The YBM Magnex Files Adrian du Plessis ... - Deep Capture

1997, a total of 3,767,703 shares were traded in 2604 transactions.
A lack of retail public distribution likely accounts for the lack of widespread discussion of YBM
Magnex on the internet. Until recently - and the FBI et al raid, auditor's concerns raised, the
trading halt, public awareness of the company's Russian mafia roots -- outside of mutual fund
managers, advisors, and brokerage analysts, there existed a comparatively small number of
people who followed the stock intently. Prospective class action lawyers will find that, although
they are out there, it will take more work to locate small investors in YBM than in such past
Canadian stock promotions as Bre-X Minerals or Harvard International Technologies (the
overheated french-fry vendor that flamed out in the mid-1990s with Canada's ex-Prime Minister
John Turner wearing a director's apron).
It's a feature of the Canadian stock markets today, driven by managed money accounts (e.g.
mutual and pension funds), that when a stock promotion falters or crashes, the institutional
managers of accounts routinely fail to pursue possible financial remedies on behalf of their
unitholders, pensioners etc.
In the near-decade since forestry company Doman Industries' shares clearcut a portion of the
CBC news network's pension fund - and led to insider trading charges against British
Columbia's former premier Bill Bennett and others - there has been curiously little legal
response from burned pension and mutual funds in this country. Lawyers for the CBC extracted
a settlement on behalf of that pension fund, but those money managers who play with other
peoples' money by buying shares in small or mid-cap stocks, particularly those spawned on the
speculative, high-risk, Alberta and Vancouver exchanges, are remarkably sanguine when losses
result from their questionable picks.
Why do industry professionals backing stocks like YBM Magnex appear so content to write
down such purchases and leave it at that? That's a question the public may well ask some day.
Questions about the levels of due diligence carried out by mutual fund managers, advisors and
securities analysts, naturally, dovetail with this line of inquiry.
My own YBM due diligence review had brought me to the SEDAR web-site where I located the
report of auditors Deloitte & Touche LLP along with various related notes, schedules and
management discussion documents that had been filed in late 1997. The one thing I didn't find
was the basis on which First Marathon's analyst, Kaan Oran, could claim that YBM Magnex had
passed this audit "with flying colours."
Certain findings of the audit were disturbing and when viewed in an overall due diligence
context -- informed by knowledge of other questionable elements of the company's history,
principals, and public disclosure practices - they heightened a growing sense of alarm about
YBM Magnex.
That any professional would put such a positive spin on this situation seemed more than bizarre
- it appeared downright negligent or reckless.