'Bermuda Short' Accused Pleads Guilty In Plea Bargain

by Leroy James, Tax-News.com, New York

26 December 2002

The 'Bermuda Short' case, in which a 2-year investigation resulted in the arrest of more than 50 individuals last August accused of wire and securities fraud, looks to have claimed its first scalp as one of the accused, Paul Lemmon, has reached a plea bargain with the US Department of Justice which will invove his full co-operation in assisting ongoing enquiries and the continuing court action. He is pleading guilty to one count of wire fraud.

Lemmon and his colleague, Thomson Kernaghan head Mark Valentine were two of the most high-profile targets of the joint RCMP/FBI undercover operation. The charges against Lemmon, Valentine and others relate to a complex operation in which they are alleged to have encouraged sales of penny share stocks whose value had been artificially inflated, only to profit from their inevitable collapse through short-selling. Much of the dealing involved was operated out of Bermuda - hence the code-name 'Bermuda Short' given to the sting operation which eventually brought about the arrest of the accused.

At the same time as the arrests were made, in August, the Central Bank of Barbados revoked the banking licence of Keywest Swiss Investment Bank, in accordance with the International Financial Services Act, 2002. Bahamas-based accountant, Michael Hepburn, who acted as the bank's principal officer, had been arrested in Miami, and charged with five counts of money laundering and conspiracy to commit money laundering.

Mr. Lemmon's plea agreement was signed and filed in court last Wednesday. In it, Mr. Lemmon pleads guilty to one count of conspiracy to commit wire and securities fraud, while the other two counts on his grand jury indictment will be dropped after sentencing. He pledges his full co-operation with authorities, and he will presumably have plenty to say about how Mr. Valentine operates, especially in the broker's lucrative offshore shorting activities. Mr Lemmon, who has been in gaol since his arrest in August, will now be released on bail.

However, a motion to allow Mark Valentine to dispense with the electronic anklet he wears during his bail is being opposed by the prosection. Currently he is restricted to living in South Florida pending his trial, set for March, but wants to be able to travel to Canada.

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