Canadian arrested in Greece for broker bribery
Viosolar’s Walchuk, Winsor indicted in U.S.
U.S. PROSECUTORS have unsealed criminal charges against Canadians Richard Walchuk and Caroline Winsor for a broker bribery scheme. The pair allegedly paid a kickback to have cor- rupt brokers buy shares of two pink sheets listings, Viosolar Inc. and FACT Corp. Unfortunately for Mr. Walchuk and Ms. Winsor, they made the payment to a person prosecutors say was secretly co-operating with the FBI.
Although the charges are 18 months old, they remained sealed until police arrested Mr. Walchuk last week in Greece. He had been wanted on a U.S. warrant since Dec.
6, 2012. On Monday, April 28, a financial crime squad located him in Palaio Faliro, a seaside town on the outskirts of Athens, and took him into custody. He remains in custody while U.S. prosecutors seek his extradition. The U.S. has not announced any arrest for Ms. Winsor, a resident of Calgary.
The allegations against the pair are contained in a criminal indictment filed on Dec. 6, 2012, in the Eastern District of Pennsylvania. The indictment identifies Ms. Winsor, 66, as a Canadian also known as Caroline Meyer and Caroline Danforth. The scheme, as described in the indictment, involved an attempt by Ms. Winsor and Mr. Walchuk to manipulate Viosolar and FACT in 2008. According to prosecutors, they agreed to bribe brokers to purchase and hold the two stocks on behalf of retail customers.
The bribery, as described in the indictment, first came about in July, 2008, when Ms. Winsor was introduced to a person who claimed to represent a group of corrupt brokers. The indictment only identifies the person as the “CW” (for co-operating witness). According to the indictment, the CW explained to Ms. Winsor that his brokers could purchase and hold a significant number of shares in exchange for a 20-per-cent fee.
About a month after the initial contact, Ms. Winsor spoke with the CW and said she wanted to “press forward” with his services for FACT and Viosolar, the indictment states. She explained that she had created Viosolar as a shell company and had sold the shell to Mr. Walchuk. She also told the CW that her daughter was an officer of both companies, but she did not want her daughter to know about the buying, prosecutors say.
According to the indictment, Ms. Winsor spoke about the plan with the CW on the phone multiple times through July and August, 2008. Those conversations, as detailed by prosecutors, included her explaining that she would like a “very slow and steady gain in price” so she could release news to justify the increased trading volume. According to the indictment, she told the CW that if the scheme went well, she would use him with other companies she had under her management.
Prosecutors claim that Mr. Walchuk agreed to the scheme in a later phone conversation. In an Aug. 29, 2008, call he stated that he had substantial control over Viosolar and needed approximately $500,000 to $700,000 in immediate buying over the next 30 to 60 days, with $2-million to $3-million in the “medium term.” (All figures are in U.S. dollars.) He also said that the CW’s initial buying campaign should inflate the stock gradually.
The actual buying, as described in the indictment, occurred in a small test
transaction. After FACT issued a news release on Oct. 15, 2008, the CW agreed to have his brokers buy $5,000 worth of stock. In reality, the FBI used undercover accounts that day to buy shares of FACT and Viosolar, prosecutors say. That same day, Ms. Winsor wired $2,000 to pay for the test transaction, according to the indictment.
The CW then discussed future buys in amounts of up to $4-million, but it appears from the indictment that there were no further transactions. The final communication that the indictment describes is an e-mail dated Oct. 29, 2008, in which Ms. Winsor asked about the “time line” for buying FACT shares.
In addition to the criminal charges, Ms. Winsor and Mr. Walchuk are defendants in parallel a civil action filed by the U.S. Securities and Exchange Commission. That case names two additional defendants, Florida broker Lisa Esposito and Illinois resident Lance Bauerlein. The SEC says that Ms. Esposito and Mr. Bauerlein participated in several phone conversations during which the defendants planned the bribery scheme.
Although Ms. Winsor and Mr. Walchuk have not had the opportunity to enter a plea in the criminal case, it appears Mr. Walchuk plans to plead not guilty. On May 5, 2014, a company called American Graphite Technologies Inc. disclosed his arrest (he is that company’s president) and said that he denies any allegations against him.