Cycomm + Marleau Lemire Sec.: How Mumble and Rumble fumbled and stumbled

[Adrian du Plessis]

Marleau, Lemire Inc MRM

Shares issued 5,989,921 close $4.75 Tuesday Mar 10 1998

HOW MUMBLE AND RUMBLE FUMBLED AND STUMBLED by Adrian du Plessis

Hubert Marleau was billed "The Rainmaker" and Andre Lemire, "The
Stabilizer." In their home province of Quebec, members of the financial
community and press called them "Mumble" and "Rumble", respectively, if not
respectfully.

Nine years ago, the pair, who now might more aptly be named Fumble and
Stumble, teamed up to launch Marleau Lemire Inc, an investment dealer that
quickly moved into the penny stock trade, previously considered the special
preserve of Howe Street operators.

Last month, furnishings of the brokerage's King Street, Toronto
headquarters were auctioned off, marking an inglorious end to a
much-celebrated venture. Before the walnut boardroom table, the Royal
Doulton chinaware and other office contents were consigned to the highest
bidder, Marleau Lemire Securities had enjoyed a glowing reputation, in part
a self-crafted legend, as the corporate extension of its two visionary
founders.

When Messrs Marleau and Lemire, friends since university, opened their own
shop and began to pitch penny stocks to institutional and other clients
their company was heralded as a new breed of broker-dealer. Exemplary of
the tone struck by Canada's national business press, the now defunct
Financial Times of Canada praised the boutique's research capabilities at
the same time it studiously avoided reviewing the firm's more dubious
offerings.

One fluff piece, with its focus on then company principal, Richard T.
Groome, recorded how "Marleau Lemire was established in 1990 with the
belief that Canada's infrastructure was in the midst of a fundamental
transformation." Another write-up told readers about the two men who would
lead investors into this brave "New Economy" of emerging growth companies.
Hubert Marleau, it was said, "belongs to a rare breed of high-end, abstract
thinkers and describes himself as a formula-oriented type". Andre Lemire,
was credited with bringing balance to Mr Marleau's flamboyance. "The
particular chemistry they create," gushed a 1996 profile, "has helped shape
the culture of the company - a culture of venture and boldness tempered by
calm reflection."

Mumble and Rumble's company went public in October 1993 and the leaders
were instantly rewarded. For 1993, Messrs Marleau and Lemire received
identical salaries of $120,000 and identical bonuses of $832,247. Richard
Groome, then a senior executive vice-president, received a salary of
$60,000 and a bonus of $931,328. The compensation paid these three
executives represented about eight percent of Marleau Lemire's total
revenues and 44 percent of the company's total profits for the year.

Despite troubling scandals in 1994 and 1995, which made public certain
questionable practices at Marleau Lemire, overall the firm's public face
remained positive. In mid-1995 The Financial Post reported: "Marleau Lemire
is still regarded as innovative, and respected for being independent in an
industry that is being increasingly dominated by banks."

After the Investment Dealer's Association of Canada fined the firm $150,000
for having a "serious lack of systems and procedures" in place for the
segregation of clients' securities and the supervision of retail client
accounts, the faithful Post located an unidentified investment dealer whose
comments balanced the negative news: "They (Marleau Lemire) have a very
good future and have done an excellent job in an undernourished market.
They have been right on the button."

The IDA's 1995 fine, a penalty considered severe for the self-regulatory
industry lobby group, along with a bizarre controversy involving $2 million
in futures trading losses tied somehow to a corrupt Cambodian bank, and
other set-backs preceded similar words of dutifully published support. In
July 1995, weeks after the Cambodian bank scandal had broken, and days
after company president Richard Groome had resigned, (to begin "realigning
his career path" in the words of Andre Lemire), Dominik Dlouhy of Dlouhy
Investments told the press: "Marleau Lemire is an independent firm and we
need more firms like them to prevent the industry from getting too
cartel-like."

Today, however, there is one less firm like Marleau Lemire Securities and
there are official probes ongoing into the shut down brokerage's practices
in connection with penny stock companies. Central to investigations
underway at the IDA and Toronto Stock Exchange are questions about secret
share buyback arrangements and disappearing funds involving juniors KWG
Resources and Ste-Genevieve Resources (yet another Hubert Marleau-directed
vehicle).

What went wrong?

For each share price winner sponsored by Marleau Lemire and touted in its
promotional literature, such as Cinar Films or Mosaid Technologies, there
exists an unmentioned stock market fiasco like Modatech Systems or Belcarra
Motors. A look at some of the firm's forgotten deals shows a pattern of
questionable activities, and even evidence of illegal conduct - right at
the top of the brokerage.

The extremely well-documented case of Cycomm International, a Marleau
Lemire favourite that has been little-advertised since its stock price went
in the tank, provides a picture window into internal operations of the
ballyhooed boutique during its heyday.

Mumble (Hubert Marleau) was a director of Alberta-listed Cycomm in 1993 and
1994 when it came under regulatory scrutiny by the BC Securities
Commission. Around this time, shares in KWG Resources, one of the juniors
that has catalysed the recent undoing of Marleau Lemire Securities, were
purchased by Stratton S.A., an Uruguayan-registered trading account
associated with public companies favoured by controversial, long-time,
Cycomm-backer, Graham Ferguson Lacey. Stratton was flagged as a suspicious
money and share conduit by both the RCMP and the US Securities and Exchange
Commission prior to it drawing the attention of staff at the BC Securities
Commission looking into a large special warrants financing in Cycomm by
Marleau Lemire.

Cycomm, previously known as Sonartec North America and Sonatel
Telecommunications, was a perennial money loser and operational failure.
The company promoted itself by continually exaggerating and misrepresenting
the status and salability of items as varied as a sonar activated
ocean-going crab trap and cellular phone privacy devices.

For much of its rubbishy history as a Canadian junior, from 1987 - 1991,
Cycomm had hyped three products which did not even exist in commercially
viable form: the AdZapper, a non-existent black box that promised
commercial-free home videotaping; the AdSwapper, a larger and equally
non-existent form of the AdZapper,; and the PL2000 (an illusory black box
billed as converting telephone party-lines into single use lines).

The AdZapper, AdSwapper and PL2000 were all said by Cycomm to be the
inventions of Dieter Blum, a "widely respected" engineer who had "obtained
both a Bachelor of Science degree from Basel University, Switzerland and a
Masters of Science degree in Electronic Engineering from Roosevelt
University, Belgium." In truth, Mr Blum, a high school drop-out with a
string of fraud-related criminal convictions to his name, was serving time
in a Canadian penal institution on charges of false pretenses at the time
Cycomm certified he was receiving his degrees. Under such circumstances,
the fact that Basel University did not offer a Bachelor of Science degree
and, further, that there is no Roosevelt University in Belgium seems
academic. It was a company that only the likes of Fumble and Stumble could
love.

In October 1997, Mr Blum, retained as a consultant by VSE-listed IVS
Intelligent Vehicle System, said of the Cycomm scandal: "Yes, the false
statement of degrees... is a gross misrepresentation of the truth when
certified by a public issuer; but what in heaven does that have to do with
my credibility when it comes to conceiving, researching and developing new
technology?" According to the inventor, "the BCSC requested a meeting with
me in May of this year. You guessed it, they asked about Sonatel and fraud
etc. After showing them what I had been up to over the years... the BCSC
found that I be allowed to be involved with IVS, or any public company, for
that matter."

Cycomm's backers had already learned to weather the smell of swindle when,
in the mid-1980s, the Australian arm of the company's crab-pot peddling
venture, Sonartec, featured in one of that country's largest-ever financial
scandals. The Teacher's Credit Union collapse in Western Australia
necessitated a multimillion dollar government bailout. It was discovered
that teacher's pension funds had been loaned to a handful of penny stock
promoters and invested in shares of dodgy stocks pushed by these same
individuals.

In a controversial move, the bank handling the bailout disposed of a large
block of Cycomm shares to an associate of company insiders, Roger Leopard,
who operated out of Post Office Box 423 in the Geneva airport. After these
shares passed to letter-box Leopard, at a tremendous discount to the price
at which the stock was then publicly trading on the ASE, the company
dropped mention of its trumpeted Australian projects. Robert Martin, the
promoter for Sonartec down under, was found not guilty on charges of
bribing the penny stock-loving fund manager. Once the bribery trial ended,
however, Mr Martin was sent to jail for illegally tapping the telephone
lines of court witnesses.

The ongoing North American activities of Cycomm, primarily under its
predecessor name, Sonatel, earned more negative publicity in 1988/89 when
share trading in the company's stock by a London-based bucket shop, T.C.
Coombs & Co, caught the limited attention of securities investigators in
Canada and the U.K. In 1991, British authorities shut down T.C. Coombs (a
dealer in various scam stocks throughout Canada, Europe and Australia),
but, as had occurred when the Australian pension fund misadventure hit the
fan, Cycomm and its backers sailed on with a new name and a new story for
investors. By November 1993, when Mumble became a director of Cycomm
International, the company was no longer associated with the former
jailbird or his inventive line of non-functioning high-tech products. In
1991, after questions were raised about Mr Blum by staff of the Ontario
Securities Commission, the company shifted its promotional emphasis to the
commercially unsuccessful secure cellular and radio products of a Portland,
Oregon-based subsidiary, Cycomm Corp.

For years before it was taken over by the ASE (and, subsequently,
Amex-listed) company, Cycomm of Portland had promised it was
just-around-the-corner from enjoying "stable profitability" from sales of
its family of communication security devices (voice systems for cell
phones, scramblers etc.) Management in Portland was unflagging in its
proclamations: 1987/88 sales were projected at $6 million, doubling to $12
million by the next year and then leaping to $55 million by 1990.

After 1991, production of unrealistic and unfulfilled hype was transferred
to management of the public vehicle, Sonatel, renamed Cycomm International.
Cycomm announced receiving "a $2.4 million sales/distribution contract from
GEC-Marconi of England to provide the complete line of cellular privacy and
telephone privacy products into the European marketplace." Further, it was
stated, Cycomm's distribution of a Marconi product line "could result in
another marketplace generating more than $40 million by the end of Fiscal
Year 1994."

These inflated projections, like all those issued before, failed to
materialize. In reality, for fiscal year ended May 31 1994 Cycomm, which
consistently spent inordinate sums on management fees and administrative
expenses, recorded a loss of $9.1 million on sales of only $1.5 million.

In late 1993 there was an air of expectation about Cycomm's Vancouver
headquarters and a mood of boosterism percolating in the offices of Marleau
Lemire Securities. Marleau Lemire agreed to underwrite a special warrants
issue for the company priced at $3.50 per warrant. This financing was to
raise $8.75 million in new funds and to repay, by the issuance of warrants,
$2.8 million in loans reportedly received by Cycomm via an anonymous
Bermuda Trust account and from Epsom Investment Services N.V. a Roger
Leopard-associated Geneva airport letter-box company that had routed its
curious loan payment through the Netherland Antilles.

Cycomm filed a national prospectus on November 9, 1993 with B.C. the "prime
vetting jurisidiction" and Marleau Lemire the sponsoring underwriter.
Proceeds of the special warrant offering were held in trust "subject to the
provision that they be returned unless a final receipt for the prospectus
was received" by the day following the "drop dead" date of January 28,
1994.

Mumble once explained: "In assessing a company's prospects this is how I
discipline myself and perform my due diligence: I look at capital spending,
the ability to borrow, and income-generating potential. I deal with numbers
first, and then with the verbiage." Based upon the numbers, Cycomm was an
unqualified disaster. Partner Rumble boasted of the "fundamental, bottom-up
stock picking" approach that gave the pair's firm a competitive edge. The
process followed by the failed brokerage firm in its underwriting of Cycomm
is, therefore, worth considering beyond its regulatory implications.

In December 1993 the BCSC questioned Marleau Lemire as to what due
diligence efforts had been undertaken in conjunction with the brokerage
lending its imprimatur to the $11.55 million special warrants prospectus.
The investment dealer's vice-president of corporate finance, Richard O'C
Whittall, assured government investigative staff that Cycomm had been
diligently researched for two months by analyst Rob McConnachie, an MBA
employed in the broker's Vancouver office (and currently employed by Scotia
Capital Markets)

An on-site inspection of files maintained at Marleau Lemire's Hastings
Street branch turned up little material that suggested independent
research. When trapped, Mr Whittall blathered: "I don't think, first, it's
a pretty boring file... It's, it's full of stuff produced by the company.
But there's the, the, ah, last culling I did of the file, just because it
was getting unwieldy, because we had four copies of the same annual report
and all that kind of crap."

The "kind of crap" that bloated Marleau Lemire's Cycomm research file was
promotional literature and other standard issue junior company material.
Much of the independently generated contents of the brokerage firm's files
related, not to an arms length review of Cycomm's operations and history --
work product that could benefit public investors or private clients -- but,
rather, to matters of self-interest, such as the efforts of Marleau Lemire
staff to confirm that various accounts subscribing for special warrants
could pay for the stock.

The "pretty boring" papers spread out on Marleau Lemire's boardroom table
did, however, contain a few lists of interesting due diligence questions
said to have formed part of meetings between the underwriter and the
issuer. (Cycomm was represented at sessions by its then Chief Financial
Officer Steven Blacklock, a B.C.-based Chartered Accountant who, among
other things, professed a blank ignorance of certain key details of
Cycomm's financial affairs, including the identity of its mysterious
offshore lenders.) When pressed for copies, in any format, of any answers
obtained to questions as part of this due diligence process, Marleau
Lemire's management and legal counsel advised the BCSC that answers to the
firm's underwriting questions had not been recorded.

In a search for evidence of investigations carried out by the underwriter,
attention turned to the "information document" credited to Mr McConnachie,
a member of Mumble and Rumble's vaunted research team. Mr McConnachie put
his name to a six page report that was woefully short on verifiable facts
and corporate history but long on inaccuracies, unsubstantiated points and
extravagantly unrealistic earnings and profit projections. Questionable
highlights included: disclosure of a previously unannounced order - "the
largest on record in the U.S." - for installation of anti-eavesdropping
equipment on mobile telephones used by staff of an unnamed "major U.S.
medical products company"; and grossly overstated sales and earnings
numbers for Galactica Telecom, a Venezuelan entity in which Cycomm had
recently entered into negotiations to acquire a partial stake.

Despite Cycomm recording sales of only $882,000 in fiscal 1993, Marleau
Lemire projected "conservative" sales for the company in fiscal 1994 of
$23,587,000; in 1995 of $75,072,000; and in 1996 of $129,581,000
(translating into a forecast loss in 1994 of $416,000 and profits in 1995
of $8,278,000 and 1996 of $11,591,000.) The forecast figures for fiscal
years 1994 through 1996, deemed "conservative" by the underwriter,
predictably proved to be fantastic. Cycomm's actual numbers were in line
with its historical results. Instead of Marleau Lemire's estimated three
year profits of $19.5 million on sales of $228.24 million, Cycomm incurred
a loss of $23.05 million on sales of just $8.25 million.

In his pre-financing report, Rob McConnachie pronounced Cycomm "should
attain profitability by the fourth quarter of the current fiscal year
(1994)." Justifying the broker's published expectation that revenues would
rocket 26-to-147-fold and Cycomm's lengthy history of losses turn around
into sizable profits, the analyst, (saluted last year as a top stock
"sleuth" by The Financial Post), concluded his pitch: "With new product
introductions coming to the marketplace at the end of this year, and
following a sizable capital injection to allow the Company to implement its
business plan, we believe the prospects for Cycomm to be extremely
favourable and for its share price to reflect the anticipated growth in
both revenues and profitability over the next 3 years."

"We're happy to share our investment research with clients," Howard Eisen,
Marleau Lemire's vice chair has said in print. But when a BCSC investigator
requested a copy of the firm's Cycomm report, corporate finance vp Richard
O'Whittall was hesitant. He intimated that, as a consequence of it
containing so many errors, Mr McConnachie's report (issued under the banner
of Marleau Lemire's Corporate Finance Research department) was not being
widely circulated. In any event, the firm's incredible earnings/sales
projections were prepared for internal use only. Brokers could use that
knowledge and sell the issue to clients, but Marleau Lemire did not intend
for hard copies of the forecasts to be in public hands. Mr O'Whittall's
efforts to bury the report came only days after he had boasted of his
firm's thorough due diligence by citing Rob McConnachie's two month Cycomm
review.

In August 1993, weeks before Mr McConnachie completed his report, Cycomm
was preparing the market in advance of the special warrants financing. The
company announced it had agreed to acquire 50 percent of Galactica Telecom,
falsely described as a "profitable, well established telecommunications
systems integration and distribution company with revenues of US $12
million". Financial and other statements provided to the BCSC revealed that
Galactica had a limited history of operations and had not established
itself as a significant market participant. Galactica's most recent nine
month fiscal period showed it to be unprofitable - recording a loss of
$179,420 on sales of only $1,273,718.

In December 1993, shortly after Mumble joined its director-team, Cycomm
declared that it had reached agreement, in principle, to provide encrypted
data and voice services to US government agencies, including the FBI and
DEA, via participation in a $500-million satellite "scheduled to be
launched toward the end of 1994." The satellite deal, then president Philip
Garratt enthused to a Bloomberg news reporter, could bring in commissions
of $15 million a year. In fact, the hyped satellite deal was nothing more
than an unsubtantiated "verbal" agreement in principle. Typical of Cycomm's
many bogus claims, this satellite venture never materialized - but the
statements made about it were allowed to stand on the public record until
well after Marleau Lemire had laid off the financing in January 1994.

The misrepresentative and false statements about Galactica and an FBI/DEA
satellite deal remained on the public record during the special warrants
"waiting period", (that time between initial filing of the prospectus,
being November 9, 1993, and its "drop dead", or final approval, date of
January 28, 1994). During this period Cycomm stock was buoyed from the $4
per share range up to a high of $6 which made the Marleau Lemire financing
price of $3.50 especially marketable.

The offering was sold mostly to institutional clients like Altamira
Management, M.K. Wong & Associates and Raoul Tsakok's Sagit Management. (A
Canada Stockwatch "Street Wire" for Cycomm, published on February 9 1994,
looks at mutual fund and other investors in this placement.) Andre Lemire
lent credibility to the underwriting by making the largest purchase by an
individual. According to Cycomm's published list of buyers (filed with the
BCSC on October 7 1993), Rumble picked up 71,000 special warrants at a
total cost of $248,500.

This also was a distortion, but anyone examining Cycomm's public file, then
or now, would conclude that the brokerage chief invested a sizable amount
of his own funds in the firm's deal. But that is not what happened and a
brief notation in a lawyer's letter, found among the "boring" papers
stacked on the underwriter's boardroom table, set securities investigators
on a trail of illegality and cover-up at Marleau Lemire Securities.

Subscription to Cycomm's financing had to be completed by September 30
1993. Two days before the offering closed, Drew Wells, of the Vancouver law
firm Getz Karby, advised client Marleau Lemire: "There appear to be five
accounts that are purchasing less than $97,000 of Special Warrants... I
confirm that there appears to be no prospectus exemption available to these
purchasers unless Mr. Lemire is purchasing for them as portfolio manager
(though, as I mentioned, George may have some technical problems with
this). If Mr. Lemire is so purchasing, he must sign the Subscription
Agreement as principal and should indicate in the agreement that the
certificates are to be registered to the various accounts."

In the wake of revelations about fund manager Veronika Hirsch and her
dealings in VSE-listed junior Oliver Gold, there has been increased public
awareness of private placement offerings and the rules which apply to them.
In the case of Cycomm's special warrants issuance a specific B.C.
Securities Act exemption was required in order to enable "sophisticated
purchasers", e.g. those buying more than $97,000 worth of securities, to
legally participate.

Drew Wells' note pointed to five Marleau Lemire clients lacking the
necessary legal exemption. BCSC staff pin-pointed the transactions. On
January 19 1994, Peter Bayerthal, a filing analyst with the Commission's
Corporate Finance Division, wrote: "if we find out that the beneficial
owners have purchased less than the prescribe(d) amount ($97,000) the
exemption is not available to them and the company has made an illegal
distribution."

It was quickly confirmed that four of the five Marleau Lemire clients were
each purchasing only $49,000 worth of Cycomm Series A warrants and the
fifth was spending just $52,500. None qualified for a legal exemption. But,
as occurred in the case of Veronika Hirsch and Oliver Gold, steps had been
taken to circumvent securities law and enable the transactions to be
executed.

The five Cycomm investors signed and filed their own subscription
agreements, and paid for their securities, on September 17, 1993. On
September 29, the day after Mr Wells noted the problem, an effort was made
to recast and disguise these separate purchases of only 14,000 to 15,000
warrants each. Andre Lemire signed forms falsely certifying he had
purchased these same 71,000 warrants. Subscription forms signed by Rumble
on September 29 stated they had to be completed along with other official
filing documentation and submitted, along with a certified cheque or bank
draft in the amount of the subscription funds, "no later than 10:00 a.m.
(Vancouver time) on September 17, 1993."

According to those documents subsequently filed with, and made public by,
the BCSC, in making this quarter-million dollar Cycomm purchase, Rumble was
acting under Section 55(2)(4) of the B.C. Securities Act which states "the
person is purchasing as principal, and the trade is in a security which has
an aggregate acquisition cost to the purchaser of not less than a
prescribed amount."

The official document reporting such an exempt distribution is known as a
Form 20. The Form 20 contains a bold-face warning: "IT IS AN OFFENCE FOR A
PERSON TO MAKE A STATEMENT IN A DOCUMENT REQUIRED TO BE FILED OR FURNISHED
UNDER THE SECURITIES ACT THAT, AT THE TIME AND IN THE LIGHT OF
CIRCUMSTANCES UNDER WHICH IT IS MADE, IS A MISREPRESENTATION." The B.C.
Securities Act states that "every person" who makes such a
misrepresentation "commits an offence and is liable, in the case of a
person other than an individual, to a fine of not more than $1 million and,
in the case of an individual, to a fine of not more than $1 million or to
imprisonment for not more than 3 years or to both."

Susan Adams, then Policy Advisor with the BCSC's Policy and Legislation
Division, noted that for Andre Lemire to legally justify his firm having
papered over, (or "redocumented" as one official described it), the
original Cycomm transactions, two tests need be met. Firstly, Rumble would
have to be registered as a portfolio manager in B.C. in order to act in
such capacity. Secondly, any accounts for which Mr Lemire claimed to be
purchasing as principal would have to be fully managed discretionary
accounts. That meant the five Cycomm buyers would have to Mr Lemire's own
clients and those for whom he made the investment decisions and directed
the transactions.

Rumble failed to pass either test. B.C.'s then Deputy Superintendent of
Brokers Lang Evans reported to staff: "I have just talked with the IDA who
takes care of registration for Marleau Lemire. Guess what? Lemire is not
registered with them as a portfolio manager. They are double checking and
are sending a confirming letter by fax shortly." The confirming letter
arrived from the IDA as did additional confirmation from the VSE that Mr
Lemire was not registered in the province as a portfolio manager.

On January 25 1994, just days before the "drop dead" date of Cycomm's
prospectus, Deputy SOB Lang Evans reported to his investigative staff: "I
called Getz Karby. I talked to Drew Wells as (Leon) Getz was not available.
I made the following demands and told it was necessary for my
recommendation on whether to issue a receipt (for Cycomm's prospectus); 1.
under my understanding that their law firm held the due diligence responses
given by the issuer, I wanted to see what those representations were 2.
confirmation that marleau lemire (is) still of the view that the investment
was appropriate for their client 3. all details pertaining (to) the
purchases made by Lemire as principal for managed accounts. I clearly
spelled out that my concern was that the clients were dealing with another
broker and were sold the warrants without an exemption and that after the
fact they (were) put in managed accounts of lemire in order to create the
appearance of complying with the exemption and such treatment was at the
advice of Wells."

The next morning, professing bafflement, Drew Wells responded to the BCSC's
Mr Evans: "We are not sure that we understand your question about whether
the special warrants sold to the investors set out above were 'sold' by a
broker other than Mr. Lemire. However, we understand that you expressed
some concern to Mr. (George) Holloway (Cycomm's legal counsel) that
subscription agreements were initially signed by the investors themselves
and were subsequently replaced by the subscription agreement signed by Mr.
Lemire. We understand that Marleau had the investors sign the agreements in
error, as the intent was for Mr. Lemire to purchase in his capacity as
portfolio manager for those accounts."

When Mr Wells attempted to pass off Marleau Lemire's legerdemain as a
simple error in filing BCSC investigators already had in hand original
documentation showing that the five investors were clients of B.C. brokers.
Not only was Mr Lemire not a registered portfolio manager in the province,
but the accounts in question were not under his direction and management.

Brokerage account records that Mr Wells included in a January 26 package
compounded regulatory concerns about the illegal distribution. One
signature giving discretionary authorization over an account to Marleau
Lemire was dated January 25, 1994. Another client had not yet signed. The
Cycomm purchases had occurred in September 1993. Spurred by the BCSC
investigation, the securities dealer was back-tracking to obtain
authorizations that were required, but did not exist four months earlier
when the Cycomm transactions were completed.

The "know your client" rule is often referred to as one of the cornerstone
principles of the securities marketplace. On January 26 1994 the BCSC made
calls directly to the clients to see how well they and their investment
objectives may have been known to Rumble (AKA The Stabilizer). Four of the
five non-exempt investors were reached on that date. None of them were
clients of Mr Lemire nor did they know him. Their accounts were managed by
two different brokers working in Marleau Lemire's Vancouver branch office,
many miles away from Quebec. One of the Marleau Lemire clients was curious
as to why the BCSC was calling -- he explained the timing was remarkable:
"I am being asked (by my broker) to sign the discretionary order right
now."

Late in the working day of January 26 1994, B.C's then Deputy SOB, Lang
Evans, summarized the status of the investigation into Marleau Lemire's
Cycomm dealings and cited six examples of rule breaking evident in the
scenario: "1/ Acting without registration in the province (section 20) 2/
Not having written authorization to enter discretionary orders (section 36
of regs) 3/ Engaging in an illegal distribution section 42 4/ False filings
with the Commission section 138 5/ failure to supervise 6/ know your
client". Mr Evans added his own punctuation mark: "Plus, they're lying to
me."

Lawyer Leon Getz is a former Chair of the BCSC's predecessor body and
helped draft the B.C. Securities Act -- sections of which his client,
Marleau Lemire Securities, was now violating. In 1994 Mr Getz served as a
member of the BCSC's Securities Law Advisory Committee and was treated with
deference by senior investigative and legal staff of the government agency.

Up to this point, it was mostly Mr Getz's junior, Drew Wells, who had been
directly dealing with the BCSC regarding the illegal Cycomm distribution
and the surrounding coverup attempt by Marleau Lemire. Before going home on
January 26, Mr Evans posted an e-mail: "Subject: I called getz I told him
to slow his client down because in my view they were compounding the
problem and not helping themselves at all. I gave him the general details
about the nonexistent discretion being exercised by Lemire. He thanked me
for the call and was going to talk to his client straightaway."

On January 27, 1994, the day before Cycomm's prospectus "drop dead" date,
evidence of the quarter-million dollar illegal distribution, the issuer's
gross misrepresentations, the underwriter's inadequate due diligence
efforts and various other concerns were placed in the lap of then B.C.
Superintendent of Brokers Dean Holley. It was up to the SOB, the province's
top stock cop, to decide whether or not it was not in the public interest
for the government to approve the prospectus and allow Cycomm to sell
millions of dollars worth of securities to investors.

Analyst Peter Bayerthal, handling the Cycomm review for the Corporate
Finance department, shared his perspective: "Hopefully they kill this damn
thing once and for all. We haven't got any due diligence. There has been no
due diligence."

On the morning of January 27, Mr Holley was in a tête-à-tête with
Switzerland-based VSE promoter and money-raiser, Carlo Civelli. Mr Civelli,
a prominent arranger of off-shore private placements in Canadian penny
stocks, was under investigation by UK authorities who pegged him as a
conduit for the laundering of insider trading profits in suspicious share
deals. News of the European investigation had reached Vancouver and Frank
Giustra, then president of Yorkton Securities, arranged for Mr Civelli, a
valued client, to make a "courtesy call" to the offices of VSE president
Don Hudson and SOB Dean Holley. Mr Civelli was anxious to explain his
version of events and mitigate any negative fallout from the international
publicity.

After BC's senior securities enforcer wrapped up his private meeting with
one of Europe's best known penny stock fronts, he addressed the
Cycomm-Marleau Lemire situation. In a decision that has never been
explained, Dean Holley gave Cycomm the thumbs up and Marleau Lemire
completed its financing. (When the decision later came under public
criticism, a government appointee paid to look into the matter did not
analyze any factual basis for Mr Holley's judgement, nor did he question
its wisdom. Instead, the appointee simply concluded that the SOB had the
authority to make the call.) Mr Holley has since retired.

Since Mr Holley gave Cycomm's prospectus his stamp of approval, investors
have seen the company's stock drop in price from above $3.50 per share to
$1 or less (taking into account a 1:5 share consolidation). Today the
company, under the guidance of Graham Ferguson Lacey associates Albert
"Bud" Hawk and Rick Mandrell, still promises that it is a soon-to-be
profitable venture. For the nine months ended September 30 1997 Cycomm
recorded a loss of US $3,800,188 bringing its accumulated deficit to US
$41,625,514.

After years of exploiting the unique opportunities presented by those
companies at the forefront of the "New Economy", like Cycomm, the brokerage
house that Mumble and Rumble built has closed its doors. But the firm's
"culture of venture and boldness", reflected in its innovative business
practices and special research bent, will be remembered - at least as long
as investigations into KWG Resources and Ste-Genevieve Resources continue.

Mumble and Rumble are survivors. Andre Lemire, the executive praised for
bringing balance to the management of Marleau Lemire Securities, was caught
violating securities laws in connection with his firm's illegal
distribution of Cycomm warrants. After facing potential penalties of a fine
of not more than $1 million or imprisonment for not more than 3 years or
both, Rumble walked away without any sanctions being levied. His more
flamboyant partner, Hubert Marleau, says the secret of being a successful
investment dealer is to have long term goals. Back when his house and stock
deal were under investigation by the BCSC, Mumble, who remains a Cycomm
director to this day, explained: "We have our name on this thing, and we
don't want to fuck it up you know."

(c) Copyright 1997 Canjex Publishing Ltd.
http://www.canada-stockwatch.com