A former B.C. stock promoter who pleaded guilty to criminal securities violations last December has had his April 18 sentencing hearing delayed to November.
In the meantime, Avtar Singh Dhillon says he’s willing to testify about his knowledge of another securities fraud case brought by the U.S. Securities and Exchange Commission against himself and seven other British Columbians after initially pleading the Fifth Amendment.
“I would be competent to testify to the facts set forth in this declaration if I were called as a witness,” stated Dhillon in a declaration signed April 14 in Los Angeles County nearby his multi-million-dollar waterfront home in Long Beach, where he is under house arrest.
Major alleged securities fraud scheme originated in Vancouver
The SEC case against him is a civil proceeding that alleges he and other co-defendants engaged in a multi-year scheme to defraud American investors, involving over one billion dollars’ worth of stock transactions from over 100 public firms conducted via offshore shell companies.
Co-defendants include former West Vancouver lawyer turned offshore shell facilitator Fred Sharp, who has been found guilty in a default judgment; he and Zhiying Yvonne Gasarch of Richmond and Courtney Kelln of Surrey face criminal charges as well in connection to the alleged scheme.
B.C. businessmen Mike Veldhuis, Paul Sexton, Jackson Friesen and Graham Taylor are also alleged to have committed securities fraud.
In February, Taylor agreed to pay the SEC nearly US$5 million following a settlement in which he neither admitted nor denied his role in the alleged “pump and dump” scheme orchestrated in B.C. between 2011 and 2019.
The allegations against Veldhuis, Sexton, Friesen, Dhillon, Kelln and Gasarch have not been proven in court.
Dhillon’s sworn declaration discusses three companies he was involved with as board chairman, wherein the SEC alleges fraud occurred.
Dhillon traces through the SEC’s amended complaint to explain his end of the deals.
“I engaged with Sexton, Veldhuis and other individuals to own and sell shares of [OncoSec Medical Inc.], [Vitality Biopharma Inc.] and [Arch Therapeutics Inc.] in the United States public markets. We engaged in this activity deliberately without disclosing our joint ownership interest in those shares,” stated Dhillon, who said he had known Sexton for several decades, having met in Vancouver.
Dhillon told of how he was aware of the need to break up the ownership of company shares into entities that held less than five per cent of outstanding shares to avoid disclosure requirements that would restrict their sale.
“I understand that Sexton, Taylor, Veldhuis and their associates owned their free-trading shares through a number of companies they had the ability to control,” stated Dhillon of his dealings in OncoSec, while noting he “did not understand the details” of how the others owned the shares nor how they sold them.
Dhillon also said the group paid for “aggressive promotions” of the companies they were involved with.
Following the promotions and an uptick in stock price, Dhillon's associates sold their shares and, as stated by Dhillon, "I expected to receive, and did receive, a portion of the sales proceeds…"
Dhillon said he was paid in cash, including Sexton handing him a "package at a Starbucks coffee shop."
With respect to Stevia First, which was selling a sweetener product, Dhillon said he sold Sexton, Veldhuis and Taylor "a block of restricted shares at cost."
"I had discussions with Sexton about selling about 20 million of these restricted shares into the public markets," stated Dhillon.
Concerning Arch Therapeutics, Dhillon stated he introduced the company CEO to Sexton as a potential financier. Ultimately, said Dhillon, Arch received financing "upon a reverse merger with a public shell company introduced by Sexton, Veldhuis and their associates."
Dhillon said he provided $250,000 to Sexton to purchase shares but never disclosed this fact to the regulator.
All parties in this case have been ordered to be ready for trial by September 11, and Dhillon remains a defendant.
Former B.C. doctor turned to public market promotions
Dhillon, 60, was once a family physician after obtaining a medical degree from the University of B.C. Over the past 25 years, he had pivoted his career toward promoting mainly health science companies and claimed to have raised more than $1 billion from investors. He's also served as past chairman of the Cannabis Canada Council and is a former member of the securities practice advisory committee to the B.C. Securities Commission.
Following the trial with the SEC, Dhillon will next be in court in November to face sentencing for his criminal misconduct.
Dhillon pled guilty to one count of wilful failure to disclose stock sales, one count of aiding and abetting the sale of unregistered securities and one count of conspiracy to not disclose touting compensation.
Based on his offences, he could receive a prison term of 63 to 78 months in federal prison.
Dhillon is banned from promoting stocks and acting as a director or officer of a public company in the United States. However, he can do so in Canada, as the B.C. Securities Commission has not placed reciprocal orders on him.
Dhillon directed Vancouver-based Emerald Health Therapeutics in the Lower Mainland before running afoul with the SEC in 2021. Therapeutics' parent company was Emerald Health Pharmaceuticals (EHP), a San Diego-based company Dhillon also directed and one in which he concealed compensation for stock promotions, leading to criminal proceedings against him.
"The principal purpose of the conspiracy was to persuade subscribers of the subscription newsletter to participate in the offering by purchasing EHP shares, thereby providing financing for the benefit of EHP and, in turn, its other direct and indirect shareholders, including Dhillon," stated the indictment.
Last October Dhillon's business partner and Vancouver lawyer Jim Heppell, EHP chairman, reached a settlement for EHP with the commission EHP and "to resolve the SEC's investigation of the alleged concealment of a paid promotion of the company's Regulation A offering in an investment newsletter."
Heppell stated the company agreed to pay the SEC a $517,955 civil monetary penalty but neither admits nor denies the allegations in the settlement