IN EARLY 2005, the Canadian-born entrepreneur Shawn Richard was emailing a trader in Hong Kong, Jack Flader, to seek advice about their Australian assets after the brutal murder of their business partner Matthew Littauer.

For years Littauer was involved in an array of stockbroking scams, which ended only when he was stabbed to death in his office in Tokyo’s red light district in December 2004. His murder remains unsolved. There is no suggestion his business colleagues named here were involved in the murder.

In his emails to Flader, Richard discussed their half ownership of Advanced Medical Institute. Richard also mentioned discussions he had been having with Richard Doyle.

Doyle, 41, was a solicitor with the top-tier global law firm Baker and McKenzie. After representing AMI when the company was sued for misleading and deceptive conduct, Doyle quit Baker and McKenzie to become a highly paid consultant and spokesman for AMI.

Doyle told the Herald that in early 2005 Richard introduced him to Flader, who he understood was one of Richard’s business associates and funders.

A plan was hatched – to float AMI on the American sharemarket. When AMI Inc listed in March 2005, its only assets were the Australian sexual dysfunction operations.

First the men obtained control of a US listed shell. After allocating shares to themselves, they then used that shell to acquire two Australian companies holding the ”intellectual property” to AMI.

The initial documents lodged with the US Securities and Exchange Commission contain Flader’s name.

The second-largest shareholder in AMI Inc – the largest was its promoter, the medical entrepreneur Jacov ”Jack” Vaisman – was the mysterious Huntleigh Investment Fund based in the Caribbean tax haven St Lucia. Documents obtained by the Herald show that behind Huntleigh were Flader and his associates.

Huntleigh’s principal, Frank Richard Bell, had been Flader’s second-in-charge in an earlier ”boiler room” scam in Britain. Along with Richard, who was then a junior dealer, the men worked for the discredited Pacific Continental, whose desk jockies flogged sharemarket floats of dubious value to unsophisticated investors, mostly over the phone.

Bell also has links to Astarra Strategic Fund, part of the failed Trio Capital Group, via the British Virgin Islands.

Halfway through 2005, an ingenious plan was put in motion. AMI’s promoter, Vaisman, had lodged an ”innovation patent” for a nasal spray to treat premature ejaculation with Australian authorities.

It takes only a minute to fill out the documentation online and, not long after, an ”innovation patent” is granted to protect the idea until it can be scientifically verified.

An innovation patent is completely different to a standard patent. Millions of dollars and rigorous medical trials are required for a drug to be patented. According to a former AMI executive, “the company has never owned any patents. The only thing it owned was Jack’s bullshit.”

But American investors weren’t expressly told about the difference between the two patents. They were told in mid-2005 that the company had been ”awarded” an innovation patent by the Commonwealth Patent Office. Not only that, the company holding the Australian rights to the patent (which had cost Vaisman a mere $150) was now being acquired by AMI Inc for an astronomical $24 million.

The pattern was repeated the following year when a second company – owner of the global rights, as opposed to Australian rights – was acquired by Vaisman’s publicly listed US company for “the aggregate acquisition price of $24.05 million”, the SEC was informed.

Filings with the US market regulator show Vaisman said he would not benefit either directly or indirectly from AMI Inc’s purchase of these two Australian companies.

He said he had stepped down as a director of the companies while the lucrative deals were being negotiated. What he did not say was that his replacement was his then son-in-law Igor Chalik, who told the Herald he only did what Vaisman told him.

Records show Chalik was a director for only three days and then Vaisman was back in control.

These two Australian companies also had a curious list of shareholders – companies domiciled in far-flung tax havens such as Belize, St Lucia and the British Virgin Islands. The man behind several of them was Flader. Doyle and Vaisman also held shares through their own British Virgin Islands companies.

A fortnight before the US announcement about Vaisman’s ”patent” triumph, Flader’s associate, Huntleigh, bought $7.5 million worth of stock in AMI Inc.

Investor chatrooms on the internet say two stocks often spruiked by boiler room operators have been AMI and General Components Inc. The Herald has discovered Flader has been behind the scenes in both.

Vaisman and Doyle received millions of dollars for these two deals. Doyle said there was nothing inappropriate about the deals as they had been “independently valued by a major Australian accounting firm”.

After these transactions Doyle said he had no “major involvement” with Flader and Richard. He said that he hadn’t communicated with Flader for more than two years.

Doyle also said, “I have not had any business interaction with Mr Richard for an extended period.”

He said Richard contacted him when the Astarra/Trio debacle came to light and he suggested Richard “co-operate with the authorities”.

Doyle, whose offshore companies still own shares in AMI, claims AMI owes him $600,000. The Herald is also a creditor.

Before AMI’s collapse, Vaisman took legal action to try to prevent the Herald publishing details of AMI’s unconscionable practices. The day before the NSW Supreme Court ordered him to pay the Herald’s costs, which were in excess of $500,000, Vaisman put his company into administration. A creditor’s meeting is being held on Thursday.