Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Monday, April 14, 2014

The Curious Case of Irwin Boock l Corporate Hijackings 101

The Irwin Boock corporate hijacking case is a gift that keeps on giving.  The Securities and Exchange Commission (“SEC”)  brought its original action against Boock and his associates in September 2009; since then several parallel actions have been filed.  On September 27, 2013, the SEC announced that Nicolette Loisel, a Houston-area attorney, had agreed to settle.  Loisel had been charged with hijacking 22 dormant public companies (along with the other original defendants) and with writing 28 legal opinion letters falsely stating that offerings of approximately 223 million shares were exempt from the registration requirements of the federal securities laws.
 
She agreed to accept a permanent injunction from violating antifraud provisions and was barred from participating in any penny stock offering.  Disgorgement of $143,755 was ordered but waived
due to the her financial condition.  She had previously been suspended from practicing before the Commission as an attorney.  The suspension stemmed from a criminal prosecution brought against her in Florida by the Department of Justice in connection with the hijackings.
 
That case was decided on December 20, 2012, and Loisel was subsequently sentenced to 12 months and one day in federal prison, followed by three years’ probation.
 
Corporate hijackings are more common than many market observers realize.  Scammers locate an inactive public company that has allowed its corporate charter to lapse.  They may then simply pay a small fee to reinstate the company in its state of domicile, and convince the transfer agent that they are the legitimate management of the company.  Alternatively, they may bring fraudulent custodianship or receivership actions to gain control through an order granted by a state court judge.  Either way, they then either sell the public shell in a reverse merger transaction, use it in a pump and dump scheme, or both.

The various actions against Boock and his accomplices began in October 2008, when the Ontario Securities Commission (“OSC”) filed a Statement of Allegations and scheduled a hearing.  The SEC followed up a year later, filing suit against Boock, Stanton B. J. DeFreitas, Loisel, her parter Roger Lee Shoss, and Jason C. Wong on September 29, 2009.  Boock dreamed up the scheme in late 2003, and recruited Shoss and Loisel to handle the paperwork.  That, according to the SEC, consisted of false documentation to Secretaries of State, the Standard & Poor’s CUSIP Service Bureau, transfer agents, and Nasdaq Corporate Data Operations.  They also provided fraudulent opinion letters.
This hijacking operation was more complex than most.  Boock (who was born Irwin Lawrence Krakowsky), is, like Wong and DeFreitas, a Canadian citizen.  In the course of the scam, all three used a variety of aliases, and even “borrowed” the names of real people.  Boock was a recidivist securities laws violator; he and his wife Birte were sued by the SEC in 2000, in connection with another penny stock scam.  Birte Boock was a relief defendant in the 2009 case.

The perpetrators even created their own transfer agency, Select American Transfer Company, to ensure that no questions would be asked by a suspicious independent transfer agent.
 
In late September 2008 the SEC obtained judgments against Boock, DeFreitas and Wong.  Boock and DeFreitas had defaulted; the agency won summary judgment against Wong in 2011.  Despite DeFreitas’s default, he had cooperated with Commission staff during the litigation, and so received a lesser penalty than Boock.  Disgorgement and monetary penalties were ordered in the amount of
$12.9 million.
 
On September 16, 2013, the SEC was granted summary judgment against a relief defendant, Alena Dubinsky.  Dubinsky opened brokerage accounts in her name through which some of the other defendants made unregistered sales of stock.  She was ordered to pay disgorgement and prejudgment interest of $1,085,495.55.
 
Both investors and companies considering going public in a reverse merger transaction should be aware that the SEC is cracking down on hijacking operations like Boock’s.  Buying stock in a hijacked company could result in heavy losses when an enforcement action is brought, because the issue would be demoted to the Grey Market, where it would die a slow and painful death.

For further information about corporate hijackings and reverse mergers, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202N, Boca Raton Florida, (561) 416-8956, info@securitieslawyer101.com or visit www.securitieslawyer101.com. This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTCMarkets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com

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