The RCMP has charged Robert "Bobby" Waxman with 12 counts of fraud over $5,000 in connection with activities during a period several years ago when he was a senior executive at Philip Services Corp. (formerly Philip Environmental based in Hamilton, Ontario). The charges are the result of a five-year international investigation and more than 200 interviews conducted jointly by RCMP and the Hamilton Police Service’s major fraud unit.
Robert Karey Waxman, 49, was formerly president of Philip’s metals recovery group. The RCMP has charged Waxman of defrauding the company of about US $20-million between January 1, 1996 and December 31, 1997. Waxman headed up the company’s lucrative copper recycling business, which he had pioneered at I.W. Waxman & Sons before that business was acquired by Philip.
The RCMP alleges that during the time in question Mr. Waxman transfer profits through a series of about 80 complex transactions into various "shell companies" of which he was "a beneficial owner."
The investigation took police to locations in Ontario and Quebec as well as 11 different states. In addition to conducting more than 200 interviews, police examined more than 160,000 pages of documents.
Philip Services was started in Hamilton when brothers Philip and Allen Fracassi took over their father’s bankrupt trucking company in 1979. Interestingly, Morris Waxman (Bobby’s uncle) helped the Fracassi brothers get their start, but their informal partnership fell apart when Morris Waxman entered into a lawsuit against his brother Chester Waxman, claiming Chester and his sons cheated him out of his 50 per cent share of I.W. Waxman & Sons. The lawsuit spanned 14 years — the longest civil suit in Ontario history. Eventually Madam Justice Saunderson found for Morris and instructed that his half ownership in the company be restored to him.
That award is significant because after the Waxman brothers fell out with one another, the Fracassis stopped doing business with Morris Waxman and began working with Chester Waxman and his sons, including Bobby Waxman. Eventually the Fracassis repaid Chester and Bobby and his siblings by purchasing the assets of the Waxman scrap recycling business in 1993. Philip grew into a business operating across North America and in six European countries, with annual revenue of $3-billion.
Bobby Waxman ran the metal business inside Philip along with his father and two brothers. He led a series of acquisitions and by the end of 1997, Philip was the largest scrap metal dealer in North America, with metals accounting for nearly two-thirds of the company’s revenue.
Waxman resigned abruptly in January, 1998, saying the company was no longer interested in expanding the scrap metal business. But only a few days later Philip said it couldn’t account for $90-million worth of copper. It then blamed rogue traders for orchestrating an elaborate scheme to hide $184-million in copper trading losses over three years. The revelations forced the company to restate its financial reports for three years.
In July, 1998, Philip launched at $200-million lawsuit against Waxman, alleging that with the help of two accomplices he masterminded the trading scam. The suit claims the three pocketed at least $25-million from the scam and that Waxman used company money to renovate his home in Ancaster, Ontario, to pay for vacations and to cover the cost of a private aircraft charter. That lawsuit has languished but is still outstanding.
The scandal caused Philip, a former stock market darling, to lose the confidence of investors and descend into bankruptcy. Philip Services emerged from its first restructuring in 2000 as a Delaware-registered company (with Houston as its head office). It sought court protection from creditors again in 2003 because of debts and emerged from that round of bankruptcy protection in January 2004 when all the shares were bought by turn-around specialist Carl Icahn.
In addition to the new RCMP charges against Bobby Waxman, in 2000 the Ontario Securities Commission accused Waxman, the Fracassi brothers and four other former Philip executives of withholding damaging information about the company from a 1997 prospectus for a $364-million share offer. A hearing on that case is slated to start in April.
Mr. Waxman surrendered to police in Hamilton this week and was released on $250,000 bail. Bobby Waxman has always maintained that other executives, including company co-founders Allen and Philip Fracassi, knew and approved of his activities at Philip.
"This will be vigorously defended and Mr. Waxman denies any improprieties or wrongdoing," Toronto lawyer Brian Greenspan, who is representing Waxman, was quoted as saying.
Solid Waste & Recycling magazine will attend the preliminary hearing scheduled for the end of January 2005 and report on the RCMP case, private lawsuits and also the OSC hearings as they develop.