French and Swiss investigators are receiving information from their U.S. counterparts as they try to unravel a penny stock fraud that bilked investors around the world out of as much as $500 million, according to sources familiar with the European investigation.
Part of the information comes from Arnold L. Kimmes, 67, a longtime penny stock promoter who is cooperating with a federal grand jury investigation in Las Vegas, said the sources, who spoke on the condition that their names be withheld.
Kimmes is not cooperating directly with the foreign investigations, but some of his evidence is being relayed to Swiss and French investigators as a result of a formal request approved by the U.S. Justice Department, the sources said.
One target of the European investigators is Thomas F. Quinn, a convicted stock swindler and longtime associate of Kimmes, the sources said. Quinn has been held in a Paris jail since being arrested at his villa on the French Riviera last summer.
Kimmes, who has not been charged in the European scheme, left France shortly after Quinn's arrest and has been cooperating with U.S. authorities for several months.
His attorney, Robert M. Silverman, said Monday that Kimmes was not involved in the European operation allegedly run by Quinn.
"Mr. Kimmes was not involved in any stock operations with Mr. Quinn in Europe," Silverman said in a telephone interview.
Silverman declined to provide any further information or say whether Kimmes is being held in protective custody in the United States.
Key Role in Fraud
According to an affidavit filed in federal court in Denver late last year by an Internal Revenue Service agent, Kimmes has been providing information to federal investigators examining the growing problem of penny stock fraud in this country.
Kimmes has acknowledged that Quinn played a role in advancing one of Kimmes' frauds in the United States in the mid-1980s, according to the IRS agent's affidavit. The agent said Kimmes also described how funds from his U.S. scheme were laundered by a Swiss middleman.
The money laundering is apparently a key interest of European investigators. The sources close to the current U.S. inquiry said European investigators have had difficulty tracking millions of dollars lost by investors who bought highly overpriced stocks after sophisticated telephone pitches from salesmen.
Last fall, investigators and prosecutors from eight European countries and Australia attended a meeting in Washington organized by the Securities and Exchange Commission, the IRS and the FBI. The meeting was held to exchange information and coordinate the investigation of Quinn and several associates, according to a U.S. investigator who was involved.