Irving Kott, a Canadian financier and stock promoter with long history of civil and criminal violations, has died at age 78.
Kott’s obituary appeared Aug 24 in a Montreal newspaper, but his passing drew no further media attention. In a sense, he was as invisible in death as he was in life – a life in which he played pivotal behind-the-scenes roles at numerous public companies and brokerage firms.
Kott pleaded guilty in 2004 to two felony charges related to his undisclosed ownership interest in J. B. Oxford Holdings Inc., a brokerage based in Beverly Hills, Calif. J.B. Oxford, whose employees pushed several stocks linked to Kott and his associates, had contended that he was merely a consultant.
The original grand jury indictment alleged, among other things, that Kott used his influence at J.B. Oxford to reap millions in profits on the sale of shares in which he or his associates had an interest. While working at J.B. Oxford, Kott lived in a mansion once occupied by actor Cary Grant.
In his plea, Kott acknowledged that he provided much of the $6.5 million that a Swiss firm loaned to the brokerage in 1994 and 1995 to keep it alive. The Swiss firm and its owner got notes that were convertible to a majority stake in the brokerage (formerly known as Reynolds Kendrick Stratton Inc.). In addition, Kott acknowledged that he provided funds for another investor who bought more than 5 percent of the brokerage’s shares in 1994. Neither Kott, the investors or the brokerage disclosed his role in those transactions, which could have been considered material information because of Kott’s past.
Kott was sentenced to five years’ probation rather than prison time, in part because of claims that both he and his wife were in ill health. He was ordered to pay $1 million in fines and charitable contributions.
J.B. Oxford had earlier agreed to pay $2 million to settle the Justice Department’s probe into possible fraud by Kott and others involved with the brokerage.
Kott also figured into the Securities and Exchange Commission’s investigation into the sharp rise in the stock of Mamma.com in the spring of 2004. Over a two-day period, the small Montreal-based Internet company’ stock shot from $4.10 a share to a high of $15.68. It peaked the following month at $17.49.
Mamma.com later disclosed in regulatory filings that the SEC was not only looking into the unusual activity surrounding the company’s shares, but also was probing whether a certain individual – known to be Kott – and “people acting jointly or in concert with him may have had a significant influence on the company in the past as a result of undisclosed shareholdings.”
Mamma.com changed its name in June 2007 to Copernic Inc. (Nasdaq: CNIC). Three months later, Copernic announced that the SEC had ended the investigation and that the agency’s staff was not recommending enforcement action.
Kott’s history of run-ins with securities regulators spanned at least four decades. In 1976, he pleaded guilty in Ontario to conspiring to defraud the public through the distribution of shares in a mining company. He was fined $500,000, which at the time ranked as the biggest personal penalty in Canadian history.
In 1979, he was convicted in Ontario in connection with another manipulation scheme and was sentenced to four years in prison. That conviction, however, was overturned on appeal.
In the 1980s, Dutch authorities identified Kott as the person behind a boiler-room style brokerage in Amsterdam called First Commerce Securities. That operation sold shares in obscure Canadian- and American-listed companies to foreign investors.
Authorities said in 1987 that First Commerce might have taken more than $400 million from investors, an amount equal to nearly $800 million in today’s dollars. Kott was never charged in connection with the case; he agreed to pay a fine of roughly $4 million in 1990 to settle the probe into his activities.