British Columbia Securities Commission

British Columbia Securities Commission

October 03, 2005 09:30 ET

British Columbia Securities Commission: Convicted Stock Fraudster Hit with Maximum Penalty

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 3, 2005) - The British Columbia Securities Commission has ordered the maximum penalty against a B.C. man with a lengthy record of securities fraud and criminal convictions.

Michael Lee Mitton is permanently banned from the capital market and must pay a $250,000 administrative penalty for violating securities laws in four investment schemes he ran beginning in December 1995.

"Mitton has a long and egregious history of fraudulent and abusive trading," said the panel in issuing its decision. "He has 103 criminal convictions in Canada and an outstanding indictment for securities fraud in the U.S. In 1988, the Superintendent of Brokers issued an order prohibiting Mitton from participating in the capital markets for 20 years, an order that Mitton brazenly ignored. We consider it to be in the public interest to remove Mitton permanently from the capital markets, and from involvement with issuers, and to impose on him the maximum administrative penalty."

The commission panel found that Mitton:

- Advised investors without registration

- Sold shares he did not own without telling investment dealers

- Defrauded investment dealers through his investment schemes

- Traded securities without registration

- Made an illegal distribution of securities

- Manipulated the stock market

In three schemes Mitton - directly or through nominees - defrauded investment dealers. "Mitton's conduct was clearly deceitful," said the panel. "Neither he nor his nominees told the various dealers that they would pay for their transactions only if they were able to undertake a profitable offsetting transaction. Indeed, Mitton instructed his nominees to take steps to prevent the dealers from discovering this for as long as possible."

The panel found Mitton's fourth scheme "a textbook market manipulation." Mitton used a network of market makers and promoters across North America to manipulate the trading of shares of H & R Enterprises Inc., a shell company quoted on the NASD Over-the-Counter Bulletin Board in the U.S. As part of the manipulation, H & R issued promotional news releases about business ventures and a private placement that never occurred. In all, Mitton gave his market makers, promoters and nominees three million shares they traded under his direction.

"Mitton had controlled it all," said the panel in its decision. "He acquired the shell company. He issued promotional news releases. He set up a network of market makers, promoters and nominees and funneled shares into their hands. He directed the trading not only in the nominee accounts, but among the market makers as well...over $6 million was paid out of those accounts to Mitton or at his direction."

As part of its decision, the commission panel also permanently cease-traded the shares of H & R Enterprises in B.C. and sanctioned two others involved in the manipulation. David Scott Heredia and Jerome Rosen are permanently banned from the B.C. capital market.

In December 2000, B.C. Supreme Court sentenced Mitton to a four-year jail term after he entered guilty pleas to six counts of securities fraud.

The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province. You may view the decision on our website by typing in the search box Michael Lee Mitton, H & R Enterprises Inc., or 2005 BCSECCOM 612.

Contact Information

  • British Columbia Securities Commission
    Andrew Poon
    Media Relations
    (604) 899-6880 or (B.C. & Alberta) 1-800-373-6393