Canadian Shenanigans « Mining Blog

Canadian Shenanigans

8. November 2012,

The From Money to Metal wiki database has just posted three new entries which have a lot in common. They relate to allegedly fraudulent schemes, used by private promoters to profit from boosting a mining company’s stock price – even when there’s nothing to justify doing so.

And all three schemes were played out by Canadian citizens in North America.

Take Kelly Fielder – alleged to have raised money for a capital pool company and defrauded the man who gave it to him – he’s also currently promoting a gold “shell” company. See:

Then there’s Bobby Genovese, a flamboyant private equity and venture capitalist, accused with others of holding undisclosed control over tens of millions of shares in a US company called Liberty Silver – and promoting a huge rally in the company’s share price just before trading was suspended and the price collapsed. See:

Most intriguing perhaps is Tom Coldicutt, a former Vancouver stockbroker. He’s currently facing civil fraud charges in the United States for an OTC-BB (Over The Counter Bulletin Board) “shell selling scheme” – allegations he denies.

“Shell” (sometimes called “front” companies) are outfits, listed on a stock exchange or similar market, which may in reality have no assets to back their credibility. After unsuspecting investors have put money into them they often go bust – thus leaving the investors high and dry, but with the originators sometimes considerably better off.

The United States Securities Exchange Commission (SEC) claims that Coldicutt and his wife, Elizabeth, employed a network of nominee officers and directors that allowed them to create fifteen purported “mining companies”. According to the SEC, Coldicutt then sold the companies as shells, grossing US$4.8-million in dodgy profits[Stockwatch, 24 October, 2012; Street Wire, 23 October 2012].

The SEC complains that the couple never intended to run the companies as exploration outfits, and “merely formed [them] to be sold as clean shells for the benefit of the Coldicutts and their network of corporate nominees”.

One of the examples of this was a company called Mesquite Mining Inc – incorporated in October 2007 by one of Mrs. Coldicutt’s friends “who knew nothing about mining”. Although Mesquite raised $25,000 in a public offering purportedly from 25 shareholders, “all of the money came from the Coldicutts”, the SEC said.

Like “many other companies in the scheme”, Mesquite abandoned mining after obtaining its listing, according to the complaint. In June 2009, Mr. Coldicutt negotiated an agreement to sell the company as a shell, obtaining $225,000. (The company then became Mesa Energy Holdings Inc., an OTC-BB oil and gas company that went to $3.50 a share in 2010, but has now topped to 17.9 cents.)

The other defendants in the case included Mr. Coldicutt’s office manager allegedly convinced her sister and a friend to serve as nominee officers and directors of two Coldicutt companies. Another defendant was a former housekeeper to the Coldicutts, said by the SEC to have provided the names of 200 investors that purportedly subscribed to offerings in at least 12 of the Coldicutt companies.

Another defendant was San Diego lawyer Robert Weaver. The SEC claims he wrote opinion letters, served as securities counsel to the companies and helped prepare regulatory filings. The final defendant is Mrs. Coldicutt’s son from a prior marriage, Christopher Greenwood. The SEC says he helped with the formation of Las Rocas Mining Inc., a shell that Mr. Coldicutt ultimately sold for $760,000.

The Coldicutts have disputed the SEC’s contention that they only created the companies to sell them at a profit, arguing that they were all formed to pursue genuine mining activities and only sold off as shells “after exploration activities showed [their properties] not to have commercial potential.”
At the time of writing, no trial date had been set for a hearing of this case.

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