Securities Commissions assist predatory behaviours

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Postby Guest » Sat Oct 29, 2005 2:52 pm

Audit the watchers

Terence Corcoran
Financial Post


Saturday, October 29, 2005


These are not the best of times for Canada's major securities regulators. They are seen either as bungling Keystone Kops who never seem to nab the crooks (Bre-X, YBM, etc.) or over-aggressive witch-hunters who drag innocent people into court on little more than coincident evidence (ATI and K.Y. Ho). Compounding their low ratings as effective enforcers of securities law is the emerging picture of laid-back and ineffective management controls recently revealed at the Alberta and Ontario securities commissions.

Rarely has the phrase "Who's watching the watchers?" seemed more appropriate. The signs are everywhere -- from the spending habits of former OSC chairman David Brown to the loose and inadequate management oversight at the ASC -- that something is clearly amiss in the world of regulation.

The report Thursday from Alberta's auditor general catalogues a list of lax controls and incoherent policies on conflict and enforcement systems at the ASC. The report did not produce any smoking guns or evidence of regulatory malfeasance. But it sure hasn't been a smooth-running, squeaky-clean machine. There is plenty of troubling evidence of flabby procedures, weak oversight, and inadequate reporting and record-keeping -- all the things almighty regulators routinely throw at the corporations they regulate.

The best straight-up line in the report is a comment on human resources: "We found that there was very little oversight of HR matters by the HR committee." Also oddly out of touch are the ASC's rather loose policies on conflict of interest. While private bodies, such as accounting and law firms -- and even newspapers! -- impose sometimes onerous and intrusive policies that restrict share ownership and trading to avoid conflict, the ASC seems singularly disinterested in such policies for itself.

Commission members and ASC staff are prohibited from being directors of "an unreasonable number of issuers." How many? And is that proper? Also, the auditor found that "the current chair of the HR committee was unaware of his responsibility to monitor the commission chair's trading activity." As for ownership and trading, it's apparently generally OK, so long as each person doesn't own more than 5% of the shares of a regulated company, which would have to be disclosed.

As the auditor notes, owning a "small position in a large company may be more financially significant ... than a large holding in a smaller company." Logical though that may seem, the ASC response to the auditor's call for greater internal disclosure of staff trading was to express concern about the paper burden associated with having everybody filling out forms on their investment activity.

One of the main recommendations in the audit report received the strongest objection from the commission. The auditor called for creation of a "lead independent member" of the commission, with prescribed powers, duties and functions. In effect, this is a call for separation of the chair and CEO functions at the commission. The independent chair would have the power to oversee the enforcement decisions of commissioners and staff to make sure there are no conflicts and that decisions "are made in a consistent, even-handed and unbiased manner."

The ASC response to this idea is a long list of reasons why it should not be done. "Will another layer of decision-making improve chances for a better decision?" "Is there evidence" that existing management is not fully accountable? And "we are not aware" of any other agency having such a structure. How interesting to see a regulator respond so passionately in opposition to an idea that regulators have pushed on the corporations they regulate.

As for the claims that the former chair of the Alberta commission and its director of enforcement improperly interfered in enforcement matters that staff wanted to pursue, the auditor says he found no evidence to support the allegations. What he did find was a loosey-goosey management system and non-existent paper trails to justify decisions. Only after extensive interviews with all the players involved did the auditor conclude that while there may have been differences of opinion, there was no evidence of wrongdoing.

What we have left, in the end, is a portrait of regulatory inadequacy. What we also have, though, is an important precedent -- the first outside audit of a securities regulator's operations. Financial audits are routine, but the Alberta experience shows that there's much to be gained from an independent outside review of non-financial activities.

Such an audit could benefit the Ontario commission. The issues in Ontario are different, but there is a clear need for greater external and independent oversight of the OSC. Its enforcement record is demonstrably inconsistent, filled simultaneously with failures and abuses. The Financial Post's story last Saturday on the travel habits of former OSC chairman David Brown suggests the commission had rather generous and regal travel policies that were only tightened last year. Even today, the OSC is resisting further changes.

Ontario's auditor general has the power to look into the province's securities regulator. But other approaches could be useful to bring greater independent oversight. Lawyer Phil Anisman has proposed having the OSC report directly to a legislative committee. Other options exist. But if we've learned anything over the past year, it's that these regulatory agencies are not getting the oversight they deserve -- and that they attempt to impose on everybody else.

© National Post 2005
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Postby Guest » Fri Oct 28, 2005 4:16 pm

FYI. Dr. Kevin Taft, Alberta Leader of the Official Opposition, is asking for a RCMP IMET investigation of missing investigation files at the ASC in this afternoon's session of the Alberta Legislature. I sent his assistant the RCMP IMET letter to Joe (his name XX'd out) which says RCMP IMET says it only receives its cases by referral from provincial securities commissions, IDA, MFDA and MRS. All hell may break loose with Alberta journalists who learn that the RCMP IMET gets its orders from the ASC.
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Postby Guest » Fri Oct 28, 2005 4:14 pm

CRITICS CALL FOR BAN ON PERSONAL TRADING BY ASC STAFF
The Edmonton Sun
Fri 28 Oct 2005
Page: 14
Section: News
Byline: BY DARCY HENTON, LEGISLATURE BUREAU

A scathing report by Alberta's auditor general has prompted calls for the province to ban personal trading by the Alberta Securities Commission staff and commission members.

The report by Fred Dunn revealed that staff have been involved in "significant" trading - even in companies they were investigating.

Alberta opposition members and industry insiders say that has to stop.

Former ASC enforcement director Wayne Alford, who quit after complaining of interference in enforcement files, said it's "a no-brainer."

"You cannot be seen to be involved in the very industry that you are regulating," he said. "You shouldn't be buying and selling. That's fundamental."

Finance Minister Shirley McClellan said she wants to see if other provincial regulators allow staff and commissioners to trade in stock they regulate.

But Liberal Leader Kevin Taft said "it's time we raised the bar."

He called the report's revelations a shame and an embarrassment for the Tory government and demanded a complete overhaul of the ASC.

While McClellan downplayed the infractions and slammed whistleblowers for raising "innuendo," self-appointed investors watchdog Diane Urquhart said the report vindicates them.

"I think the auditor general has highlighted some severe deficiencies in the enforcement division of the ASC.

"I would consider this to be a verification of the concerns that had been raised."

Former broker Larry Elford wished the auditor general had helped the four whistleblowers who were fired and the one who quit over the turmoil.

"I just keep thinking of the lives ruined of people who made legitimate complaints," he said.
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Postby Guest » Fri Oct 28, 2005 4:08 pm

I had lunch with the a senior member of the Alberta government today, and this was a fairly important part of the discussion.

He found something I said quite interesting. I mentioned that while the minister of finance appears willing to play the "see no evil, hear no evil" game, when it comes to the audit report of the ASC, it certainly looks (to me) like the report says that failures to follow steps and proper process happen over and over again at the ASC. Where does that leave those members of the public, those employees, and those industry members whose finances, lives and or careers have been ruined by these failures by our provinces top financial regualtor?

I said that my impression of the report was that it pretty well lays out a case for a class action against the ASC by every person who has made complaint, or suffered damages by thier "regulatory failure" during this time. Brushing it off might be the wish of the finance minister, but I am sure that real investors, who have suffered real losses, to no avail may not be quite as satisfied, as she is.

He found this to be an interesting angle, and one he had not thought of. He asked me if I thought there might be a few investors who might be willing to take this action, and said he had some legal contacts in Calgary that he might discuss this with. I came away from the meeting fairly optomistic that the ASC situation might not simply die after this, and that there might be some attempts at recourse, responsibility and accountability yet.
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Postby Guest » Fri Oct 28, 2005 8:28 am

ASC report a 'wake-up call'
Auditor General findings: Nothing to support 'a questioning of integrity'


JESSICA GERGELY / CANWEST NEWS SERVICE BRUCE EDWARDS / CANWEST NEWS SERVICE
Shirley McClellan said she was “satisfied,” but Fred Dunn lamented “a general lack of information in the files to support key decisions.”

Theresa Tedesco, Chief Business Correspondent
Financial Post


Friday, October 28, 2005



CREDIT: Bruce Edwards, CanWest News Service
...Fred Dunn lamented "a general lack of information in the files to support key decisions."

After a three-month examination, Alberta's Auditor General has concluded the enforcement system at the provincial securities commission "needs more discipline." However, he found there was insufficient evidence to recommend that any cases be re-opened.

In a much-anticipated report, Fred Dunn, Alberta's Auditor General, found "there was a general lack of information in the files to support key decisions," made to determine whether the provincial securities regulator pursued or closed enforcement cases, especially in the "most sensitive or potentially high-profile" cases. To remedy that, the Auditor General put forward 10 key recommendations to improve the watchdog's internal procedures.

"We believe our report is a wake-up call to the commission," said Merwan Saher, a spokesman for Mr. Dunn, who is on holiday. "There are serious lapses in the use of the control structure there and we think that sloppy execution of work will get you into trouble. The real problem is that you risk losing your credibility."

For its part, the ASC, which for months has been fighting allegations that its senior executives interfered in enforcement cases and facilitated a "toxic" work environment, said it was "pleased" the Auditor General's report "confirms that there are no apparent or significant flaws identified in the existing systems that support a questioning of integrity."

William Rice, chairman of the ASC, said in an interview yesterday that Mr. Dunn's findings underscored "what we've been telling everyone, that there are no deep-rooted problems in respect of enforcement at the ASC."

Alberta Finance Minister Shirley McClellan concurred.

"There's nothing in the report that says there is lousy enforcement [at the ASC]," she told reporters yesterday.

Ms. McClellan, who has faced criticism in the media and fended off claims of a whitewash and a witchhunt against a group of whistleblowers for the past 10 months, said she was "satisfied" Mr. Dunn's report would silence the critics.

"I think the Auditor General has raised points that I hope will dispel further concerns on enforcement policies."

Mr. Rice and Ms. McClellan both emphasized the ASC would implement the Auditor General's recommendations quickly.

Meanwhile, Alberta's Liberal Opposition leader, Kevin Taft, disagreed with the ASC's and the government's interpretation.

"[The report] shows a deeply dysfunctional organization in which enforcement procedures weren't followed," he said. "Rather than a clean bill of health, it's really a diagnosis of some pretty serious illnesses."

The Auditor General's findings are the culmination of a controversial process that began last December when a group of senior ASC employees complained to an ASC commissioner about Stephen Sibold, former ASC chairman, and David Linder, the current executive director. They accused both men of favouritism, condoning a highly sexualized work environment and interfering in enforcement cases.

Those allegations were brought to the attention of the ASC board of directors, which hired Calgary lawyer Perry Mack to investigate and report back. Earlier this year, he issued two reports: one containing the evidence of about 34 current and former ASC employees, and another with the responses of Messrs. Sibold and Linder.

In late March, the ASC board reported to Ms. McClellan that it found no evidence of enforcement interference, although it confirmed the human resources complaints about senior management had merit.

The Auditor General's office began its examination of the ASC on July 18 after a series of legal challenges launched by the provincial regulator. According to his report, Mr. Dunn's staff was eventually given access to the ASC's internal files, current and former employees, including Messrs. Sibold and Linder, and to the confidential Perry Mack reports, which had been the source of the legal challenge.

In all, the Auditor General's department reviewed 82 enforcement cases that had either been closed or were under current investigation. Although 11 of those were singled out for examination by former and current ASC employees, Mr. Dunn's office said it never intended to "reinvestigate" the cases, but simply review how decisions were made.

"We were looking at the evidence in the files to see if it supported the conclusions," Mr. Saher said.

As a result, "we concluded that the enforcement system needs more discipline." In fact, in his examination Mr. Dunn found there was a lack of general information to support key decisions, and that "information in the files supporting decisions tended to diminish at higher levels." Furthermore, he said, "we found the most sensitive or potentially high-profile cases to be the most poorly documented ... "

Mr. Saher said a major concern was that the auditors had to rely on interviews with current and former staff because there was a lack of a paper trail.

Mr. Dunn's report concluded the conduct of Messrs. Sibold and Linder in the cases his office reviewed was "appropriate."

In a statement, Mr. Sibold said he was "very pleased" the Auditor General "confirmed that my involvement in, and actions in respect of, various enforcement files were appropriate and reasonable."

At the same time, the auditor general's review found that in some cases, there was no evidence that an independent review of work and approval of decisions were conducted when files were closed and that the ASC's internal manual did not provide very specific procedures or guidance to staff on how to handle enforcement activity.

"Better recording of the rationale for decisions is not a documentary matter," he said. "It's not just some missing paperwork, it's important to a good system, which has to have evidence that supports that the correct decisions are being made."

© National Post 2005
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Postby admin » Thu Oct 27, 2005 3:46 pm

some thoughts and notes upon reading the auditor general report on the ASC. It is available at oag.ab.ca

I thought the report was soft, soft, soft on the activities of the ASC. It read like a chat in the principle's office with a student who is humbled and crying and saying repeatedly that he "will not do it again". The auditor general report sounds like a comforting adult offering the errant child a Kleenex and making polite suggestions. I was hoping for stronger terms of reference than "we recommend you do the following.......".

Given that employees, investors, and confidence in our capital markets have taken a severe blow, and lives and opportunities in some cases may have been ruined, this type of chat is not sufficient to say the least. It is failure by a government auditor placed on top of failure by a government regulator in my opinion. (I have been wrong before though,a nd it has been one of those days)

If it can be explained as one government agency trying to use words to prevent embarrasement or political fallout, then I understand the spin, but if not then the auditor failed to convey the seriousness.

The report basically finds fault with nearly every process or procedure being followed (or not followed) by the ASC, and makes suggestions for improvement. The ASC then repsonds humbly suggesting that they agree and they will "fix it". Case closed. No punishment. No recourse for those who were hung out to dry by the failure of this regulator to do it's job. Go see a lawyer I guess.

The report does open the door to the last alternative, by describing the failures in policy at most every level.

some quotes from the report:

"not following investigative process"
"not following conflict of interest guidelines"
""no action plan as required by policy"
"lack of info in files to support key decisions"
"files closed without supporting reason"
"files open for over a year without work performed on them"
"system needs more discipline"
"did not comply with the Commissions conflict of interest policies"
"great deal of power in the hands of this one individual"
"information in the files supporting decisions tended to diminish at higher levels"
"the most sensitive or potentially high-profile cases appear to be the most poorly documented"
etc., etc., etc

There must be several dozen such references to failure to follow any kind of process. Apparently it was a shoot from the hip kind of place where decisions were made by guess and by gosh. (or by some secret process)

My hunch is that the auditor general was lied to when questions were given to him about the investigative process. My experience with IDA firms is that all complaints involving IDA firms are turned over to the IDA, and the ASC does not appear to admit this in the audit report. They suggest a full investigation process and do not mention this "delegation" to an industry trade organization. (never mind that it has never been proven between the IDA and the ASC just who is legally responsible to do the job............lots of conflicting finger pointing there)

The ASC also spent $1.2 million in legal manouever attempts to avoid this audit by the government agency charged with overseeing this government agency. This does not speak highly to their motives, nor our ability to trust entirely what they swear to.

They (the ASC) should be ashamed of their conduct and their lack of professionalism. Most should be replaced. All should be re-trained in values and ethics of an honest society. Former cases where the result was unsatisfactory and the process now questioned should be re-opened. This is a classic example of the combined illnesses of bureaucratic indifference and regulatory failure. The public has not been served. It has been used instead.
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Postby Guest » Wed Oct 26, 2005 9:19 pm

October 25, 2005
Reports from the Auditor General to the Members of the Legislative Assembly of Alberta

Albertans are not well served by manipulation of the accountability process

Today, a newspaper published an article based on a leak of the content of the Auditor General’s soon-to-be-released report on the Alberta Securities Commission’s Enforcement System.

This is the second premature disclosure of the work of the Auditor General in the last twelve days. With respect to the first breach of trust, we have not yet been able to determine the source of the leak. With respect to this second leak to the media, we will begin a second review immediately.

Both these unauthorized disclosures to the media interfere with the integrity of the audit process thereby treating the Legislative Assembly with disrespect. The long-established legislative requirement that reports of the Auditor General be made available to all mlas simultaneously and before any public release is designed to protect the integrity of the parliamentary process, including the independence of the legislative auditor.

We will do our best to find out who it is who seeks to gain an advantage by leaking audit results. Until the source of the leaks is identified, many groups of people, including our staff and senior management of the audited organizations, remain under a cloud of suspicion. As a last resort, we may have to change how and to whom we provide draft reports.

Under section 20.1(1) of the Auditor General Act, the report on the Alberta Securities Commission’s Enforcement System will be delivered to the Speaker of the Legislative Assembly for distribution to each Member on Thursday, October 27, at 11 a.m.

- 30 -

For further information, please contact:

Lori Trudgeon, Communications Coordinator

Office of the Auditor General, 8th Floor, 9925 – 109 Street, Edmonton, AB T5K 2J8

Tel: (780) 422-6655 Fax: (780) 422-9555 E-mail: ltrudgeon@oag.ab.ca
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Alberta Auditor General Report on ASC

Postby urquhart » Tue Oct 25, 2005 5:57 pm

The Globe and Mail reported today that the Alberta Auditor General's Audit of ASC Enforcement will be released on Thursday, October 27, 2005. It will be posted on the Alberta Auditor General's website.

Dr. Kevin Taft, Leader of the Offical Liberal Opposition, is likely to place top priority in this term of the Alberta Legislature on fixing corruption at the ASC. It remains to be seen whether Premier Klein wants the ASC to clean up or not.
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Postby Guest » Tue Oct 25, 2005 8:29 am

Norbourg founder sued by watchdog
$94M action

Sean Silcoff
Financial Post


Tuesday, October 25, 2005


MONTREAL - Quebec's securities regulator yesterday sued Norbourg Asset Management Inc. founder Vincent Lacroix to recover $94-million on behalf of investors who saw $130-million of their money vanish from mutual funds under his control.

In the suit, filed with Quebec's Superior Court in Longueuil, Que., the province's Financial Markets Authority accused Mr. Lacroix of "illegally appropriating" investor funds, using $18-million "for his own personal benefit" to buy properties, pay off personal loans and invest $7-million in a junior mining company, Dianor Resources.

The suit claims he "illegally" transferred a total of $84.3-million from several mutual funds under Norbourg's management into four bank accounts and falsified financial statements to hide their true value. The suit seeks repayment of the $84.3-million and $10-million in damages.

The lawsuit is the latest in a growing list of legal actions surrounding the Norbourg scandal, which involves the disappearance of $130-million in funds belonging to 9,200 small investors. Police are also conducting a fraud investigation. No charges have been laid.

Yesterday, a Quebec securities tribunal recommended Michel Audet, the provincial Finance Minister, order the liquidation of the remaining assets of the funds, worth $75-million at latest count. That money will be returned to investors.

In addition, last week, Quebec's revenue ministry petitioned the court to declare Mr. Lacroix bankrupt, to recoup $18.6-million in personal income taxes it says he owes. Mr. Lacroix had already placed Norbourg into bankruptcy protection a week earlier. It is under control of trustee RSM Richter.

There's also a class-action suit that has been filed against Norbourg. It was expanded last week to include pension giant Caisse de depot et placement du Quebec and Northern Trust Co. Canada as defendants.

Northern Trust was Norbourg's custodian, while the Caisse sold its controlling interest in a company that managed some of the mutual funds at the centre of the scam to Norbourg in 2003. The Caisse says "there are no grounds" for the claim against it.

Norbourg has been under the control of Ernst & Young since August, when the FMA unveiled its accusations of missing funds, and had Mr. Lacroix barred from the profession and Norbourg's assets frozen.

It's rare for a Canadian securities regulator to pursue legal action on behalf of investors, as the FMA pledged last month it would do. In its suit, the FMA cited its mission under securities law to protect investors against fraud and financial impropriety and ensure the proper functioning of the province's financial markets.

But the suit could complicate the settling of accounts. Not only is the FMA proposing to take over the work of class-action law firm Lauzon Belanger, it's also treading on familiar territory for trustee RSM Richter, which has the power, as an officer of the court, to "take whatever action is required to recover funds on behalf of investors," Gilles Robillard, a partner with the trustee, said in a recent interview.

© National Post 2005
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Postby Guest » Thu Oct 20, 2005 10:38 pm

Persistence pays off for investors
Court rules in favour of pair battling the ASC

Barry Critchley
Financial Post


Tuesday, October 18, 2005


For Jason Cowan and Barbara Trosin, two unhappy shareholders, the results from an Edmonton court hearing conducted last week were positive. On Thursday, Madame Justice Wong of the Alberta Court of Queen's Bench received the evidence provided by the two shareholders, who recently brought so-called criminal informations against two Alberta individuals, Mani Chopra and Richard Haderer.

Those informations were filed last month with Doreen Poon Phillips, a justice of the peace. Justice Phillips decided that the informations -- which basically assert that Chopra and Haderer "did unlawfully steal" more than $5,000 from the two investors -- could move ahead. Such a decision is highly unusual.

At Thursday's hearing, Judge Wong requested that Trosin and Cowan submit documentation on their eight-year-old civil lawsuit and on the court decisions taken to date. "We have to go back to court on Dec. 1. In the meantime, she wants more information," said Cowan, who is being helped by John Gladwin and Brian Webber, two former CSIS and RCMP investigators.

Cowan and Trosin (actually her late husband, Dieter) formed Global Well Control, a privately held oil technology company in 1996. A few years later, that company was supposed to be vended into Northside Minerals, a company traded on the Alberta Stock Exchange. Chopra was the corporate counsel for Northside; Haderer was the listing officer at the Alberta Stock Exchange.

Adds Gladwin: "You have to admire the determination of Trosin and Cowan. The court system is so daunting that most other people would have given up by now. The system is supposed to work in such a way that the government agencies, such as the Alberta Securities Commission, try the cases, not individuals."

Cowan and Trosin have also taken civil action against the ASC, against two brokerage firms (ScotiaMcLeod and Pacific International) and principals of Northside. The two filed a statement of claim in 1997 and want $5-million.

Earlier this month, the two parties were in court over an appeal to a decision made in early 2004. In that decision, the courts ruled with Cowan and Trosin and said they were not required to post a $500,000 bond for the matter to proceed. The other parties -- represented by seven lawyers -- then appealed.

"We represented ourselves," Cowan said. "And we told the justices we didn't have a lawyer or any money. But we had Brian Weber, an ex-RCMP officer, in our camp and when he spoke, the justices certainly listened."

© National Post 2005
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David Wilson Supervised RYG Prospectus Where Fraud Alleged

Postby urquhart » Mon Oct 17, 2005 2:52 pm

Toronto Sun, Thursday, October 13, 2005
Linda Leatherdale, Money Editor
Who can we trust now?
There seems to be no one to protect consumers

It's all a matter of trust. And who can you trust with your money, your vote, your confidence?
Well, believe me, Ontario's fallen finance minister Greg Sorbara shattered my trust a few-years ago, when Dalton McGuinty's Liberals signed a taxpayer protection pledge on the election trail promising not to hike taxes. Then wham - once elected, Sorbara whacks us with the biggest tax grab in a decade, to lift another $10 billion from our pockets.
To me, a lie is a lie,and it's wrong to lie. But not for the Liberals.
Now, it's small investors whose trust is again being shattered after scandal after scandal - with fraud police swooping into the offices of Sorbara's family businesses as the criminal probe into Royal Group Technologies widens.
With Sorbara's name added to the RCMP search warrant, this scandal grows deeper and more interesting.

Swears innocence
But, he swears his innocence, just as he did back in February 2004, when finally it came to light the Mounties and federal tax authorities were investigating real estate deals involving Royal Group, where Sorbara served as a director and a member of the audit committee. Sorbara was already stripped of his finance minister’s duties of overseeing the Ontario Securities Commission(OSC). Now, he’s stepped down as finance minister
But it goes deeper.

Now, some investor advocates are crying "conflict of interest'' over Queen's Park's
appointment of David Wilson, Scotia Capital CEO and Scotiabank vice-chairman, as new OSC head, effective Nov. l, replacing David Brown.

This week, the Mounties were back at Scotiabank, after spending several weeks there last winter in its probe of financial dealings involving Royal Group. Scotiabank is a lender to Royal Group, while Scotia Capital and ScotiaMcLeod are underwriters involved in issuing prospectuses for the company that are part of the probe. The bank, police say, is not under investigation.

"While there are not any criminal charges or securities offence allegations ... it would be appropriate for David Wilson to resign or be asked to resign, pending the completion of the RCMP investigation," wrote advocate Diane Urquhart in a letter to Premier Dalton McGuinty.
A spokesman for Government Services Minister Gerry' Phillips, who took over the role of overseeing the OSC, responded, saying Wilson already underwent "a thorough conflict of interest of review" during the selection process.
"Protocols are in place to ensure no conflicts of interest and (Ontario's) integrity and conflict commissioners are satisfied with those arrangements," said Ciaran Ganley.
Meanwhile, the RCMP allege Sorbara, Royal Group founder Vic De Zen and others engaged in fraud and published false disclosure.
At the heart of the allegations are real estate deals, including $32 million worth Iof transactions between Royal Group and a resort controlled by De Zen on the Caribbean island of St. Kitts.
_ Now the probe includes a 1998 deal involving 75 hectares of land in Woodbridge, where both Royal Group and Sorbara Group are based. The property was purchased by a company owned by De Zen and others for $20.5 million, then immediately sold to Royal Group for $27 million, without disclosure that was a related-party transaction and without board approval, authorities allege.
Big bonus
De Zen, who was at the heart of a shareholder revolt over his $5.6-million bonus, stepped down as co-CEO of the plastic building materials firm in late 2003.
Royal Group shares, worth $30 in mid-2002, now trade in the $10 range on the TSX.
Stan Buell, founder of the Small Investor Protection Association, says it's time for tougher laws to restore investor confidence. "It seems Canada is a moral wilderness with so many scandals. Greed and corruption seem to rule and no one has stepped up to protect the consumer," he said.
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Alberta Private Criminal Charges Moving Ahead

Postby urquhart » Fri Oct 14, 2005 4:35 pm

I spoke with John Gladwin, who told me the Alberta Court of Queen's Bench Hearing Judge was D.R. Wong. She has received the evidence provided by Jason Cowan and Barbara Trosin and has requested that they submit documentation on their civil lawsuit and on the court decisions taken to date pertaining to it. She has committed to review all the evidence and has set a court date of Dec. 1st to receive arguments on whether the criminal charges have prima facia merit and what are the appropriate procedures for the court's handling of criminal charges and a civil lawsuit on related issues. She has blocked out the morning of Dec. 1st for the next hearing.

The Alberta Justice of the Peace who accepted the laying of the charges was Doreen Poon Phillips.
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Postby Guest » Fri Oct 14, 2005 12:02 pm

Controversy continues at the ASC
Two disgruntled investors square off against regulator

Barry Critchley
Financial Post


Friday, October 14, 2005


The effectiveness -- or otherwise -- of the enforcement activities of the Alberta Securities Commission was on display in an Edmonton court yesterday.

The activities are in the courts because of two informations for criminal charges laid before a justice of the peace by two unhappy investors, Jason Cowan and Barbara Trosin.

The two investors have since 1997 been battling the ASC and one of its investigators; two brokerage firms, Scotia McLeod and Pacific International Securities; the principals of a now-defunct company called Northside Minerals and Mani Chopra, an Edmonton lawyer who was corporate counsel to Northside.

"What's great about this is that two individuals have spent eight years of their life and all their money in pursuing an investigation that the ASC should have taken care of," said John Gladwin, a former CSIS executive who now runs his own manufacturing business and who has been helping Cowan and Trosin for the past two years.

"And what's really galling is that the ASC told us initially they took no action on the complaint lodged by Barb and Jason. However we later learned that they did a 2 1/2 year investigation which clearly" supported Cowan's and Trosin's allegations. "Yet they took no action.

"Clearly the ASC has an A list and a B list as to who they go after," added Gladwin.

Accordingly Gladwin is disgusted by the inaction of the ASC.

"There is no transparency, no accountability and as a taxpayer that galls me. In theory they are there to protect the interests of the investors. Yet they buckle under pressure. Hence my support for the whistle blowers," the group of ASC staffers who complained this year about the workings of the ASC.

Adds Diane Urquhart, a former research director now an investor advocate. "The case of Jason Cowan and Barb Trosin is one where the ASC had evidence that there was securities fraud.

"Despite that, the ASC has been prepared to enter into a protracted civil legal fight with the two to prevent them from proceeding with their action in a public court," noted Urquhart, who added the ASC has, for example, insisted that the two post a $500,000 bond before the civil trial gets underway. In that civil action, Trosin and Cowan are seeking about $5-million.

- - -

The informations in front of the justice of the peace claim that Cowan and Trosin "have reasonable grounds to believe and [do] believe" the following allegations:

- In Trosin's information against Richard Haderer, a former listings officer at the Alberta Stock Exchange: "That between the 1st day of March, 1996, and the 21st day of July, 1996, both dates inclusive, at or near Edmonton, did unlawfully steal 10,000 shares of a value exceeding $5,000, the property of Barbara Trosin, contrary to Section 594 (A) of the Criminal, Code of Canada.

- Cowan's two-count information against Mani Chopra, an Edmonton-based lawyer: "Between the first day of March, 1996, and the 31st day of May, 1996, both dates inclusive, at or near Edmonton, Alberta, did unlawfully steal 15,000 shares of a value exceeding $5,000, the property of James Cowan, contrary to section 334 (A) of the criminal Code of Canada; and

"Between the 1st day of March, 1996 and the 31st day of May, 1996, both dates inclusive, at or near Edmonton, Alberta, did unlawfully steal 10,000 shares of a value exceeding $5,000, the property of James Cowan, contrary to section 334 (A) of the Criminal Code of Canada.

- - -

The Cowan/Trosin matter has gone on for more than eight years. At its simplest the story concerns the efforts of the two to take their privately held oil industry technology company public via a reverse takeover. Northside Minerals was selected as the public company to be used. That advice came from a ScotiaMcLeod broker. Ultimately the Cowan/Trosin company was vended in.

Cowan/Trosin and some principals at Northside Minerals then entered into a sharepooling arrangement. "The terms were that no stock could be sold without the consent of each one of us. We later learned through Mellon Trust that all our shares had been sold without our consent or knowledge and we were not given any of the proceeds," noted the two in a letter to the Justice of the Peace.

- - -

So what does the ASC say?

It said that the legal aspects of the civil case have been turned over to Duncan & Craig, an Edmonton law firm. The ASC spokesperson wouldn't comment on what instructions it has given to the law firm. Last week the two parties were in court on an appeal on the posting on the $500,000 bond. No decision was handed down.
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Private Criminal Charges Being Heard Dec 1st

Postby urquhart » Thu Oct 13, 2005 7:50 pm

I spoke this evening with John Gladwin, who told me the Alberta Court of Queen's Bench Hearing Judge was D.R. Wong. Today she has received the evidence provided by Jason Cowan and Barbara Trosin and has requested that they submit documentation on their civil lawsuit and on the court decisions taken to date pertaining to it. She has committed to review all the evidence and has set a court date to receive arguments on whether the criminal charges have prima facia merit and what are the appropriate procedures for the court's handling of criminal charges and a civil lawsuit on related issues. She has blocked out the morning of Dec. 1st for the next hearing.

The Alberta Justice of the Peace who accepted the laying of the criminal charges was Doreen Poon Phillips.
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Investor Fraud Charges in Alberta Court Tomorrow

Postby urquhart » Wed Oct 12, 2005 2:28 pm

Tomorrow morning there will be an Alberta Court of Queen’s Bench hearing on private criminal charges laid by two investor fraud victims against a former corporate lawyer for Northside Minerals Inc. and a former Alberta Stock Exchange (ASE, now TSX Venture Exchange) listing officer, who listed Northside Minerals Inc. The hearing will take place Thursday, October 13, 2005 at 9:30 a.m. in Court Room 269 of the Alberta Court of Queen’s Bench, Edmonton, Alberta.

The court documents showing the criminal charges laid and the complaints filed with the Alberta Justice of the Peace are in the PDF document attached, called Northside Private Criminal Charges. This is a newsworthy court hearing since victims of investor fraud in a public company have laid private criminal charges that were accepted by an Alberta Justice of the Peace for adjudication in the Alberta Court of Queen’s Bench. Normally, criminal fraud charges are laid by the Royal Canadian Mounted Police or either a local or provincial police commercial fraud unit. The Alberta Securities Commission can also lay quasi-criminal charges for securities offences under the Alberta Securities Act.

Jason Cowan of Edmonton, Alberta and Barbara Trosin of St. Albert, Alberta have convinced an Alberta Justice of the Peace to accept their laying of private criminal charges against Mani Chopra, the former Northside corporate lawyer, and Richard Haderer, the former ASE listing officer, who was also the listing officer for Bre-X Minerals. Jason Cowan and Barbara Trosin are presenting evidence that Northside shares owned by them were sold without their authorization and that the proceeds of these share sales were taken by Mani Chopra and Richard Haderer. The criminal charges are theft of shares of a value exceeding $5000.00 contrary to section 334(a) of the Federal Criminal Code. Jason Cowan and Barbara Trosin are presenting evidence that was collected by RCMP and Alberta Securities Commission investigators and contained in an Alberta Securities Commission investigation file, that is normally not available to the public. Jason Cowan and Barbara Trosin have received assistance in compiling the evidence from John Gladwin and Brian Webber, two former CSIS and RCMP officers, who are now private investigators. Neither the RCMP nor the Alberta Securities Commission (ASC) has taken enforcement action and this is one of the files that was the subject of interference complaints by ASC whistleblowing employees.

According to an article written by Mark Wells of the St. Albert Gazette also in the attached PDF – Northside Private Criminal Charges, "Barbara Trosin is a 61-year-old St. Albert grandmother that has been battling the Alberta Securities Commission (ASC) in Edmonton Court of Queen’s Bench, with a civil lawsuit claiming the commission conducted an investigation in bad faith. In a statement of claim filed Aug 21, 1998, Trosin and co-plaintiff Jason Cowan each seek $2,366,765 in damages from the ASC, former ASC investigator Brett Kimack … Others named in the statement of claim include Cowan and Trosin’s former business associate Jim Sikora, brokerage Pacific International Securities and Ronald Loewen, ScotiaMcLeod and Dale Nesvold, and former Northside lawyer Manny Chopra. …Trosin’s journey to the courtroom began with a product devised by her late husband Deiter, a subsea engineer for offshore oil rigs. His idea — a new, lightweight, split ball blow-out preventer for drilling rigs — was left with Barb, when Deiter died. Trosin then enlisted Cowan’s help to find financing for development of the valve. A meeting with Scotia McLeod broker Dale Nesvold, also named in the suit, put them in touch with John and Jim Sikora, twin brothers heading up a junior oilfield company. The company, Northside Minerals International Inc., was traded on the Alberta Stock Exchange with John acting as president and Jim, a stock promoter, heading up marketing.”

For additional information, please contact myself or Jason Cowan of Edmonton, Alberta whose telephone number is 1-780-487-0118.

Diane Urquhart

Volunteer Investor Advocate
Mississauga, Ontario
E-mail: urquhart@rogers.com
Telephone: 905-822-7618
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