Proceedings


ONTARIO SECURITIES COMMISSION
IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990 C.S.5, AS AMENDED
AND
IN THE MATTER OF BELTECO HOLDINGS INC.,
TORVALON CORPORATION, GARY SALTER, ELAINE SALTER,
PETER ARTHUR MITCHELL, RODIKA FLORIKA, GLEN ERIKSON,
CHRISTINE ERIKSON, KAI HOESSLIN, HARCOURT WILSHIRE,
921159 ONTARIO INC. and  918211 ONTARIO INC.

HEARING:

July 6, 7, 8, 9, 13, 15, 16, 20, 22, 23, 27, 29, 30; August 4, 5, 6, 7, 10, 13, 14;

September 4, 1998

PANEL:

John F. Howard, Q.C. Chair
G. Patrick H. Vernon, Q.C. Commissioner

APPEARANCES:Lawrence Ritchie, Esq. and
Nancy Roberts OSC Special Counsel
Darryl T. Mann, Esq. for Peter Arthur Mitchell
Allan Sternberg, Esq. for Glen Erikson and Christine Erikson

 

DECISION AND REASONS

 

(September 30, 1998)

 

TABLE OF CONTENTS

I INTRODUCTION
A. The Allegations
(i) Allegations Against the Salter Group
(ii) Allegation Against Erikson
(iii) Allegations Against Mitchell
B. Brief History of the Proceeding
C. The Mandate of the Commission

II THE WITNESSES

III BELTECO - FROM OBLIVION TO CLEAN SHELL REPORTING ISSUER
1988 to December 1990
A. Belteco - the Clean Shell is Transferred

IV ISSUANCE OF BELTECO SHARES FROM TREASURY
A. The Moon Balancer and Continuous Feed Squirt Gun
B. Fifty-One Per Cent of the Baptist Journal
C. The Golden Age Film Rights
D. Subscriptions of Elaine Salter and Albertine Madeiros
E. New Testament Bible Readings on Audio Tape
F. Stock Options at $0.10 to Christine Erikson, John Bennett and
Harcourt Wilshire - February and March 1991
G. Private Placement - December 23, 1991
H. Stock Options - April 30, 1992
I. Summary

V TORVALON - CLEANING UP A REPORTING ISSUER IN DEFAULT
A. Acquisition of Control - June 1991
B. Issuance of 4,122,000 Shares - 9 July 1991
(i) 1,522,000 Shares to 921159 For Debt
(ii) 100,000 Shares to Christine Erikson
(iii) 2,500,000 Shares to Kent Toys Inc.
C. Issuance of 1,000,000 Shares to Stall Universal Inc.
D. Issuance of 900,000 Shares Under Options
E. Additional Submissions
F. Summary of Shares of Torvalon Corp. Acquired and Issued From Treasuryas at June 1991 to July 1991

VI BELTECO - ANALYSIS OF SALE OF SHARES ISSUED FROM TREASURY TODEALERS

VII TORVALON - ANALYSIS OF SALE OF SHARES ISSUED FROM TREASURY TODEALERS TO 31 DECEMBER 1991

VIII CONCLUSION
IX APPENDIX


I INTRODUCTION

These proceedings began by a Notice of Hearing dated 15 December 1993. At thattime, there were twenty Respondents, including two broker/dealer firms and six individualsassociated with those firms. By 1 March 1996 the number of Respondents had beenreduced to the twelve Respondents named in the style of cause above. At that time, byan Order of 1 March 1996, the Notice of Hearing was amended to delete the namedbroker/dealers and the individuals associated with them and the Statement of Allegationswas also amended to delete the allegations made against those former Respondents.

It is not necessary to recount in detail the reason for these changes. Suffice it tosay that they were the result of decisions not to proceed on the part of Staff and, in onecase, dismissal by the Commission as against some Respondents when counsel soughtan adjournment which was opposed.

On 21 March 1997 an Order was made pursuant to a Settlement Agreement of 14March 1997 imposing certain sanctions on the Respondents Gary Salter, Elaine Salter,Rodika Florika ("Florika"), 921159 Ontario Inc. ("921159"), and 918211 Ontario Inc.("918211") (Reported (1997) 20 O.S.C.B. 1575). In the Order approving the settlementand imposing sanctions on the settling parties, they are referred to collectively as the"Salter Group". In the Amended Notice of Hearing and Statement of Allegations which setout the allegations which are the subject of this proceeding, the Salter Group is identifiedas including the five Respondents who settled on 21 March 1997 as well as theRespondents Christine Erikson, Kai Hoesslin ("Hoesslin") and Harcourt Wilshire("Wilshire"). In order to understand the allegations against the remaining Respondents,it is necessary to set out the allegations in detail. In doing so, we will refer to theRespondents who have settled as the Salter Group and identify the remainingRespondents alleged to be part of that group by name.

A. The Allegations

In the Amended Statement of Allegations by way of identifying the parties it isalleged that:

(i) Glen Erikson ("Erikson") was at all material times a solicitor practising lawin the Province of Ontario, and the first director of 921159 and 918211. Atall material times, Erikson was the corporate solicitor for Belteco HoldingsInc. ("Belteco") and Torvalon Corporation ("Torvalon");

(ii) Christine Erikson is the wife of Erikson and was, at all material times, anofficer and shareholder of Torvalon and Belteco;

(iii) Hoesslin and Wilshire were, at all material times, business associates ofGary Salter.

(iv) The respondent Peter Arthur Mitchell ("Mitchell") is, and was at all materialtimes, registered with the Commission as a sales person at the firm ofLevesque Securities Inc. ("Levesque"), a securities dealer;

(v) Belteco is a reporting issuer whose common shares were at all materialtimes traded over-the-counter and were quoted on the Canadian DealingNetwork Inc. ("CDN"), formerly the Canadian Over-the-Counter AutomatedTrading System; and

(vi) Torvalon is a reporting issuer whose common shares were at all materialtimes traded over-the-counter and were quoted on CDN.

By the Amended Notice of Hearing, the Commission announced that it proposed tohold a hearing to consider whether by reason of the allegations set out in the AmendedStatement of Allegations made by Staff of the Enforcement Branch of the Commission("Staff") that the conduct of the Respondents was not in the public interest and:

(a) whether pursuant to section 27 of the Securities Act, R.S.O. 1990, c.S.5, asamended (the "Act"), it is in the public interest to order that the registrationof Mitchell should be suspended, cancelled, restricted or be made subjectto conditions, or whether Mitchell should be reprimanded;

(b) whether pursuant to section 128 of the Act, it is in the public interest to order,subject to such terms and conditions as the Commission may impose, thatany or all of the exemptions contained in sections 35, 72, 73 and 93 of theAct no longer apply to Belteco Holdings Inc., Torvalon, the Salter Group,Erikson, Christine Erikson, Hoesslin, Wilshire and Mitchell; and

(c) such further and other order as the Commission considers appropriate.

The allegations in the Amended Statement of Allegations after identifying the partiesmake allegations against the Salter Group as there identified and separate allegationsagainst Mitchell. In setting out the allegations here, we will, except in the heading, againrefer to the Respondents who have settled as the Salter Group and identify the remainingRespondents alleged to be part of that group by name.

(i) Allegations Against the Salter Group

1. During 1991 and 1992, the Salter Group, Christine Erikson, Hoesslin, Wilshire andother nominees of Gary Salter acquired control of Belteco and Torvalon andengaged in distributions of the common shares of Belteco and Torvalon withoutfiling a prospectus and obtaining a receipt therefore, in circumstances where theprospectus exemptions under the Act were unavailable or where reliance upon suchexemptions constituted abuse of the exemptions contrary to the purpose andobjects of the Act.

2. Further, in connection with the acquisitions and dispositions described in paragraph1 above, the Salter Group, Christine Erikson, Hoesslin, and Wilshire or one or moreof them failed to file, or filed inaccurate reports contrary to sections 101, 107, 108and 109 of the Act regarding the securities of Belteco and Torvalon.

3. Further, Belteco, Torvalon, the Salter Group, Christine Erikson, Hoesslin andWilshire engaged in trading, and conduct relating to trading, involving the securitiesof Belteco and Torvalon which was abusive of the capital markets and contrary tothe public interest. This conduct included, among other things, that which isdescribed in paragraphs 1 and 2 above, as well as the issuance and filing ofmisleading, exaggerated and promotional press releases relating to the affairs ofBelteco and Torvalon, and the failure to issue and file press releases relating to theaffairs of Belteco and Torvalon in accordance with section 75 of the Act.

(ii) Allegations Against Erikson

4. During the relevant period, Erikson engaged in conduct which was abusive of thecapital markets, and contrary to the public interest by authorizing, permitting,acquiescing in, facilitating or participating in the conduct described in paragraphs1, 2 and 3 above of the Allegations Against the Salter Group.

(iii) Allegations Against Mitchell

5. During the relevant period, Mitchell, while a salesperson registered with theCommission:

(a) conducted trades in the securities of Belteco and Torvalon in clientaccounts, which trades were executed without prior authorization by clients;

(b) failed to maintain accurate books and records necessary to properly recordbusiness transactions and financial affairs contrary to section 113 ofRegulation 1015, R.R.O. 1990 under the Act (the "Regulation");

(c) conducted discretionary trades for clients in the securities of Belteco andTorvalon, which trades were contrary to section 221 of the Regulations; and

(d) conducted his trading activities in the manner contrary to the public interestin that he knew, or ought to have known, of the trading activity described inparagraph 1 above, and permitted, acquiesced in, or facilitated the same.

In typical wishful thinking, and no doubt out of an abundance of caution, theAmended Statement of Allegations also refers to "such further and other allegations asStaff may advise and the Commission may permit". Notwithstanding that nearly five yearshave elapsed since the original Notice of Hearing, Staff has not thought up or advancedany "other allegations" and if they had done so we would not have been inclined to permitthem having regard to the extended and tortuous path which this proceeding has taken.

Since it clearly would not ordinarily be in the public interest for allegations of thisnature made in December 1993 to be left until July 1998 for hearing on the merits of theallegation, we believe that a short history of the path taken should be set out here.

B. Brief History of the Proceeding

Shortly after the commencement of these proceedings, they became caught up inan attack on the jurisdiction of the Commission in other proceedings which were basedupon allegations founded on policies of the Commission as opposed to rules madeformally by the Commission. The decisions of the Commission made in this regard werethe subject of lengthy appeals in the courts and this led to a delay in this proceedingbecause, as it was constituted, it could have involved similar issues. Indeed some of thepreliminary motions which we had to deal with as set out below which we characterized asthe "rule making" motions did raise issues which were then on appeal in otherproceedings.

When those matters had eventually been resolved, an initial date for hearing in thisproceeding was set for July 1996 and extended to August 1996 when certain preliminaryobjections were raised as to jurisdiction and apprehension of bias. These objectionshaving been dismissed, the matter was then scheduled to proceed on the merits beforethis panel on 6 March 1997 when further motions were made seeking a stay based on thelengthy delay and, in the alternative, for further and better productions and particulars.After two days of argument on these motions, our decision of 10 March 1997 (1997 20O.S.C.B. 1333) dismissed the motions, but during the argument it became clear that furtherpreliminary motions were contemplated.

Accordingly, we directed that all preliminary motions were to be filed and argumentpresented beginning 2 April 1997. We sat fourteen days in April and two days in Maywhile another panel of the Commission sat for one day in April to deal with a preliminarymotion on the admissibility of certain evidence which it was thought would be better dealtwith by another panel. As a result, we delivered decisions dated 7 April 1997 (1997-20O.S.C.B. 1835), 24 April 1997 (1997-20 O.S.C.B. 2401) and 26 May 1997 (1997-20O.S.C.B. 2921) either dismissing the attacks made on the jurisdiction of the Commissionor deciding that they failed because they raised matters which were not suitable fordecision by way of preliminary motion. In these decisions, we gave leave to renew thelatter type of motions during the hearing on the merits when the full facts would beavailable.

Two matters so reserved were the applicability of the limitation sections of the Actwhich sets time limits for the commencement of proceedings and a further motion todismiss made on behalf of Erikson on the basis of what was then summarized as "systemicbias" on the part of Staff and personal bias against Erikson. After our final decision on allof the preliminary motions of 26 May 1997, appeals were launched to the Divisional Courtand they, having failed, leave was then sought to appeal to the Court of Appeal. Thatleave was ultimately denied, but not until after more than a year had passed since ourdecision of 26 May 1997.

All appeals having finally been determined, this hearing on the merits of theallegations began on 6 July 1998.

We sat to hear the evidence of twenty-two witnesses on eighteen days in July andAugust and a further two days of argument in August as well as one additional day ofargument on 4 September 1998.

In the hearing on the merits, and indeed through all the preliminary motions whichcame before this panel as set out above, Belteco, Torvalon, Hoesslin and Wilshire did notappear and were not represented. At the outset of this hearing, it was agreed by allcounsel that the hearing should, at this stage, deal only with the merits of the allegationsof fact. We indicated that should we find the allegations established on the evidence anddeserving of censure, we would set a further date to hear argument (and evidence, ifrequired) on the question of the limitation period and what order, if any, should be madehaving regard to our findings of the facts.

It should be noted that while the question of the limitation period was specificallyreserved, Mr. Sternberg abandoned, during argument, the allegations of systemic bias andpersonal bias which were made on behalf of Erikson during the preliminary motions.Although in support of that motion, Erikson had filed a lengthy affidavit during thepreliminary motions, neither Erikson nor Christine Erikson gave any other evidence duringthis phase of the proceedings or during preliminary motions. We invited submissions asto whether or not this fact should be given any weight during our consideration of theevidence which was adduced. While we will set out our conclusions on this matter shortly,we state here that while we draw no inference from the failure to give evidence nor fromthe abandonment of the motions referred to, we do believe that we are entitled to rely onthose portions of the affidavit filed by Erikson which deal with the nature and extent of hispractice as a solicitor and any other relevant matters of fact which are set out in theaffidavit filed.

One further matter should be noted here. During the evidence, Mr. Mann and Mr.Sternberg objected to evidence led by Staff of facts which occurred prior to 1991. Theyargued that the allegations are clearly limited to conduct during 1991 and 1992. Wepermitted the evidence to be led over the objections on the basis that it was necessarybackground information in order to understand the allegations with respect to conduct in1991 and 1992.

We note that the identification of Erikson in the Amended Statement of Allegationsalleges that he was the first director of 921159 which was incorporated on 28 November1990 and of which Gary Salter was, at all material times, an officer and sole shareholder.It is also alleged that Erikson was the first director of 918211 which was incorporated on8 November 1990 and of which Elaine Salter was, through most of the relevant period, anofficer and sole shareholder. These facts could lead to a conclusion that the allegationsagainst Erikson extend into 1990 and they are clearly established by the evidence. Wedo not so extend the allegations. In addition, it is alleged that, at all material times,Erikson was a solicitor practising law in the Province of Ontario. While there was evidenceto support this allegation, to the extent that it may be necessary to prove that allegationin a formal sense we rely upon the Erikson affidavit filed.

Nevertheless, during argument, we indicated to counsel that we would ignoresubmissions made by Staff advancing violations of the Act or abusive practices prior toJanuary 1, 1991, but that we would rely upon evidence of facts and conduct prior to 1991in order to come to a conclusion as to what the Respondents knew or ought to have knownas at January 1, 1991 and we have done so in the reasons which follow.

C. The Mandate of the Commission

Because the allegations refer to the purpose and objects of the Act, we consider ituseful to outline briefly those purposes and objects of the Act which are particularlyapplicable to the proceeding before us prior to dealing with the specific facts in thisproceeding.

The Act is designed to provide protection to investors from unfair, improper orfraudulent practices and, as well, to foster fair and efficient capital markets and, to fosterconfidence in capital markets. The Commission is charged with the administration of theAct. Under the Act, the Commission is authorized to make certain orders if, in its opinion,it is in the public interest to do so. In brief, having regard to the purpose of the Act and itsmandate, it is the task of the Commission to protect the public interest and administer theprovisions of the Act so as to ensure the integrity of capital markets in Ontario.

The regulatory regime imposed by the Act requires that public companies whichwish to raise capital in the market become reporting issuers and as such are required tomake public disclosure regarding their enterprises so that prospective investors haveavailable to them full information as to the opportunities and risks involved before investingin the securities of such companies. Inevitably, the regulatory regime imposed under theAct involves delay and expense to reporting issuers principally by requiring the filing andobtaining a receipt for a prospectus, if securities are to be distributed to the public.

The Act provides exemptions from prospectus requirements where, for example,knowledgeable and sophisticated investors are providing capital to an enterprise. Thegeneral objective of the available exemptions is to enhance the efficiency of capitalmarkets by permitting those seeking initial capital to do so at a reasonable cost. It is theCommission's mandate, however, to ensure that the use of exemptions is not abused sothat the integrity of the capital markets is maintained.

Over the years, participants in the investment community and those lawyers whosepractice becomes specialized in securities law, have recognized that the expense involvedcan be reduced if a moribund reporting issuer is reactivated and those exemptionsapplicable to sophisticated investors are used to raise new capital. Perhaps inevitably,some promoters of such enterprises not only seek to avoid expense and delay, but alsoto avoid any careful scrutiny of the risks involved by prospective public investors. In doingso, procedures are adopted which may mean that not only is the necessary information notmade known to prospective investors but, indeed, that such information is not readilyavailable even if a prospective investor seeks to become knowledgeable.

These procedures are well known to the promoters of speculative ventures. Duringthese proceedings in argument (though not in evidence) such procedures were describedas involving three stages, namely, the build-up, the marketing, and the blow off. The resultis that public money can be invested in the securities of speculative ventures with no realopportunity for investors to obtain the necessary information even if it is desired, butperhaps more importantly, investors become involved financially by purchasing shares inthe market although the amounts invested do not reach the venture to supply the fundsnecessary to support the development of the speculative project being undertaken.

A brief description of the three phases may be appropriate. During the build-up,assets are transferred to the enterprise for shares. These shares are issued to thepromoter of the enterprise or associates of the promoter at a nominal price and are freeto be traded. During the marketing, some of these shares are transferred to dealers in themarket place as principals, at an increased price. The dealer then encouragesparticipation in the venture by selling shares to members of the public at a furtherincreased price. The blow off occurs when prices in the public market increase becauseof the activity generated. As the price of shares continues to rise in the market place theoriginal promoters transfer additional shares to the dealers involved during the blow-offphase at increased prices. Ultimately through lack of funds in the primary venture anddecreased participation by the dealers in the market place, the price of the shares in thehands of the public decreases substantially and often turns out to be nominal.

These procedures have often been employed in mining ventures when the assetstransferred into the enterprise are very speculative mining claims which are referred to inthe vernacular as "moose pasture". The result has been that on occasion members of thepublic have been sold securities with no real opportunity to assess whether the assetstransferred are prospective mining claims or barren wasteland and with no real possibilityof assessing whether the capital funds actually reaching the enterprise are sufficient toenable it to do the work necessary to determine the real value of the claims transferred.

While there is no analysis in the proceeding before us of the reality of the possiblesuccess of the commercial ventures which were the assets transferred to reporting issuersin this case, it is clear, at least on an ex post facto view of what occurred, that theenterprises were highly speculative or, at the very least, grossly under capitalized to offerany real prospect of success. In the circumstances, it is tempting to describe the assetswhich were transferred to the enterprises for shares which later ended up in the hands ofthe public purportedly under the exemptions provided by the Act as "commercial moosepasture".

There can be no doubt, however, that on the whole of the evidence before us, therewas, in this case, a carefully prepared scheme which was designed to profit theparticipants whether or not the speculative ventures proved to be successful. Moreover,the scheme was designed to take advantage of every possible exemption available underthe Act to reduce expense while at the same time providing practically no information onthe public record as to the likelihood of success. The main case against the Respondentsis based upon the submission that in furthering the scheme many violations of therequirements of the Act occurred principally in relying on exemptions which were notavailable in the circumstances of this case.

It was submitted by counsel on behalf of the Staff that, even if there were noviolations of those sections of the Act designed to protect the integrity of the market andprovide information to prospective investors, the Respondents remaining in the case,knowingly participated in a series of transactions which were designed to create a numberof tradeable shares which the participants would transfer to two broker dealers at priceswhich would afford the participants a substantial profit while knowing that the shares wouldthen be in turn sold to members of the public at prices which returned a profit to the brokerdealers. Neither the prices to the broker dealers nor the prices which the broker dealerssold shares to members of the public reflected in any way the real or prospective value ofthe securities. This, it is argued, was abusive of the market even in the absence oftechnical violations of the Act.

As will appear from what follows, we are satisfied that there were violations ofimportant requirements of the Act which deserves censure. Even if we are wrong in this,however, we also hold that by knowingly participating in a scheme which was clearlydesigned to place securities in the hand of investors at prices which did not reflect theirreal value, the respondents have participated in a process which was abusive of themarket which also should lead to censure.

II THE WITNESSES

As indicated, we heard extensive evidence from twenty-two witnesses and therecord in this case suffers under the weight of 156 exhibits, many of which contain a greatmany documents in up to four volumes. Eleven witnesses who were involved in theinvestigation or in some of the share transactions were called by Staff. These includedfour persons who participated in the investigation of this matter, the sometime accountantfor Belteco, Derek Barbour ("Barbour"), an officer of the transfer agent, and two officersfrom Levesque. One hand-writing expert was called by counsel on behalf of the Eriksons,and counsel appearing on behalf of Mitchell called Mr. Mitchell and his assistant, PauletteBrangman. At this stage, we do not propose to review the evidence of these witnesses,but we do think it important to review in detail the evidence we have concerning the actionsof the people who were directors of Belteco or Torvalon in the period under review.

Three of these (Wayne Whymark, Lawrence Piecha, and Maria Piecha) weredirectors of Belteco in 1990 only but they did give evidence. Virginia Bailey and DanielBailey were directors of Torvalon prior to June 1991. They only signed resolutionsprepared by Erikson to accommodate Mrs. Bailey's father who was President of Torvalonat the time.

Of the ten people who were directors of Belteco or Torvalon in 1991 and thereafter,only four gave evidence. These were: Lincoln Torrance ("Torrance") who was a directorof Belteco from 26 November 1990 to May 1991; Albertine Madeiros ("Madeiros") who wasa director of Belteco from 15 May 1991 and was secretary of Belteco from 24 January1991 to 4 September 1991. She was also secretary-treasurer of Torvalon from 26 June1991; Peter Rooney ("Rooney") who was a director of Torvalon from 26 June 1991, andFlavio Arconti ("Arconti") who was a director of Belteco from 4 September 1991.

The six remaining persons who were directors of Belteco or Torvalon in 1991 andthereafter did not give evidence. They are: the respondent Erikson who was a directorand president of Belteco from 28 June 1990 to 23 January 1991; the respondent ChristineErikson who was a director of Belteco from 9 August 1990 to 14 May 1991 and assistantsecretary of Torvalon from 26 June 1991 to 23 July 1991; the former respondent ElaineSalter who was a director of Belteco from December 1990 to 4 September 1991; JohnBennett ("Bennett") who was a director and president of Belteco from 4 September 1991and a director and president of Torvalon from 26 June 1991; Robert Petry ("Petry") whowas a director of Belteco from 15 May 1991 and a director of Torvalon from 4 July 1991;and, finally, Harry Hans Jedig ("Jedig") who was a director of Torvalon until the 26 June1991.

Other than Wayne Whymark, Lawrence Piecha, Maria Piecha, Torrance, VirginiaBailey, Daniel Bailey, and Erikson, all of the directors named above received issues oftreasury shares either in their own name or in the name of private corporations in whichthey were the sole shareholder and director. In addition, the former respondent, Florika,and the respondents Hoesslin and Wilshire, received issues of treasury shares and noneof these three gave evidence. The former respondent, Gary Salter, was issued shares ofTorvalon in the corporate name 921159 of which he was the sole shareholder, director,and president. Gary Salter gave no evidence.

Elizabeth J. Kirkwood ("Kirkwood") who did give evidence received treasury sharesof Belteco in the name of the corporation W.M. & J.M. Holdings Inc. ("W.M. & J.M.") ofwhich he was the sole director and shareholder.

While the evidence is far from complete, we are satisfied having carefully reviewedthe evidence of Torrance, Madeiros, Arconti, Rooney, and Kirkwood, that they becameinvolved in the corporate transactions of Belteco and Torvalon as nominees of Gary Salter,or in the case of Torrance, as a nominee of Erikson, who was at the time acting for Salterin the acquisition of control of Belteco. This evidence, together with the documentaryevidence, makes it clear and we find that all of the director's participation in corporatetransactions of Belteco and Torvalon in the period under review took place by the signingof resolutions, prepared by Erikson or under his direction, by those who were directors atthe time. There were never any meetings of directors face-to-face to consider the meritsof the actions being taken, the assets being acquired, the nominal value of the sharesbeing issued, the option price attached to options being issued, or the price per share forshares being issued as a result of subscriptions. In our view, while this manner ofproceeding may be technically available under the relevant corporation legislation, it istotally improper for directors of public corporations whose securities are being sold in themarket.

Some effort was made in cross-examination and in argument to establish thatTorrance, Madeiros, Rooney, Kirkwood, and even Arconti were acting independently asindividuals and not as pure nominees of Gary Salter or as participants in a scheme. Whilewe do not believe that Rooney and Kirkwood were as innocent of what was going on asthey would have had us believe, we have concluded on the evidence to be reviewed later,that either they were acting as pure nominees of Gary Salter or they were part of a controlblock with Gary Salter acting in concert.

We accept the evidence of Madeiros that in her capacity as a director and officerof Belteco and as an officer of Torvalon, she was acting as a pure accommodation partyat the request of Gary Salter or through him at the request of Erikson. In our view, this isalso true with respect to the trading in shares which were issued to her or to the actionsof corporations of which she was the sole director and officer. We reached the sameconclusion with respect to Arconti although there is no evidence that any trading tookplace in the shares made available to him under an option during the period covered bythe evidence.

Most, if not all, of the proceeds of the sales of shares to the two broker dealers bythese parties appears to have been paid out to corporations about which we have virtuallyno information. If an attempt was made to trace these proceeds, it must have beenunsuccessful as we have little or no evidence. A submission was made by Staff thatMitchell and Levesque distributed proceeds from the accounts without having properdirections from the apparent owners of the accounts. While the paper records in theevidence is not complete in every respect on this issue, we are not prepared to make afinding that payments were made without the authorization of the apparent owners of theaccounts.

Nevertheless, having heard the evidence of Madeiros, Rooney, and Kirkwood, weaccept their evidence that they did not themselves receive the benefit of any of thepayments made out of the accounts at Levesque which were apparently in their name orin the name of corporations which they controlled.

All of the directors and officers of Belteco and Torvalon who gave evidence testifiedthat they did not at any time exercise independent judgment but merely signed corporateresolutions as requested. Based upon this evidence and our review of the specifictransactions later in this decision and in particular our analysis of the sale of treasuryshares issued to them, we do not believe it matters whether they were acting as purenominees of Gary Salter because if they were not acting as pure nominees, they wereclearly acting with him as part of a control group of the two public corporations involved.Whatever their degree of participation in the scheme which unfolded, all of them actedcarelessly and without due regard to the obligations of a person who accepts anappointment as a director or as an officer of a public corporation.

III BELTECO - FROM OBLIVION TO CLEAN SHELL REPORTING ISSUER, 1988 toDecember 1990

As explained above, in view of the submission with respect to the period of timecovered by the Notice of Hearing, we review the events in this period of time in order toaddress the question of what the Respondents knew or ought to have known in 1991 and1992 having regard to their activities prior to 1991. We do not record or review thesubmissions made by Staff regarding violations of the Act which occurred during the periodprior to 1991.

In 1988 Wayne Whymark ("Whymark") began looking for the owner of mining claimswhich he and some associates were interested in pursuing. He learned that they appearedto be owned by Belteco Kirkland Lake Mining Ltd. ("Belteco Kirkland") which appeared tobe an inactive corporation. Eventually he learned the name of an officer and made contactwith that man's widow when he learned that taxes had apparently been paid by the Estateto keep the mining claims in good standing and that the Estate owned 25,000 shares inBelteco Kirkland. He also learned that Belteco Kirkland had been dissolved for failure tocomply with the Corporations Tax Act on April 4, 1989.

Whymark originally planned to purchase the shares owned by the Estate and takecontrol of the corporation. To this end he retained Erikson to assist in the transaction.Agreements were prepared by Erikson for this purpose in September 1989. In theseagreements, it was contemplated that Whymark would become a promoter of BeltecoKirkland.

It was found, however, not only that Belteco Kirkland had been dissolved, but alsothat prior to its dissolution, the Commission had issued a cease trade order on August 13,1979 which was still in effect.

Steps were taken to cure the dissolution of Belteco Kirkland in the name of thewidow as a shareholder and this was accomplished by 26 April 1990. More complicatedsteps were still required to re-establish Belteco Kirkland as a reporting issuer and to lift thecease trade order. Whymark and his associates were not interested in the corporation assuch but only in the mining claims in its name. As a result of his experience in thesecurities law field, Erikson knew that a "clean" reporting issuer had a value of its own.

On Erikson's suggestion, in order to save Whymark legal fees and expenses, theright to purchase the 25,000 shares for $11,000.00 then held by Whymark was assignedas of 24 April 1990 to Krater Minerals Inc. ("Krater Minerals") a corporation controlled byChristine Erikson. This assignment was conditional upon Belteco Kirkland being revivedand the cease trade order being lifted.

In material prepared by Erikson, it is indicated that Whymark had become presidentand a director of Belteco Kirkland as of 9 January 1990 although it is clear that this wasdone by back dating so that he could sign the annual filing required of a reporting issuerunder the Act (Form 28). This filing is dated 14 January 1990. A blank resignation andan undated resolution said to "roll the board to Christine et al." appointed Erikson adirector and president and Lawrence Piecha (Christine Erikson's brother) a director andsecretary-treasurer of Belteco Kirkland were signed in blank and later dated 28 June 1990.

Whymark testified that during the whole of his term as a director and officer ofBelteco Kirkland, he was a nominee director only and took no part in any decisions made.He considered his function to be limited to signing documents and facilitating the transferof the company to Erikson or whoever was purchasing control of the corporation throughhim so that he and his associates could purchase the mining claims in which they wereinterested.

In June 1990, Erikson incorporated a numbered company, 901436 Ontario Inc., inthe name of an associate of Whymark and as of 29 June 1990 that company agreed topurchase the mining claims from Belteco Kirkland for $11,000.00 on a date to be fixed.

Early in July 1990, Erikson, as president and a director of Belteco Kirkland, beganto take the steps necessary to re-establish Belteco Kirkland with the Commission. By thistime, Christine Erikson's brother, Lawrence Piecha was a director and her mother, MariaPiecha was the third director.

Although Christine Erikson's company, Krater Minerals owned some 25,000 sharesof Belteco Kirkland, there were another 1,089,000 shares in other hands. Accordingly, ifcontrol of the corporation was to be secured, there would have to be a substantial capitalreorganization.

An annual and special general meeting was called for July 27, 1990 for the purpose,inter alia, of approving audited financial statements for fiscal years ended December 31,1987, 1988 and 1989; to approve the sale of the mining claims; and to reorganize thecapital principally by consolidated the outstanding common shares on the basis of tenpreconsolidated shares for one post consolidated share. The material relating to thismeeting was filed at the Commission on July 6, 1990.

Subsequent to the annual and special general meeting and on the basis that theDirector of the Commission was satisfied that Belteco Kirkland had by then complied withthe requirements of Part VII of the Act and had remedied past defaults, the cease tradeorders of 16 and 30 August 1979 were revoked on 24 August 1990.

As of 21 September 1990, purportedly pursuant to a resolution passed by theshareholders, Articles of Amendment were issued, inter alia, changing the corporate nameof Belteco Kirkland to Belteco Holdings Inc. The Articles also consolidated the commonshares on a four for one basis. (There is no explanation in the record as to how thechange from ten to one in the notice calling the meeting to four to one in the Articles wasauthorized.) As a result, this meant that Krater Minerals owned 6,250 shares and therewere 272,250 shares in other hands.

On 17 September 1990, the directors of Belteco (Erikson, Lawrence Piecha andMaria Piecha) passed a resolution which recited that the corporation was indebted toErikson & Associates in the amount of $11,464.95 and to Gyro Capital Inc. in the amountof $11,500.00 which debts had been assigned to 774226 Ontario Inc. ("774226"). Thisnumbered company was said to have "taken a lead in reorganizing and reactivating"Belteco. The resolution provided that 439,299 shares with a paid up value of $0.05 eachbe issued in payment of the debt. Insider trading reports filed at the time indicated that774226 was controlled by Christine Erikson and that on 21 November 1990 the 439,299shares were transferred to another corporation controlled by her, namely, Krater Mineralsat the same price of $0.05. If all shares had been consolidated on the four to one basis,this would mean that 278,500 shares were owned by others and that Krater Minerals withthe 6,250 shares resulting from the consolidation of 25,000 shares and the 439,299 sharesadded would now own 62% of the outstanding shares.

Some time later it was discovered, apparently in the process of appointing a transferagent or, perhaps in the process of getting ready to transfer the shares into the market asdescribed below, that since the Articles consolidating common shares had not becomeeffective until 21 September 1990, the 439,299 shares issued at $0.05 on 17 Septemberto satisfy debts of $22,964.95 would have become only 109,824 shares some four daysafter they had been issued. Perhaps more importantly, these shares would only represent39.4% of the outstanding common shares or even adding the 6,250 shares would be48.4% instead of the 62% expected.

Accordingly, on 14 December 1990, a resolution was passed amending theresolution of 17 September to make it effective as of 21 September 1990 and authorizinga direction to be issued to the transfer agent to issue 439,299 shares to Krater Minerals.As of 26 November 1990 Lawrence Piecha resigned as an officer and director of Beltecoand was replaced by Torrance as a director and by Christine Erikson (who had been adirector since 9 August 1990) as secretary-treasurer. According to Torrance, he acceptedthe appointment as a director at the request of Erikson. He said that no directors meetingswere ever held; he just signed resolutions at Erikson's request, took no part in anydecisions and relied on Erikson who he assumed controlled the corporation.

A. Belteco - the Clean Shell is Transferred

On 21 December 1990, the 439,299 common shares of Belteco held by KraterMinerals were sold to 916567 Ontario Inc. ("916567"), a company incorporated 29 October1990 by Erikson, he being the original shareholder, director and president. It is not clearon the record when Erikson ceased to act in these capacities, but by 21 December 1990,Gary Salter's nominee, Madeiros was said to be the authorized signing officer of thepurchaser. In the purchase agreement, it was recited that the purchaser "seeks to becomethe promoter" of Belteco.

The purchase price was $85,000.00. A deposit of $10,000.00 cash to be held byErikson & Associates in trust for Krater Minerals and to be retained if the full purchaseprice was not paid and a promissory note for $75,000.00 payable on the earlier of 1February 1991 and receipt of the first proceeds of resale of some or of all shares beingpurchased. While the promissory note was signed by Madeiros as president of thepurchaser, a separate deed of guarantee signed personally by Gary Salter guaranteed theperformance by the purchaser under the agreement and promissory note.

On the same day, Elaine Salter was appointed a director of the purchaser and twopress releases were issued by 916567 announcing the appointment of Elaine Salter andthe purchase of the shares and stating that 916567 while acquiring more than 10% of theoutstanding shares of Belteco was "not acting jointly or in concert with any person who hasacquired or owns any shares of the company"... nor did the purchaser ... "or any personwith who it is acting jointly or in concert have control or direction over any other Beltecoshares". While this may have been technically true at the time (except for the remaining6,250 shares which were still at Krater Minerals, so far as the record shows) the rest of thepress release made it clear that this situation was not to continue indefinitely. It read:

"The undersigned intends to activate and promote the company as a companyhaving interest in media, entertainment and novelty merchandising. Shares of thecompany may in future be issued to the undersigned or persons acting jointly or inconcert in connection with agreements for the sale of assets or the assignment ofbusiness opportunities to the corporation."

Even so, while the press releases of 21 December 1990 may have been technicallytrue as of that date, in view of the developments to be set out later, it is harder, if notimpossible to accept, that the statements were still true as of 21 January 1991 when acopy of the press releases of 21 December was delivered to the Commission with a letterof 916567 purportedly reporting under section 100 of the Act (now section 101), andstating that:

"The offeror seeks to activate and promote Belteco Holdings Inc. as a companyhaving interest in media, entertainment, novelty merchandising. The offeror mayin future acquire further shares of Belteco Holdings Inc. as a promoter of thatreporting issuer or in connection with agreements for the sale of assets or theassignment of business opportunities to the reporting issuer."

It should be noted that while this report purported to report an event in 1990 it wasfiled in 1991 and it is therefore within the time period mentioned in the Notice of Hearing.As will appear below, a number of events had occurred by 21 January 1991 in theacquisition of business opportunities by Belteco.

One further event occurred in 1990 which needs to be described.

On 27 December 1990, the shareholders of 916567 were changed to substitute newnominees of Gary Salter as follows:

Erikson's one common share and an additional 74 common shares were issuedfrom treasury for $1.00 each to Jepead Holdings Ltd. ("Jepead"). As indicatedabove, Jepead was controlled by Salter's nominee, Peter Rooney.

75 shares were issued from treasury for $1.00 each to W.M. & J.M. for $1.00. W.M.& J.M. was controlled by Salter's nominee, Elizabeth Kirkwood.

50 shares were issued from treasury for $1.00 each to 918211.

Jepead and W.M. & J.M. now each owned 37.5% of 916567 and 918211 now owned 25%of 916567 and thus their proportionate share of 439,299 shares of Belteco. Thedocuments show that Elaine Salter was the sole owner of 918211, but on the evidencebefore us, she was acting as a nominee of and/or took all business steps on the directionof Gary Salter.

If these corporations were not alter egos of Gary Salter, it is passing strange thatfor $199.00 contributed to the share capital of 916567, these corporations acquired theirrespective percentage interest in 916567 which owned control of Belteco which it had justpurchased for $85,000.00 to be paid to Krater Minerals. No doubt 916567 owed or wouldowe its "organizer" the dollars to be paid for a control of Belteco if, as and when it was infact paid but the fact is that at 1 January 1991, the ownership of Belteco was as follows:

Shareholders other than Salter Group 272,250 37.93%

Krater Minerals 6,250 0.87%

916567 (Note) 439,299 (Note) 61.20%

717,799 100.00%

916567 in turn was nominally owned:

918211 (Elaine Salter) 25% (representing 109,825 shares in Belteco)

Jepead (Rooney) 37.5% (representing 164,737 shares in Belteco)

W.M. & J.M. (Kirkwood) 37.5% (representing 164,737 shares in Belteco)

(representing 439,299 shares in Belteco)

The manner in which the Belteco shares represented by the proportionate interestin 916567 came into the hands of the shareholders of 916567 to be marketed isinteresting.

A certificate for the 439,299 shares of Belteco was issued to Krater on 7 January1991 as Certificate 0001000. This certificate was surrendered on 24 May 1991 and newcertificates were issued that day not to 916567 but rather to Jepead, W.M. & J.M. and918211. There is no explanation on the record as to how this transaction occurred.

The new certificates were issued as follows: Certificate 0001120 for 109,825shares was issued to 918211 and was delivered to its account at Levesque on 10 June1991; Certificate 000121 for 164,737 shares was issues to Jepead and was delivered toits account at Levesque on 13 June 1991, and; Certificate 0001122 for 164,737 shareswas issued to W.M. and J.M. and was delivered to its account at Levesque on 28 June1991.

It is clear, however, that these shareholdings at 1 January 1991 put control ofBelteco into nominees of Gary Salter and was carefully designed to enhance thedistribution of the Belteco shares. The number of shares represented by the respectivepercentage interest in 916567 and the sale of these shares into the market are particularlyinteresting when the marketing of the shares is reviewed below.

IV ISSUANCE OF BELTECO SHARES FROM TREASURY

A. The Moon Balancer and Continuous Feed Squirt Gun

On 17 January 1991, the directors of Belteco (Christine Erikson, Elaine Salter andTorrance) resolved to enter into an agreement with W.N.D. Inc. ("WND") to acquire therights to two toys called the Moon Balancer toy and the Continuous Feed Squirt Gun. (Asa matter of curiosity, the squirt gun had continuous feed because it was designed to beattached to a garden hose.) The price was to be satisfied by the issuance of 350,000shares of Belteco. The resolution stated that the paid up value of the shares was to be$0.05 each or a total of $17,500.00. The shares were to be held in escrow by Erikson tobe released at the rate of one share for each $1.00 of pre-tax profit derived from theexploitation of the toys. The escrow agreement reflected an address for WND in Kent,Ohio.

Although efforts were made, no record could be found of a corporation named WNDin Kent, Ohio. Records were found of a California corporation of the same name whichwas suspended 1 July 1982 and an Illinois corporation of the same name which wasdissolved 1 July 1984.

On 22 January 1991, a press release was issued by Belteco from the address ofErikson's office and filed with the Commission announcing the acquisition of the rightsdescribed. While the press release reflected the escrow agreement and the fact that on10 January 1994, Belteco was required either to release all escrow shares or return allrights to the toys to WND against the surrender of escrowed shares for cancellation, novalue was placed on the shares issued for the rights acquired.

In a note to the 31 December 1990 financial statements of Belteco regarding eventssubsequent to the year end, it is stated that the shares were issued at a nominal value of$0.05 per share. By the 31 December 1991 financial statements, a note indicated (withoutexplanation) that the shares were then valued "for accounting purposes" at $0.12 each or$42,000.00.

On 1 February 1991, the transfer agent of Belteco was directed to issue a certificatefor 350,000 shares to WND, the address given to the transfer agent was Erikson's office.

No prospectus was filed prior to the issuance of these shares to WND. An insidertrading report was filed in the name of Robert Petry dated 17 May 1991 reporting theacquisition of 350,000 shares of Belteco being held by WND "which is controlled by theundersigned". This form indicates that Petry was filing as a director of Belteco and thathe had become so on 15 May 1991. In fact, WND held 350,000 shares or 32.78% of thetotal issued capital of 1,067,799 shares of Belteco as at 17 January 1991, although nocertificate was authorized until 1 February 1991.

It is submitted by Staff that this treasury issue being a distribution as defined inSection (1)(1) of the Act was made in violation of the Act since no prospectus was filed asrequired by Section 53 of the Act and no statutory exemption was available. Erikson aspresident and a director of Belteco at the time was fully aware of and participated in thistransaction.

It should be noted here that Mr. Sternberg made a general submission that the casebefore us is not about irregularities in filings unless it be concluded that the failure to makestatutory filings was part of a scheme. Mr. Sternberg further argued that in consideringfailures to file we should consider whether there was such a pattern of failure that a patternof deception was evident rather than a good faith attempt to comply with the Act. We willdeal with these general submissions later.

In this case, while a material change report as required of WND by Section 101 wasnot filed, Mr. Sternberg argues that Regulation 14(c) which exempts trades to a promoterof the issuer relieves against the requirement of a prospectus for this distribution oftreasury shares.

In our view, the promoter exemption is not applicable since WND and its apparentprincipal, Petry, had not as at 17 January 1991 taken any part in the reorganization of thebusiness of Belteco.

On this first acquisition of business assets for treasury shares, it is clear that aprospectus was required. This is part of the fundamental protection under the Act. Mr.Erikson as a solicitor knowledgeable in securities law and as the president and a directorof Belteco at the time ought to have ensured compliance. The press release which wasfiled was woefully lacking in the information required in the circumstances.

B. Fifty-One Per Cent of the Baptist Journal

On 12 February 1991, the Commission received a communication purporting to bea report by Belteco under Section 74(2) of the Act signed by Madeiros as secretary butclearly prepared in Erikson's office. In the document it is stated that a material changeoccurred on 22 January 1991 and that a press release annexed was published at Torontoon 22 January 1991.

The lack of care with which matters were being dealt with is indicated by the factthat the press release annexed was in fact dated 25 January 1991 and an additional copyof the press release was received by the Commission on 30 January 1991. It appears onthe record that the transaction, in fact, occurred 24 January 1991.

The report indicates that Belteco has acquired Pearl Entertainment Inc. ("Pearl") for750,000 common shares issued from treasury. It incorporates the press release byreference.

The press release indicates that Pearl had a 51% interest in the Baptist Journal andthat of the 750,000 common shares issued from treasury, 250,000 were issued in escrow.It is stated that the terms of the escrow are that the shares may only be released on orbefore 24 January 1994 at the rate of one share for each $0.50 of net profit earned byPearl and that any escrow shares not released by 24 January 1994 are to be cancelled.It is also stated that 750,000 common shares were issued to Elaine Salter and toMadeiros. No value is attributed to the common shares in the report or the press release.

As to the business acquired, it is stated that the Baptist Journal is:

"A publisher which intends to shortly commence publishing periodicals ofparticular interest to American Baptists. The periodicals, it is expected, willbe marketed with endorsement from the religious organizations involved. Itis expected that the Baptist Journal will receive an official recognition fromthe American National Baptist Convention and will commence publication inMay 1991."

The origins and the development of the acquisition of this business enterprise areinteresting. It is clear from the record that all of the transactions were done by nomineesof Gary Salter and that Erikson, acted both as solicitor and participated in the transactionsthroughout although he resigned as president and director of Belteco the day before thefinal agreements were executed. This transaction originated in June 1990 by way of anagreement between Elaine Salter and Aldrich & Associates and ended up in an agreementin principle in December 1990 between Belteco and Pearl in which Erikson & Associateswere to be responsible for a due diligence review. There is no explanation as to howElaine Salter and Madeiros became the owners of Pearl.

The parallel between the incorporation and development of 916567, 918211,Jepead and W.M. & J.M. which initially acquired control of Belteco and that of theacquisition of Pearl is striking. In addition, the similarity of the terms upon which this"business opportunity" was acquired by Belteco and those of the acquisition from WNDand a later acquisition of film rights are striking except that, in the case of this acquisitionfrom Pearl, nominees of Gary Salter ended up with a substantial number of shares whichwere not subject to escrow. Elaine Salter received 260,650 and Madeiros received239,350 shares which were not subject to any escrow. Single share certificates wereissued by the transfer agent for these shares on 4 February 1991 and delivered toErikson's office (E. Salter, Certificate 1004; A. Madeiros, Certificate 1006). At the sametime, separate certificates were delivered for shares to be held in escrow (E. Salter,130,325, Certificate 1003; A. Madeiros, 119,675, Certificate 1005).

It is submitted by Staff that this treasury issue being a distribution was made inviolation of the Act since no prospectus was filed and no statutory exemption was availableand that Erikson having acted as solicitor and participated in the transactions was fullyaware of the transactions. It is also submitted that reliance on the exemption underSection 72(1)(j) of the Act for a take over bid should be denied since to permit it would beabusive.

It is submitted by Staff that Madeiros was a pure nominee of Gary Salter and thatwhile she and Elaine Salter were the nominal owners of Pearl, they were really acting forGary Salter as part of the Salter control group. That being so, a report under Section101(2) of the Act indicating that the control groups holdings had increased by more than2% should have been filed.

In argument, Mr. Sternberg submitted on behalf of Erikson that the exemption underSection 72(1)(j) applied, that a press release and material change report were filed byBelteco and that insider trading reports were filed by Madeiros and Elaine Salter. Whileconceding that a Section 101 report should have been filed, he defended this omission asa mere oversight which in view of the reports that were filed should not be regarded as anattempt to mislead.

While the exemption might be technically available, the failure to file a section101(2) report identifying the recipients of shares as part of a control group is serious. Wewill deal with the submission that to permit reliance upon the exemption would bepermitting abuse of the Act later.

C. The Golden Age Film Rights

The submission made by Staff fixed this acquisition as occurring on 17 January1991, but on our review of the documents we have concluded that it is more likely to haveoccurred on 31 January 1991.

On 31 January 1991, the directors of Belteco (Elaine Salter, Christine Erikson, andTorrance) resolved to enter into an agreement with Crystal Group Inc. ("Crystal") underwhich Crystal's rights under an agreement of 17 January 1991 with Golden Age Films Inc.(of which Belteco is said to have actual knowledge) were assigned to Belteco. The pricewas to be satisfied by the issuance of 750,000 shares. The resolution states the paid upvalue of the shares to be $0.05 for a total of $37,500.00. The shares were to be held inescrow by Erikson to be released at the rate of one share per $1.00 of pre-tax profitderived from the exploitation of the rights. The escrow agreement was exactly similar tothe escrow agreement with respect to the shares issued to WND to the extent that in theprovision with respect to the return of ownership if securities remained in escrow inJanuary 1994, references is made to returning ownership "of the Schedule B toys". Notsurprisingly there is no Schedule B nor were there any toys involved. Neither the draftagreement nor the draft escrow agreement in the record show an address for Crystal.

Again, although efforts were made, no record could be found of a corporation bythat name. The evidence of Madeiros and Barbour, however, indicates that it was acompany at least operated, if not owned, by Brett Salter, Gary Salter's son.

On 1 February 1991, the transfer agent of Belteco was directed to issue 750,000shares to Crystal. The address given was Erikson's office. Certificate 1002 was deliveredto Erikson's office 4 February 1991.

No prospectus was filed prior to the issuance of these shares to Crystal. AlthoughCrystal filed an insider trading report, no report was filed under Section 101 and nomaterial change report or press release was filed by Belteco.

In a note to the December 31, 1990 financial statements of Belteco, it is stated thatthe shares were issued at a nominal value of $0.05 per share. By the December 31, 1991financial statements, it is indicated (without explanation) that the shares are "valued foraccounting purposes" at $0.12 each or $90,000.00.

The 750,000 shares issued to Crystal represented 29.21% of the issued capital ofBelteco as at 31 January 1991.

It is submitted, by Staff, that this treasury issue, being a distribution, was made inviolation of the Act which required an exemption from the prospectus requirements of theAct and that no exemption was available. In addition, the Staff submits that Crystal wasa company associated with Gary Salter and that no mention having been made in thepublic disclosure relating to the acquisition of the participation by association of GarySalter or Brett Salter's involvement in the company, reliance on any exemption even, ifavailable, would be abusive. It is also submitted that Erikson, in his various capacities,was fully aware of and participated in the transaction. It is further submitted that no reportwas filed with respect to the transaction as required by Section 1.01(2) of the Act.

It was submitted on behalf of Erikson that while no exemption of prospectusrequirements was available, the failure by Crystal to file the Section 101 report and byBelteco to file the press release and material change report should be regarded as anoversight with no intent to mislead.

We observe that while there is no very reliable evidence as to the ownership ofCrystal, a prospectus at this stage of the development of the "business opportunities"being acquired by Belteco would have identified on the public record the identity of thosemaking up the control group of Belteco.

D. Subscriptions of Elaine Salter and Albertine Madeiros

By a written subscription dated 1 February 1991, Elaine Salter and Madeirossubscribed for 200,000 shares of Belteco each at a price of $0.05 per share. The shareswere authorized to be issued by directors resolution (Elaine Salter, Christine Erikson, andTorrance) dated the same day. A direction to the transfer agent dated 7 March 1991signed by Madeiros and Christine Erikson instructed the delivery of 20 share certificatesof 10,000 shares each to Elaine Salter and Madeiros at the office of Erikson. The sharecertificates were sent by letter of transmittal dated 19 March and Erikson acknowledgedreceipt on 20 March 1991. The certificates for Elaine Salter are numbered 1039 to 1058and for Madeiros from 1059 to 1078.

None of the subscription, the resolution of directors or the insider trading reportsfiled by Elaine Salter and Madeiros identify them as "promoters". Elaine Salter's insidertrading report identifies her relationship with Belteco as being a director and a securityholder who beneficially owns or exercises control over, directly or indirectly, more than10% of the shares. Madeiros' insider trading report only identifies her as a senior officerof Belteco.

No press release appears to have been issued with respect to these issues,although in notes of the financial statements of 31 December 1990 and 31 December 1991it is indicated that the shares in question were issued to promoters without identifying thepersons involved.

Whatever the role of Elaine Salter was as a member of the Salter Group, Madeirostestified directly that although the signature on the subscription was hers, it was just oneof many papers that she had signed when they were put in front of her by either GarySalter or Erikson. She testified that she did not pay for any shares nor did she receive anyconsideration for shares which may have been issued in her name and later sold.

It is submitted by Staff that these issues were trades in securities of Belteco thathad not been previously issued and therefore, being a distribution, a prospectus wasrequired unless an exemption was available. If it is sought to rely upon the exemption forpromoters under Section 72(1)(j) of the Act and subsection 14(c) of the Regulation, it isclear that Albertine Madeiros, on the evidence, was not in fact a promoter. In addition, weaccept her evidence that she never made any payment for the shares issued in her nameas a result of this transaction.

It is further submitted that Erikson must have had full knowledge of the transactions,having in all likelihood prepared the relevant documentation and having received the sharecertificates issued to Elaine Salter and Madeiros. Madeiros testified that whenever sheand Elaine Salter signed documents, this was always done at Erikson's office.

Further it is submitted that, at the time the issuance of these shares was authorized,200,000 shares represented 6.7% of the outstanding shares of Belteco and, together withthe shares authorized to be issued on 24 January, Elaine Salter held 19.9% of theoutstanding shares and Madeiros held 18.8% of the outstanding shares. On the evidence,it is submitted, that even if they were not nominees of Gary Salter, Elaine Salter andMadeiros were members of a control group and since more than 2% of the outstandingshares were added to their holdings, a report was required under section 101(2) of the Actand a corresponding press release was required. No such documents were filed.

It is submitted on behalf of Erikson that notwithstanding the identification of therecipients as promoters in the financial statements, no prospectus was required since theshares were issued to employees and the exemption under Section 72(1)(n) of the Act isapplicable. It was conceded that no Section 101 reports were filed which again should beregarded as an oversight.

We have no doubt that Madeiros and Elaine Salter were not employees of Beltecoor Pearl in the spirit in which that term is used in Section 72(1)(n) and observe that thecombination of no press release and oversight was keeping the identity of substantialshareholders from the public record.

E. New Testament Bible Readings on Audio Tape

By resolution dated 12 February 1991, the directors of Belteco (Elaine Salter,Christine Erikson and Torrance) approved an agreement between the corporation andFlorika and Hoesslin whereby for the issue of 1,000,000 shares valued at $0.05, Beltecoacquired 100% of the equity in a corporation named Audio Publications Inc., by acquiringall the shares of 906851 Ontario Inc. ("906851").

906851 was incorporated 2 August 1990. On 1 September 1990 Florika subscribedfor 360,000 shares (60%) for $6.00 and Hoesslin subscribed for 240,000 shares (40%) for$4.00 making a total paid up capital of $10.00.

On the evidence, Florika was Salter's daughter-in-law and Hoesslin was a pilot whowas giving Salter's son Brett flying lessons. Neither apparently had any businessexperience.

It is clear that Gary Salter was involved at the inception of these transactions.

The asset said to be owned by 906851, was a 100% interest in a Nevadacorporation called Audio Publications Inc. ("Audio Publications"). According to thedocuments filed, Audio Publications, acting through Gary Salter, was incorporated on6 November 1990 in Nevada and had acquired from a California corporation TapeSpecialties Inc. ("TSI") the rights to produce and market a program consisting of 24 hoursof readings from the New Testament by James Earl Jones recorded on magnetic tape.Audio Publications acquired these rights for a deposit of $7,500.00 and an agreement topay $57,580.00 by 31 January 1991. In the incorporating documents for AudioPublications in Nevada, as of 1 November 1990, the Respondent, Wilshire of Long Beach,California, is shown to be the sole director and president, secretary and treasurer of thecorporation. Notwithstanding the fact that Gary Salter signed the agreement with TSI on6 November 1990 on behalf of Audio Publications, on that same day Wilshire wasappointed sole director, president and secretary, 100 shares of Audio Publications wereissue to him for $1.00 which were immediately transferred to 906851.

In return for the outstanding shares of 906851, Belteco authorized the issuance of1,000,000 shares from Treasury at a value of $0.05 per share or a total value of$50,000.00. 600,000 of these shares were authorized to be issued to Florika and 400,000were authorized to be issued to Hoesslin. Half of the shares issued to each of Florika andHoesslin were to be held in escrow under agreements similar in every respect to theescrow agreements referred to above which accompanied the issuance of 17 January toWND and 24 January to Elaine Salter and Madeiros. Two certificates for 300,000 shareseach were issued to Florika (Certificates 1010 and 1011); two Certificates for 200,000shares each were issued to Hoesslin (Certificates 1008 and 1009).

The 600,000 shares issued to Florika amount to 15.1% of the outstanding sharesafter the issue and the 400,000 shares issued to Hoesslin amounted to 10.1% of theoutstanding shares after the issue. It is submitted on behalf of the Staff that these tradesbeing in securities that had not been previously issued amounted to a distribution andtherefore required a prospectus and that no exemption was available. If reliance is basedon Section 72(1)(j) of the Act being a trade in a security of an issuer that is exchanged bythe issue with the security holders of another issuer pursuant to a takeover bid made bythat company, it is submitted that reliance on that exemption would be abusive in thecircumstances.

It is further submitted on behalf of Staff that Florika and Hoesslin, on the evidence,were clearly acting as nominees for Gary Salter and, in addition, that the proceeds of thesale of the Belteco shares out of Hoesslin's account at Levesque were received by 901139Ontario Inc. ("901139"), a company for which Gary Salter had signing authority for its bankaccount and was apparently its sole shareholder. Further it is submitted that the proceedsof the sale of the Florika shares were received, at least in part, by Gary Salter orcorporations associated with him in that proceeds were transferred through the accountsof Friedberg & Co. Ltd. ("Friedberg") and ended up in the hands of Elaine Salter and921159, a company controlled by Gary Salter and 901139. There is, of course, clearevidence that Gary Salter was associated with the acquisition of the rights involved byAudio Publications and there is no public disclosure of this involvement in the pressrelease announcing the transaction.

It is further submitted that Glen Erikson had full knowledge of the transaction in thathe was the escrow agent for the shares. The Florika and Hoesslin shares were deliveredto his address and that address also appeared on the insider trading reports of Florika andHoesslin.

It is further submitted that even if Florika and Hoesslin were not nominees for GarySalter, and acting in their own right, they were clearly part of a group acting in concertwhich was a control group and the acquisition increased that control group's holdings bymore than 2%. Accordingly, a Section 101(2) and a corresponding press release oughtto have been filed and no such documents were filed.

It was submitted on behalf of Erikson that the Section 72(1)(j) exemption isapplicable. It was further submitted that the failure of Florida, Hoesslin and Belteco to filereports under Section 101 should be regarded as the result of oversight.

We have no doubt that in this transaction Florika and Hoesslin were acting asnominees of Gary Salter who was solely responsible for acquiring this "businessopportunity" for Belteco and their names were used to keep his name out of theconsideration being paid.

F. Stock Options at $0.10 to Christine Erikson, John Bennett and

Harcourt Wilshire - February and March 1991

According to a copy of a resolution of the directors of Belteco (Christine Erikson,Elaine Salter and Torrance) dated February 1991 (no day is given) stock options wereapproved for Bennett, Wilshire and Christine Erikson in the amounts of 100,000, 100,000and 75,000 shares of Belteco respectively, at a price of $0.10, pursuant to a form ofEmployer (sic) Stock Purchase Agreement annexed and dated as of 12 February 1991.The Stock Option Agreements themselves were all dated as of 12 February 1991 andsigned on behalf of Belteco by Madeiros.

Under the terms of the resolution, Bennett, Wilshire and Christine Erikson are saidto be full or part-time employees of Pearl.

In an insider trader report dated 18 February 1991, Christine Erikson gave herrelationship with Belteco as a director and senior officer and reported the acquisition of75,000 shares at $0.10 per share as a purchase carried out in the market, "excluding theexercise of an option" rather than the exercise of an option. This was not a correctdescription of the acquisition.

On 25 February, five certificates (Certificates 1012 to 1016) for 15,000 shares eachwere issued from treasury to Christine Erikson by the transfer agent giving an address atErikson's office. A direction to the transfer agent dated 7 March 1991, authorized theissuance of 10 certificates for 10,000 shares each in the name of Bennett and Wilshiregiving addresses as the office of Glen Erikson. The share certificates (Certificate 1019 to1028 in the name of Bennett and Certificates 1029 to 1038 in the name of Wilshire) weresent with a letter of transmittal dated 19 March 1991 and receipt was acknowledged byErikson on 20 March 1991.

At the time Christine Erikson was issued 75,000 shares from treasury, theseamounted to 1.9% of the shares issued. At the time the 100,000 shares were issued toBennett and Wilshire, 100,000 shares represented 2.4% of the total issued andoutstanding shares.

The first insider trading report filed by Bennett as a director and senior officer ofBelteco was filed on 5 September 1991, the day after he became a director and president.It was not until 12 May 1992 that Bennett reported the acquisition of an additional optionfor 200,000 shares granted 30 April 1992. It should be noted that while certificates undersection 139 of the Act identifying all insider trader reports filed with the Commission bynamed parties reporting trades in Belteco, Wilshire's name does not appear in thecertificate so it is not known whether Wilshire filed an insider trading report.

It is submitted by Staff that all of the shares issued pursuant to these options wereissued to members of a group acting in concert who controlled Belteco and that group, byMarch 18, 1991, held at least 2,815,299 shares representing 66.35% of the issued andoutstanding shares of Belteco.

Again, it is submitted by Staff that these trades, being in securities that had notbeen previously issued, a prospectus was required unless an exemption is found. It issubmitted that the exemption in subsection 72(1)(n) of the Act for the issuance of securitiesto employees or employees of an affiliate is not available.

As to Christine Erikson, there is no evidence that she was ever an employee ofPearl and although she was a director of Belteco at the time, there is similarly no evidencethat she was ever employed by Belteco although for a period of time she carried the titleof secretary-treasurer.

The shares received as a result of these transactions were all quickly resold despitethe fact that notice was not filed with the Commission of any exempt trade pursuant tosection 72(5). Indeed 30,000 of the shares issued to Christine Erikson as a result of theexercise of her option were deposited in an account at Levesque on 26 February 1991 inthe name of 921159, a corporation controlled by Gary Salter and were sold from thataccount. The proceeds from the shares deposited by Wilshire at Levesque were receivedby International Securities Inc., a Bahamian company, with some association to GarySalter as he was billed for the incorporation of that corporation. The proceeds from theshares Bennett received as a result of his exercise of the option were paid by a chequeissued to Erikson & Associates in Trust in April 1991.

In these circumstances, it is submitted that either the exemption is not available orthat to rely upon the circumstances would be abusive.

It is further submitted that Glen Erikson was fully aware of and participated in thetransactions, having prepared the agreements, received the share certificates andprepared insider trading reports giving as his office the address on the insider tradingreport filed by Christine Erikson.

It is submitted on behalf of the Eriksons that the exemption permitted by Section72(1)(n) of the Act is applicable since the recipients of these options are recited in theresolution granting them to be "full or part-time employees" of Pearl, an affiliate of Belteco.It was conceded, however, that no notice of exercise was filed as required by BlanketRuling then in effect, but now replaced by Regulation 1015:69(2).

This breach was described as a problem, but not a big problem. No mention wasmade in argument of the fact that the insider trading report of Christine Erikson describedthe acquisition as a purchase carried out in the market.

We find that there were violations of the Act and the Regulation in thesetransactions and reserve our comments on the size of the problem until all allegedviolations have been considered.

G. Private Placement - December 23, 1991

Pursuant to a directors resolution of 17 December 1991, (Bennett, R. Petry andArconti) a private placement was authorized under an agreement attached, signed byBennett on behalf of Belteco and by Elaine Salter on behalf of 918211. Under theagreement, 232,342 units were authorized to be issued to 918211. The units comprisedof one common share and one warrant to purchase a common share by 13 December1993 at a $1.50. The units were to be issued for a total consideration of $250,000.00 or$1.076 per unit. Under the agreement, the shares were to be subject to an eighteen monthhold to 7 June 1993 and the consideration of $250,000.00 was to be paid by 31 December1991.

A report dated 7 January 1992 of this private placement was filed specificallyreferring to section 71(1)(d) of the Act (now 72(1)(d)) reporting a distribution to a principalacquiring at a cost of not less than $97,000 was filed. A material change report referringto Section 74(2) of the Act also dated 7 January 1992 was also filed. A press releaseregarding this transaction dated 23 December 1991 did not disclose that the purchaserwas 918211, a corporation controlled by Elaine Salter.

The transfer agent was directed to issue the shares concerned on 7 January 1992and deliver them to Erikson & Associates. The shares were delivered on 9 January 1992and forwarded by Erikson & Associates to Elaine Salter by letter dated 20 January 1992.One certificate (#1463) was issued in the name of 918211 which was directed to bear thelegend "These Shares May Not Be Sold or Transferred Until June 17, 1993".

The Staff submissions seem to concede that while the transaction required aprospectus an exemption under section 72(1)(d) of the Act and section 27 of theRegulation, was probably available.

However, it was submitted that the use of the exemption in the circumstances wouldbe abusive. In this connection, it is submitted that while the press release indicated thatthe issuer is to provide "funds to be applied directly to debt reduction", it does not reportwhat debts are to be paid nor does it disclose the name of the recipient to be repaid northe fact that 918211 was part of a control group.

As to Erikson's participation, it is clear from the record that he was fully aware of thecircumstances and probably participated in the preparation of both the report and thepress release.

No submission was made on behalf of Erikson on this transaction, but none of theseshares reached the market as it had collapsed before the shares became tradeable.

H. Stock Options - April 30, 1992

Pursuant to directors resolution of 17 January 1992 (Bennett, Petry and Arconti),the issuance of stock options of 200,000 shares each to Bennett and Elaine Salter and23,000 shares to Petry and Arconti at $0.70 per share was authorized. Pursuant to adirection signed by Bennett and Arconti dated 7 April 1992, 200,000 shares each weredirected to be issued to Bennett and Elaine Salter and 23,000 shares to Petry. Theresolutions and agreements relating to the stock options recited that Bennett and Petrywere directors and Elaine Salter was an employee of Belteco. The option to Arconti wasapparently never exercised.

Staff submits that this trade in securities not previously issued required aprospectus and while it might otherwise be exempt under Section 72(1)(n) of the Act, theuse of such an exemption in the circumstances would be abusive in that all directorsappear to have acted only as signatory to documents placed in front of them and ,theissuance of such a large number of securities without full public disclosure, was part of anabusive scheme. In fact as appears from the review of evidence in Part II above, Arcontiwas a young man of twenty years of age with no business experience serving as a merenominee director and signing whatever was placed in front of him. Further, the issue ofshares to Bennett and Elaine Salter amounted to 4.1% each of the issued and outstandingshares, and the cumulative total of shares issued to Elaine Salter and her company918211 by this time amounted to 832,342 shares or 17% of the issued and outstandingshares. It is further submitted that Erikson must have been fully aware of this transaction.

It is submitted on behalf of Erikson that here there was compliance with therequirements of the Act and the Blanket Ruling then in effect.

I. Summary

Table A, which is annexed as part of the Appendix to this decision, summarizes theshares issued from Belteco treasury as at 1 January 1991 and in the period to 30 April1992.

In summary, it will be observed that the directors of Belteco issued 3,524,400treasury shares during the first three months of 1991; of these, 1,674,400 were fullytradeable and 1,850,000 were to be held in escrow. Including the 445,549 held at 1January 1991, this meant that 2,119,949 fully tradeable shares were in the hands of GarySalter and his nominees. Of these, 400,000 shares were said to have been issued for atotal cash consideration to Belteco of $47,500 and the balance were issued at a valuationof five cents to pay debt or to acquire what, at best, were speculative business rights orlicenses with no track record of success. Indeed, the total revenue earned by Beltecoduring the whole of 1991 was $17,805. There was no trading in Belteco shares in therelevant period until March 1991 when the summary of trading in Ex. 88, Vol. 11, Tab 17,shows 4,000 shares were traded at $0.27. In fact, these 4,000 shares were shares issuedto Christine Erikson and were sold from Gary Salter's account at Levesque in the name of921159 in two transactions of 2,000 shares each on 15 and 18 March.

As will appear from the full analysis of trading which follows in Part VI, a total of2,054,000 shares were sold from the accounts of Salter nominees at Levesque by 15 July1991.

From the foregoing review, it will be apparent that we conclude that there were anumber of violations of the requirements of the Act which apply to the distribution oftreasury shares of reporting issuers. These requirements are imposed in order to protectthe public interest by providing information on the public record which is vital to those whomay subsequently be offered these shares in the market. It is true that some of theviolations are more serious than others, but where a carefully thought out scheme such asthe one which is apparent here, we believe that exact compliance with the Act should bestrictly enforced. We reject the submissions that violations should be ignored as mereoversight.

V TORVALON - CLEANING UP A REPORTING ISSUER IN DEFAULT

Control of the reporting issuer Torvalon was acquired by Gary Salter and hisassociates in June of 1991. (We note here that while the Respondent is named asTorvalon Corporation in these proceedings, it would appear that the actual name of thecorporation is Torvalon Corp.)

The evidence of the events which lead to this acquisition begins as early as October1988 and will be reviewed briefly in order to understand the knowledge which at leastsome of the participants had at the time of the acquisition in June of 1991.

In argument Staff made a number of submissions directed towards a finding thatserious violations of the Act occurred prior to 1991. In addition, it was submitted that inthis period of time, none of the exemptions which might be available should be accordedsince the whole scheme demonstrated substantial abuses of the capital market. We haveno doubt that these submissions are correct, but we base no part of our decision on theevents prior to 1991. As indicated, we rely on them solely in considering what theparticipants knew or ought to have known, at the time of the acquisition of control ofTorvalon.

Torvalon became a reporting issuer in October 1988 after a reverse takeover of anOntario private company named Torvalon Inc. by a public corporation named ChambersAcceptance Corp. Torvalon Inc.'s business was carried on through a wholly ownedsubsidiary, Torvalon Inc. (U.S.) located in Los Angeles. The business was to providedesign, construction and kitchen remodelling services. Two days after the reversetakeover, Chambers Acceptance Corp. changed its name to Torvalon. Erikson was thecorporate solicitor for the Torvalon companies throughout these transactions.

The business of Torvalon was managed by Jedig who, with members of his familyand associates, controlled the company. The Board of Directors consisted of hisdaughters and his son-in-law, all of whom gave evidence that they merely acted asnominees for Jedig.

If the creation of a reporting issuer in Ontario was meant to raise funds to supportthe business enterprises in California, it was apparently not a success since on4 December 1989, the Commission issued a temporary cease trade order against Torvalonfor failure to file various required financial statements. This temporary cease trade orderexpired but on 6 July 1990 a new temporary cease trade order was made for failure tocomply with continuous disclosure requirements and that cease trade order was extendedon 20 July 1990.

By the fall of 1990, the controlling shareholders of Torvalon desired to sell and onthe evidence of one of the nominee directors, this fact was known to Erikson becausewhen this nominee director attempted to resign in December of 1990, Erikson informed himthat a sale of the company was pending and he was discouraged from resigning by Eriksonbecause that might postpone or delay the transaction.

During 1990, the number of shareholders in the control group of Torvalon wasdeliberately reduced from at least eight to five by the transfer of shares notwithstandingthe existence of the cease trade order and then later in 1991 to three by a further transferof shares.

During the fall of 1990, six companies were incorporated in Ontario by Erikson. Infive of these companies, Erikson was not only the incorporator but the only director andpresident, while in the sixth corporation, Gary Salter was the sole director and president.The precise role of these corporations in the acquisition which occurred in June 1991 willbe dealt with later. It is sufficient to say, at this time, that five of them were, on the face ofthe documents filed, owned and operated by persons who, in fact, were either purenominees of Gary Salter or associates of his in the scheme which was being developed.The sixth corporation, 921159, owned by Gary Salter did not participate directly in theacquisition but within two weeks after the acquisition it had been issued 1,522,000 sharesof Torvalon at a nominal value of $0.05 each in payment of a debt owed to that corporationby Torvalon in the amount of $76,100. The debt was, at least in part, incurred by GarySalter or 921159 advancing funds to Torvalon in order to cure its defaults as a reportingissuer. Part of this debt was in fact the result of an assignment to the corporation of a debtowed by Torvalon to Erikson & Associates.

It will appear from what follows that what occurred beginning at least in the fall of1990 and up until early June 1991, was a carefully orchestrated scheme to revive a publiccorporation which was a reporting issuer, to eliminate its few remaining assets and all ofits liabilities while in the process acquiring or creating common shares to be sold in themarket place to pay for the shares acquired as well as the expenses of cleaning up thebalance sheet of a public corporation and re-establishing its good standing under the Act.

On the evidence, Erikson acted as the solicitor for both the sellers and thepurchasers. He acted as corporate solicitor for Torvalon prior to the sale of control andhe certainly acted for Gary Salter and his nominees in the creation of the purchasers andin the purchase.

A. Acquisition of Control - June 1991

Under a purchase agreement dated 10 June 1991, 4,868,145 shares of Torvalonwere acquired from three named sellers by corporations which were clearly eithernominees of Gary Salter or acting in concert with Gary Salter. The shares acquiredrepresented 87% of the outstanding shares of Torvalon. Since it is submitted by Staff thatthe actual number of sellers was artificially reduced so as to come within the exemptionprovided by Section 93(1)(c) of the Act for "private acquisitions", it is necessary to examinethe facts with respect to the sellers' share holdings. It will be useful to examine the realidentity of the purchasers so as to follow the acquired shares into the marketplace.

The seller, Amalgamated Plat-au Resources Inc., ("Amalgamated Plat-au") acquiredsome of the shares being sold under an amalgamation which occurred on 30 November1990 between Plat-au Resources Inc., 787679 Ontario Inc., Healix Capital Corp., andAyriane Holdings Inc. so that four holders became one. The record shows that the fouramalgamating corporations held 33.1%, 10.1%, 10.5%, and 8.9% of the outstandingshares of Torvalon respectively. The second selling shareholder was Lode Star CapitalInc., about whose holdings the record does not disclose any consolidation. The thirdselling shareholder was Jedig. According to the record, Jedig acquired shares by way ofgifts from three family members on 17 May 1991, the very day the cease trade order wasrevoked. Accordingly the shares of nine shareholders were consolidated into the handsof three shareholders to come within the statutory exemption which limits the number ofselling shareholders to five.

It is also appropriate to point out here that for the purposes of Section 93(1)(c), itis provided by Section 93(2)(b) that where an offeror knows or ought to know that the sellerof the security has acquired the securities in order that the offeror might make use of theexemption provided by 93(1)(c) then each company from whom the securities wereacquired shall be included in determining the number of persons from whom the securitieshave been acquired. It is clear that Erikson knew or ought to have known that shares werebeing acquired from more than five shareholders as he participated in the transactionthroughout for both the sellers and the buyers.

Under the purchase agreement, the transaction was to close 14 June 1991 but itis probable that it actually closed on 25 June 1991 because one of the documentsannexed to the signed agreement was a covenant signed by Gary Salter personally dated25 June 1991 and that is the date of the press release purporting to announce theacquisition.

Under the agreement, the sellers warrant that Torvalon has no employees, has nosignificant assets, will have no cash on closing, and no liabilities except $26,000 owed toErikson & Associates, $18,000 owed to Yale & Partners, and $3,500 owed to NationalTrust, for a total of $47,500. The agreement also cites that it has a subsidiary namedTorvalon Inc. The purchase price provided for payment of $25,000 in cash on closing anda promissory note for $115,000 payable on the 19 July 1991. The total purchase priceindicates a price per share of $0.0287.

The financial statements of Torvalon as at 30 June 1991 disclose that in factTorvalon had no significant assets, a deficit of $71,561, and had outstanding a demandnote payable to 921159 in the amount of $76,100. It is also noted that on 9 July 1991, thenote payable was converted to common shares. The note was payable to 921159, acorporation owned and controlled by Gary Salter.

Perhaps the most astonishing provision in the agreement was that while all sharesacquired should be held in escrow by Erikson & Associates until the promissory note waspaid, provision is expressly made for the issue of 100,000 shares pursuant to a stockoption outside the escrow. This right is supported by a personal covenant signed by GarySalter who covenants that he will deliver on 9 August 1991 common shares equal to thenumber of employee stock options exercised under this right if the purchasers have notpaid the promissory note on or before 19 July 1991. Ever more astonishing, there is norestriction in the agreement against the issue of additional shares.

It will be clear from what follows that it was always the intention of the purchasersthat the purchase price should be paid from the proceeds of shares sold by the purchasersin the market. By the date for payment of the promissory note on 19 July 1991, a total of5,122,000 new shares had been issued representing 51.6% of the total new authorizedcapital. Of these new shares, 2,622,000 were free to be traded in the market.

The apparent purchasers were HOJ Holdings Ltd. ("HOJ"), and Inculo Holdings Ltd.("Inculo"). HOJ was incorporated by Erikson 26 October 1990, but by the date of thepurchase, Bennett was the sole director and shareholder. Inculo was incorporated byErikson 29 October 1990, but by the date of the purchase, Madeiros was the sole directorand shareholder. Another agreement dated 10 June 1991, makes it clear that HOJacquired the shares in trust for three other corporations, namely: for Texas B.J. HoldingsLtd. ("Texas B.J."), a corporation nominally controlled by Bennett as to 1,333,334 shares;for 918211 nominally owned and controlled by Elaine Salter and for 916574 Ontario Inc.("916574"), a corporation nominally controlled by Rooney as to 1,333,333 shares each.The remaining 868,145 shares were acquired directly by Inculo, a corporation nominallyowned and controlled by Madeiros. On the evidence, we hold that either the apparentowners of these purchasing corporations were acting as pure nominees of Gary Salter or,in the alternative, were acting in concert with him.

The shares were authorized to be issued 25 June 1991 and certificates wereactually issued 9 July 1991.

On the facts of this acquisition, the Staff submits that a takeover bid as defined inSection 81(1) of the Act occurred for which no exemption was available under Section 93of the Act because it was known or ought to have been known that there were more thanfive sellers. One of the consolidations having occurred 17 May 1991 comes within the timeframe of the statement of allegations. In the alternative, it is submitted that the transactionand the public disclosure which followed it were designed to hide the identity of the truepurchaser and there is therefore a violation of Section 101 of the Act because the reportof the acquisition was inaccurate and incomplete. It is further argued that in thecircumstances, reliance on any exemption would be abusive.

As to Erikson's involvement, it is submitted that he acted as the corporate solicitorfor both vendors and purchasers, that he incorporated all of the corporate entities thatpurportedly acquired the shares and served as the sole director and officer of each of thecorporations at all relevant times. In addition, Erikson billed Elaine Salter for theincorporation of HOJ, 916574, Texas B.J., and Inculo, and on the evidence of Madeiros,took instructions regarding Inculo from someone other than Madeiros, and therefore hadknowledge of all the material and relevant facts.

In the circumstances, he must also have known that the report on the acquisitionwas both inaccurate and incomplete.

It is submitted on behalf of Erikson that all requirements for filings were completedand that the take-over bid was exempt from prospectus requirements under Sections72(1)(j) and (k).

We have no doubt that the real number of sellers was artificially reduced so that theprospectus requirements of the Act could be avoided. This fact was clearly known toErikson and consequently no prospectus exemption was applicable because he knew thatthe nominal sellers were acting as nominees or agents for others having a beneficialinterest in the securities being sold. There was a clear breach of the Act. A prospectuswas required. Furthermore, the Section 101 filing was inaccurate and incomplete as it didnot disclose the true identify of the purchasers.

B. Issuance of 4,122,000 Shares - 9 July 1991

Within fourteen days after the acquisition of control, the issuance of 4,122,000 hadbeen authorized by the directors of Torvalon and the transfer agent had been directed toissue certificates for these shares. The particulars of the three transactions involved areset out below.

(i) 1,522,000 Shares to 921159 For Debt

By resolution dated 26 June 1991, the day after closing the acquisition of 87% ofthe outstanding shares of Torvalon, the directors (Jedig, Madeiros, Bennett, and Rooney)authorized issuance of 1,522,000 shares to 921159 for a nominal value of $0.05. Theshares were issued in satisfaction of Torvalon's liability to "Gary Salter's corporation921159" reciting that it had "provided funds to sustain the corporation" and had anassignment of the liabilities of Torvalon to Erikson & Associates, the transfer agent, andthe auditors referred to above in the amount of $47,500 and reciting a total debt of$76,100.

No press release was issued and filed with the Commission regarding thistransaction, however, in a form 23 dated 25 February 1992 and filed with the Commissionon 26 February 1992, some eight months later, it was stated that 921159 held 1,535,370shares and proposed to distribute 1,000,000 shares by public sales at Torontocommencing 4 March 1992. It was also stated that 921159 had acquired the securitiesunder section 14(c) of the Regulation, being an exempt distribution to a promoter ofTorvalon.

On 9 July 1991, the transfer agent was directed to issue the shares to 921159 inone certificate - C923. The share certificate is at Exhibit 78, Tab 7, endorsed in blank tobe transferred only "as per attached instructions" from Levesque. Exhibit 78, Tab 1,establishes that this certificate was surrendered to the transfer agent 13 January 1992when new certificates were issued to Levesque as follows: 2 x 30,000; 2 x 50,000; 13 x100,000; 1 x 60,000, and; 1 x 2,000. (The certificates are numbered sequentially from1011 to 1029.) We have been unable to trace the sale of these shares since the accountsat Levesque in the record end with the accounts of December 1991.

It is argued by Staff that this distribution from treasury required a prospectus andthat the exemption in 14(c) of the Regulation is not available because even if 921159 wasin fact the promoter of Torvalon, reliance on an exemption would be abusive in thecircumstances. It would be abusive because Gary Salter, his nominees and those withwhom he was acting in concert, exercised direction and control over Torvalon which wasnever publicly disclosed during the relevant period. No press releases were filed. NoSection 101 report was filed. The Insider Trading Report which was filed by 921159 doesnot disclose that Gary Salter was the sole beneficial owner, merely that he was Presidentof 921159. The disclosure which did occur in February 1992 was far too late to beadequate disclosure.

It is further submitted that at all relevant times, Erikson was fully aware of the extentof Gary Salter's exercise of direction and control over Torvalon and therefore that aSection 101(2) Report was required in that the acquisition added more than 2% to theshares held by the control group. In fact, as of the date the issuance that was authorized,Salter's direct holdings through 921159 amounted to 21.1% of the outstanding Torvalonshares.

On behalf of Erikson, it is submitted that the only breach which occurred was thefailure to file a Section 101 report which should be regarded as an oversight. The resultof this oversight was that there was no information on the public record that a promoterhad acquired 21% of the outstanding shares of Torvalon for debt owed by Torvalon duringits rejuvenation and that the promoter was a member of a control group holding 89% of theoutstanding shares.

(ii) 100,000 Shares to Christine Erikson

By a directors' resolution of 26 June 1991 (Bennett, Rooney, Madeiros), ChristineErikson was allotted employee stock options to purchase 100,000 common shares on orbefore 15 July 1991 at $0.05 each. Christine Erikson had become the Assistant Secretary-Treasurer of Torvalon on 26 June 1991 and would resign 23 July 1991 within weeks of theexercise of this option. The option was exercised the day it was issued and on 9 July1991, a direction was issued to the transfer agent to issue five share certificates for 20,000shares each to Christine Erikson (Certificates 917-921).

The evidence is that Christine Erikson played no active role at Torvalon andBarbour who was Torvalon's accountant testified that she was not an employee becauseshe never received any income.

It is submitted by Staff that this being a distribution from treasury, a prospectus wasrequired unless an exemption is available. If the exemption sought to be relied upon isSection 72(1)(n) of the Act, it is only available if it is a trade with an employee who is notinduced to purchase by expectation of employment or continued employment. It issubmitted that the exemption is not available to senior officers unless they are alsoemployees and in any event the blanket ruling under Section 73 of the Act expanding theexemption to non-employee directors and officers requires that the issuer must file with theCommission a letter indicating, inter alia, reliance on the exemption. No such letter wasfiled.

It is further submitted by Staff that the evidence demonstrates that Christine Eriksonwas either part of the scheme designed to increase the public float of Torvalon and inflatethe price of its shares or was acting as a nominee of Gary Salter. It was noted thatalthough Christine Erikson did not have an account at Levesque, 60,000 of the sharesissued pursuant to this transaction were cancelled and reissued to Levesque. As well, theremaining 40,000 shares were cancelled and reissued to one of the broker dealers.Accordingly, it is submitted, reliance on the exemption would be abusive in thecircumstances.

Finally, Staff submits that Christine Erikson being part of a control group, theissuance ought to have been included in the Section 101 Report as well as acorresponding press release. No such documents were filed.

It is submitted on behalf of Christine Erikson that she was an employee and thusSection 72(1)(n) was effective and that she was an officer and thus the exemption underSection 73 was available though it is conceded that no letter was filed with the Commissionindicating reliance on that exemption. Finally it was submitted that no Section 101 reportwas required as Christine Erikson did not (individually or in conjunction with others) controlmore than 10% of the shares of Torvalon.

Whether "employee" exemptions are available to persons who are senior officersfor less than a month and perform no services in that capacity need not be decidedbecause it is clear that Christine Erikson was, in our view, either a pure nominee of GarySalter or a member of a control group established by him and acting in concert. Therefore,there was a failure to file a report required by Section 101 of the Act.

(iii) 2,500,000 Shares to Kent Toys Inc.

On 4 July 1991, the directors (Madeiros, Bennett, Rooney) resolved to enter intoa license agreement with Kent Toys Inc. ("Kent Toys") dated the same date and resolvedthat 2,500,000 shares be issued to Kent Toys in a paid-out value of $0.05 each, a totalvalue of $125,000. By the same resolution, Petry was appointed a director of Torvalon.The agreement of 4 July 1991 referred to in this resolution is not in the record.

In a press release dated the same day, it was said that Torvalon had acquired alicence to all rights to graphic characters known as "Moodie" and "Taste Buddy" from KentToys and at the same time, all rights to the U.S. trademark for a game called "Lottery".The press release went on to say that the Moodie character had been licensed in the pastto Daiwa Securities of Tokyo and had been test marketed by Kellogg's in connection withtheir Rice Crispies brand of breakfast cereal.

The press release also stated that 2,500,000 common shares had been issued inconsideration of a ten-year renewable license although no nominal value for the shareswas stated. It was said that the shares were "subject to resale restrictions for 2 years", andthat to maintain the license, Torvalon was to pay a 5% royalty and was "to have raised$250,000 U.S. within 6 months to further develop the license rights".

By a direction of 9 July 1991, one share certificate in the amount of 2,500,000shares was directed to be issued to Kent Toys on 9 July 1991 (Certificate C922). Theevidence is that no restriction on resale was endorsed on the certificate which was issuedand directed to be sent to Kent Toys in Kent, Ohio.

On 24 July 1991, a Material Change Report under Section 74(2) of the Act was filedat the Commission reporting the material change of 4 July 1991 and attaching a copy ofthe press release. In this document, it is stated that "the acquisition of the Moodie andTaste Buddy licences will allow management to redirect the reporting issuers efforts awayfrom the kitchen cupboard business towards the toy and novelty business".

It might be noted here that the financial statements as at 30 June 1991 record thatany connection with the "kitchen cupboard business" had been terminated as at 25 June1991 when the shares of the wholly-owned subsidiary which was in that business hadbeen transferred, effective 22 July 1991, for a total consideration of $10.00 U.S. Onemight also think that the press release could be more forthcoming if it had said when andfor how long the license to Daiwa was in effect and what the results were of the testmarketing referred to. Certainly, ex post facto, the acquisition was not a brilliant stroke ofbusiness since no revenue was recorded by Torvalon in the financial year ended 30 June1992 while its expenses totalled $235,142.

It is submitted by Staff that a prospectus was required and that the effect of Section72(1)(l) and Section 28 of the Regulation only permits an exemption where the value of theassets purchased is not less than $150,000. A prospectus was acquired for this firstacquisition of a "business opportunity" by the new Torvalon and no prospectus was filed.

No submissions are made against Erikson with respect to this transaction exceptthat he "was apparently the escrow agent for the shares issued in escrow pursuant to thetransaction" but since the agreement is not before us, we make no finding in connectionwith this submission.

C. Issuance of 1,000,000 Shares to Stall Universal Inc.

By resolution dated 16 July 1991, the directors (Bennett, Madeiros, Rooney, andPetry) authorized the President "to execute the agreement with Stall Universal Inc. toacquire 949032 Ontario Inc." ("949032"). Under the same resolution, 1,000,000 commonshares of Torvalon were allotted and issued to Stall Universal Inc. ("Stall Universal") forthe shares of 949032 at a paid-up value of $0.10 each. The directors delegated to Bennett"the decision as to whether or not the valuation report respecting the Moodie inventory andtoy assets of 949032 is acceptable to the corporation".

The agreement referred to is not on the record, nor are there any particulars of anykind regarding Stall Universal. We infer, however, that Stall Universal was somehowconnected to Petry and that the transaction was initiated between Petry and Gary Salterbecause, the inventory acquired consisted of toys and novelty items exploiting the Moodiecopyright which had been licensed on 4 July 1991 from Kent Toys and the valuation reportreferred to was sent by Petry to Gary Salter as early as 29 April 1991 when that licensewas being negotiated.

Moreover, 949032 was incorporated by Erikson & Associates on 8 July 1991 andErikson served as its first director. No explanation was offered as to how 949032 cameto own the inventory nor as to how Stall Universal came to own 949032.

A press release dated 19 July 1991 and a continuous disclosure report dated 20August 1991 was filed with the Commission on 23 August 1991. The press release andthe report refer to the fact that 949032 owned an inventory of toys, decals, and othernovelty items exploiting the "Moodie" copyright recently licensed from Kent Toys andstates that the inventory is the subject of a valuation report "indicating that themanufacturing cost of same is over $300,000 U.S." and that it was acquired for 1,000,000common shares issued from treasury. No paid-up value for the shares is indicated in thepress release or the report.

The resolution of the directors indicates a value of $100,000. This is consistent withthe notes to the financial statements of Torvalon as at 30 June 1991 where it is stated thatthe company issued 1,000,000 common shares from treasury with a paid-up value of$100,000 for all outstanding shares of 949032. By the time of the financial statements asat 30 June 1992, however, it is stated that the purchase of 949032 was acquired by theissuance of 1,000,000 shares for a valuation of $364,208. It is also stated that inventoryis valued at the lower of cost and net realizable value.

The latter statement is hard to accept since no revenue was recorded by Torvalonin 1992 and therefore no value was realized in nearly a year of "exploitation". It is statedin the 1992 financial statements that the agreement with respect to this acquisition wasdated 15 July 1991 and that the common shares are valued at $364,208 Cdn. "inaccordance with the valuation report obtained respecting the inventory held" by 949032.

While under the resolution, the valuation report must have been satisfactory toBennett, it was submitted by Staff that it was insufficient to establish the value of the assetsacquired for the issuance of the shares and it is further submitted that the actual valuationshould be the value placed on the shares issued at the time they were issued, namely,$100,000. It is submitted that on its face the valuation is unsatisfactory in that it wasperformed by an accountant based on inventory sheets provided to him by Petry. Thereis no indication that the valuator actually viewed the inventory; further some of theinventory was valued on the basis of the suggested retail value and dealer value from the"the Moodie's catalogue"; certain items were valued in accordance with informationprovided by Petry, and; some items were valued by estimating what similar products wouldcost to produce.

We are satisfied on the evidence before us that a valuation of $100,000 asindicated by the paid up value placed on the shares issued in exchange for the shares ofthe corporation said to own the inventory is the most realistic value to be attributed to theassets acquired.

It is submitted by Staff that the issuance being from treasury is a distributionrequiring a prospectus unless an exemption is found and that under Sections 72(1)(l), and72(1)(j), and Section 28 of the Regulation, no exemption is available where the value ofthe assets acquired is less than $150,000. Thus, a prospectus was required and not filed.

It is further submitted that Erikson was fully knowledgeable concerning thetransaction. He incorporated 949032 on 8 July 1991 and was its first director. Heprepared the press releases and the Notice of Continuous Disclosure. He also forwardedthe direction to issue the shares to the transfer agent and ten share certificates for$100,000 shares each in the name of Stall Universal were delivered to him by the transferagent on 16 July 1991 (Certificates 00924 to 00933).

It is submitted on behalf of Erikson that while no insider report or Section 101 reportwere filed by Petry, this should be regarded as an oversight since a press release and amaterial change report were filed by Torvalon. In addition, it was submitted that theexemption for a promoter acquiring 10% or more of the outstanding shares excuses theabsence of a prospectus.

It is not clear to us how Petry or Kent Toys instantly became a promoter of Torvalonon the completion of this agreement and we hold that a prospectus was required. In ourview, if exemptions are to be relied upon when business opportunities are acquired by areporting issuer, the provision of the Act and Regulations must be strictly complied with.

D. Issuance of 900,000 Shares Under Options

The board of directors (Madeiros, Bennett, Rooney, and Petry) by resolution dated15 July 1991 resolved that Christine Erikson be granted a further option to acquire 100,000common shares from treasury at $0.05 each. According to Insider Trading Reports, sheexercised that option the next day, 16 July 1991. Five certificates for 20,000 shares eachwere issued in her name on the same day (Certificates 215 to 219). On 23 July 1991, sheresigned as an officer of Torvalon.

By resolution dated 9 July 1991, the directors (Madeiros, Bennett, Rooney, andPetry) had reserved 800,000 common shares for stock options under a Stock Option Plansaid to have been approved at a shareholders meeting of 30 June 1989 in favour ofdirectors, officers, employees, and consultants of the corporation. The resolution grantedoptions for 200,000 shares each to Bennett, Madeiros, Petry, and Kellie Bailey. The firstthree are identified as directors and Kellie Bailey as an employee. The options grantedwere exercisable at $0.10 per share until 9 July 1992. Bennett, Madeiros, Petry, and KellieBailey exercised their options on 16 July 1991 when each were issued ten certificates for20,000 shares: Madeiros, Certificates 220 to 229; Petry, Certificates 230 to 239; Bennett,Certificates 240 to 249; K. Bailey, Certificates 250 to 259.

By a letter to the Commission dated 9 July 1991, Erikson & Associates reported thegranting of the options for 200,000 shares each to Madeiros, Petry, Bennett, and Bailey,totalling 800,000 "directors and employees stock options exercisable at $0.10 per shareuntil July 9, 1992". No report was filed of the option granted to Christine Erikson.

At the time of the exercise of the options on 16 July 1991, Bennett and Madeiroswere officers and directors of Torvalon, Petry was a director, and Christine Erikson wasAssistant Secretary-Treasurer but would resign 23 July 1991.

It is submitted by Staff that Christine Erikson never played any role in Torvalon'soperations other than to serve as a figure head and to sign documents from time to time.It is also submitted by Staff that Madeiros was a pure nominee director and acted in thatcapacity as a nominee for Gary Salter.

The shares being issued from treasury required a prospectus unless an exemptionwas available under Section 72(1)(n) of the Act allowing issuance of securities toemployees or employees of an affiliate. It is submitted that the exemption is not availableor, alternatively, reliance on the exemption would be abusive in the circumstances sinceall of them, particularly Christine Erikson, were mere nominees and not officers oremployees in any real sense.

It is further submitted that Erikson was thoroughly involved in and knowledgeableof these transactions and that while a letter was filed regarding the options granted toBennett, Madeiros, Petry, and Bailey, no mention was made of the earlier option nor thisoption granted to Christine Erikson. For this reason, it is submitted that Erikson knew orought to have known that the 900,000 shares issued on 16 July 1991 were issued topersons who were either nominees of Gary Salter or members of the Salter control blockand since this constituted an additional issue of more than 2% of the outstanding shares,a Section 101(2) Report was required as well as a press release. No such documentswere filed.

It is submitted on behalf of the Eriksons that while no notification was given to theCommission of the exercise of options by an employee, this should be regarded as anoversight and that no Section 101 report was required since Christine Erikson did not(individually or in conjunction with others) control more than 10% of the shares ofTorvalon. We have already rejected the latter submission.

It was also submitted that no Section 101 reports were required of Madeiros andBailey and that the failure of Bennett and Petry to file such reports should be regarded asan oversight. For reasons expressed elsewhere, we are of the view that, at least Madeirosand Bennett, were members of a control group acting in concert and their failure to fileSection 101 reports was a breach of the Act.

E. Additional Submission

A submission was made by Staff that a transaction made in September 1991 byGary Salter through 921159 disposing of 200,000 Torvalon shares directly to a brokerdealer purportedly as a result of securities pledged as collateral for a debt was a trade bya control person and accordingly a prospectus was required unless an exemption couldbe found and that the exemption provided by Section 72(1)(e) was unavailable becausethe purpose of providing the collateral could in no way be said to be made for a debt madein good faith.

There is some force in this argument since the pledge agreement was dated 24April 1991, long before 921159 owned any shares of Torvalon and, in addition, the debtin question amounted to $52,500 while the market price of Torvalon shares in September1991 traded at a low of $0.90 per share and a high of $1.65 per share and so the publicsale of these shares would give proceeds ranging from $180,000 to $330,000.

We need make no findings with respect to this submission, but record it here todemonstrate the length to which some of the participants in the scheme which wasdeveloped would go in order to trade shares in the market.

F. Summary of Shares of Torvalon Corp. Acquired and Issued From Treasury asat June 1991 to July 1991

We have summarized the share acquisition and issue of shares of Torvalon inTable B in the Appendix to this decision.

As noted above, 4,868,145 shares, 87% of the outstanding shares, were acquired25 June 1991 from the Jedig group by Inculo (Madeiros), Texas B.J. (Bennett), 918211 (E.Salter), and 916574 (Rooney) for $0.0287 per share in the form of a $25,000 cashpayment and a promissory note for $115,000 payable 19 July 1991. The shares were tobe held in escrow until the note was paid.

By 16 July 1991, certificates for an additional 5,822,000 shares had been issuedas follows: 1,522,000 at $0.05 to 921159 (G. Salter) for debt; 200,000 at $0.05 acquiredby Christine Erikson on options granted 26 June and 9 July; 2,500,000 at $0.05 whichcarried resale restrictions for two years to Kent Toys (R. Petry) for a license to certain toys;1,000,000 to Stall Universal at $0.10 for all the shares of 949032 said to own an inventoryof toys (on the date these shares were authorized and issued there had been notransactions in the market in Torvalon shares, but a bid price of $0.20 and ask price of$0.40 is reflected in the record); and 200,000 shares at $0.10 had been acquired by eachof Bennett, Madeiros, K. Bailey, and Petry on options granted 9 July.

Cash received by Torvalon for the shares issued totalled $70,000.

As a result of these issues, in less than one month outstanding shares increasedfrom 5,594,295 to 11,416,295 - more than 100%. While Kent Toys and Stall Universalheld 3,500,000 of the new issue, the Salter Group now held an additional 2,322,000shares or a total of 63% of the outstanding shares.

As will appear from the analysis of trading in Part VII, by the year end 1991,3,525,000 shares were sold from the accounts at Levesque in the names of corporationswho were either Salter nominees or members of a control group. The first sale on therecord from these shares was a sale of 925,000 at $0.25 made on 18 July for settlement25 July for total proceeds to 918211 (E. Salter), net of commission, of $222,000.

Again, as in the case of Belteco, there were a number of violations of therequirements of the Act which apply to the distribution of treasury shares of a reportingissuer. For the reasons expressed earlier, we believe that exact compliance with the Actshould be strictly enforced in the circumstances of this case.

VI BELTECO - ANALYSIS OF SALE OF SHARES ISSUED FROM TREASURY TODEALERS

In Ex. 88, T.12, the Trading Analysis in Belteco shares between the accounts atLevesque and the two dealers is set out using the dates appearing in Insider TradingReports. Following the conclusion of the arguments, we did a further analysis based onthe settlement dates for each of the relevant transactions, as shown in the copies ofLevesque monthly statements contained in Exhibit 88 for each of the parties. This analysisis shown in Table C of the Appendix to this decision.

There are a number of glaring facts which this analysis disclose.

Firstly, of the 2,069,299 shares issued from treasury and delivered to accounts atLevesque, 2,054,000 shares were transferred to two dealer accounts at Levesque as to1,027,000 shares each (Columns 8, 12 and 13).

Second, the large differences between recorded dates of sales (Column 5) and thesettlement dates (Column 6) as well as the identity of the dates of settlement and paymentout of proceeds (Column 11) make it very clear that either the parties involved were actingin concert as a group in accordance with a carefully articulated plan or all of this tradingwas done on the instructions of one person or done by those nominally involved as purenominees in accordance with instructions of one person.

Third, the persons involved either personally or through private corporations(Jepead (P. Rooney); W.M. & J.M. (E. Kirkwood) and 918211 (E. Salter)) either receivedor directed the payment out of net proceeds of $969,873 over the nominal cost of theshares issued from treasury in the period from January to 23 December 1991. It shouldbe noted that in this analysis, we have only accounted for 2,069,299 of the 2,114,299shares issued from treasury free of escrow in the period under review. The discrepancyof 45,000 shares is explained because only 30,000 of the 75,000 shares issued toChristine Erikson on 18 February 1991 were delivered to the account of 921159 (G. Salter)on 4 March 1991; 4,000 of these shares were transferred as to 2,000 to each of thedealers as the first trade in the over the counter market in March. In addition, 11,000shares were transferred to a dealer to make up part of a 600,000 share trade split equallybetween the dealers by seven trades made in early May, all to close on 7 June 1991.There is no explanation on the record as to what happened to the other 45,000 sharesissued to Christine Erikson.

From this analysis and the testimony of those who gave evidence, we conclude thatChristine Erikson, Bennett, Madeiros, Wilshire, Hoesslin, Rooney, and Kirkwood, wereeither acting as pure nominees of Gary Salter or acting in concert with him in a deliberatescheme to sell shares in Belteco at ever increasing prices not justified by any businessdevelopment while taking every possible step to keep important information as to the riskynature of the enterprise from the public record. In doing so, several breaches of therequirements of the Act occurred as set out above.

In addition from this analysis, we conclude (notwithstanding the able argument ofMr. Mann that we should be careful not to exercise hindsight and impose on Mitchellknowledge gained after an ex post facto detailed review of the record) that it would havebeen impossible for a sales representative of Mr. Mitchell's experience not to haveconcluded that he was representing a group acting on direction of one person or elseacting in concert. This is particularly true when he knew that all of the persons directingthe accounts for which he was responsible were referred to him by one person, GarySalter. Having come to such a conclusion, he should have, at the very least, madeextensive inquiries as to the propriety of the trading taking place. He failed to do so.

There was some direct evidence that the trades to the dealers were pre-arrangedand Mitchell himself admitted that on at least some of the trades the seller advised him thatthe dealers "would likely buy the stock if (he) gave them a call". If this did not ring a loudbell for Mitchell, the fact that the shares being sold ended up divided virtually equallybetween the two dealer accounts at Levesque should have caused a great gong to ring.

As a result, whether he conducted trades without authorization of clients, failed tomaintain accurate records or conducted discretionary trades improperly as alleged, in ourview he did acquiesce in and facilitate the distribution of the shares of Belteco andTorvalon in circumstances where a prospectus was required by the Act and none of theexemptions were available. It was submitted that had he made inquiries, he would nothave received truthful answers. In our view, however, the pattern of trading of which hebecame aware would have demonstrated the falsity of such answers.

While Mitchell was only an accommodation party to the trading which took place,we believe that his actions or failure to act are deserving of censure.

Some appreciation of the impact of the scheme in this case upon members of thepublic who purchased shares from the two broker dealers involved can be gained by areview of the prices and trading volumes in the shares of Belteco on CDN which are setout in Exhibit 88, Tab 17 compared to the trades by the participants as shown in Table C.

The trading opened in March 1991 when 4,000 shares acquired at $0.10 per shareby Christine Erikson were sold by Gary Salter at $0.27. By the 7 June 1991, a total of954,000 shares acquired at a nominal cost of $0.05 to $0.10 had been transferred as toone half each to the two broker dealers at prices ranging between $0.25 and $0.31.

Prices for the shares in the market reached a high of $1.00 per share in May andclosed that month at $1.00. Prices then increased steadily from June to October reachinga high of $2.00 per share in July and closing at the end of October at $1.70 per share. InJune and July, the broker dealers had acquired another 1,200,000 shares which had costthe participants between $0.05 and $.010 a share for prices ranging from $0.70 to $1.00per share. After October 1991, the prices for the shares in the market declinedprecipitously to close at $0.80 per share by the end of December 1991.

Thereafter the price of shares were maintained in the market place at about $0.70to the end of May 1992 and thereafter prices again plunged precipitously on very lowvolumes to close at $0.03 per share on 31 December 1992.

According to our analysis, the participants realized net proceeds on the transfer ofshares of Belteco to the broker dealers of $969,873.

VII TORVALON - ANALYSIS OF SALE OF SHARES ISSUED FROM TREASURY TODEALERS TO 31 DECEMBER 1991

As is the case in the Belteco trading analysis, Ex.89, T8, summarizes the tradingin Torvalon shares using the dates appearing in the Insider Trading Reports. Again in thiscase, we have made a further analysis based on the settlement dates for each of therelevant transactions as shown in the copies of Levesque monthly statements containedin Exhibit 89. This analysis is shown in Table D.

The analysis is more difficult because Gary Salter and 916574 (Rooney) carried outsubstantial trading in the market in addition to the transfer of shares directly to the twodealer accounts at Levesque. In Table C, we have summarized only the trades in sharesissued from treasury between members of the Salter group and the two dealerschronologically by settlement dates.

In addition, the Levesque accounts in Ex.89, end with the accounts for December1991 so that although 5,969,767 freely tradeable shares were acquired or issued fromtreasury by the end of 1991, only 3,525,000 shares were transferred to the dealeraccounts by that time. A substantial number of shares were still in the hands of membersof the Salter group at 31 December 1991.

The analysis in Table C, however, also lead us to the conclusion that 918211 (E.Salter), 916574 (P. Rooney), Texas B.J. (J. Bennett), and Inculo (A. Madeiros), were eitheracting as pure nominees of Gary Salter or acting in concert with him in a deliberatescheme to sell shares in Torvalon at ever increasing prices not justified by any businessdevelopment while taking every possible step to keep important information as to the riskynature of the enterprise from the public record. In doing so, several breaches of therequirements of the Act occurred as set out above.

The analysis in Table D reveals:

Firstly, of the 10,690,145 shares acquired or issued from treasury by 16 July 1991(Table B above), 3,572,225 shares had been delivered to accounts at Levesque by13 November 1991. Of these, 3,525,000 shares had been transferred to the accounts ofthe two dealers at Levesque in nearly identical numbers at ever increasing prices(Columns 4, 8, 12, and 13).

Second, the striking gap between recorded dates of sale (column 5) and thesettlement dates (Column 6) make it clear that either the parties involved were acting inconcert as a group in accordance with a carefully articulated plan or all of this trading wasdone on the instructions of one person or done by those involved as pure nominees inaccordance with the instructions of one person.

Third, the persons involved either personally or through private corporations(918211 (E. Salter); 916574 (P. Rooney); Gary Salter and 921159 (Gary Salter); TexasB.J. (J. Bennett); and Inculo (A. Madeiros)) received or directed the payment out of netproceeds of $2,052,490 over the nominal cost of the shares acquired or issued fromtreasury over the period from 25 January to 16 July 1991. It should be noted that there isno information on the record as to the disposition of certificates for 100,000 shares issuedto Christine Erikson 9 July and certificates for 100,000 issued to her 16 July. Gary Salterdid, however, deliver 100,000 shares, 17 July and 100,000 shares 25 July to his personalaccount at Levesque as distinct from his account for 921159 (G. Salter). After a great dealof trading in this account the balance of 109,170 shares was transferred to anotheraccount at Levesque's in the name of Gary Salter in trust for 921159 (Gary Salter) on 27September 1991.

Again from this analysis, we conclude that it would have been impossible for a salesrepresentative of Mr. Mitchell's experience not to have concluded that he was representinga group acting on the direction of one person or else acting in concert. Having come tosuch a conclusion, he should have, at the very least, made extensive inquiries as to thepropriety of the trading taking place. He failed to do so. For the same reasons expressedin Part VI, we believe that Mitchell's conduct in the trading of Torvalon shares is deservingof censure.

Again, some appreciation for the impact of this scheme on members of the publicwho purchased shares from the two broker dealers involved can be gained by a review ofthe prices and trading volume of Torvalon shares in the market as summarized in Exhibit89, Tab 11, compared to the trades by the participants as shown in Table D.

The prices for Torvalon shares in the market place rose from $0.10 to a high of$0.75 in July 1991. During July, 918211 (E. Salter) transferred 925,000 shares acquiredat a nominal cost of $0.0287 to the two broker dealers at $0.25 per share.

During the period to the end of December 1991, a further 2,400,000 sharesacquired at nominal cost between $0.0287 and $0.10 per share were transferred to thebroker dealers at prices ranging from a low of $0.50 to a high of $1.45 per share.

The prices for Torvalon shares reached a high of $1.95 in May of 1992 andcontinued trading in substantial volumes ranging in price from $0.50 to $1.85 per share,closing at $1.35 per share in August 1992.

Volumes plunged thereafter at rapidly declining prices to close at $0.05 per shareat the end of December 1992.

According to our analysis, the participants realized net proceeds on the transfer ofshares of Torvalon to the broker dealers of $2,052,490.

VIII CONCLUSION

In the course of preparing the reasons for our decision, we have had to review andanalyze the facts and evidence in minute detail including a careful integration ofinformation set out in various exhibits and in the process we have recast much of thematerial in a form different from that presented to us by counsel. The result of this analysisis set out in Parts VI and VII and summarized in Tabular form in the Appendix.. Havingdone this, we consider that counsel should be given an opportunity to comment on ourfactual analysis. We considered issuing the accompanying Appendix in draft form andrequesting counsel to re-attend to address us on any matters relating to the factualanalysis or presentation. We decided against doing so but when counsel re-attend toaddress us on the consequences of our decision we are prepared to hear any reasonablerepresentations arising from our analysis or presentation of the facts.

We noted earlier that Erikson's counsel after the evidence was completed statedthat he was not pursuing and was withdrawing the systemic bias motion and the Eriksonpersonal bias motion. We accept that position but in doing so we record that the motionhas hung over the whole of these proceedings up until August 1998 and throughout wetreated it with great care. We note again that Erikson's affidavit filed in support of thatmotion is still on the public record. We wish to record that no evidence that we heard orthat appears from the exhibits gives any credence to the allegations of bias put forward byErikson. We trust that this finding will give Staff of the Commission a renewed degree ofconfidence in their ongoing work of administrating the Act and regulations.

In coming to the conclusions we have set out, we have been mindful of the manystatements to which we were referred that we should act on nothing short of clear andconvincing proof based upon cogent evidence accepted by the tribunal where potentialdisciplinary matters or where matters of personal reputation are involved.

We have already set out our conclusions regarding the part which Mitchell playedin the matters before us.

As a result of our review of the voluminous documentary evidence and ourconsideration of the evidence, we have concluded that Christine Erikson was either a purenominee or a member of a control group and that Erikson knowingly acquiesced in andfacilitated the distribution of the common shares of Belteco and Torvalon where violationsof the prospectus and reporting requirements of the Act occurred. The result has been aserious abuse of the capital market contrary to the public interest. We believe theirconduct deserves censure.

Finally, if we are wrong in our findings that important violations of the Act and theRegulations have occurred, we find that on all the evidence before us what occurred in thiscase was manipulative, deceptive and unconscionably abusive of the capital markets andwe would exercise our discretion under Section 127 of the Act in the absence of anybreach of the Act to find that the public interest was involved, that what occurred wascontrary to the public interest and thus sufficient to receive submissions as to what, if any,Order should be made within those permitted under Section 127. In this regard we rely onRe CTC Dealer Holdings et al. and Ontario Securities Commission et al. (1957) 59 OR(2d) 79 (DivCt) affirming (1997) 10 0SCB 857.

As we indicated at the conclusion of argument, we will reconvene the hearing at10:00 am Wednesday, 21 October 1998 to receive submissions as to the consequenceswhich should follow these conclusions and if desired further submissions on theapplicability of the limitation period provisions of the Act.

September, 30th 1998.

"J. F. Howard" "G. P. H. Vernon"

IX APPENDIX TO DECISION AND REASONS 30 SEPTEMBER 1998

Table A Belteco - Summary of Shares Issued From Treasury at January 1,1991 to April 30, 1992

Table B Torvalon - Summary of Shares Acquired and Issued From Treasuryat June 1991 to July 1991

Table C Belteco - Analysis of Sale of Shares Issued From Treasury -Chronologically by Settlement Date

Table D Torvalon - Analysis of Sale of Shares Issued From Treasury -Chronologically by Settlement Date to 31 December 1991

 

TABLE A
BELTECO
SUMMARY OF SHARES ISSUED FROM TREASURY
AT JANUARY 1, 1991 TO APRIL 30, 1992

Ref.
Date
Issued To
For
@ Market Clear Escrow % Total
as at Jan1, 1991 Others

Krater

916567 (A. Madeiros)

918211 (E.Salter) 25%

Jepead (Rooney) 37.5%

WM&JM (Kirkwood 37.5%

272,250

6,250

439,299

$22,964.95 n/a

n/a

$0.05

n/a 272,250

6,250

439,299

  37.9

0.9

61.2

717,799
Ex. 119

T. 6

Jan. 17 WND (Petry) 350,000 Toys $0.05 n/a   350,000 38.8 1,067,799
Ex. 119

T. 8

Jan. 24 E. Salter

A. Madeiros

390,375

359,025

The BaptistJournal $0.05 n/a 260,650

239,350

130,325

119,675

41.3 1,817,799
Ex. 119

T. 7

Jan. 31 Crystal 750,000 Golden AgeFilm Rights $0.05 n/a   750,000 29.2 2,567,199
Ex. 119

T. 9

Feb. 1 E. Salter

A. Madeiros

but cumulative

E. Salter

A. Madeiros

200,000

200,000

Subscription $0.05 n/a 200,000

200,000

(460,650)

(439,350)

(130,325)

(119,675)

6.7

6.7

(19.9)

(18.8)

2,967,799
Ex. 119

T. 10

Feb. 12 R. Florika

K. Hoesslin

600,000

400,000

Bible Tapes

100% -906851

$0.05 n/a 300,000

200,000

300,000

200,000

15.1

10.1

3,967,199
Ex. 119

T. 11

Feb. 18

Mar. 7

C. Erikson

J. Bennett

H. Wilshire

75,000

100,000

100,000

Options $0.10 n/a 75,000

100,000

100,000

  1.9

2.4

2.4

4,042,199

4,242,199

Ex. 119

T. 12

Dec. 23 918211 (E. Salter) 232,342

shares

232,342

warrants

Private

Placement

$250,000

$1.076

(Agg.)

O 1.00

H 1.70

L 0.80

C 0.80

  232,342

no transferto June17/93

5.2

 

4,474,541
Ex. 119

T. 13

1992

Apr. 30

J. Bennett

E. Salter

R. Petry

200,000

200,000

23,000

Options $0.70 $0.70 200,000

200,000

23,000

  4.1

4.1

0.5

4,897,541

 

TABLE B
TORVALON CORP.
SUMMARY OF SHARES ACQUIRED AND ISSUED FROM TREASURY
AT JUNE 1991 TO JULY 1991

DateAuthorized

1991

DateCertificates

 

Issued1991

Issued To
Number

of Shares

For
@
Market at

Authorize
d Date

Clear
Escrow
Per cent
Total

 

Authorized
June 25

 

Acquisition
July 9
Inculo (Madeiros)

Texas BJ(Bennett)

918211 (E.Salter)

916574 (Rooney)

Others held

868,145

1,333,334

1,333,333

1,333,333

726,150

$25,000 Cash

Promissory

Note $115,000

payable July 19

$0.0287
Nil
When

 

Promissory

 

Note paid
15.5

 

23.8

 

23.8

 

23.8

 

13.1
5,594,295
June 26

 

June 26
July 9

 

July 9
921159 (G.Salter)

C. Erikson

1,522,000

100,000

Debt $76,100

Option - $5,000

$0.05

 

$0.05
Nil
21.1

 

1.4
7,216,295
July 4
July 9
Kent Toys(R.Petry) 2,500,000 License for Toys$125,000
$0.05
Nil
Resale
restrictions

 

2 years
25.7
9,716,295
July 15
July 16
C. Erikson 100,000 Option
$0.05
Nil
1.0
9,816,295
July 16
July 16
Stall Universal 1,000,000 949032 forinventory
$0.10
Bid 20

 

Ask 40
9.2
10,816,295
July 9
July 16
Bennett

Madeiros

Petry

200,000

200,000

200,000

Options
$0.10

 

$0.10

 

$0.10
Nil
1.8

 

1.8

 

1.8
11,416,295

 

TABLE C
BELTECO
Analysis of Sale of Shares Issued From Treasury to Dealers
Chronologically by Settlement Date

Line 1

Seller

2

Issued

3

Cost

4

Certificate

to Levesque

5

Sale Date

6

SettlementDate

7

Price

8

No. ofShares

9

Proceeds

10

Commis-sion

11

Pay Date

12

Dealer A

13

Dealer B

14

Reference

15

NetProceeds>ApparentCost

1

2

921159 (G.Salter) To C. Erikson

30,000, 18 Feb

$0.10

$0.10

4 Mar

4 Mar

13 Mar

18 Mar

22 Mar

25 Mar

$0.27

$0.27

2,000

2,000

490

490

50

50

2,000 2,000 Ex88,T2 290

290

3

4

John Bennett

Albertine Madeiros

100,000, 18 Feb

239,350, 24 Jan

$0.10

$0.05

27 Mar

27 Mar

2 Apr

3 Apr

9 Apr

9 Apr

$0.31

$0.31

100,000

25,000

30,000

7,500

1,000

250

9 Apr

9 Apr

62,500 62,500 Ex88, T3

Ex88, T4

20,000

6,250

5 Albertine Madeiros 200,000, 1 Feb $0.05 2 May 9 Apr 1 May $0.31 125,000 37,500 1,250 1 May 62,500 62,500 Ex88, T4 31,250
6

7

8

9

10

11

12

Albertine Madeiros

921159 (G.Salter)

Rodika Florika

Lines 4&5

Line 1

300,000, 12 Feb

$0.05

$0.05

$0.05

$0.10

$0.05

$0.05

$0.05

Lines 4&5

Line 1

3 May

3 May

3 May

3 May

6 May

6 May

6 May

7 June

7 June

7 June

7 June

7 June

7 June

7 June

$0.25

$0.26

$0.31

$0.31

$0.25

$0.26

$0.31

100,000

100,000

89,000

11,000

100,000

100,000

100,000

75,700

3,300

79,000

2,890

110

3,000

7 June

7 June

7 June

300,000 300,000 Ex88, T2

Ex88, T5

61,200

2,750

64,000

13 Elaine Salter 260,650, 24 Jan $0.05 7 May 11 June 18 June $0.70 100,000 69,000 1,000 18 June Ex88, T6 64,000
14 918211 (E.Salter) 109,825, 24 May $0.05 10 June 23 June 25 June $0.70 109,825 75,779.25 1,098 25 June Ex88, T6 70,258
15

16

17

18

19

20

21

Elaine Salter

Harcourt Wilshire

Kai Hoesslin

Elaine Salter

Jepead (P.Rooney)

Albertine Madeiros

WM&JM (E.Kirkwood)

Line 13

200,000, 1 Feb

100,000, 7 Mar

200,000, 12 Feb

Lines 13&11

164,737, 24 May

Lines 4&5

164,737, 24 May

$0.05

$0.10

$0.05

$0.05

$0.05

$0.05

$0.05

22 May

10 June

23 May

7&22 May

28 June

Lines 4&5

13 June

11 June

11 June

11 June

26 June

26 June

26 June

28 June

15 July

15 July

15 July

15 July

15 July

15 July

15 July

$0.70

$0.70

$0.70

$1.00

$1.00

$1.00

$1.00

290,175

100,000

200,000

70,250

164,700

350

164,700

200,220

69,000

(US59,968.71)

138,000

69,547.50

163.053

350

163,053

2,902

1,000

2,000

703

1,647

0

1,647

15 July

15 July

15 July

15 July

15 July

15 July

15 July

600,000 600,000 Ex88, T6

Ex88, T7

Ex88, T8

Ex88, T6

Ex88, T10

Ex88, T4

Ex88, T9

185,711

59,000

128,000

66,035

105,253

333

105,253

2,069,299 2,054,000 $20,496 1,027,000 1,027,000 $969,873

 

TABLE D
TORVALON CORP.
Analysis of Sale of Shares Issued From Treasury to Dealers
Chronologically by Settlement Date to 31 December 1991

Line 1

Seller

2

Issued

3

Cost

4

Certificate

to Levesque

5

Sale Date

6

SettlementDate

7

Price

8

No. ofShares

9

Proceeds

10

Commis-sion

11

Pay Date

12

Dealer A

13

Dealer B

14

Reference

15

Net Proceeds

Treasury Shares

> Apparent Cost

1 918211

(E. Salter)

1,333,333

25 June

.0287 733,500

17 July

500,000

25 July

18 July 25 July .25 925,000 222,000 9,250 25 July

223,000

475,000 450,000 Ex.89, T3 $193,452
2 916574

(P. Rooney)

1,333,333

25 June

.0287 549,000

17 July

200,000

21 Aug

300,000

21 Aug

7 Aug

7 Aug

23 Aug

5 Sept

.50

.50

500,000

500,000

245,000

245,000

5,000

5,000

23 Aug

99,080

5 Sept

95,000

500,000 500,000 Ex.89, T4 $230,650

$230,650

3 Gary Salter 1,522,000

921159

(Salter)

26 June

.05 100,000

17 July

100,000

25 July

28 Aug 5 Sept 1.02 20,000 20,100 300 5,000 15,000 Ex.89, T2 $10,100
4 916574

(P. Rooney)

Line 2 .0287 Line 2 4 Sept 25 Sept 1.02 180,000 180,900 2,700 25 Sept

169,958

90,000 90,000 Ex.89, T4 $175,734
5 918211

(E. Salter)

Line 1

99,725

?

308,333

@.0287

?

Line 1+

99,725

20 Sept

19 Sept 7 Oct .90 400,000 354,000 6,000 7 Oct

333,072

400,000 Ex.89, T3 308,333 Shares

$264,026

91,667 Shares

?

6 Texas B.J.

(J. Bennett)

1,333,334

25 June

.0287

.10

690,000

18 July

100,000

22 Aug

23 Oct

31 Oct

28 Oct

7 Nov

1.08

1.20

400,000

90,000

426,000

106,650

6,000

1,350

28 Oct

426,000

7 Nov

106,650

400,000

90,000

Ex.89, T5 $414,520

$104,067

7 916574

(P. Rooney)

Lines 2&4 .0287

.0287

Line 2

Line 2

31 Oct

1 Nov

8 Nov

8 Nov

1.20

1.20

10,000

100,000

11,850

118,500

150

1,500

8 Nov

112,500

10,000 100,000 Ex.89, T4 $11,563

$115,630

8 Inculo

(A.Madeiros)

868,145

25 June

.0287 13 Nov

200,000

18 Nov 9 Dec 1.25 200,000 247,000 3,000 2 Dec

122,000

9 Dec

124,745

100,000 100,000 Ex.89, T5  $241,260
9 916574

(P. Rooney)

Line 2 .0287

?

156,667

Line 2 11 Dec

11 Dec

18 Dec

13 Jan/92

1.45

1.45

100,000

100,000

143,500

143,500

1,500

1,500

US111,062 100,000 100,000 Ex.89, T4 43,333 Shares

$160,838

156,667 Shares

?

3,572,225 3,525,000 $43,250 1,770,000 1,755,000 3,525,000 Shares

$2,052,490