New York prosecutors have recommended a sentence of up to 30 months in jail for John Zanic, 50, the Vancouver promoter who pleaded guilty to charges stemming from a 2008 broker bribery scheme. Prosecutors say he was behind a “blatant scam” in which he paid kickbacks to have brokers buy shares of pink sheets listing Guyana Gold Corp.
The charges against Mr. Zanic stem from a scheme in which he and another man, New York resident Shay Keren, sent money to an individual claiming to represent corrupt brokers. In reality, the individual was an undercover FBI agent. Mr. Zanic and Mr. Keren sent the agent $122,000, and were arrested on bribery charges. (All figures are in U.S. dollars.)
The prosecution filed a sentencing memorandum for Mr. Zanic on April 12, 2011. In it, the government argues that a jail term of 24 to 30 months is appropriate, as he and others “brazenly and illegally” conspired to commit fraud. The sentence is also necessary to deter others from similar crimes, the prosecution says.
While Mr. Zanic has not yet filed a response to the memorandum, it appears he will be asking for leniency based on the ill health of his 79-year-old mother. His lawyer wrote a letter to the judge on April 13, 2011, which requests time to prepare a sentencing recommendation while doctors complete tests on his mother. She has been diagnosed with colon cancer, and is under the care of a doctor in Las Vegas. Mr. Zanic’s lawyer says he needs time to examine medical reports before he can prepare his argument. The judge agreed to the request, and set the sentencing for June 11.
This means that Mr. Zanic, who was to be sentenced on Friday, April 15, will remain free on a $500,000 appearance bond. The bond specifies that he must remain in Las Vegas, where he was living with a girlfriend when the FBI arrested him.
Zanic’s indictment
Prosecutors indicted Mr. Zanic and Mr. Keren on Nov. 6, 2008, in the Southern District of New York on one count of securities fraud and commercial bribery. According to the indictment, Mr. Zanic met an undercover FBI agent in April, 2008, who offered to recruit stockbrokers to buy Guyana Gold shares using discretionary accounts. In return, Mr. Zanic would pay a 30-per-cent kickback.
The agent, who used the alias Charles Moore, initially proposed a test transaction in which the brokers would buy $75,000 worth of Guyana Gold. Mr. Zanic agreed to the deal, and said he would “take care of his end” in 24 hours. The FBI then bought shares of the company, through undercover accounts, at an average price of 62 cents. Mr. Zanic and Mr. Keren, after some prodding, sent a $22,000 bribe, the prosecution said.
Mr. Zanic then contacted the agent to arrange a more substantial purchase. He offered a $100,000 kickback, and asked that the brokers complete the buying by Sept. 1, 2008. The agent agreed to the terms, and Mr. Zanic wired the $100,000 to an undercover account that the FBI controlled, the indictment stated.
This time the FBI did not buy any shares of the company. Instead, agents arrested Mr. Zanic in Las Vegas, and transported him to New York to face the charges. After he entered an initial not guilty plea, the judge took away his passport and restricted him to living in Las Vegas.
While Mr. Zanic is still waiting to be sentenced, Mr. Keren has already finished his jail term. He pleaded guilty to the charges in February, 2010, and received a six-month custodial sentence, to be followed by 28 months of home confinement. He was released from the low-security Moshannon Valley Correctional Institution in Pennsylvania on Nov. 12, 2010.
Should Mr. Zanic receive the full 30 months that prosecutors are requesting, his penalty would be substantially stronger than that of Mr. Keren, as well as that of another Vancouver promoter arrested in a similar sting, Gary Burnie. He was charged in 2007 after agreeing to pay a 35-per-cent kickback to an undercover agent who would have brokers buy shares of his company, pink sheets listing GSB Financial Inc. Mr. Burnie pleaded guilty and received six months of home detention.
SEC v. Zanic
In addition to the criminal charges, Mr. Zanic and Mr. Keren are facing a parallel civil suit from the U.S. Securities and Exchange Commission.
The defendants in that case include two New York promoters, Glenn Grossman and Lawrence Cohen, who the SEC claims knew of the scheme. That suit is on hold pending the outcome of the criminal matter.
When he lived in Vancouver, Mr. Zanic worked for Stockscape Inc., a company that ran a stock market information site. He bought Stockscape’s operating subsidiary in November, 2001, for an undisclosed amount.
Courtesy of Mike Caswell
