Month: April 2018

It looks like the fiasco that IS the British Columbia Securities Commission (and one of their flunky lawyers, Olubode Fagbamiye) is alive and in full form.   Recently, a judge in the Court of Appeal for British Columbia has ruled in favor of a BCSC Respondent – indicating that the BCSC (and their regiment) should be ‘extra careful’ when it hands out a permanent ban.   They indicate such bans can ‘interfere with a person’s ability to earn a living, and should only be considered after an examination of lesser options.’   The Panel consisted of Suzanne K. Wiltshire, George C. Glover, Jr., and good ole Don Rowlatt.

From Mike Caswell – a reporter for Street Wire:

The matter before the Appeal Court was in regard to Larry Keith Davis (“Davis”) –  Davis, an investor relations man who received a permanent ban from the BCSC in 2016. BCSC enforcement staff said that Mr. Davis offered to sell shares in an OTC Bulletin Board company to his neighbor. He then used her money for personal expenses, and never delivered the shares.

The matter went to a hearing before a BCSC panel, at which Mr. Davis argued that he was a victim of circumstances. The company that he worked for (Formcap Corp.) had promised him the shares after it completed a rollback. He said that he sold the shares to his neighbour on the basis that she would get the stock as soon as he did. Unfortunately for everybody, he never received the shares, he said.

The BCSC panel rejected Mr. Davis’s arguments, noting that he was well aware that Formcap was having serious financial troubles when he sold his neighbor the shares. Moreover, after his neighbor sought the return of her money, he continued to deceive her, the regulator determined. He told her that there was no money available as it was tied up in market.

When it came to penalties, the BCSC found that Mr. Davis’s actions constituted more than a minor offence. When he sold the shares to his neighbor, Wendy McDonald, he “not only knew he did not have any Formcap shares to sell to [Ms. McDonald] but also knew the previously proposed Formcap share consolidation had been abandoned and the company was having serious financial difficulties. Yet, he proceeded to agree to sell [Ms. McDonald] another 30,000 Formcap shares which he did not own on the same terms and conditions.”

For those reasons, the BCSC decided to impose a permanent ban. It also ordered Mr. Davis to pay $15,000. In doing so, it noted that the amount of money at issue was relatively small ($7,000) but Mr. Davis’s continuing deceit amounted to the “most serious misconduct” that the BCSC regulated.

The penalty, however, was not properly considered, at least according to the Court of Appeal. In its Friday ruling, the court determined that the BCSC should have looked at a lesser penalty for Mr. Davis. While much of the ruling hinges on technical points of law, the Court of Appeal heard that Mr. Davis had worked in the industry for decades without attracting any regulatory sanctions.

Of more importance, at least to other potential regulatory targets, is the fact that the Court of Appeal identified an error in the BCSC’s approach to the ban. The regulator imposed it without considering if a lighter sanction would suffice. A permanent ban is an extreme measure that should only be considered under a specific set of circumstances, the ruling states. Such bans are for instances when the public has been abused, an individual is resistant to governance, there is an element of criminal activity or there is a reason to believe that the individual could not be trusted to deal honestly with the public, the Court of Appeal found.

For those reasons, the Court of Appeal has sent the case back to the BCSC to have another look at Mr. Davis’s penalty. While Mr. Davis won the sanctions part of the appeal, he lost another part of the appeal in which he had contested his liability. The decision was unanimous, all three judges having agreed.

This revelation is huge – the BCSC has been issuing these permanent bans to virtually everyone the come across in their hearing room.   Did they consider other possible (lesser) findings in matters such as ours?  Of course they didn’t – they just don’t work that way!   Breaking Canadian’s Charter of Rights on a daily basis seems to be the MO.

Complete case is available at this URL http://www.courts.gov.bc.ca/jdb-txt/ca/18/01/2018BCCA0149.htm  Case #CA44114, April 20, 2018. Davis vs BCSC

***ORIGINALLY POSTED IN JULY 2017***

What a last couple of weeks it has been for Walton International – the Alberta Securities Commission suspended Walton’s registration which prohibits them from selling any more of their investments.  And then they hired Ernst & Young to take them through the CCAA process in an attempt to re-organize their debt.   This sounds almost identical as the League Assets story we discussed last summer in this blog post.     One can conclude the Walton matter will have the same ending!   How can a company make hundreds of millions of dollars selling land be broke after 25+ years of being in business?  Rumor on the street is the company is being gutted and those (at the top) have already cashed out their millions…

WAS THIS ALL PREDICTABLE?

Back a few years ago I came across a Sales Representative that worked at Walton International at a Calgary Flames hockey game.  After chatting for a few minutes he suggested I look at his investment opportunity – it was a parcel of land down by Spruce Meadows (in the southern tip of Calgary).    Although I was not interested in the investment, I agreed to meet with him at his office a short while later.

I remember their office being really nice and it seemed like they had a ton of staff.  After receiving a brief sales pitch I was sent on my way with an envelope full of paperwork.   Some time later, I opened the envelope and (as part of the package) discovered a letter from a lawyer named Donald Boykiw from the fancy Bennett Jones LLP law firm.

The letter is short and cuts to the point – it indicates that Boykiw is writing to inform Walton that the Alberta Securities Commission had reviewed Walton’s business practice of selling undivided interest in land to purchasers and that this review had been done as a result of sanctions against Walton’s prime competition in Alberta land banking.    Boykiw goes on to state, “I would also advise that the Commission staff member who was involved in this matter has further advised that the ASC’s enforcement counsel would not be recommending any changes to the current forms of referral arrangements for both the mortgage referrals from Westmount Mortgage Corporation and the land referrals from Cordex Realty.   We have also received a follow-up call from the registration counsel at the Alberta Securities Commission indicating that they ave also completed their review of such referral agreements and were not proposing any changes.”    A copy of the letter:  

The significance of this letter is simple – Walton International’s business model sees them allegedly buying farm land for as little as $400 per acre and turn around only days later and sell it for up to 7000% increases to investors from all over the World – and the gang down at the ASC gave them a clean bill of health while sanctioning others in the same line of work.    And don’t forget – this happened during Ralph Klein’s duration as Premier of Alberta who’s daughter physically worked at Walton’s head office.

For those people that do not know who Walton International are (or were) – they purported to be the largest land banker (and then later land developer) in the nation.    They had many projects throughout Canada and the United States.   They had come under fire in some circles for paying huge upfront commission to their sales people and for having lavish spending sprees on chartered boats and trips for Staff.   In one instance, it was reported they had chartered a large ship and had the expensive Self-Help Guru Anthony Robbins as a guest to get their staff motivated to sell their product.

Facts are – may people have been reporting on Walton’s demise for years.   A simple google search has found us endless reports from press from all over the World suggesting Walton’s business plan had some distinct cracks and was leaking severally.   An article in the Ottawa Citizen from March 2013 suggests the land banking project in Ottawa was in trouble.

What happened in Singapore when they had several complaints about many Land Banking firms – even Walton International?   Out comes the huge Public Relations wheel and they brought an entire news crew to see their operations in Canada….

https://www.youtube.com/watch?v=sTzJ_61nY54

This video is so biased towards Walton but comes across as some bi-partial news telecast – We wonder how much more they raised after this video made the rounds…

Would this all have been avoided IF the ASC had not given them that clean bill of health back in 2002 – that they used as a sales aid for their sales people???  Shame on the ASC!   This story is going to be huge when the cards ALL come falling down – and this letter is going to be used in any case against the ASC!   How are they going to be able to protect the Walton Investors when they are complicit in allowing Walton to exist – even going as far as giving legal advice that their sales people used to close the unexpected investors?

At the conclusion of our hearing, the Panel Chair NIGEL CAVE instructed both parties to complete Written Submission on Liability.  These documents argued the points brought up during the hearing and gave the parties the ability to prove (or disprove) the allegations brought forward in the Notice of Hearing.

One of the key documents involved in the hearing was the Offering Memorandum(s) (“OM’s”) used by the Respondents to raise capital.  For those that invested with the Respondents, you will remember this document as one you were given at the time you invested.    The BCSC (and other securities jurisdictions) allow an OM Exemption when raising capital in the securities market.

On May 16, 2014, the Respondents received the Executive Directors Submissions on Liability and began reviewing the points brought forward by Staff.    Staff Litigators Olubode Fagbamiye and C. Paige Leggat prepared the document on behalf of the Executive Director.

We read them from cover to cover a couple of different times and soon noticed something very particular….

Unfortunately, at paragraph #10 of their submissions, Staff resorted to physically changing the appearance of the document.   We feel they did this to suite their theory (and main allegation) that the Respondents did not forward the MAJORITY of the funds to the Developer.   This was the big $5.45 million fraud allegation that was ultimately dismissed by the Panel.   Let’s take a look at paragraph #10 as it appears in their submissions….

And now, for those of you that don’t have the FCC or DCF Offering Memorandums in front of you, this is how the document looked – keep in mind this document was relied upon at all times to raise capital for the projects, and Staff were suppose to have the onus of proving the case as alleged in the Notice of Hearing:

Staff (in paragraph 10) took Section 1.2 on page 5 of the FCC OM, merged it with Section 2.2 which is 2 pages later.  They then highlighted both portions they manipulated (in yellow) to give an appearance that they were from the same section.  In the first highlighted yellow box it states, “The Corporation is raising funds pursuant to this Offering for the purpose of lending the majority of the funds raised hereunder for the purpose of meeting its financial contribution obligations as set forth in item 2.2.3 below (the “FCC” Loan”).   The catch here though is they placed the portion from 2.2 above section 1.2 in their submissions.  Section 2.2 includes the word ‘hereunder’ which the reader would automatically think was the second yellow highlighted box.   The second box then uses the words “majority of proceeds” and “financial obligations”.   They complete their manipulation by omitting the title “Use of Net Proceeds” all together.

For those of you that do not understand the significance of these actions of Staff, we will try to explain it this way…originally when the Executive Director brought forward the allegations of fraud, they took a simple grade 2 math equation (the amount of the cheques written to the developer AND the amount of commission paid to sales people were subtracted by the total amount of funds raised).   They did not consider ANY other of the valid business expenses incurred by the corporation that were allowed under the OM’s.   In their allegations, they stated the Respondents did not advance the majority of the funds to the Developer which was wrong!    The Respondents (who did not have a lawyer) proved this allegation to be wrong by repeatedly asking the Lead Investigator (the flunky Elizabeth Chan) questions during the cross examination.   It is VERY apparent that Staff relied on basic, summary evidence that was only a small portion of the actually story – these were very complex, intertwined companies and Staff had all the information (bank records, credit card statements, etc.) but failed to bring strong compelling evidence to the hearing.

To this day, we are not sure why Staff’s Bigshot Litigators felt they needed to manipulate the evidence they had before them.  We have had people speculate that once the hearing was over they realized their case was not as strong as they had once thought so they needed to resort to something like this.   That maybe because the Respondents were self-represented, they thought they might be able to sneak this past.

Either way, this shows the playing field one faces when going against an internally run regulator.    Nobody seems to be accountable – as an example, during the hearing the Respondents asked repeatedly (IN FRONT OF THE PANEL) for the litigator (Olubode Fagbamiye) to explain his actions to which he did not even acknowledge the question.    We still question WHY the Panel Chair did not stop the proceedings and ask the litigator IF my our allegations were true and/or WHY they did this.    The Commission for intense and purposes appears to be a Kangaroo Court – where the judge, jury and executioner all work in the same office space.

Interesting enough, right after the Respondents submitted their Reply Submissions on Liability (in July 2014  where we accused them of manipulating the document) the other Staff Litigator who’s name is on the document (C. Paige Legatt) resigned.    She resigned and we have never had the chance to ask her whether or not she takes credit for manipulation.     Again, what are these people hiding?  Complete scumbags!     If they would have come in with a reasonable number there is a great chance we would have been able to negotiate a settlement and could have had our investors participate in the Deercrest development without any involvement from us.

Shame on the BCSC!!