Judge increases disgraced securities lawyer’s sentence
SEC defendant Dalmy’s jail term grows to five years
A JUDGE in Connecticut has added two years to the prison term of Diane Dalmy, a Vancouver-linked securities lawyer who lied about her assets before she went to jail for a pump-and-dump scheme. The extra two years reflects the discovery of a chest of cash that she had stashed in a storage locker. She had failed to disclose the money, attempting to avoid having to pay it to the victims of her
crime, prosecutors said. Ms. Dalmy received the extra two years in an appearance on Friday, Dec. 7, before U.S. District Court Judge Jeffrey Meyer in New Haven. The extra jail time means that she will now spend a total of five years in prison for her part in a $10-million pump-and-dump scheme. (All figures are in U.S. dollars.) She previously pleaded guilty to a conspiracy charge, admitting that she wrote fraudulent legal opinion letters that allowed others to receive tradable shares in at least two companies. The letters helped those behind the fraud to make millions, according to the government.
The judge had initially sentenced Ms. Dalmy to three years in jail and ordered her to pay $2-million in restitution. Not long into her prison term, prosecutors received a tip that she had a large amount of cash. The tipster told them that Ms. Dalmy had asked for help holding $60,000. The person refused to take the money, and subsequently learned that Ms. Dalmy planned to place it in a storage unit in Colorado. The government located that storage unit, and discovered a chest containing $47,000 in cash.
The judge has not issued his reasons for adding two years to Ms. Dalmy’s sentence, but he was undoubtedly dismayed that she had lied during her initial sentencing hearing. At that hearing, she had told the judge of her intention to “do whatever I can to make restitution.” She also expressed how “very, very sorry” she was and how she was “consumed by guilt every day over these circumstances from my waking moment until when I go to sleep, and the consequences on the investors.” Prosecutors, of course, pointed out just how untrue her words were. They said that if she was indeed so “consumed by guilt” she would not have set aside thousands of dollars for herself, when the money could have been used for restitution. The five-year term that the judge imposed on Friday is the sentence that prosecutors had initially sought.
For her part, Ms. Dalmy portrayed the money as a simple misunderstanding. She said that she had no intention of violating a court order. When the judge ordered her to pay $2-million, nobody expected her to come up with a lump-sum payment. The judge instead set monthly payments for Ms. Dalmy at $500. She claimed that she did not realize she was supposed to hand over all of her assets, and that she thought she was to make monthly payments.
The intended purpose for the money, if Ms. Dalmy is to be believed, was for medical treatment. She suffers from osteoarthritis in both knees and her left hip and requires knee and hip replacement surgery. The costs will exceed what Medicare will pay for the procedures. She said that she wanted to be able to ensure she could afford proper care. The events that landed Ms. Dalmy in jail stemmed from a scheme in which she wrote false opinion letters for a Florida man named William Lieberman (who has since pleaded guilty to related fraud charges and is serving seven years in jail). Those opinion letters allowed Mr. Lieberman and others to receive millions of free-trading shares. Ms. Dalmy prepared the letters while knowing that Mr. Lieberman and his associates should have been disclosed as insiders. Ms. Dalmy continued preparing the letters even after the OTC Markets banned her. She circumvented the ban by using the name of another lawyer, with that lawyer having no relevant legal background and suffering from a degenerative disease.
The stocks in the scheme included Mammoth Energy Group Inc., a purported lithium explorer. It reached a 20-cent high in 2013 before falling under a penny. Also in the scheme was Fox Petroleum Inc., which was looking for oil in Texas, Colombia, Peru and other places. It went to 63 cents in 2009, and also fell to under a penny.
The five-year jail term represents just one of Ms. Dalmy’s legal troubles. The
U.S. Securities and Exchange Commission previously pursued her in a case that leads back to Vancouver. On Sept. 18, 2015, she received a $680,000 fine from the SEC for a shell factory scheme that involved former Vancouver lawyer John Briner. The SEC said that she wrote opinion letters in support of an effort by Mr. Briner at listing 20 purported mining companies. Mr. Briner had attempted to create the companies as shells by using sham property deals and nominee officers.
Mr. Briner is no longer in the securities industry. The Law Society of British Columbia has since disbarred him for misusing a client’s money. He now lives in Chilliwack and works in the hop farming business.