"We can confirm the arrest," Stefan Biehl, a spokesman for the public prosecutor's office in Stuttgart stated in an email Thursday.
"He was arrested in Austria and is still in jail. We wait for his delivery. He is accused of market manipulation. There are two accomplices, one of which is also in jail in Germany."
Biehl declined to provide any further details.
Goldman Morgenstern & Partners, a German financial intelligence service, earlier reported that one of the other defendants is Pascal Geraths, former editor of two stock newsletters, Focus Money and BullVestor, which heavily promoted De Beira shares.
Goldman said Geraths was arrested in his Salzburg apartment on Monday, but will not be extradited to Germany because market manipulation is deemed an "administrative infraction" in Austria, rather than a criminal offence.
Stuttgart prosecutors were apparently not pleased with Austria's refusal to extradite him: "After all, the accused by market manipulation in early 2006 generated more than 47 million euros [about $65 million]," Goldman quoted Stuttgart public prosecutor Claudia Krauth as saying.
The third defendant has not been identified.
When it went public on the OTC Bulletin Board in the United States in early 2006, De Beira was clearly a sham exploration company.
It was headed by Vancouver longshoreman Mike Fronzo, who had no prior experience in mineral exploration. The company's property cost only $126 to stake and the company's geologist was Erik Ostensoe, who routinely recommended work programs on properties of dubious merit.
Seed shares were distributed to local residents who appear to have been acting as nominees. Among them was Angelo Freda, who bought 125,000 shares. When I contacted Freda at the time, he said he had bought them on Fronzo's recommendation, but couldn't remember how much he paid for them. He said he sold them in January, before the company went public, for about the same price as he bought them. "I basically broke even," he said.
This is the typical pattern: the promoters distribute the shares, then gather them up. The net result is a tightly held, easily controlled, publicly traded shell company that is perfect for some future promotion.
Sure enough, immediately after clearing the company's shares for resale, Fronzo handed off the company to a pair of Australian promoters, Reginald Gillard and Klaus Eckhof.
In May 2006, Gillard and Eckhof announced an option to explore a project in Colombia and -without drilling a single hole -the company's total stock value jumped from practically nothing to $600 million US within several weeks.
The stock was co-listed on the Frankfurt Exchange in Germany, where it was aggressively touted by newsletter writers and spam email.
"The whole thing is an insult to the concept of a free market," I reported at the time. "It is a carefully orchestrated piece of artifice that is sure to bring grief to public investors, and more injury to Vancouver's financial reputation."
Eckhof denounced my reports as "typical journalistic trash."
In June 2006, the B.C. Securities Commission issued a cease-trade order against the company on grounds that it had not made proper disclosure of its mineral interests. The promotion subsequently unravelled and the stock, which peaked at nearly $15, is now trading at a dime under the name Panex Resources Inc.
Mawji's alleged role in all this is not clear. When De Beira shares were in full flight, Mawji told me he had introduced De Beira to the Australian promoters. And during April and May 2006, when control was changing hands, Mawji's personal telephone number was listed on De Beira's press releases. The company's website was also registered in Mawji's name.
Mawji recently became president and chief executive officer of Golden Touch Resources Corp., a TSX Venture-listed company that is exploring properties in Albania.
Last week, while en route to Albania, Mawji stopped over in Vienna, where he was arrested.
Golden Touch issued a release stating that Mawji "has been detained in Europe on matters that to the best of the company's knowledge, information and belief are completely unrelated to any of Golden Touch's business or affairs."
The company also announced that Mawji had resigned as president and CEO and had been replaced by Australian geologist Robert Murdoch.
dbaines@vancouversun.com
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