The men who bit the dog

Not to mention the long arm of coincidence

[UPDATED 10:45 EST] The quest for the name of the figurative dog in the “Man bites Dog” tale, in which three men have been accused of defrauding an unnamed Chicago area hedge fund of $25 million, is still on. But the man – well, three men – who did the alleged biting are an interesting cast of characters, to say the least.

The one-time bank chairman, himself a former fraud victim, married to a Paraguayan cabinet minister. The one with the same name as a one-time prime bank fraud perpetrator. And a man of mystery who doesn’t leave much of a paper trail at all.

Frank L. Cowles Jr of Scottsville, Va. (shown at left with his wife,  Paraguay’s Minister of Foreign Affairs and former ambassador to the US, Leila Teresa Rachid de Cowles), 74, is prominent Virginia businessman. A founding director of Virginia Commerce Bankcorp (VCBI), where he was chairman from 1989-99. and remains a director. [UPDATE: VCBI yesterday filed an 8K announcing that Cowles had resigned from his positions as a director of VCBI and its wholly owned subsidiary, Virginia Commerce Bank “in order to focus upon a personal matter unrelated to his service as a director.”]

According to his biography, he owns two auto dealerships, Scottville Hardware, and Greenfields Farms, the home of Hidden Hill Arabians, an Arabian horse breeder. He was also, for several years, a member of the Virginia Motor Vehicle Dealer Board.

Among his other interests, Cowles was of counsel to Cowles Rinaldi & Arnold, now Cowles, Rinaldi, Judkins & Korjus Ltd, a “law firm concentrating in construction claims, business and contract law, with lawyers practicing in Virginia, Maryland, and Washington DC.” A call to managing partner Vic Rinaldi to confirm whether or not Cowles is still associated with the firm was not returned.

Cowles was several years ago among the victims of an investment fraud by Motilall Sudeen, a sometime radio evangelist in New Orleans who was sentenced to 18 years in jail after his January 2003 conviction on a 38-count indictment of conspiracy, wire fraud, and money laundering charges.

When Sudeen was indicted in June 2002, The Times-Picayune, of New Orleans reported that “One of the investors listed in the indictment, Northern Virginia car dealer Frank Cowles, was first approached by Sudeen in London in the fall of 1998. In papers filed in a civil lawsuit by Cowles against Sudeen, Cowles said he was impressed with Sudeen's supposed international trading in fertilizer and claims he ended up losing $3.4 million in the investment scheme.”

Sudeen’s operation was essentially a prime bank scheme that he claimed would deliver returns of between 15 and 50% a month. Cowles was chairman of VCBI at the time he was defrauded. No record exists of any SEC action against Sudeen.

Richard E. Warren, 63, leaves a much shorter paper trail. But for the interesting fact that in 1997-98, the US Securities & Exchange Commission acted against Richard Warren & Associates, and Richard E. Warren, for…prime bank fraud. A spokesman for the US Attorney’s office in Chicago declined comment on whether the two Richard E. Warrens are the same individual.

The SEC case alleged that RWA and Warren, in 1996, raised $8 million from at least 48 investors through two fraudulent offerings. The first was of “Prime Bank Debentures” offering a return of 180% a year; the second was for trading debentures that would generate a return of approximately 1600% within 66 days.

The case apparently ended in October 1998, when the US District Court for the Northern District of California issued permanent injunctions enjoining RWA and Warren from securities law violations and ordering the disgorgement of $7.2 million. Additionally, the relief defendant, Citadel Enterprises Ltd, an Isle of Man entity based in London, was ordered to disgorge $2.05 million it held on behalf of both RWA and Warren.

Citadel Enterprises Ltd has no connection with the well-known “Chicago area hedge fund,” Citadel Investment Group.

According to Nevada corporation records, Warren was president of American Trade Industries Inc, the company in which the hedge fund invested $25 million, and Cowles was its secretary. A third individual, Doyle M. Conway, is listed as its treasurer; he was not indicted and has not been accused of wrongdoing.

David L. Myatt, of Los Banos, Calif., said by federal prosecutors to be “an associate” of American Trade Industries Inc, is much more of a mystery man. Nevada state records list him as being associated with several companies:

• Akela Capital Inc, registered on Mar. 24, 2005. He is named as secretary, director, and treasurer of the firm. One Sharon E. Vaughn, of Lake Forest, Ill., listed as the president of Akela Capital Inc, is the principal of Directors Financial Group Ltd, “a comprehensive fee-only financial services firm providing substantial value as an investment advisor, fiduciary and consultant to high net worth individuals.” Ms Vaughn had not returned a call, or an email, seeking comment by the time this article was published.

Akela Capital Inc is not related to the Cary, NC-based convertible arbitrage manager Akela Capital LLC, headed by Anthony B. Bosco.

• Capital Investment 525 Inc, registered on Feb. 28, 2005. Myatt is secretary of this company, which has as its president Tokuo Aida, of Tokyo, Japan. Its other listed officers are Ronald Ninowski (Treasurer), of Reston, Va., and Richard Warren (Director), of Woodbridge, Va., the third defendant in the alleged hedge fund fraud.
• Prestone Inc, registered on Aug. 25, 2005. As with Akela, Myatt is named as secretary, director, and treasurer of the firm. Its president is listed as one Jean-Baptiste Vivet, of Autun, France.

Apart from Myatt, the entities have several common themes. In each case, the “resident agent” is an Eric Rueker, at an address that appears to be a mail drop. No listed telephone number could be found for an Eric Rueker; two other companies, Dalemy Inc, and Plex Capital Inc, appear under his name but both are classified as in default with their filings, and no officers are listed.

Likewise, the Los Gatos, Calif., address given for Myatt appears to be a mail drop, and no listed telephone number could be found for him in either Los Gatos, or Los Banos. The addresses given for Ninowski and Warren similarly appear to be mail drops. No phone number could be found for Ninowski in Virginia, and the Woodbridge, Va., phone listing for Warren appears to be out of order.

NakedShorts would like to formally express its appreciation to the source who provided much of the source material from which the reporting in this article was developed.