Hugh Craig

Following a merits decision finding that the respondents perpetrated a massive corporate fraud involving standing timber assets and related party transactions, the Ontario Securities Commission held a sanctions and costs hearing.

The Commission imposed permanent market participation bans on the individual respondents.

It also ordered administrative penalties totaling over $11.6 million and disgorgement of over $64.6 million, representing salaries, bonuses, and proceeds obtained through the fraudulent conduct.

The respondents were also ordered to pay over $5 million in costs.

During the 117th day of a protracted hearing on the merits, four respondents brought a motion requesting permission to file written witness statements in lieu of oral examinations-in-chief for their remaining witnesses.

The respondents argued this was necessary to ensure the hearing concluded by the scheduled deadline and to prevent the exhaustion of their funding, relying on the Supreme Court's direction in Hryniak regarding proportionality and access to justice.

Staff opposed the motion, arguing that credibility was at issue and written statements would provide a 'varnished version' of the facts.

The Panel granted the motion, finding that the slight prejudice to Staff in not observing the witnesses during examination-in-chief was outweighed by the necessity to complete the hearing efficiently and the significant costs already incurred by all parties.

Following a merits hearing where the respondents were found to have engaged in a fraudulent boiler room scheme that raised approximately $18 million from investors, the Ontario Securities Commission held a sanctions and costs hearing.

The Commission ordered permanent market participation bans against the individual respondents.

It also ordered disgorgement of approximately $16.7 million, representing the amounts obtained by the respondents as a result of their non-compliance with Ontario securities law.

Administrative penalties totaling over $5.6 million were imposed to provide specific and general deterrence.

Finally, the Commission ordered the respondents to pay $344,500 towards the costs of the investigation and hearing.

Staff of the Ontario Securities Commission sought sanctions against the respondents following their criminal convictions for fraud, unregistered trading, and illegal distribution of securities in connection with a boiler room operation.

Relying on the inter-jurisdictional enforcement provisions in s. 127(10) of the Securities Act, the Commission found it was in the public interest to impose sanctions.

The Commission ordered permanent market bans against the respondents, permanent director and officer bans, and joint and several disgorgement of $205,000, representing the funds illegally obtained from investors.

The respondent, a directing mind of a mutual fund manager, pled guilty to criminal fraud and admitted to contravening Ontario securities law by misappropriating investor funds and authorizing payments to himself.

Following an agreed statement of facts, a sanctions hearing was held.

The Commission ordered permanent trading and registration bans, a reprimand, and disgorgement of $320,000, rejecting the respondent's argument that he lacked the ability to pay.

The respondent, George Schwartz, brought a motion to exclude and seal his compelled evidence, arguing that it was obtained after the predominant purpose of the Commission's investigation became penal, relying on the Supreme Court of Canada's decision in R. v. Jarvis.

The Commission dismissed the motion, finding that the proceeding was administrative under section 127 of the Securities Act, not quasi-criminal under section 122.

The Commission held that compelled evidence is admissible against a respondent in an administrative proceeding, and that the protections against self-incrimination apply to subsequent criminal or quasi-criminal proceedings, not administrative ones.

The request to seal the evidence and hold an in camera hearing was also denied.

The respondents, George Schwartz and Victor York, brought motions to terminate the hearing on the merits or exclude materials seized during a search of a premises.

The search warrant was obtained to search for materials relating to Brilliante Brasilcan Resources Corp., but investigators also found and seized materials relating to York Rio Resources Inc. The respondents argued the seizure of York Rio materials was beyond the scope of the warrant and obtained on a pretext.

The Commission dismissed the motions, finding that the respondents lacked standing as they failed to establish a reasonable expectation of privacy in the premises or the seized materials.

Furthermore, the Commission found no evidence of a pretext and held that the seizure was lawful under the plain view doctrine.

The Commission concluded it was in the public interest to admit the evidence and continue the hearing.

The applicants, George Schwartz and Victor York, sought an adjournment of the hearings on the merits in two related matters before the Ontario Securities Commission.

The applicants argued that an adjournment was necessary due to a pending appeal of an earlier Commission decision and the potential hardship to witnesses.

The Commission dismissed the application, finding that the public interest required the matters to proceed as scheduled, given the considerable time they had taken to reach the hearing stage.

The Commission noted that the applicants could renew their request if the timing of the appeal became clearer.

Staff of the Ontario Securities Commission sought sanctions and costs against the respondents following a merits decision finding they engaged in unregistered trading and, in the case of Lehman and Schnedl, fraud.

The respondents operated a fraudulent investment scheme targeting European investors, using a Toronto virtual office and bank accounts to create a false impression of legitimacy.

The Commission ordered permanent market bans against all respondents.

Additionally, Lehman and Schnedl were ordered on a joint and several basis to pay a $500,000 administrative penalty, disgorge $297,542 representing the funds misappropriated from investors, and pay $51,718.83 in costs.

Staff of the Ontario Securities Commission brought allegations against Donald and Lisa Buchanan for their involvement in the sale of securities in Gold-Quest International and Harmoney Club Inc. Based on agreed statements of fact, the Commission found that Donald Buchanan engaged in unregistered trading, illegal distributions, and breached a temporary cease trade order, raising approximately US $4.3 million from Ontario investors in what was alleged to be a Ponzi scheme.

Lisa Buchanan admitted her conduct was contrary to the public interest.

The Commission held that Donald Buchanan's status as an undischarged bankrupt did not preclude it from ordering financial sanctions, as the Commission only becomes a creditor upon making the order.

The Commission imposed permanent market bans on both respondents, and ordered Donald Buchanan to disgorge $352,000 and pay an administrative penalty of $300,000, which was higher than the $150,000 requested by Staff, to ensure adequate deterrence.

Following his criminal conviction for insider trading, Staff of the Ontario Securities Commission sought an order imposing sanctions against the respondent under subsection 127(1) of the Securities Act.

The Commission found that it had jurisdiction under subsection 127(10) to make a public interest order based on the criminal conviction.

The Commission ordered a 12-year prohibition on trading and acquiring securities, with a limited carve-out for registered retirement accounts, and a 12-year ban on acting as a director or officer of a reporting issuer.

Staff of the Ontario Securities Commission alleged that the respondents solicited European investors to invest in a fraudulent investment scheme offered by Lehman Cohort Global Group Inc. The respondents used a Toronto virtual office and Toronto bank accounts to mislead investors into believing they were dealing with a legitimate Ontario company.

The Commission found that Lehman and its directing mind, Anton Schnedl, traded in securities without registration and knowingly perpetrated a fraud by misappropriating investor funds, contrary to sections 25(1)(a) and 126.1(b) of the Securities Act.

Representatives Richard Unzer and Alexander Grundmann were found to have traded without registration, but the fraud allegations against them were dismissed due to insufficient evidence of their knowledge.

All respondents were found to have acted contrary to the public interest.

The Ontario Securities Commission held a hearing to consider whether to approve a settlement agreement between Staff and the respondent regarding his involvement with Gold-Quest.

The respondent admitted to serious misconduct but cooperated with Staff, ceased activity upon learning of the receivership, and compensated some investors.

The Panel applied the standard that a settlement should be approved if it falls within acceptable parameters, rather than substituting its own judgment.

The settlement was approved, resulting in a ten-year prohibition on acting as a registrant, removal of exemptions, and an order to disgorge approximately $60,851.

The applicant, Weizhen Tang, brought an application to permit him to trade in foreign currencies under supervision on behalf of himself and consenting investors, despite an existing temporary cease trade order.

Staff of the Ontario Securities Commission sought to extend the temporary cease trade order pending related criminal proceedings.

The Commission found that the applicant had admitted to serious allegations, including failing to disclose losses, creating misleading account statements, and dissipating all invested funds in what Staff alleged was a Ponzi scheme.

The Commission dismissed the application to permit trading, finding it would pose an unacceptable risk of further harm to investors and capital markets, and extended the temporary cease trade order.

Staff of the Ontario Securities Commission and the respondent entered into a settlement agreement regarding the respondent's trading transgressions.

The Commission held a hearing to determine whether to approve the settlement.

The Commission found the settlement to be a rational, reasonable, and sensible resolution, noting that the transgression was explainable given the respondent's mental condition at the time.

The Commission approved the settlement, ordering a one-year prohibition on the respondent trading in securities of issuers where he is an officer, director, or insider, followed by permanent trading restrictions regarding GLR Resources unless done through a registrant or lawyer/accountant.

The respondent was also ordered to pay an $8,000 administrative penalty.

The Ontario Securities Commission held a hearing to consider whether to approve settlement agreements between Staff and five respondents.

The respondents admitted to acting as market intermediaries and trading in securities of Imagin Diagnostic Centres Inc. without being registered, contrary to section 25(1) of the Securities Act.

The Commission approved the settlement agreements, imposing various prohibitions on the respondents acting as directors, officers, or registrants, and ordering one respondent to pay a $15,000 administrative penalty.

The Ontario Securities Commission held a hearing to consider a settlement agreement between Staff and the respondent, who had previously been subject to cease trade orders.

The respondent admitted to breaching the prior orders by engaging in unauthorized discretionary trading and defrauding investors of substantial funds, for which he was also criminally convicted and sentenced to imprisonment.

The Commission approved the settlement agreement, finding that permanently restricting the respondent from registering, trading, or acting as an officer or director of any issuer was in the public interest.