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YBM Magnex To Enter Receivership

December 9, 1998

TORONTO (AP) _ YBM Magnex International Inc., a troubled maker of bicycles and industrial magnets, said Tuesday it intends to go into receivership because it likely faces a criminal indictment in the United States.

YBM was a well-regarded member of the Toronto Stock Exchange 300 index and had a market capitalization of almost $1 billion eight months ago, before allegations of links to Russian mobsters.

In a statement released late Tuesday, the company said its board of directors had been advised by lawyers that YBM ``is certain to be indicted by a grand jury in the United States ... and there is good reason to believe that the U.S. authorities will be able to marshal substantial credible evidence of criminal wrongdoing.″

YBM’s head office is in Newtown, Pa., but it was founded by Canadian-based entrepreneurs and was traded on the Toronto and Alberta stock exchanges until its recent woes prompted a suspension of trading. It has applied to an Alberta court to have Ernst & Young named receiver and manager.

YBM noted that an audit last spring raised concerns about transactions in Eastern Europe and ``indicated that certain individuals associated with these entities and certain other related entities are reputed to have ties with organized crime.″

On May 13, YBM’s head office in Newtown was searched by the FBI, the Internal Revenue Service, the Immigration and Naturalization Service, and the U.S. Customs Office. On the same day, Ontario and Alberta securities officials halted trading in YBM shares.

The statement said parts of YBM’s operation, particularly in Hungary and elsewhere in Eastern Europe, are out of control, and the board lacks ``the ability to adequately or responsibly supervise YBM’s ongoing business and affairs to ensure that such business and affairs are lawfully and appropriately conducted.″

The statement said the company foresees ``no real likelihood of the shares of YBM ever resuming trading or for YBM to have access to financing.″

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