David Baines
vancouversun.com
Former Vancouver stockbroker Marcel Rada has agreed to a permanent revocation of his broker's licence and a $75,000 fine after admitting he induced three clients to make off-book investments in two companies without his employers' knowledge or consent.
In a recent settlement agreement with the Investment Industry Regulatory Organization of Canada, Rada also admitted that, although he told the investors their money would be used to advance the companies' fortunes, much of it ended up in his personal bank account.
Unstated in the settlement agreement is the alarming fact that a fullpatch member of the Hells Angels was a shareholder in one of the companies, and later became a major shareholder of the other company.
The first company was Ialta Industries Ltd., which was listed on the CNQ Exchange. One of its major shareholders was Glen Jonathan Hehn. In May 2006, he subscribed for one million shares at five cents each, according to company filings.
Hehn is a member of the Nomads, an elite chapter of the Hells Angels. He made headlines in July 2003, when police arrested him and Coquitlam resident Ewan Lilford after watching them load boxes from a truck into a Cloverdale storage unit rented by Hehn. Police seized $1.5 million worth of cocaine bricks from the vehicle and the locker.
Hehn denied any knowledge of the cocaine. He claimed he rarely used the locker, but permitted friends -including Lilford -to use it. He said that on the day in question, Lilford used his own key to access the locker, although police didn't find any such key on Lilford or in the truck.
B.C. Supreme Court judge Peter Leask accepted Hehn's explanation and acquitted him in March 2007. Lilford pleaded guilty and agreed to a 16-year jail term.
(Readers may recall that this was the court case where Leask swore multiple times. He later apologized for his conduct.)
The Crown appealed Hehn's acquittal, but in April 2008, the appeal court upheld Leask's decision on grounds that the assessment of evidence is "uniquely within the purview of a trial judge."
Interestingly, Hehn acquired his shares from Ialta under the "friends and family" exemption from prospectus and registration requirements. There is no indication that Rada was involved in this share distribution.
The settlement agreement notes that in January 2007, the B.C. Securities Commission issued a cease-trade order against Ialta for failure to file financial statements.
At that point, Rada -who was working at Wolverton Securities at the time -started raising money to get Ialta re-listed. He persuaded three people (including two Wolverton clients) to invest a total of $180,000.
The investments were to be repaid as soon as Ialta was re-listed, but the company was never reinstated and only one investor got back $12,000.
So what happened to the money?
According to the settlement agreement, a total of about $265,000 was deposited into Ialta's bank account during the first three months of 2007 (including the $180,000 provided by the three investors).
Unstated in the settlement agreement is the alarming fact that a fullpatch member of the Hells Angels was a shareholder in one of the companies, and later became a major shareholder of the other company.
The first company was Ialta Industries Ltd., which was listed on the CNQ Exchange. One of its major shareholders was Glen Jonathan Hehn. In May 2006, he subscribed for one million shares at five cents each, according to company filings.
Hehn is a member of the Nomads, an elite chapter of the Hells Angels. He made headlines in July 2003, when police arrested him and Coquitlam resident Ewan Lilford after watching them load boxes from a truck into a Cloverdale storage unit rented by Hehn. Police seized $1.5 million worth of cocaine bricks from the vehicle and the locker.
Hehn denied any knowledge of the cocaine. He claimed he rarely used the locker, but permitted friends -including Lilford -to use it. He said that on the day in question, Lilford used his own key to access the locker, although police didn't find any such key on Lilford or in the truck.
B.C. Supreme Court judge Peter Leask accepted Hehn's explanation and acquitted him in March 2007. Lilford pleaded guilty and agreed to a 16-year jail term.
(Readers may recall that this was the court case where Leask swore multiple times. He later apologized for his conduct.)
The Crown appealed Hehn's acquittal, but in April 2008, the appeal court upheld Leask's decision on grounds that the assessment of evidence is "uniquely within the purview of a trial judge."
Interestingly, Hehn acquired his shares from Ialta under the "friends and family" exemption from prospectus and registration requirements. There is no indication that Rada was involved in this share distribution.
The settlement agreement notes that in January 2007, the B.C. Securities Commission issued a cease-trade order against Ialta for failure to file financial statements.
At that point, Rada -who was working at Wolverton Securities at the time -started raising money to get Ialta re-listed. He persuaded three people (including two Wolverton clients) to invest a total of $180,000.
The investments were to be repaid as soon as Ialta was re-listed, but the company was never reinstated and only one investor got back $12,000.
So what happened to the money?
According to the settlement agreement, a total of about $265,000 was deposited into Ialta's bank account during the first three months of 2007 (including the $180,000 provided by the three investors).
During the same period, $156,650 was disbursed to Rada. Many of these disbursements were made on the same day or the day after Rada deposited the investors' money.
So why was this money disbursed to Rada?
Mark Kauhane, who was the president of Ialta at the time, told IIROC investigators that Rada was driving the fundraising efforts, and was to receive a 20-per-cent commission on all the money he raised.
Stockbrokers are prohibited from such outside dealings without the knowledge and consent of their employers. In this case, Wolverton said it had no knowledge of Rada's fundraising activities.
Questioned by IIROC investigators, Rada denied he had received any fees from Ialta, or had any dealings with the company while working at Wolverton.
He claimed the $156,650 that was disbursed to him was payment for work he did for Ialta during a brief, seven-day period before joining Wolverton, when he was not licensed as a broker. Rada left Wolverton March 2007 and joined Global Securities, where -unknown to Global -he got involved in more off-book transactions.
The settlement agreement notes that in May 2007, he instructed a lawyer to incorporate a company called Montrose Exploration Ltd. The following month, he persuaded one of the three Ialta investors -who is identified only as JB -to subscribe for 500,000 shares at five cents each, for a total of $25,000. The proceeds were to be used to acquire a mining company.
However, the same day JB's money was deposited in Montrose's account, the company issued two cheques to Rada for $17,000 and $3,100.
Rada later claimed that he had previously loaned the principal of Montrose some money, and the cheques were simply repayments of that loan.
The settlement agreement further notes that in August 2007, Rada persuaded JB to lend another $25,000 to Montrose. In addition to his original capital, JB was to be paid a bonus of $2,500 and 250,000 Montrose shares.
In November 2007, Rada became Montrose's president and instructed the company's lawyer to prepare documentation for 15 new shareholders.
JB was not on that list, even though he had subscribed for 500,000 shares and was entitled to 250,000 bonus shares.
According to court documents in an unrelated case, there were some very interesting people on that list. One was Hehn, our entrepreneurial biker enthusiast, who subscribed to 3.5 million share at five cents each, making him one of Montrose's largest shareholders.
Another was Ralph Biggar, a former stockbroker at Georgia Pacific Securities in Vancouver. He bought 100,000 shares at five cents each.
Biggar was president of Tora Technologies Inc. in 2005 when it went public on the OTC Bulletin Board on the basis of a services agreement with a Vancouver company called LA Embroidery Inc.
That company made headlines after I discovered the owner of LA Embroidery, Tony Pires, was also a full-patch member of the Nomads.
In February 2008, JB demanded repayment of his money and shares, but Rada repaid only $1,000.
So what happened to this money?
According to the settlement agreement, $538,460 was deposited to Montrose's account from May to November 2007. During the same period $242,605 of this amount was disbursed to Rada.
As events unfolded, Montrose never became a public company, and Ialta's shares were never relisted.
Global Securities sued Rada for unpaid advances, and the lawyer who incorporated Montrose sued him for unpaid fees. That's where we found the company's subscriber list and learned that Hehn and Biggar were shareholders.
The moral of the story? Always pay your lawyer's bills.
dbaines@vancouversun.com
Read more: http://www.vancouversun.com/Stockbroker+sold+shares+junior+company+part+owned+full+patch+member+Hells+Angels/4784512/story.html#ixzz1MN7WrxH1So why was this money disbursed to Rada?
Mark Kauhane, who was the president of Ialta at the time, told IIROC investigators that Rada was driving the fundraising efforts, and was to receive a 20-per-cent commission on all the money he raised.
Stockbrokers are prohibited from such outside dealings without the knowledge and consent of their employers. In this case, Wolverton said it had no knowledge of Rada's fundraising activities.
Questioned by IIROC investigators, Rada denied he had received any fees from Ialta, or had any dealings with the company while working at Wolverton.
He claimed the $156,650 that was disbursed to him was payment for work he did for Ialta during a brief, seven-day period before joining Wolverton, when he was not licensed as a broker. Rada left Wolverton March 2007 and joined Global Securities, where -unknown to Global -he got involved in more off-book transactions.
The settlement agreement notes that in May 2007, he instructed a lawyer to incorporate a company called Montrose Exploration Ltd. The following month, he persuaded one of the three Ialta investors -who is identified only as JB -to subscribe for 500,000 shares at five cents each, for a total of $25,000. The proceeds were to be used to acquire a mining company.
However, the same day JB's money was deposited in Montrose's account, the company issued two cheques to Rada for $17,000 and $3,100.
Rada later claimed that he had previously loaned the principal of Montrose some money, and the cheques were simply repayments of that loan.
The settlement agreement further notes that in August 2007, Rada persuaded JB to lend another $25,000 to Montrose. In addition to his original capital, JB was to be paid a bonus of $2,500 and 250,000 Montrose shares.
In November 2007, Rada became Montrose's president and instructed the company's lawyer to prepare documentation for 15 new shareholders.
JB was not on that list, even though he had subscribed for 500,000 shares and was entitled to 250,000 bonus shares.
According to court documents in an unrelated case, there were some very interesting people on that list. One was Hehn, our entrepreneurial biker enthusiast, who subscribed to 3.5 million share at five cents each, making him one of Montrose's largest shareholders.
Another was Ralph Biggar, a former stockbroker at Georgia Pacific Securities in Vancouver. He bought 100,000 shares at five cents each.
Biggar was president of Tora Technologies Inc. in 2005 when it went public on the OTC Bulletin Board on the basis of a services agreement with a Vancouver company called LA Embroidery Inc.
That company made headlines after I discovered the owner of LA Embroidery, Tony Pires, was also a full-patch member of the Nomads.
In February 2008, JB demanded repayment of his money and shares, but Rada repaid only $1,000.
So what happened to this money?
According to the settlement agreement, $538,460 was deposited to Montrose's account from May to November 2007. During the same period $242,605 of this amount was disbursed to Rada.
As events unfolded, Montrose never became a public company, and Ialta's shares were never relisted.
Global Securities sued Rada for unpaid advances, and the lawyer who incorporated Montrose sued him for unpaid fees. That's where we found the company's subscriber list and learned that Hehn and Biggar were shareholders.
The moral of the story? Always pay your lawyer's bills.
dbaines@vancouversun.com
