Justice against Fraud

The following are some of the failures by the regulator to provide reasonable governance in the financial market and as a direct result, mum and dad investors who were encouraged by government to save for their retirement lost their savings.

ASIC attended three court hearings:
1. ASIC v. Paul Richard Bell. (Sept 2001)

ASIC reported cold calling firms in its publication.1
ASIC obtained a court order that prevented Paul Richard Bell from leaving Australia2 then reported he pleaded guilty in the Brisbane Magistrates Court to 21 charges laid by ASIC in relation to his activities as a cold-caller operating out of Thailand and the Philippines.3

1. ASIC - Report 14. International cold calling investment scams. June 2002. Pages 47 & 48.
http://download.asic.gov.au/media/1339370/International_Cold_Calling_report.pdf
2. ASIC MR 01/361 4 October 2001
http://asic.gov.au/about-asic/media-centre/find-a-media-release/2001-releases/01361-asic-obtains-court-order-against-cold-caller/
3. ASIC MR 01/396 9 November 2001
http://asic.gov.au/about-asic/media-centre/find-a-media-release/2001-releases/01396-cold-caller-convicted/

2. CDPP v. Hart. (2002)

Commonwealth Director of Public Prosecutions (CDPP) v. Steven Irvine Hart, ASIC joined forces with the Australian Federal Police and the Australian Tax Office as part of a tax minimization investigation that took the regulator to James Sutherland’s Zetland office based in Hong Kong to secure 100,000 documents that enabled the court to charge Hart with nine offences of defrauding the Commonwealth.
Sutherland is mentioned in two trials 2001-2003 trials & and the case lasted for about 10 trials. Sutherland and Jack Flader were business partners 2001-6 working from the Hong Kong Zetland office.

4. Commonwealth Director of Public Prosecutions v Hart [2010] QDC 457 (30 November 2010)
5. CDPP v Hart & Ors; Yak 3 Investments P/L as t/tee for Yak 3 Discretionary Trust & Ors v Commonwealth of Australia [2013] QDC 60 (2 April 2013)

3. ASIC v. Online Investors Advantage Inc. (Sept 2004-April 2005).

2004-5 ASIC fought the American company “Online Investors Advantage Inc” (“OIA”) in the Queensland Supreme Court over the selling of investment software on its web site and at seminars in Brisbane, Sydney and Melbourne. OIA touted “INVESTools”, a software application that enhanced investments opportunities.

ASIC’s media release noted that OIA was incorporated in Utah, USA and is a wholly owned subsidiary of ZiaSun Technologies Inc, a US registered foreign company. ASIC’s media release also notes the firm ZiaSun as being wholly owned subsidiary of INVESTools Inc, another US registered foreign corporation and that OIA was granted an Australian financial services licence in June 2004.’

ASIC could have discovered that behind ZiaSun was Canadian broker Bryant Cragun. Cragun was known for his 2001 divorce settlement that revealed his ownership interest in Oxford International Management and PT Dolok Permai, (which did business under the name International Asset Management (IAM)). These firms provided Cragun with about $50 million that had to be divided in the settlement.

Verification that PT Dolok Permai did do business as International Asset Management
(IAM) can be found in the SEC Press Release (October 2000) of Cragun and ZiaSun’s

defence against manipulation tactics.

As already mentioned, ASIC warned in 2002 in its ‘REPORT 14’ against PT Dolok Permai and International Asset Management (IAM). ASIC’s MoneySmart web site warns against “IAM”. ASIC arrested and convicted a cold caller on 21 charges who had operated out of IAM.

In 2004 ASIC provided an AFS Licence to OIA. Cragun had business interests with OIA making him the beneficiary of the ASFL. According to The National Association of Securities Dealers records Cragun had not held a brokers licence to operate in the United States since 1988.

In 2004-5, had ASIC checked Cragun they would have discovered he was officer and director of ZiaSun and Chequemate and he arranged for these companies to sell large blocks of unregistered stock to Oxford International Management (Oxford) and related boiler rooms, which marked up the share price and hyped them to investors in foreign jurisdictions’.

ZiaSun is linked to Momentum Media Ltd. in a SEC ‘Form 8-K’ Share Purchase Agreement dated April 27, 2001. Momentum used several names such as Momentum Media Ltd, Momentum Campaigns, Momentum Internet Inc., and Momentum Asia Inc., wholly owned subsidiary of ZiaSun Technologies Inc.

Momentum Campaign used James Sutherland’s Hong Kong Zetland office address (where ASIC in 2001-2 gathered 100,000 documents). Jack Flader was the director of Momentum Campaign in 1999.

Oxford International Management, was the subject of numerous complaints from its foreign investors/clients who claimed they were defrauded of their investments in connection with its investment solicitation of foreign securities dealing/brokering activities.

In 2004-5 the broker Cragun and the firms: ZiaSun, Chequemate, Momentum, PT Dolok Permai and International Asset Management were in documents held by ASIC. Had ASIC checked these names and firms thoroughly they would have found connections to Zetland, Flader and Sutherland.

6. Australian Securities and Investments Commission v Online Investors Advantage Inc & Anor [2005] QSC 324 Supreme Court, Brisbane, Moynihan J.
7. http://asic.gov.au/about-asic/media-centre/find-a-media-release/2005-releases/05-348-court-finds-website-promoted-at-financial-superstars-workshops-is-unlawful/
8. Carey, Christopher Article from St Louis Post-Dispatch ’Failed company provides a glimpse into the world of penny stocks.’ June 22, 2004
http://business.highbeam.com/435553/article-1G1-118434237/failed-company-provides-glimpse-into-world-penny-stocks
9. Carey, Christopher 2004 op. cit.
10. SEC Press Release October 25, 2000
http://www.sec.gov/Archives/edgar/data/1085705/000109309400000219/0001093094-00-000219-0002.txt
11. MR 01/396 Cold-caller convicted - 9 November 2001.
http://asic.gov.au/about-asic/media-centre/find-a-media-release/2001-releases/01396-cold-caller-convicted/
12. http://www.zoominfo.com/p/Bryant-Cragun/34130855 (accessed Aug 12 2015)
13. Ibid.
14. http://www.sec.gov/Archives/edgar/data/1085705/000109309401500038/maisale8k.txt
15. http://web.archive.org/web/19990117062204/http://www.momentumasia.com/
16. http://forums.moneysavingexpert.com/showthread.php?t=15495
17. Republic of the Philippines Securities and Exchange Commission, Compliance and Enforcement Department. Order in the matter of Oxford International Management, Inc. CED(PED) Case No. 01-2613. Dated May 10th 2001. http://www.sec.gov.ph/notices/order/cdo/oxford%20int'l.pdf

ASIC had several opportunities to take notice of the information it already held on its own database, for example:

1. ASIC’s registration database 2001.

The 2001 registration of Wright Global Investments Pty Limited, (WGI) lists officeholders Shawn Richard, Eugene Liu, Frank Richard Bell and Matthew Littauer. “Fit and proper person test”

2. ASIC’s registration database 2003.

The 2003 registration report of Wright Global Asset Management Pty Ltd., lists the officeholders Eugene Liu, Shawn Darrell Richard, Jack Flader and Matthew Littauer. Had a “fit and proper person test” been carried out ASIC would have found Littauer’s company New World Financial Inc., was fined $12,500.00 by NASD and was suspended from serving as a financial and operations principal for 60 business days beginning January 6, 2003.(18)

Also 2003 World Financial Capital Market (WFCM) was fined $100,000.00 for reports prepared by an unregistered person that contained exaggerated, unwarranted, or misleading statements and failed to disclose material facts.19

In addition, in 2003 NASD fined Littauer $20,000 for breaches of US Security law and suspended from association with any NASD member in any capacity for 30 days.20

Under an FOIA request the SEC provided a copy of “Form 144” document of the sale of securities pursuant to rule 144 under the Securities Act of 1933 dated, the form March 20th 2000 was for the sale of 65,828 eSat shares to Jack Flader, based in Hong Kong. Broker acquiring the securities was Pacific Continental Securities based in New York.21

The 2003 WGAM registration document lists the company Bella Donna Limited. The Security and Exchange Commission document ‘10QSB’ for 9/30/01 confirms that Flader is the authorized signatory for Belladonna (Bella Donna) and Accesspoint.22

In 2002 siliconinvestor Jeffrey S. Mitchell replying to StockDung wrote,

‘Michael Horne fugitive from the Scorpion Technology criminal indictments as well as offshore boiler room operator Jack Flader Esq. Zetland is on the New Zealand Securities Exchange Commission web site. They have been busy little beavers pushing TBXR and ASAP. Madison and Wall World Wide is the IR Company for TBXR. Pacific Continental Securities Corp who's broker dealer licence was pulled was also active in both TBXR and ASAP.’23

An online posting at forums.moneysavingexpert dated 2004, shows information about boiler room scams from around 4 years earlier. The blogger ‘zetlandinquirer’ writing to ‘woody_56’ says,

‘The people behind Zetland used to be involved in a company called Momentum Campaigns in Hong Kong. One Zetland Director, Jack Flader, was a Director of Momentum Campaigns. This was an “Internet company”. They supported the web sites of other companies, including the early versions of Pacific Continental (PCS). Those early PCS sites touted such stocks as eSat and Accesspoint.

Zetland used be called Gemini. They had a subsidiary called Pacific Capital Group ltd (PCG), also of Hong Kong, same address as Zetland. PCG was an early shareholder in the predecessor to eSat. Other figures behind eSat include Regis Possino …’. ‘PCG was also involved with Accesspoint. So is Reid Breitman of GCH Capital.’ ‘…Jack Flader filed form 144 to sell more than 60,000 eSat shares in 2000 for more than $300k. The same year, 2000, another boiler room, Steinmorgan, was touting eSat share. Those who bought in 2000 saw their investment worthless by 2001.(24)

‘Momentum was taken over by a company called ZiaSun. Somebody called Bryant Cragun was behind ZiaSun. He ran a manila boiler room called Oxford International Management. He was touting stocks he was involved in like Titan Motorcycles and Chequemate, all duds. Accupoll staff include Chett Noblett and Andreea Porcelli. Chett was in charge of eSat. Andreea was involved in Junum. David Coulter, used to be CEO of eSat’.25

‘In 2001 Jack Flader was director of Momentum, PCG, Gemini and Zetland in 2004. Sutherland was a director Zetland. Zetland owned PCS. The Spanish version of the SEC warned of the association between Sutherland and PT Dolok Permai, an Indonesian boiler room, and another name for International Asset Management. IAM was run by Cragun.’26

It is significant that Flader’s name is mentioned alongside Regis Michael Possino. Possino was convicted of a crime involving moral turpitude (27) and in 2000 Bryant Cragun was involved in a suit by ZiaSun to silence a group of investors who raised questions concerning the operational and valuation issues associated with the company. The trial was termed the "cyberexpose" lawsuits.28

In 2002 ASIC had published warnings against International Asset Management and PT Dolok Permai in ‘REPORT 14’ but it is apparent ASIC did not look into what it was they were warning against or who owned and operated the firms.

Rather than carry out a “fit and proper person test” on people handling superannuation savings it appears ASIC were busy laying a trap to catch the gullible people who look for investment opportunities. April 1st 1999 ASIC set up a scam website offering a fake investment scheme in an effort to highlight the willingness of people to invest in companies about which they know nothing. Exposed a month later, ASIC’s April Fools Day Joke had succeeded in convincing more than 1400 people to seek out further investment information from the "site" and 233 people pledged over $4 million.’29

Imagine the police setting up a safe house for abused people then entrap people and suggest how easy they make them self available to be abused and raped.

18. FINRA BrokerCheck Report NWF INC. Docket C10020113

19. FINRA BrokerCheck Report New World Financial, Inc. Owner Matthew Littauer Docket No CAF030057

20. http://brokercheck.finra.org/Individual/Summary/2027330

21. Security and Exchange Commission File No. 0-26039, No. 950344604.

22. http://www.secinfo.com/d11Amt.4f8Ys.c.htm.

23. http://www.siliconinvestor.com/readmsg.aspx?msgid=17393001

24. http://forums.moneysavingexpert.com/showthread.php?t=15495

25. Ibid.

26. Ibid.

27. Supreme Court of California. In re Possino (1984) http://law.justia.com/cases/california/supreme-court/3d/37/163.html

28. http://news_3.tripod.com/27.htm

29. Hughes, Sean Enforcement and compliance seminar 27 – 28 March 2001 Melbourne ASIC Regulatory compliance in the borderless community of 2001

4. Murder of businessman registered with ASIC. (Dec 2004)

Matthew Littauer was murdered December 3rd 2004 at his office in Tokyo, Japan.31 ASIC had Lattauer’s particulars on their database, and had they learned that Littauer’s murder was suspected to be business related – ASIC could have ask the question “what kind of business warrants being stabbed to death? This line of inquiry would have led ASIC to discover Littauer’s previous breaches of securities law, fines and suspensions dating back to the 1990s.

31 Federal Bureau of Investigation (FBI) document sent to VOFF under the Freedom of Information Act October 16th 2014. The FBI provided a document they received from the Immigration and Customs Enforcement (ICE) that states Littauer is a subject of an ongoing investigation in the Philippines as he was identified as being involved in a telemarketing stock Boiler Room scam.

Littauer was a US Citizen, 34 years of age, he had been in Japan since August 2004 just 4 months before his death on December 3rd 2004 at his office Katsura KR Bldg, 3rd Floor, 7-17-16 Roppongi, Minato-ku, Tokyo. Cause of Death is Homicide, shock and severe blood loss due to stab wounds. According to the Liaison Bureau, Interpol Hong Kong, (in the FBI dossier) Littauer was stabbed at least 11 times. The location where Littauer was murdered is populated by bars, restaurants and massage parlors, as well as a large number of illegal Chinese aliens.

In the FBI document two heavily redacted pages p23 & p24 are dated January 1st 2001 but no text is made available. (This date suggests Littauer was under surveillance well before the date of his murder.) Pages 27 & 28 of the FBI document are also heavily redacted, but Littauer's name and September 12th 2000 is visible. The FBI dossier also raises issues with the possible link between Littauer’s murder to the American citizen Christopher Andrew Coppola who was stabbed to death in Manila. Coppola had reportedly been employed by a Pastrana boiler room in Manila. The Tokyo metropolitan Police and the Foreign Police Cooperation Homicide Investigation unit were interested in comparing the type of knife used in Coppola’s murder to that of Littauer. The FBI included a 5 pages article 'Laws and Raids Fail to Thwart Boiler Room Activities' by Sheila Samonte-Pesayco. Samonte-Pesayco names some of the biggest global scammers such as Pangasinense Amador Apungan Pastrana, Regis Possino, Sherman Mazur and Adnan Khashoggi.

The Tokyo Metropolitan Police Department (TMPD) contacted the Philippines for additional details regarding Coppola's murder and they also contacted New York to provide historical information regarding Littauer.

5. Breach of the Corporations Act. (2004 – 2006)

Well before Trio was exposed as a fraud, ASIC permanently banned Mr. Ronald Jeffery Caines from providing financial services after his breach of the Corporations Act. ASIC’s investigation found that between October 2004 and October 2006, Caines advised eight of his clients to invest in financial products issued by Astarra Capital Limited. Caines failed to disclose to his clients that a director of Astarra Capital Limited (and associated companies of the director) made loans totalling over $500,000 to his wife, and a company of which Mr Caines was a director.32 ASIC should have kept a close watch on Trio directors for their part because similar loans and incentatives discovered after the fraud was uncovered in September 2009, made by the Trio directors with other financial advisors were taken very seriously by ASIC.

(32) 08-185 ASIC permanently bans Sydney financial adviser August 13th 2008 http://asic.gov.au/about-asic/media-centre/find-a-media-release/2008-releases/08-185-asic-permanently-bans-sydney-financial-adviser/

7. Linked to unlicensed firms. (2002 – 2004)

Littauer, Bell, Flader and Sutherland operated globally with offices based in the United States, United Kingdom, Europe, the British Virgin Islands, Philippines, Australia, New Zealand, and Hong Kong. Before coming to Australia, companies linked to them such as New World Financial (NWF) and Millennium Financial, Ltd. (Millennium) sold dud stock. Warnings were raised about NWF and Millennium by, • The Netherlands Authority for the Financial Markets (AFM); • The Financial Supervision Commission of the Isle of Man (FSC); • The Austrian Financial Market Authority (FMA); • The Comisión Nacional del Mercado de Valores (CNMV) Spain; • Financial Markets Authority (New Zealand) and • Securities & Futures Commission of Hong Kong.

In 2002 New Zealand Securities Commission warned about Millennium and listed 17 employees. Four of those names are Artzt, Rullo, Lopresti (also employees of NWF) and Shawn Richard.

ASIC warned about Millennium in 2002 in their cold-calling Report but neither named Mr Richard or noticed the New Zealand warning because in 2003-2004 ASIC accepted his false credentials to get into the financial market.

Story 2. ASIC missed opportunities

ASIC - missed opportunities to note information it already held on ASIC's company registry database.

ASIC attended three court hearings:
1. ASIC v. Paul Richard Bell. (Sept 2001)

2. CDPP v. Hart. (2002)

3. ASIC v. Online Investors Advantage Inc. (Sept 2004-April 2005).

1. ASIC’s registration database 2001.

2. ASIC’s registration database 2003.

3. Fine and suspension. (Sept 2003)

4. Murder of businessman registered with ASIC. (Dec 2004)

5. Breach of the Corporations Act. (2004 – 2006)

6. Permanently barred. (Nov 2003 – Jan 2004)

7. Linked to unlicensed firms. (2002 – 2004)

8. ASIC accepts lies. (2003-4)

Story 2. ASIC missed opportunities

ASIC - missed opportunities to note information it already held on ASIC's company registry database.

ASIC attended three court hearings:1. ASIC v. Paul Richard Bell. (Sept 2001)

2. CDPP v. Hart. (2002)

3. ASIC v. Online Investors Advantage Inc. (Sept 2004-April 2005).

1. ASIC’s registration database 2001.

2. ASIC’s registration database 2003.

3. Fine and suspension. (Sept 2003)

4. Murder of businessman registered with ASIC. (Dec 2004)

5. Breach of the Corporations Act. (2004 – 2006)

6. Permanently barred. (Nov 2003 – Jan 2004)

7. Linked to unlicensed firms. (2002 – 2004)

8. ASIC accepts lies. (2003-4)

ASIC attended three court hearings:
1. ASIC v. Paul Richard Bell. (Sept 2001)