By NEIL HARTNELL
Tribune Business Editor
One of the two Bahamians indicted over a $500 million money laundering scheme allegedly told an undercover US federal agent he could “orchestrate” fraudulent securities trades and did this “all the time”.
The claimed remarks by Rohn Knowles were contained in the US federal indictment against himself and fellow Bahamian financial services executive, Kelvin Leach, that was finally unsealed yesterday in the US eastern New York district court.
Other fresh allegations contained in the indictment include claims that US undercover agents were first introduced to Leach and Knowles, and their Belize-based broker, Titan International Securities, by employees at a Bahamas-based broker/dealer.
The lawsuit claimed that an unnamed employee at the now-defunct Gibraltar Global Securities “directed” law enforcement agents to Titan, and provided contact details for Mr Leach.
“Beginning in approximately November 2012, a law enforcement agent posing as a stock promoter engaged in fraudulent trading activity was directed by John Doe 1, an employee for the now-defunct Bahamas-based broker-dealer, Gibraltar Global Securities, whose identity is known to the Grand Jury, to Titan and Legacy,” the indictment alleged.
“John Doe 1 advised the undercover agent that Titan and Legacy could establish an IBC for the undercover agent to facilitate his stock promotion business, and that same day, sent an e-mail to the undercover agent providing him with the contact information for the defendant Kelvin Leach.”
Sean Moree, attorney and partner at McKinney, Bancroft and Hughes, pointed out that neither Gibraltar nor its directors/management/employees had been charged or named as defendants in the Knowles/Leach indictment.
The attorney for Gibraltar and its former principal, Warren Davis, also described the broker/dealer’s involvement as “cursory” and “tangential”.
And, with Gibraltar in the throes of winding down at the date referenced in the document, Mr Moree said it was only natural for the company to refer potential clients to other broker/dealers.
He wrote in an e-mail: “During its liquidation, Gibraltar referred all inquiries to it to various companies as it was no longer a going concern.
“As can be seen from the indictment, Gibraltar is not a named party nor is it said to have been involved in any way with any illegal activity.”
Gibraltar and Mr Davis are still embroiled in their own, separate legal challenges in the US, where they are fighting two lawsuits (civil, not criminal) launched against them by the Securities & Exchange Commission (SEC).
They have, though, enjoyed some success in getting the most serious, fraud-related charges against them dismissed by the US federal courts, heavily ‘watering down’ the US case against them.
Meanwhile, the Leach/Knowles indictment alleged that the former told the US undercover agent in January 2013 that he could use an IBC to conceal his ownership of a stock brokerage account with Titan.
The undercover agent paid $3,300 to create and IBC and open a brokerage account, aided by Robert Bandfield and Andrew Godfrey, two others charged in relation to the same alleged scheme.
Bandfield allegedly boasted, during a November 6, 2013, meeting that”he had created Titan”, and formed more than 5,000 companies to help conceal beneficial ownership from SEC and Internal Revenue Service (IRS) reporting requirements.
“That same day, the undercover agent also met with the defendant Rohn Knowles. Consistent with the defendant Robert Bandfield’s explanation of IPC CORP’s fraudulent coordination with Titan and Legacy, Knowles acknowledged that Titan could not open an account for US citizens, like the undercover agent, without IPC Corp’s IBC and LLC arrangement,” the indictment alleged.
“When the undercover agent explicitly indicated that he wanted to engage in fraudulent market manipulation through wash trades and match trades between two accounts controlled by him, Knowles stated that he could orchestrate those trades through close coordination with the defendant Brian De Wit at Legacy, and stated that “me and Brian do it all the time for other clients’.”
The undercover agent allegedly met Bandfield and Godfrey at IPC’s office again on March 4, 2014, and boasted that he had devised a “slick structure” to circumvent the US Foreign Tax Compliance Act (FATCA).
Alleging that all those charged helped to aid the agent’s purported scheme, the indictment added: “On or about April 9, 2014, during a consensually-recorded telephone call between Leach and the undercover agent, Leach confirmed that any wire transfer requests to Titan must go through IPC Corp, and that IPC Corp’s nominee must execute stock transfers.
“When the undercover agent explicitly stated that he wanted to orchestrate trading in the stock of a publicly traded company between Legacy and Titan, Leach responded that Titan worked well with Legacy.”
Wire taps and e-mails obtained via court-authorised search warrants allegedly showed the defendants were helping others perpetrate similar schemes.
“The e-mails from the search warrants revealed that the defendants were engaged in similar fraudulent schemes to the ones exposed by the undercover operation,” the indictment alleged.
Detailing some of the alleged acts committed to aid these schemes, the indictment claimed: “On or about December 16, 2013, the defendant Rohn Knowles sent an e-mail to Bandfield, copying Leach, in which he forwarded an e-mail from Corrupt Client 2, an individual whose identity is known to the Grand Jury, requesting six wire transfers totalling $1.9 million for various IBCs.”
And it further alleged: “On or about March 28, 2014, Corrupt Client 5, an individual whose identity is known to the Grand Jury, called the defendant Rohn Knowles to inquire about his trading order and wire transfers to a third party.
“In response, Knowles stated that Titan could execute third-party wire transfers but reminded Corrupt Client 5 that he needed to send the wire instructions through Godfrey or ‘whoever the signatory is on the account’.
Messrs Leach and Knowles are understood to still be in Belize. There is some suggestion that they might try to return to the Bahamas, and fight any US extradition attempt from here.