A key player in the $175 million Eron Mortgage scandal, B.C.’s biggest fraud case, faces charges by the U.S. Securities and Exchange Commission, the agency revealed this week.
Francis Biller, known in his Eron days as Frank Biller and one of only two figures to serve jail time in that scandal, is accused in a civil fraud case of being involved in a boiler-room operation based in Medellin, Colombia, that U.S. authorities allege netted US$58 million.
Biller and four other defendants — fellow Canadians Raymond Dove and Troy Gran-Brooks, American Chester Alvarez and Dutch national Justin Plaizier — are charged with running pump-and-dump penny-stock promotions from the Medellin operation between 2016 and 2018 to defraud investors in the U.S. and Canada.
“These scam artists went to great lengths — using bogus companies, aliases and spoofing phone numbers — to defraud and mislead investors into a pump-and-dump scheme,” said Paul Levenson, director of the American agency’s Boston regional office, which pursued the case.
The charges filed March 14 in the U.S. district court’s eastern district of New York have not been proven in court and SEC spokesperson David Ausiello told Postmedia by email that the agency would not comment on questions about Biller’s whereabouts.
However, in the complaint filed in court, the SEC named Biller as one of two “closers” who sealed deals set up by up to 10 junior participants which it alleged hooked unsuspecting investors using high-pressure sales tactics.
News of the charges was a disappointment, but not a surprise, to North Vancouver’s Barbara Mayer. She and her husband Wendel lost $850,000 in the Eron Mortgage scheme, which turned out to be a Ponzi scheme led by the mortgage firm’s president Brian Slobogian, with Biller’s help.
“I felt very sad for anybody that is caught up in these things, because it’s devastating,” Mayer said Thursday. “It’s a death of your money, I’ve always said that.” She said that directly to Slobogian in B.C. Supreme Court during proceedings in 2005.
Slobogian and Biller pleaded guilty to five counts of fraud related to Eron deals that defrauded investors of $28 million, but in total Eron initiated 80 deals in which 3,000 investors lost $175 million.
Slobogian was sentenced to six years in prison, Biller three years, by Justice Mary Ellen Boyd, who noted in her judgment Biller’s youth and that he had saved the court from an arduous trial with his plea.
Boyd wrote that Biller wasn’t well educated and “loyally followed the Eron vision,” set out by Slobogian, which didn’t detract from his guilt, “but it at least places his actions — particularly his omissions — in context.”
Biller and Slobogian were out of jail less than a year later with Biller released on day parole to a halfway house somewhere in Ontario.
Mayer, now 75, said victims felt “they never got enough time. They hurt so many people, people became almost destitute.”
“People were sick, there were a couple of people that I know had heart attacks over it,” Mayer said, and she is not surprised to hear he is in trouble again.
“So I hope that Biller is put away, and put away for good,” Mayer said.
David Baines, The Vancouver Sun’s now-retired longtime white-collar-crime columnist covered the Eron case and said the new allegations are more evidence that courts need to prosecute such frauds more vigorously.
Baines said before his criminal conviction, the B.C. Securities Commission banned Biller from capital markets for 10 years over the Eron scandal, which he characterized as “kid-glove treatment for reasons that escaped me.”
Biller was sanctioned again by the B.C. commission for supervising another so-called boiler room in downtown Vancouver during 2002. In 2007, the commission barred Biller from B.C. markets for life based on his admissions in the case.
“The key is criminal prosecution,” Baines said Thursday. “Biller was sentenced to three years in jail, he probably was on parole within six months, which was a cruel joke on many victims, most of whom were in their senior years.”
Simon Fraser University criminologist Neil Boyd conducted a study of the Eron victims, which found that most were in their 50s and invested in the scheme looking for safe retirement savings.
“That’s again what makes this sort of horribly predatory,” Boyd said. “It focuses on people who are approaching retirement without adequate resources.”
“It does raise questions about the kinds of penalties that have been given to people engaged in this,” Boyd said, considering the $175 million lost in the Eron fraud along with “the clear demonstration of harms to individuals, in terms of their health, their economic well-being.”
Boyd said another of his findings was that “we as a culture tend to underestimate” the consequences of financial crime, which can be devastating and becoming ever more prevalent due to technology.
In the SEC complaint, Biller, now 52, and listed as living in Medellin, was named as a partner in the boiler-room operation with Dove.
The SEC alleges the operation was commissioned by groups that controlled significant holdings of penny-stock companies to pump up the value of their holdings then sell shares to unsuspecting investors from lead lists secured by the company.
The companies involved traded on over-the-counter venues, not major stock exchanges, and insiders of the Medellin operation would allegedly trade their shares between nominee accounts to create the illusion of investor interest and inflate their value before selling to outside buyers.
Enforcement action started in the spring of 2018 when Biller and Dove connected with a purported new client who was actually working undercover for law enforcement.
In recorded evidence, the principals described how they used false names and fictitious investor relations firms, complete with fake websites, then cover their tracks by taking websites down and cancelling phones. Then they would start over on their next promotion with new names and phone numbers.
Biller boasted that the boiler room had generated US$100 million in sales over its history, according to the complaint.
The SEC alleges the boiler room promoted the shares of at least 18 companies generating US$58 million in proceeds for the control groups. The complaint names three firms in particular, Oroplata Resources Inc., Garmatex Holdings Ltd. and PureSnax International Inc.
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