SEC charges former Vancouverite Miller for OTC workSEC charges former Vancouverite Miller for OTC work
2019-09-24 20:14 ET - Street Wire
Also Street Wire (U-ABKI) Abakan Inc
by Mike Caswell
The U.S. Securities and Exchange Commission has filed civil fraud charges against former Vancouver resident Robert Hillis Miller over an OTC Markets scheme. The SEC claims that Mr. Miller sold $1.39-million worth of shares in Abakan Inc., a purported materials coating company, in unregistered offerings. (All figures are in U.S. dollars.) He had secretly held the shares in front companies incorporated in Uruguay, the SEC says.
The allegations against Mr. Miller come decades after he spent time in Vancouver, first as a broker and then as a shareholder of many Vancouver Stock Exchange listings. Public companies that he was associated with include controversial miner Crystallex International Corp., Dil Gujral's Gagan Gold Corp. and Scorcorp Industries Inc., a technology promotion that went to over $3 (Canadian) in 1990. Mr. Miller left Vancouver in 1993, moving to his wife's home country of Uruguay before settling in the Miami area.
The SEC's case against Mr. Miller is set out in a civil complaint that the regulator filed on Tuesday, Sept. 24, in federal court in Maryland. The complaint identifies Mr. Miller, 65, as a resident of Coral Gables, Fla., and as the chief executive officer of Abakan. The company's primary asset was an interest in a metal coating technology that it was attempting to commercialize.
The case centres around illegal share sales that, according to the SEC, took place from 2013 through 2015. In late 2013, Abakan was desperately short of cash. Among other things, the company was unable to raise money to pay Mr. Miller's salary or to pay rent to a company that was associated with Mr. Miller, the SEC says. To raise money, Mr. Miller arranged a roundabout transaction in which he sold shares that he held through front companies, the SEC said.
The way the transaction worked, at least according to the SEC, was that Mr. Miller arranged a loan using Abakan shares as collateral. The shares were supposedly unrestricted, or immediately available to sell. The problem, as set out in the complaint, was that Mr. Miller secretly controlled the stock. As he was an insider, the shares should have been subject to a hold period and unavailable for sale.
(The complaint describes a somewhat elaborate arrangement in which Mr. Miller secretly held his shares through front companies. According to the SEC, he had an accountant in Uruguay, who he had known from high school, set up the companies. On paper, the accountant had control over the companies, but according to the SEC, Mr. Miller was their directing mind. He or his son regularly contacted the accountant and provided instructions with respect to the front companies.)
Through several transactions, Mr. Miller borrowed a total of $1.2-million for Abakan using the shares as collateral, according to the complaint. The lender ultimately sold the shares on the market, generating $1.21-million, the SEC says. With Mr. Miller being an insider, the shares were not freely tradable and should not have been sold to the public, the SEC claims.
In addition to those transactions, the SEC cites Mr. Miller for share sales that he carried out through an investor relations consultant. According to the complaint, Mr. Miller transferred blocks of shares to the consultant in 2013 and 2014, and directed the consultant to sell the stock on the market. Mr. Miller then used the money to pay Abakan's expenses and debts, the SEC says.
With those sales, the brokerage that was selling the shares flagged the transaction and demanded more documentation, the complaint states. The brokerage sought confirmation that the stock was not coming from an insider. According to the SEC, Mr. Miller signed a letter stating that the entity that had held the stock "has never been an affiliate nor a control entity of Abakan Inc." This was entirely false, as Mr. Miller beneficially owned the stock, the SEC says. In all, those sales generated $245,000, according to the complaint.
On top of those complaints, the SEC cites Mr. Miller for failing to disclose his full ownership of Abakan shares in public filings. From 2013 to 2015, the company's filings disclosed Mr. Miller's holdings at a steady 24.1 million shares, about one-third of the total outstanding. That figure did not include the shares he held through his front companies, which amounted to 7.15 million shares in August, 2013, the SEC claims.
The SEC is seeking an appropriate fine, disgorgement of gains, and an officer and director ban for Mr. Miller. The regulator is further asking for a court order barring any future violations. Mr. Miller has not yet filed an answer.
For Abakan shareholders, the case comes with the company essentially defunct. The stock traded as high as $3.50 in 2013, but was under a penny by 2016. The SEC revoked the company's registration on May 17, 2018, for failing to file financial statements.
Tuesday's case is not the first to arise from Abakan trading. On Aug. 31, 2017, two brokers agreed to pay a combined $225,000 in penalties after the SEC accused them of manipulating the stock. According to the SEC, the men marked the close as part of an attempt to get the stock listed on the Nasdaq. (Companies seeking a Nasdaq listing must close at or above $2 for 90 days. The attempt was ultimately unsuccessful, as the men did not realize that the requirement was for 90 trading days, and not 90 consecutive days.) The two brokers, Richard Cedrone and George Thorseson, did not admit to any wrongdoing in agreeing to pay the fines.
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