Ponzi scheme operators committed fraud and ordered to pay millions into courts



    VANCOUVER, Feb. 21 /CNW/ - A British Columbia Securities Commission panel
has ordered three men to pay $12.7 million into the courts for operating a
fraudulent Ponzi scheme that bilked 89 B.C. investors out of millions of
dollars. The panel also permanently banned the men from the public markets and
ordered them to pay $4 million in administrative penalties.
    On Feb. 20, 2008, the commission panel found that two Abbotsford men -
Malcolm Cameron Boyd Stevenson and Daniel Eric Byer - and Preston Pinkett II,
a resident of Virgina, violated securities laws and perpetrated a fraud
through an investment vehicle called International Fiduciary Corp SA (IFC).
    The men ran the IFC scheme between April 2004 and November 2006,
promising investors a return of 6 per cent per month, telling them this was
possible through IFC's "asset growth program" that purportedly bought
securities called "1st Tier medium term bank notes" at a discount and then
sold them for a profit. The men told investors that their money was not at
risk - it would be in their control at all times in a U.S. bank account and
could be withdrawn on short notice.
    In fact, the asset growth program did not exist. The investors' money,
once invested, was not under their control. Instead, Stevenson, Pinkett and
Byer used the money to enrich themselves and to keep the scheme going.
    The program turned out to be a Ponzi scheme that took over $23.3 million
from B.C. investors, who received payments of only about $10.3 million in
return.
    "Ponzi schemes are a particularly sinister form of fraud because those
lucky enough to get in at the beginning do in fact earn the promised returns,
and lend the credibility to the scheme that it needs in order to lure
investors," the panel said. "The asset growth program, which was the purported
source of the astronomical returns they promised to investors, was a fairy
tale ... the only reason the respondents made any payments to IFC investors
was because they had to in order to make the scheme work."
    Stevenson and Byer solicited individuals to invest in the IFC scheme.
They met with prospective investors, explained how the IFC investment worked,
and provided documentation that described the investment.
    Pinkett opened bank accounts at United Bank in Arlington, Virginia,
worked with Byer to facilitate the deposit of the investors' funds in those
accounts, and made the fraudulent transfers of investors' money.
    Stevenson and Pinkett decided each month how much to pay themselves and
Byer from the scheme.
    The panel chose to apply recent legislative changes to the Securities Act
sanction provisions. The changes, which came into effect in 2006 and 2007,
increased the maximum administrative penalties for contraventions of the Act,
and added new powers for issuing administrative orders, including disgorgement
orders.
    The evidence showed that Pinkett distributed a total of about
$5.5 million to Stevenson, $4.8 million to himself, and $2.4 million to Byer.
In these circumstances, the panel deemed it appropriate to order the
disgorgement of those funds into the courts where investors may have chance to
recover money.
    The panel also ordered Pinkett to pay $1 million, and Stevenson and Byer
to pay $1.5 million, in administrative penalties. In addition, the panel
permanently banned all three men from trading securities or exchange contracts
and from being a manager or consultant in connection to the securities market.
They are also prohibited from being a director or officer of any issuer,
registrant or investment fund manager, being a registrant, investment fund
manager or promoter, and from engaging in investor relations activities.
    The only IFC assets its receiver has located so far are a little over
$8 million in IFC bank accounts. These funds, net of competing claims and the
receiver's fees, will have to be shared by all of the investors who may have
claims. This suggests that any recovery from IFC will fall far short of any
meaningful repayment of the investors' principal.

    The B.C. Securities Commission is the independent provincial government
agency responsible for regulating trading in securities within the province.
You may view the decision on our website www.bcsc.bc.ca by typing in the
search box, Daniel Eric Byer, Malcolm Cameron Boyd Stevenson or Preston
Pinkett II, or 2008 BCSECCOM 107. If you have questions, contact Ken Gracey,
Media Relations, 604-899-6577.

    Learn how to avoid investment fraud at the BCSC's investor education
    website: www.investright.org.





For further information:

For further information: Ken Gracey, (604) 899-6577 or (B.C. & Alberta)
1-800-373-6393


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890