The Mitt Romney Connection: How the Scammers Behind Virgin Gold Mining Corporation Bit Off More Than They Could Chew (VII)

… while FBI agents, moved from white collar fraud investigations, help search behind bushes for an Al Qaeda terrorist, hundreds of swindlers roam Utah.

– Lynn Packer, utahpoliticalcapitol.com

Mitt would make a good Moses. Think about it.

– Former Romney campaign official

By Richard Smith

Let’s start in 2006, with one of The Seattle Times’ Stupid Investments of the Week:

Uncovering new, tiny companies with the potential for success is a bit like hunting for treasure.

You need to read the map of financials, understand the landscape of the business and do the right calculations or you are just going to wind up throwing a lot of money away with nothing to show for it.

So when a company promises to be a treasure, literally and figuratively, investors should recognize that those businesses are exceedingly rare.

And when the treasure company is being touted by celebrities and penny-stock promoters, investors would be wise to think that they’re more likely to strike stupidity than to find great riches.

That’s why Deep Blue Marine, a new company that is in the treasure-hunting business and being touted by actor James Brolin, earns its place as Stupid Investment of the Week.

A certain pattern develops. In 2007, there is great news:

October 4, 2007 – 9:39 AM ET – Market Wire

Deep Blue Marine Inc. (PINKSHEETS: DPBM) is pleased to announce that company divers have started recovery of a significant wreck in the Atlantic Ocean with recovery of several hundred coins.

President and CEO Wilf Blum had this to say: “This is a great day for our company, we have worked on this site for the better part of a year and as of yesterday it has started to pay off in a very exciting way. The size and location of the site will not be released at this time in an effort to protect divers and company assets.”

In 2008, less good news is hushed up:

Deep Blue Marine, its CEO Wilf Blum, and Alexander Lindale LLC sued former Deep Blue operations manager Edward Krajewski after Krajewski criticized the plaintiffs and allegedly disclosed Deep Blue proprietary information on several online investor forums. The plaintiffs sought an injunction in Utah federal court against Krajewski to prevent him from posting any further criticism or materials. They also brought claims for defamation, false light, intentional interference with economic advantage, breach of contract (including publication of trade secrets), and breach of convenant of good faith.

In May 2008, Deep Blue moved for a temporary restraining order and preliminary injunction against Krajewski. The court … granted the motion, issuing an order prohibiting Krajewski from

1. publishing statements concerning trade secrets, confidential, and/or proprietary information of Deep Blue . . . , including but not limited to methods, processes, discussions, plans, techniques, equipment, locations, discoveries, recovered materials, research projects, sources of supplies, financial data and marketing, contract amounts and/or salaries, corporate income, disbursements, expenditures, and/or merchandising systems or plans of Deep Blue; and

2. publishing false and/or defamatory statements regarding Deep Blue Marine, Wilf Blum, and/or Alexander Lindale, and/or their agents, employees or affiliates.

Nevertheless, by 2009, the news is good again:

Wilf Blum… says there’s money to be made going after sunken treasures.

Blum spoke last week at the Jacksonville Museum of Military History about his explorations in the Caribbean. He brought one of his large finds from the French ship Scipion, a 241-year-old cannon used by the French against the British during the American Revolutionary War.

Before starting his treasure-hunting business four years ago, Blum was in public relations.

PR, eh? Who’d have guessed? In 2010, the news is positively exciting:

Although her captain, Nicolas Henri de Grimouard, and 43 of the crew are wounded, another 15 dead, Le Scipion will not back down.

In the heat of battle, cannonballs flying, the crew manages to rake the 90-gun London, wounding it. Then they race the ship away, into the shelter of Samana Bay, just off the coast of Hispanolia, now the Dominican Republic.

As he tells the story on a recent October day, Wilf Blum is sketching the treacherous Mona Passage on the whiteboard in his Utah office, punctuating it with dotted lines and trade routes and mad scribbles that oddly contribute to the sense of a frenzied fight. There’s a chest at his feet and a visitor’s quick glance spots photographs and coins and bits of pottery.

“I get caught up in the story,” he says. “Stop me if I go on too long or you get bored.”

You’ve gone on far too long already, mate. But you’re going to press on anyway, whatever the likes of the muzzled Mr Krajewski might be trying to say about what you are really up to.

By 2011 the news is great again:

“We have a contract which includes, I think, about 42 miles of coastline,” Rawson said. Our contract allows us to keep 50 percent of all artifacts recovered, and right now we have 13 wrecks that we are currently working.”

The company found Rawson’s Wreck by obtaining an ancient coin from a local fisherman.

“We found it was the oldest coins ever minted in the new world. We did some more research on where the (local fisherman) found the coin and little by little we found pieces of the shipwreck, which led us to where we are now,” Rawson said.

“We have artifacts here that we can date to 1535,” Blum said. “The only other fleet we know of that is older than this is the 1502, and it’s never been discovered.” Among the discovery were some of the first coins ever minted in the new world, ancient mirrors, musket balls and Mayan artifacts and jewelry.

Yet, oddly, by 2012, when it’s all been going so well lately, Deep Blue decides that it’s time to relocate its quote to the UK, having purportedly raised $1.6Mn from the Brits; self funding is evidently still some way off.

Why does Deep Blue suddenly take a hike across the Atlantic? Is there bad news to hush up, perchance?

Yes indeed, and surprisingly enough, the bad news apparently comes in the form of the family of Bain Capital cofounder Mitt Romney, Mormon blueblood and presidential candidate, via the story of two Utah Attorneys General, Mark Shurtleff and John Swallow, on a spree,

On October 20, 2009, a small private plane flew to Salt Lake City from its home base in Cedar City, picked up then-Attorney General Mark Shurtleff and three other passengers, shuttling them to Milford, Utah where Shurtleff would visit the Copper King Mine.

Shurtleff was not there as Utah’s top law enforcement official to serve subpoenas or make arrests, even though the company was committing a massive penny stock fraud. He was there to support the venture by lending his name, and to raise money for his announced senatorial campaign.

The question is: was Shurtleff unwittingly duped into lending high-profile support for an alleged scam, or was he more than willing, whatever the company’s credibility, to seek campaign support from anyone seeking to “pay to play.”

Copper King Mine had raised millions of dollars from investors, including from Mitt Romney’s son Josh Romney, who had been lured in with the promise of extraordinary returns. The mine was touting it had the potential to become the largest of its kind in the world. Unfortunately, the operation would soon collapse into bankruptcy taking millions of investors’ dollars down with it. (Unlike most investors, Romney got most of his money back.)

At the time of Shurtleff’s visit, Utah’s future Attorney General, John Swallow, was a lobbyist for one of the mine’s lenders, Winterfox, LLC. George Evan Bybee, who actually is Winterfox, was also among the lucky ones to recover money.

It turns out that Deep Blue Marine’s Wilf Blum hadn’t really quit the PR business in 2005 at all:

Securities and Exchange Commission lawsuits accused Copper King Mining, Dotson and promotor Wilf Blum of issuing false materials and misleading press releases about the company, offering unregistered securities for sale and acting as an as an unregistered broker.

…

Copper King hired Midvale public relations firm Alexander Lindale, owned by Wilf Blum, to mount a campaign to attract investors. Blum’s campaign included billboards, celebrity endorsements and infomercials. “In March 2009, Copper King hosted a media event at its site in Milford where former CEO Mark Dotson boasted of an “ocean of copper” that could rival the size of Kennecott’s Bingham Canyon mine,” The Deseret News reported.

The SEC litigation release naming Blum is dated June 2011, long before Blum’s outfit’s British flit. The judgment comes in November 2012:

Respondents consented to an injunction based on allegations that during a two-year period, they conducted numerous unregistered offerings and distributions of stock in violation of the federal securities laws. This conduct was egregious and recurrent, resulting in more than $3.2 million in illegally-obtained profits.

…

I ORDER that, pursuant to Section 15(b) of the Securities Exchange Act of 1934, Wilfred R. Blum and Alexander Lindale, LLC, are barred from association with a broker, dealer, investment adviser, municipal securities dealer, or transfer agent, or from participating in an offering of penny stock.

I FURTHER ORDER that, pursuant to Section 9(b) of the Investment Company Act of 1940, Wilfred R. Blum and Alexander Lindale, LLC, are unconditionally and permanently prohibited from serving or acting as an employee, officer, director, member of an advisory board, investment adviser or depositor of, or principal underwriter for, a registered investment company or affiliated person of such investment adviser, depositor, or principal underwriter.

But it’s Shurtleff and Swallow who are in really big trouble:

In the culmination of the most sweeping political scandal in Utah history, former Attorneys General John Swallow and Mark Shurtleff were arrested Tuesday and charged with a combined 23 counts that could land each in prison for 30 years.

Swallow, who was forced from office in December less than a year into his first term, was charged in 3rd District Court with 11 felonies and two misdemeanors, including multiple counts of receiving or soliciting bribes, accepting gifts, tampering with evidence, obstructing justice and participating in a pattern of unlawful conduct.

Shurtleff, who served 12 years as attorney general before making Swallow his handpicked Republican successor, was charged with 10 felonies, including receiving or soliciting bribes, accepting gifts, tampering with witnesses and evidence, and participating in a pattern of unlawful conduct.

Later, the racketeering charges were dropped, but the many others stood. Since then, there have been more delays to the hearings.

Some might wonder if, after what appears to be more than a decade of unchecked corruption, any of this retribution and investigation would have occurred if the ripoff victims had not included the son of multimillionaire presidential candidate Mitt Romney. As Lynn Packer notes,

In 1989, U.S. Attorney Dee Benson, who later became a federal judge, told The Deseret News. “Penny stock fraud will get top priority.” Benson told the paper that it’s appropriate, since white-collar crime costs taxpayers “significantly more money than burglaries, bank robberies and all of that kind of crime put together.” In 1985, for example, all the money taken in bank robberies totaled $19 million, while 64 people that same year swindled more than $10 million apiece through white-collar fraud, the article said.

But what about 2013? A spokesperson for the U S Attorney in Utah said there are currently no active cases investigating penny stock fraud, nor have their been any in at least the last five years.

Pending the outcome of the hearings, one might tentatively conclude that in Utah, a dearth of fraud prosecutions indicates a level of corruption in the executive branch that could only be dislodged by  some big-hitting Romney-like SuperMormon, tax-avoiding offshore blind trusts ‘n all (on that, further reading here).  Citizens of other Mormonless fraud-prosecution-free jurisdictions might want to reflect.  Who will lead them to the promised land?

But in fact, that isn’t how Shurtleff and Swallow fell, at all; there was no visible leader:

…the release of an audio recording of Swallow meeting Johnson on April 30, 2012, at an Orem Krispy Kreme doughnut shop — complete with the revelation that Swallow had vacationed on Johnson’s massive Lake Powell houseboat, Swallow’s admission that he believed he was the target of a federal investigation, and Johnson’s advice to Swallow to get an untraceable “Wal-Mart phone” — raised the stakes.

In mid-January 2013, the U.S. attorney’s office in Utah acknowledged it was investigating the allegations — an inquiry later handed to the U.S. Department of Justice’s Public Integrity Section.

Subsequent revelations, including the release of receipts that showed Swallow and Shurtleff had vacationed at the Southern California villa of Marc Sessions Jenson, convicted of securities violations and still under the supervision of the attorney general’s office, added more fuel, as well as claims from several businessmen that they had been promised special treatment if they gave money to Shurtleff’s political campaign.

A progressive group, Alliance for a Better Utah, filed an election-law complaint with the lieutenant governor’s office, spurring a special investigation. Gill and Davis County Attorney Troy Rawlings also acknowledged they were investigating the former attorneys general.

By summer 2013, Utah House members were buzzing about the potential of impeaching Swallow, action never before taken against a statewide official in Utah. First, though, the House opted to create a special committee to investigate and report its findings.

Rep. Jim Dunnigan, tapped by then-House Speaker Becky Lockhart, R-Provo, to lead the probe, had some doubts about the allegations.

“Early on, my sense at the time was this is likely driven by some disgruntled people who were seeking retribution or to advance a political agenda,” the Taylorsville Republican recalls.

The committee hired one of the top investigative teams in the country and dived into its work, uncovering rampant document destruction.

Salvation, in this case, was brought by a motley crew of whistleblowers, document leakers, journalists, pinkoes, conservatives, foot-dragging institutions and energetic investigators: concerned citizens, more-or-less united, for a while. That, presumably, is how it always has to be.

The unruly tribe got to its destination without any sort of Moses at its head.  Just like Mitt’s campaign manager, I have pulled a bait-and-switch on you, dear citizen readers. There’s no Moses here.  The Mormon grandee is irrelevant. At most, he is part of the glossy celebrity backdrop to a Blum scam, just like Josh Brolin: a hook. The Utah story turns out to be about dozens or hundreds, just like you, pulling in roughly the same direction, bickering as you go.

The Romney family interest in the continuing saga seems to be sharply focussed on one thing: restructuring Copper King Mining Corp and resuming operations. I’m guessing that Josh Romney  vehicles now own relatively more of the Newco equity, and much less of the debt.  It’s hard to believe that the original equity holders didn’t get a thumping during the restructuring, but apparently they are still in there, for a second bite at the cherry. I hope it tastes better, this time; there is little precedent for happy endings in such cases.

Finally we return to our treasure hunter Deep Blue Marine.  What Wilf Blum needs, under the SEC cloud, is a rebranding, a stooge to front his operation, a small stock market far away that’s never heard of him, and an introducing broker whose due diligence is reliably porous.

The rebranding is “Three Reale Recovery”, the stooge is Wilf Blum’s son Richard, the small stock market is of course GXG Markets, and the broker, inevitably, is London Capital (NZ), accompanied by its regular sidekicks, accountant KD Associates Ltd and Affinity Associates Ltd.

But from the look of things, the folk behind Three Reale Recovery concluded that there was just too much transatlantic kerfuffle for another bite at the cherry. You can tell when someone’s got cold feet at GXG: their companies either stop submitting accounts, or fail to pay their listing fees, omissions that lead to delisting by GXG. Very few companies ever hand in a formal request for a delisting.

Three Reale Recovery ended up dropping multiple hints. First came the late accounts, not necessarily a great ad for the services of accountant KD Associates, of course. But GXG weren’t paying attention, so that had to be followed up by non-payment of fees. Three Reale were then duly tidied away onto GXG’s ever growing scrapheap of delisted stocks, where the only buried or sunken treasure to be found is scam stories.

So there go, very quietly, another $1.6Mn, if Blum can be believed (which I greatly doubt), and seven years of pump and dump high jinks, on and off the high seas, plus whatever dumb money was sucked in during the various pumps of Deep Blue, 2006-2011. Simply tug gently at that scam, and you quickly get to the continuing, ever-deepening, much bigger scandal in Utah, and the travails of the well-padded Romney family, such as they were. The grand and the not-so-grand: it’s all connected.

Meanwhile, as of this writing, and despite its ignominious ejection from GXG Markets, Asia Finance Corporation, trading as London Capital (NZ), Three Reale’s broker and Blum’s franchisor, is still registered as a New Zealand FSP.