St. Elias Mines

One may see some amazing similarities between SLI and the infamous Robert Papalia's Nano World in the following article. It seems the Crown didn't think there was enough evidence to convict them either.

At the very end of the article, you will see even one more similarity.......

SEC targets Nano World after Papalia fingers Hunter

2003-03-19 12:52 ET - Street Wire

Also Street Wire (U-NOWD) Nano World Projects Corp.


by Brent Mudry

Canada's top penny stock cop has another Howe Street promotion in its crosshairs. The United States Securities and Exchange Commission has launched a prosecution of Nano World Projects Corp., a former New York-based company which featured Vancouver penny stock promoters Robert Papalia and David Lynn Hunter, his current nemesis.

The SEC claims Nano World shares soared to a peak of $24.50 in April, 2000, with a market capitalization of $340-million, amid a series of bogus press releases and disclosures falsely trumpeting several big deals and proposed financings. (All figures are in U.S. dollars.)

The SEC announced Tuesday that it has filed public administrative proceedings against Nano World, to determine whether the company violated various securities regulations and rules, and whether the registration of its shares should be revoked or suspended. Neither Mr. Hunter, Mr. Papalia or any other individuals are believed named as targets in the action.

Although Mr. Papalia confirms that Nano World co-operated with SEC investigators several months ago, he was unaware of the SEC prosecution until contacted by Stockwatch. Mr. Papalia blames Mr. Hunter, who headed Nano World before he took over in mid-2000, for the company's regulatory troubles.

Mr. Hunter, who is now believed to be in Mexico, could not be located for comment. The former Vancouver broker is well known to regulators, and he and his brother Dan Hunter played secondary roles in Ultra Pure Water, Dimples Group and a host of other Howe Street dillies.

The SEC claims the Nano World promotion was little more than a hot air balloon, which has now crashed to earth. "In its order instituting proceedings, the Division of Enforcement alleges that Nano World made false and misleading statements in several press releases issued between April, 2000, and January, 2001, and in a Form 8-K that was filed with the commission on Nov. 22, 2000," states the SEC.

"According to the Division, the company's statements were materially false and misleading because they falsely represented that Nano World had entered into strategic business relationships with, acquired, and/or obtained financing commitments from, other companies, and caused the price and volume of Nano World stock to increase significantly."

The SEC also alleges that Nano World failed to comply with the reporting provisions of the Exchange Act by not filing annual reports on Form 10-KSB and quarterly reports on Form 10-QSB for any fiscal period after its fiscal quarter ended Oct. 31, 2000. A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the order are true, to provide Nano World an opportunity to dispute these allegations, and to determine whether it is necessary and appropriate for the protection of investors to revoke or suspend the company's registration.

The SEC action is an unfortunate setback for Nano World director Mr. Papalia, who along with his twin brother Anthony Papalia Sr. was well known to authorities in Vancouver, Montreal and London years ago. The twins are not related, however, to Tony (the Pops) Papalia, the Hamilton, Ont., Mafia boss murdered in a mob execution a few years ago.

According to newspaper accounts, the Papalia twins were arrested by Scotland Yard detectives in 1977 for allegedly planning to defraud investors of $300-million through the sale of shares of Metals Research, a company which claimed to have a gold mine in British Columbia. Prosecutors suggested the Mafia may have been involved, but little if any such evidence was presented in court.

The Papalia twins told The Vancouver Sun in 1991 that they spent a total 18 months in jail without bail, although they were acquitted at the heavily publicized trial. Anthony Papalia made headlines when he broke out of a detention facility, in a caper called "The Great Mafia Escape" by the British press.

The Papalia twins also drew the attention of police in Vancouver after shares of American Westwater Technology Group peaked at $9.75 (Canadian) in 1986 on the former Vancouver Stock Exchange. The RCMP claimed in a search warrant that the brothers had manipulated the stock price, and recommended charges against both in December, 1988. The Crown, however, only laid one charge -- of issuing a false prospectus -- against Robert Papalia, and this was later stayed.

The SEC's Nano World action comes seven months after the company, now headed by Robert Papalia, filed an Aug. 16 suit against Mr. Hunter, his controversial father Ben Hunter, his sister Caroline Lenardon, his former employer Thomson Kernaghan, Bermuda-based Voyager Securities Ltd. and its head Paul Lemmon. In what may be just a coincidence, the suit was filed hours after the arrest operation announcement of Operation Bermuda Short, and circulated by Mr. Papalia to various media outlets.

Mr. Lemmon is best known as the offshore front for Mr. Valentine, who led Toronto brokerage Thomson Kernaghan to its collapse last year. The pair was arrested Aug. 14 as trophy targets in Bermuda Short, a joint FBI-RCMP undercover sting inspired by penny stock dealings through Bermuda and Mr. Valentine's legendary shorting prowess.

The pair was named in grand jury indictments for their roles in a sting conspiracy to bribe undercover operatives, posing as corrupt mutual fund officials, to buy millions of dollars worth of penny stock promotions lacking in worth. Mr. Lemmon pled guilty on Dec. 6, agreeing to rat on Mr. Valentine, and was sentenced on Feb. 21 to 21 months imprisonment, after already serving four months in custody.

The other defendants in the Nano World suit include Harold Arviv and Venture Capital U.S.A. Inc., both of Toronto, Howe Street financier Alnoor Kassam and Smart Seed Inc., both of Vancouver, Stephen Moses and Parkdale Investments S.A., who share the same address in Geneva, First Union Asset Management Inc. of Zurich, and offshore facilitator Barry Herman and offshore fund Dominion Fixed Income Fund, who share the same address in the Bahamas.

"The plaintiff's claim against David Hunter, Alnoor Kassam and Smart Seed Inc. is in regard to unauthorized withdraws (sic) and misappropriation of corporate funds," states Mr. Papalia in the self-filed suit. "The plaintiff's claim against Harold Arviv, Venture Capital U.S.A. Inc., Stephen Moses, Parkdale Investments S.A. and First Union Asset Management Inc. is in regard to failure to advance funds pursuant to a financing agreement and/or misrepresentation to the plaintiff in regard the financing."

"The plaintiff's claim against Harold Arviv, Venture Capital U.S.A. Inc., David Hunter, Stephen Moses, Parkdale Investments S.A. and First Union Asset Management Inc., Ben Hunter, Caroline Lenardon, Thomson Kernaghan & Co. Ltd. in regard to breach of a voluntary pool agreement and stock manipulation," states Mr. Papalia in the suit.

The suit also claims against David Hunter, Mr. Lemmon and Voyager for failing to advance a $15-million financing, against Mr. Kassam for preparing a false and misleading press release and failing to ensure the completion of the Voyager financing, and against David Hunter, Mr. Kassam and Mr. Arviv for "failing to disclose that they were affiliated and selling shares when restricted by law."

It should be noted that while Mr. Papalia currently asserts the action is proceeding, none of the defendants have yet filed a statement of defence, which would probably provide another side to the claims. Several have filed appearances, a legal acknowledgement of receiving the suit, including Mr. Kassam and Smart Seed, who filed a joint appearance on Aug. 22, four days after the suit was launched. None of the serious allegations in the suit have yet been proven in court and no further substantiating details or evidence have been filed.

In addition to the so-far unsubstantiated allegations contained in the suit, Mr. Papalia made a series of inflammatory statements that added no credibility to his lawsuit.

"This technology is very, very important," Mr. Papalia told Stockwatch in August.

It should be stressed that Mr. Papalia's allegations have not been proven or substantiated, the defendants have not yet filed legal responses and his own history includes unhappy experiences with authorities years ago. Readers should also be aware that anybody can throw a statement of claim into court, and hope that some of its allegations may stick to the defendants before it is defeated, if it is defeated.

David Hunter had the misfortune of popping up in several notable Howe Street scandals, although never as a regulatory target. The former broker, whose career stretched back to at least 1982 with now defunct Continental Securities, left the industry in March, 2000, after a brief stint with Mr. Valentine's Thomson Kernaghan. During his career, he also served notable stints at Yorkton Securities and Canaccord Capital.

Mr. Hunter emerged in Brent Pierce's Ultra Pure affair, when Toronto broker Stephen Taub told authorities he was introduced to Harvey Gorsuch and Grant Atkins, Mr. Pierce's fronts, in mid-1993 by Mr. Hunter and his brother Dan Hunter, who both then worked at Canaccord. Around this same time, Mr. Pierce was banned for 15 years by the B.C. Securities Commission in the Cost-Miser Coupons case, which also featured Mr. Gorsuch and Mr. Atkins.

The brokerage where Mr. Taub worked, Merit Investments, took a disastrous $1-million (Canadian) hit in 1995 from offshore client accounts in the Vancouver-Calgary rig job of Ultra Pure Water Systems (Canada) Inc. The Ultra Pure wash-trading rig job, masterminded by Mr. Pierce left $2.36-million (Canadian) in unpaid debits at seven brokerages.

Ultra Pure, Mr. Pierce and his associates were the subjects of an extensive criminal investigation by the Commercial Crime Section of the RCMP. After spending years and extensive taxpayer resources preparing a solid case, the RCMP handed over the file to a senior Crown prosecutor a few years ago. In a controversial move that remains an open wound between the RCMP and the Crown, the prosecutor "no-charged" the case, basically torpedoeing the investigation, on the grounds there was insufficient evidence for a conviction. The prosecutor has since been assigned to handling welfare fraud cases, while Mr. Atkins has been busy lately promoting Genemax Corp. and vigorously denying Mr. Pierce has anything to do with the company.

Mr. Hunter and his broker-brother Dan Hunter were also parties of interest, but not targets, in the SEC's probe of another Howe Street scandal, the 1991-1993 promotion of Dimples Group, a Toronto-based diaper company. Besides the SEC, the Dimples case was also investigated by the RCMP, the York Regional Police near Toronto and the former VSE.

Of the assorted Vancouver Dimples brokers, U.S. officials showed a particular interest in the Hunter brothers. "Do you know an individual named Dan Hunter?," asked Christopher Cooke, the co-lead SEC prosecutor, in a discovery examination of Dimples promoter Robert Reid. "I plead the Fifth," the promoter replied. In his three-hour interview, Mr Reid invoked the Fifth Amendment, preferring not to incriminate himself by answering questions, scores and scores of times. Mr. Reid also invoked the Fifth when asked if he was aware of Monterey Financial, which is a Hunter family holding company.

The Nano World prosecution is particularly unfortunate for Mr. Hunter, as he ended his career as a broker, leaving Thomson Kernaghan, on March 31, 2000, to join the company's board 10 days later, on April 10. (After a vend-in from Mr. Kassam's shell, Breccia International Minerals, Nano World began trading on March 23, 2000, at $14.) The same day Mr. Hunter joined Nano World as chairman, chief executive officer and president, the company's stock peaked at $24.50. A year later, the stock had collapsed to a penny, and it has since fallen further.

A week later, on April 17, 2000, Mr. Papalia came aboard as a director. Nano World described his achievements as prolific, including serving as president and CEO of Metals Research Group since 1975, as a key director of PacRim Information Systems Inc. since 1996, and as a director of Pyramid Trust Corp., a private merchant bank, since 1970. "Mr. Papalia brings 25 years experience in investment banking specifically relating bio and high tech development," stated Nano Tech on its Web site. "Mr. Papalia is also the former assistant to Mr. Loris Fortuna, former Vice-President of Italy."

The same day, Mr. Papalia's Vancouver lawyer, John Andrew Cochrane, joined Nano World as a director, treasurer and secretary. Mr. Cochrane, who has since left private practice to become a Crown prosecutor, was unaware of the SEC action until contacted by Stockwatch. He declined to comment, but notes that he left the company 2-1/2 years ago.

Nano World's market debut month of April, 2000, was capped by news of a planned $15-million best efforts financing of one million shares at $15 through Mr. Lemmon's Voyager Securities, described as an "investment advisory and brokerage company" based in the secretive offshore enclave of Hamilton, Bermuda.

Alas, the financing never materialized and the stock soon crashed.

Although Mr. Papalia points the finger at Mr. Hunter for Nano World's troubles, he has endured some criticism himself. In July, 2000, in the latest round of litigation between the camps of Mr. Papalia and Giovanni Camporese, another controversial Vancouver promoter, an associate of Mr. Papalia filed a defamation suit against Mr. Camporese and associate William Cate, claiming he had been libelled in Raging Bull chat-site postings over the previous six weeks. (In his contentious Raging Bull postings, Mr. Camporese refers to Mr. Papalia as "Teflon Tony" and "The Teflon Man.")

A June 2, 2000, posting attributed to Mr. Cate claims that: "the Papalias are pioneers of the cyber-boiler room," operating in an office on Burrard Street in downtown Vancouver. "The Twins pay their cyber-promoters by giving them 10 cents UNregistered NAPH shares to sell at $5.00. Paying for promotion in stock violates SEC rules. It's a HiTech version of Four Star Management," states the contentious posting.

The plaintiff, Concezio Montagliani, claims Mr. Cate falsely suggests he was participating in an illegal market manipulation scheme, he was defrauding investors, and he illegally received Nano World shares at less than fair market value as compensation.

It should be noted that none of these allegations have been proven in court, and regulators urge investors and others to treat such bulletin board postings as little more than graffiti.

By August, 2000, Mr. Hunter left Nano World and Mr. Papalia replaced him as head of the company.

Although Nano World has crashed and burned, at least judging by its stock price, another Vancouver company hopes to capitalize on its technology, described as the "manipulation of individual atoms and molecules to build structures to complex, atomic specifications."

On Aug. 20, Infinex Ventures Inc., which features Howe Street promoter Mario Aiello, former broker EARL HOPE and securities lawyer Gregory Yanke, entered agreements to acquire a series of patents, rights and assets relating to Nano World's "dynamic thin linamar flow process," and a 40-per-cent interest in Nano's Italian subsidiary, Nano World Projects Europe SPA.

bmudry@stockwatch.com