by Greg Klein | December 20, 2016
Two conmen who touted a Tanzanian gold mining stock now face prison time and restitution orders, the Ontario Securities Commission announced December 20. William Wallace and Robert Heward were each sentenced to four years and ordered to pay back $6.67 million to approximately 105 people who invested in Londoni Gold Corp. The pair were convicted of fraud, illegal distribution and unregistered trading. The last two charges brought concurrent 18-month sentences.
We will continue to seek prison sentences for individuals who commit crimes like these, which have a devastating impact on the lives of people and their families.—Jeff Kehoe,
OSC director of enforcement
Despite never having been registered with the OSC and having no prospectus for their company, the two sold Londoni shares between December 2009 and December 2013. In doing so they misrepresented the project’s operations, management, viability and production potential, the court heard. “A significant portion” of the money they raised financed their personal lifestyles.
They first appeared in a Toronto court in September 2014.
“This case sends a strong message to individuals engaged in securities fraud and illegal distributions that they will be held accountable for their misconduct,” said OSC director of enforcement Jeff Kehoe. “We will continue to seek prison sentences for individuals who commit crimes like these, which have a devastating impact on the lives of people and their families.”
The charges followed an investigation by the Joint Serious Offences Team, a partnership of the OSC, RCMP Financial Crime program and Ontario Provincial Police Anti-Rackets Branch.
by Greg Klein
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A city built on gold—and smuggling
“I didn’t ‘out’ anyone in the book and it wasn’t my intention to do that,” said Timmins journalist Kevin Vincent. “If I outed one prominent businessperson, I would have to out everyone in Timmins.” Discussing his book Bootleg Gold in Tuesday’s Northern Ontario Business, Vincent recounted what was once the mining town’s second-largest industry.
“A large percentage of the prominent business community has its roots tied to the gold-smuggling industry,” he told the paper. “In the 1920s, ’30s and ’40s, there was so much gold here every business had to have a set of scales under the counter. If you didn’t, you weren’t in business.”
Highgrading, as it was called, started with miners stealing small amounts, which they sold on a well-organized black market for 50%. “Shift bosses, mine captains and even mine managers were also involved,” Northern Ontario Business stated.
“When the gold was all put together, it was really compiled by just a handful of individuals and they controlled everything,” the paper quoted Vincent. “If you tried to move significant amounts of gold outside of their operation you ran a real, serious risk. Everyone knew it was going on and there were rules of engagement you had to follow.”
The endeavour was pervasive, with spinoff opportunities for seemingly everyone. One way of sneaking loot out of the mine was “inside false teeth constructed by local dentists,” the paper reported.
Due diligence defends against dirty deeds
March has been proclaimed Fraud Prevention Month by Canada’s 13 securities commissions. The regulators have a number of public awareness programs underway, including a provincial tour by the Ontario Securities Commission which highlights the agency’s new Office of the Investor, “the voice of the investor internally at the OSC.” On Tuesday some agencies, including Quebec’s l’Autorité des marchés financiers, cautioned would-be investors to check the registration (here and here) “of any firm or individual selling securities or offering investment advice.”
The following day the British Columbia Securities Commission announced two new features to its Investright program—a guide to private placements for retail investors and a mobile app providing investment advice and up-to-the-minute scam alerts. Like its Ontario counterpart, the BCSC has its own roadshow, this one exposing the province’s top 10 scams.
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