was that the extradition treaty between Thailand and Canada was nullified when Thailand allied itself with Japan during World War II.
“I’d go back tomorrow if they’d tell me what crime I’m charged with,” he insists, adding he’s spent $20 million fighting his extradition.
In Ottawa, the justice minister is still reviewing Saxena’s case, a process that could go on for years.
Saxena says he has no interest in staying in Canada.
“What people here can’t fathom is why someone wouldn’t want to stay,” he says, adding he prefers “faster moving” economies.
“Why don’t you go after you own people?” he says. “It’s pure, undiluted racism.”
As for Saxena’s novel house-arrest arrangement, Singh says it costs $37,000 a month to keep a person in jail.
“Why should we be paying for Saxena?” he says. “I think he did us a favour.”
And the cost to Canadian taxpayers of funding the related legal battles?
Over $10 million — “easily” — says Singh.
© (c) CanWest MediaWorks Publications Inc.
Rakesh Saxena is an Indian banker, who, while in exile in Canada approached Tim Spicer of Sandline International to discuss aiding President Ahmed Kabbah‘s return to power in Sierra Leone.
Spicer says of the initial encounter: “Saxena’s interest was mineral concessions, but his approach put us on the spot, for we work for governments, not businessmen.”[http:freespace.virgin.net/ambrose.ganda/Corruption_story_goes_on.html]
At the time, Saxena was head of the Vancouver based Tidewater Management Corporation, held bauxite concessions in West Africa and was also wanted in Thailand for charges of embezzelling up to $2 billion (figures vary from as low as $88 million) from the country’s Bangkok Bank of Commerce. He made an initial payment of $1.5 million before he was arrested by Canadian authorities for having a fake passport. 
Sandline’s international chairman at the time was Anthony Buckingham who was a major shareholder in Diamond Works Ltd., a diamond company with six mines in Sierra Leone. He is also a founder of Executive Outcomes. Perhaps this is what prompted Saxena to pay Spicer a $70,000 consulting fee to prepare an appraisal of the situation in Sierra Leone.  
WHEN BLACKWATER founder Erik Prince took his seat before the House Committee on Oversight and Government Reform last October, in the midst of a firestorm over the killing of 17 civilians in Baghdad by his contractors the previous month, the 38-year-old was at the helm of a fast-growing global business—and had the confidence to match. Sporting a neatly pressed suit and a fresh military-style haircut that evoked his service as a Navy SEAL, Prince had been prepped by crisis-management specialists from the Beltway PR firm Burson-Marsteller, and throughout the tense four-hour hearing he leaned back frequently to confer with his lawyer. A private man who seldom gives interviews, he nevertheless seemed at ease in a room filled with politicians, cameras, and reporters. He extolled his men’s professionalism—”I believe we acted appropriately at all times”—and bristled at the term most commonly used to describe his line of work. “The Oxford dictionary defines a mercenary as a professional soldier working for a foreign government,” he said. “We have Americans working for America, protecting Americans.”
In his recent Capitol Hill appearance, Erik Prince played down his foreign recruiting.
Photo: Reuters/Larry Downing
IN ADDITION TO prospecting for international contracts, Greystone has become Prince’s primary recruiter of foreign military muscle. On its website, the company says its operators are drawn “from the best militaries throughout the world” and represent “numerous nationalities.” Its reliance on foreign recruits, it claims, is a matter of “cultural sensitivity” and “awareness.” What the PR materials don’t say is that Greystone, along with other security companies, likely outsources its work overseas for the same reason many other businesses do—it brings down costs and helps bypass bothersome regulations. “They’re going to pay these people a lot less, and they’re not going to respect the same type of employee and labor rights that U.S. nationals would require,” says Erica Razook, an Amnesty International lawyer whose work focuses on private-security contractors.
Consider the case of Greystone subcontractor ID Systems. Incorporated in Panama and headquartered in a nondescript office complex in Bogotá, Colombia, the company in 2005 placed newspaper ads that drew men with military experience—a plentiful commodity in a country torn by civil war and terrorized by guerrillas and paramilitaries. According to one ID Systems recruit, a former Colombian army officer who asked to remain anonymous, he and at least 30 other men were promised $4,000 per month to do security work for Blackwater in Iraq. They went through a quick refresher course in firearms and hand-to-hand combat at the Colombian army’s cavalry school in northern Bogotá, he said; among the instructors were several Americans, all ex-U.S. military working for Greystone. Afterward, the recruits returned home to wait for the call to Iraq.
It came late one evening in June 2006. The men assembled at ID Systems’ offices, where they were met by Gonzalo Adolfo Guevara, a former Colombian army captain who had overseen their recruitment. He handed them contracts and told them to be at the airport in four hours. They were told they would be making not $4,000 but $2,700 per month—still not bad in Colombia, where some workers only earn that much in a year. But the actual contract, which some of them didn’t read until after they were airborne, provided for just $1,000 per month, or $34 per day.
On arriving in Baghdad, the men were issued weapons and introduced to Blackwater and Greystone managers. Bitterness turned to anger when they discovered that their pay was about one-fourth that of the Romanians they were replacing. They composed a letter to managers at ID Systems, Greystone, and Blackwater demanding either a raise or a ticket back to Colombia. The companies stonewalled, and it wasn’t until three months later, after reports of the dispute had appeared in Semana, Colombia’s largest newsmagazine, that the men were finally sent home. (Chris Taylor says there was no impropriety: “Before every single one of those professionals were deployed, they understood there was a change in the contract. Those who went understood perfectly what they were signing.”) According to the former recruit, ID Systems continues to supply personnel to Greystone. But Guevara, the man who deceived the recruits about their wages, is no longer involved—he was shot and left to die outside a Bogotá bakery last May.
IT WAS NEITHER GUEVARA nor Erik Prince who pioneered the idea of hiring foreign soldiers to do the business of the U.S. government. That took the imagination of a Chilean American businessman named José Miguel Pizarro. “Pizarro opened the door,” says José Luis Gómez del Prado, a former diplomat who heads the UN Working Group on the use of mercenaries; it’s thanks to Pizarro that recruiting ex-soldiers from Latin America has become “a big business.”
Born in California and raised in Santiago, Pizarro served ten years as an officer in the Chilean army and another three as a Marine Corps translator attached to the U.S. Southern Command. By March 2003, he was heading a small defense-consulting firm in suburban Washington, D.C. Pizarro was connected and well spoken. He was also telegenic, and as the U.S. stormed toward Iraq he was hired as an on-air military analyst with cnn en Español, the network’s Spanish-language affiliate. It was there, in the cafeteria between shows, that he befriended a former U.S. general, also working as an analyst, who helped him hatch the idea of renting former Chilean soldiers to American private security companies. “He explained to me how the opportunity to do business in the Middle East was growing, that there was a need for private, professional security forces in Iraq,” Pizarro recalls. “I started showing up in the cafeteria with pen and paper, taking notes, taking names. It took me several weeks to form the idea.”
Before long, Pizarro was cold-calling security contractors to pitch his commandos. It wasn’t an easy sell. “No one in any of the firms would even return his calls,” says one industry expert Pizarro turned to for advice. Pizarro recalls his first meeting with Blackwater president Gary Jackson: “He told me, ‘This is a respectable company, and we’re going into a war zone. I need professional commandos, not peasants with rifles.'”
Not easily discouraged, Pizarro scored an appointment with Prince, who signed on for an initial batch of recruits to add to Blackwater’s security operations in Iraq. Pizarro left the meeting starstruck with his first paying customer. “He’s my hero,” Pizarro says. “He’s a patriot, a great Christian, and has the balls that 250 million Americans would love to have.”
Back in Santiago, Pizarro formed a new company called Grupo Táctico—incorporated in Uruguay to sidestep Chilean laws prohibiting paramilitary activity—and posted an ad in a Chilean newspaper offering recruits $3,000 per month. More than a thousand men sent résumés, including some active-duty Chilean soldiers. Blackwater reps traveled to Chile to review the applicants, and by February 2004, Pizarro and about 75 of his top recruits—most of them former Chilean special forces, marine commandos, and paratroopers—were brought to Blackwater’s compound in Moyock for training. Within weeks, they flew to Iraq, where they found themselves working alongside a veritable United Nations of security contractors: Nepalese and Indian Gurkhas, South Africans, and Eastern Europeans, to name a few. They became known as the “Black Penguins” because of the distinctive figures they cut on foot patrol, weighed down by weapons and flak jackets. Pizarro took to the term and designed a shoulder patch for his recruits: a penguin with an M-4 carbine across its chest.
TO FIND THEIR DISCOUNT SOLDIERS, Blackwater, Greystone, and their competitors have built recruitment networks reaching deep into the paramilitary milieus of the Third World. It works like this: Blackwater, for example, will win a U.S. government contract; it will then subcontract with itself—that is, with Greystone—to do the job. From there, Greystone looks to its network of international affiliates, firms like Pizarro’s Grupo Táctico in Chile or ID Systems in Colombia, which maintain informal relationships with what are known in the trade as “briefcase recruiters”—individuals with connections to the local paramilitary scene. These men find the recruits and funnel them back up the chain until, finally, they are deployed alongside U.S. forces in Iraq. The practice also serves as a convenient firewall, shielding U.S.-based companies from direct liability for the actions of their subcontractors. “If a court is looking at these issues, where the contract is signed is a factor,” explains Amnesty’s Razook. “There is a lot there that would take it out of a U.S. court’s control.”
Briefcase recruiting is a little-known niche of the private security business that has attracted some less-than-savory characters. Take Julio (a.k.a. “George”) Nayor, a Cuban American currently serving an 11-year sentence at a federal prison in Miami for drug trafficking. A one-time associate of Colombian drug lord Pablo Escobar, Nayor escaped arrest in the United States in the early 1990s and fled, by means of a fake passport and various false identities, to San Salvador. There he reportedly opened a gym and several restaurants including one he named Karaoke George, which was adjacent to an upscale shopping mall.
In late 2004, Nayor placed newspaper ads seeking men to work on contract in Iraq for an unspecified U.S. security firm; recruits were to meet him at the karaoke bar. According to a Washington Post reporter who witnessed the scene, men lined up outside for weeks. “This is the future of global security,” Nayor bragged to the reporter, adding that he’d already accepted 300 Salvadorans and expected to sign up many more, including veterans of the 380-man contingent that the Salvadoran government had contributed to the Coalition of the Willing. As soldiers in Iraq, they had earned a monthly salary of $280; as hired guns, they expected to make as much as $2,400.
Nayor disappeared as quickly as he had emerged, but nine months later many of the men who had interviewed with him were contacted by capros, a new company headed by two high-ranking Salvadoran military officers that, according to a Salvadoran newspaper, was recruiting for Greystone. In December 2005, Greystone representatives visited El Salvador to review the recruits, although it’s unclear whether they were ever sent to Iraq. Some of the men later told the Salvadoran press that the company had encouraged them to rack up credit-card purchases in preparation for their deployment, then failed to reimburse them.
Nayor’s own career as a briefcase recruiter was cut short in September 2006 by his arrest for allegedly plotting to assassinate El Salvador’s president by shooting down his helicopter with a shoulder-fired missile. He was subsequently extradited to the United States to face some of his old drug charges.
By then, Greystone’s search for contractors had expanded far beyond Latin America. In 2005, a Croatian newspaper reported that Greystone had dispatched a man named Marko Radielovic, who once worked for the aid group Mercy Corps, to perform a “feasibility study” on hiring former Croatian soldiers and police. The following year, the Filipino press reported that a company called Satelles Solutions had applied to lease land (about 25 acres) within the former U.S. Navy base at Subic Bay. Satelles was a Greystone front; its Filipino “owners” included a former high-ranking general and an attorney at a major law firm that specialized in advising foreign investors. Each held a few pennies’ worth of Satelles stock, while Greystone controlled the rest.
The firm had been courting the Filipino government for some time; seven of its embassy employees were invited to Greystone’s unveiling ceremony in Washington, the largest contingent by far of any foreign embassy. Greystone, according to Filipino news reports, hoped to build a jungle-survival training facility capable of processing up to 1,000 trainees a week. “It was merely a place to be able to provide training to customers in that part of the world,” says Chris Taylor; it wasn’t about creating a “third-country-national offensive force.” Nevertheless, after Filipino legislators called for an investigation, the company withdrew its application.
FOR A WHILE, it seemed to José Miguel Pizarro as if the private security boom might never end. Following Erik Prince’s example, he began to diversify—launching a Chilean business intelligence firm catering to the defense industry, and a security company that, like Blackwater, could provide guards, police and military trainers, and even bomb-sniffing dogs. He also took on a new client, Virginia-based Triple Canopy. But then, as quickly as his star had risen, it fell as both Greystone and Triple Canopy canceled his contracts. Pizarro blames corporate intrigue—Blackwater didn’t like his doing business with the competition, he claims—but the true reason may be far simpler. At the height of his operation, Pizarro charged a monthly fee of $4,500 per recruit, of which his men received $3,200. Recruits from other Latin American countries, meanwhile, were willing to deploy to Iraq for as little as $700 per month. “You can get five Colombian rifles for one Chilean,” Pizarro says. “Do the math.”
In January 2006, the last of his 1,157 Chilean commandos left Iraq. By the time Erik Prince testified before the House oversight committee last October, he acted as though he didn’t remember Pizarro: “He might have been a vendor to us,” he ventured when Rep. Jan Schakowsky (D-Ill.) asked him point-blank.
But if Prince has lost all memory of the Chilean recruiter, Pizarro hasn’t forgotten his role model. Having focused of late on the strategic-consulting side of his business, he says he remains prepared to muster more than 1,200 Chilean commandos for deployment anywhere in the world. “Privatization of certain security services is a long-term trend with historical consequences,” he says. “The entire future of private military companies is being redesigned as we speak.”
Indeed, the private security industry could be heading toward a shake-up—though not necessarily in the way Pizarro would like. Many of the new players could suffer the fate of any startup, disappearing or being swallowed by larger firms. “The problem these guys have is that they’re not very profitable,” says Larry Johnson, a former cia officer who works as a consultant for Special Forces. Johnson, who’s part of an investment group that was offered a crack at purchasing Triple Canopy when it went up for sale last year, says the firm clears, at most, 5 percent on about $170 million in annual revenue. “They’re like a dollar wind machine,” he says. “Dollars come in and dollars go out, but I don’t see how they stay in business doing that.”
Prince and his diversified group of companies, though, are positioned to endure. The Greystone model doesn’t depend on America’s wars: Whether the future of the business lies in what the industry calls “peace and stability” work or in providing “proactive” strike forces to private clients, some element of the Prince network is in a position to deliver. “They’re soldiers of fortune,” says the security director of a well-known humanitarian NGO. “Today they are willing to do the bidding of the United States, because the United States is willing to pay them. Who are they willing to work for tomorrow?”