Proceedings

PDF Version

PDF Version



IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c. S.5 AS AMENDED

- AND -

IN THE MATTER OF
URANIUM308 RESOURCES INC., MICHAEL FRIEDMAN, GEORGE SCHWARTZ,
PETER ROBINSON, and SHAFI KHAN

SETTLEMENT AGREEMENT
BETWEEN STAFF AND PETER ROBINSON




PART I - INTRODUCTION



1. By Notice of Hearing dated March 2, 2010, the Ontario Securities Commission (the “Commission”) announced that it proposed to hold a hearing, commencing on March 5, 2010, pursuant to sections 37, 127, and 127.1 of the Securities Act, R.S.O. 1990, c. S. 5, as amended (the “Act”), to consider whether it is in the public interest to make orders, as specified therein, against Uranium308 Resources Inc. (“U308 Inc.”), Michael Friedman (“Friedman”), George Schwartz (“Schwartz”), Peter Robinson (“Robinson”), and Shafi Khan (“Khan”) (collectively the "Respondents"). The Notice of Hearing was issued in connection with the allegations as set out in the Statement of Allegations of Staff of the Commission dated March 2nd, 2010.

2. The Commission will issue a Notice of Hearing to announce that it will hold a hearing to consider whether, pursuant to sections 37, 127 and 127.1 of the Act, it is in the public interest for the Commission to approve this Settlement Agreement and to make certain orders in respect of Robinson.

PART II – JOINT SETTLEMENT RECOMMENDATION

3. Staff agree to recommend settlement of the proceeding initiated by the Notice of Hearing dated March 2, 2010 against Robinson (the “Proceeding”) in accordance with the terms and conditions set out below. Robinson consents to the making of an order in the form attached as Schedule “A”, based on the facts set out below.

PART III – AGREED FACTS

Background

4. Before becoming involved in U308 Inc., Robinson worked as a salesperson for York Rio Resources Inc. (“York Rio”). Schwartz was one of the directing minds of York Rio. York Rio was selling securities to investors across Canada in contravention of Ontario securities laws. Friedman was also involved in the operations of York Rio. In 2007, Schwartz was involved in a dispute with another directing mind of York Rio, Victor York, so Friedman and Schwartz left York Rio and started up the company that would become U308 Inc.

5. Uranium Synergies Inc. (“Synergies”) was incorporated in Ontario in April, 2007. Friedman was the first and only registered director of Synergies at the time of incorporation. On June 7, 2007, the corporate name of Synergies was changed to Uranium308 Resources Inc. (“U308 Inc.”).

6. Throughout the time period between and including July 1, 2007 and December 31, 2008 (the “Material Time”), Friedman was the sole registered Director of U308 Inc. and the President of U308 Inc. Friedman is a resident of Ontario.

7. During the Material Time, Schwartz was a resident of Ontario and was a directing mind of U308 Inc.

8. U308 Inc. has never filed a prospectus or a preliminary prospectus with the Commission.

9. U308 Inc. has never been registered with the Commission.

10. Robinson was not registered with the Commission in any capacity during the Material Time.

11. During the Material Time, Robinson was a resident of Ontario and was a salesperson of U308 Inc. securities.

12. During the Material Time, Khan was a resident of Ontario and was a salesperson of U308 Inc. securities.

Trading in Securities of U308 Inc.

13. The Respondents traded in securities of U308 Inc. during the Material Time.

14. The Respondents traded in securities of U308 Inc. from offices in the Toronto area.

15. Robinson initially sold U308 Inc. securities from the U308 Inc. offices on Sheppard Avenue East in Toronto (the “Sheppard Office”). 2096516 Ontario Inc. (“2096516”) is an Ontario numbered company owned by Robinson. 2096516 entered into the lease agreement for the Sheppard Office.

16. Robinson later sold U308 Inc. securities from an office, also rented by Robinson, on Elm Street in Toronto (the “Elm Office”). Schwartz and Friedman wanted to open this second U308 Inc. sales office.

17. The U308 Inc. website and investor relations documents showed two addresses for U308 Inc. that differed from the actual office address. The publicly disclosed addresses were only virtual offices.

18. During the Material Time, residents of various Canadian provinces received unsolicited phone calls from salespersons, agents and representatives of U308 Inc. and were solicited to purchase securities of U308 Inc.

19. During the Material Time, Robinson telephoned potential investors across Canada for the purpose of selling U308 Inc. securities to those persons. Robinson also corresponded with investors by e-mail and provided investors and potential investors with subscription agreements in relation to the sale of U308 Inc. securities.

20. Robinson used a false name when he communicated with potential purchasers and purchasers of U308 Inc. securities. Robinson would tell people over the phone that his name was Alan Barnard. Robinson would also sign e-mails using the false name Alan Barnard. Other salespeople were also using false names when communicating with potential investors and investors. Khan used the false name Ken Shaw when dealing with U308 Inc. investors. Khan also sometimes used the alias of Joe London when speaking with potential investors and investors.

21. During the Material Time, $2,380,390 was received from at least 107 individuals and companies (collectively the “Investors”) that purchased securities of U308 Inc. as a result of being solicited to do so by Robinson, Khan and other salespersons of U308 Inc.

22. Robinson told potential investors that U308 Inc. would be going public in the future and they would receive securities of the public company. U308 Inc. never went public. Robinson also told potential investors that U308 Inc. owned certain properties in Zambia and New Mexico.

23. Robinson sold at least $757,500 worth of U308 Inc. securities to investors and several of these investors purchased U308 Inc. securities on more than one occasion.

24. Robinson and Khan were each paid commissions of anywhere from 20 to 60 percent of the gross proceeds of their sales of U308 Inc. securities.

25. Robinson met personally with two of the U308 Inc. Investors: J.V. and H.W. Schwartz, Friedman, and Khan were also at the meeting with J.V. The purpose of the meeting was to encourage J.V. to invest in U308 Inc. J.V. later invested $250,000 through the J.V. Family Trust. Ultimately, the J.V. Family Trust invested through Khan and Khan was using the alias Ken Shaw in his dealings with J.V.

26. Robinson and Khan attended the meeting with H.W. This meeting took place in Toronto after H.W. had already invested in U308 Inc. H.W. gave a statement to Staff and advised Staff that he met with Ken Shaw and Alan Barnard.

27. Robinson and Khan often worked as a team in selling U308 Inc. securities to Investors and when dealing with Investors after the Investors had purchased U308 Inc. securities.

28. Investors have not been contacted by anyone from U308 Inc. since December 2008 and the securities of U308 Inc. that they own have no determinable value. Accordingly, the funds provided by the Investors have been irrevocably lost.

29. Robinson participated in acts, solicitations, conduct, or negotiations directly or indirectly in furtherance of the sale or disposition of securities for valuable consideration, in circumstances where there were no exemptions available to Robinson under the Act.

Fraudulent Conduct

30. During the Material Time, Robinson provided information to the Investors that was false, inaccurate and misleading, including, but not limited to, the following:

  • that his name was Alan Barnard;
  • that Khan’s name was Ken Shaw;
  • that the office address of U308 Inc. was at 251 Consumers Road, Suite 1200, Toronto which, in fact, was merely a virtual office. As set out above, U308 Inc. was actually operating entirely out of the Sheppard Office and the Elm Office;
  • that U308 Inc. owned certain properties in Zambia and New Mexico, U.S.A.; and
  • that the net proceeds of the sale of U308 Inc. securities was to be used for the exploration and development of the Zambian and New Mexico properties.

31. The U308 Inc. website address was www.uranium308resources.com (the “U308 Website”) and it contained numerous pieces of false, inaccurate and misleading information.

32. The U308 Website claimed that U308 Inc.’s “Zambian holding is a 40% interest in the uranium assets of a 570-sq. km. Property in northwest Zambia in an area known as the Luswishi Dome.” U308 Inc. never actually obtained the ownership stake claimed in the Zambian property. The agreement by which U308 Inc. was to acquire this ownership stake was never completed as U308 Inc. did not honour certain terms of the agreement. Moreover, the party that was to vend this ownership stake to U308 Inc. provided a formal Notice of Termination to U308 Inc. as early as February 6, 2008. The U308 Website continued, after that point in time, to assert that U308 Inc. owned the Zambian property as set out above. No steps were taken to advise investors or potential investors of the termination of the contract or even the existence of a dispute with respect to the contract.

33. Robinson knew when he started working as a salesperson for U308 Inc. that the company did not own a property in Zambia. He did see a contract relating to the possible purchase of a property in Zambia. However, Robinson took no steps to confirm that a Zambian property was actually acquired by U308 Inc. when providing investors with false information that U308 Inc. owned this property in Zambia.

34. During the Material Time, Robinson sent potential investors and investors a copy of a prospecting licence issued by the Zambian government. This prospecting licence contained certain conditions, one of which was that a mine be operational within three months of the licence. Robinson never knew if this condition and other conditions in the prospecting licence were ever met by U308 Inc.

35. The U308 Website also contained the following statement,

“The New Mexico interest consists of a 50% concession in mining claims and leases of lands totaling approximately 3,000 acres near Grants, New Mexico.”

This statement was completely false as it describes a property, known as F-33, that U308 Inc. never had any ownership interest in. The F-33 property, described on the U308 Website, was actually acquired in November of 2007 by a company completely unrelated to U308 Inc.

36. One of the scripts that Robinson used in his telephone solicitations to potential investors included a claim that U308 Inc. owned mineral rights in a 23 square-kilometre concession in Ghana. Robinson had no knowledge of whether this was true. In fact, U308 Inc. did not own such a property.

37. Robinson knew that there were no geologists or engineers working out of the Sheppard Office or the Elm Office.

38. Robinson never took any steps to verify any of the statements that he was making to potential investors and to the Investors. These false, inaccurate and misleading representations were made with the intention of effecting trades in U308 Inc. securities.

39. As set out above, salespeople used false names when communicating with investors and potential investors in U308 Inc. As previously set out, Robinson used the false name “Alan Barnard” when dealing with Investors. Khan used the false names “Ken Shaw” and “Joe London”.

40. Robinson and Khan worked closely together in selling U308 Inc. shares from the U308 Inc. offices at 500 Sheppard Avenue and 49 Elm Street, Toronto, Ontario.

41. Khan would ask Robinson to call disgruntled investors back when these people sometimes left telephone messages or sent e-mails to U308 Inc.

42. The U308 Inc. salespeople completed a document called a “Contact Report” to track the sales to investors. Staff seized numerous of these Contact Reports during the execution of search warrants at the Sheppard Office and the Elm Office. The Contact Reports seized show some of the sales that Robinson was involved in and that Khan would sometimes request assistance from Robinson in dealing with U308 Inc. investors who were calling to complain. On one of the Contact Reports a typed note in the History section states, “Called left another message – gave to Alan Barnard”. On the same Contact Report there is a handwritten note that says, “Peter Please call left message today”.

The Robinson Investors

43. As set out above, Robinson was involved in the solicitation and/or sale of at least $757,500 worth of U308 Inc. securities to the following people and companies:

 

Investors     
4-Sep-07  Investor - K. M. M. (Alberta)   5,000.00  
30-Oct-07  Investor - D & K G. (Alberta)  2,500.00  
2-Nov-07  Investor - J & M K. (Alberta)  25,000.00 
7-Nov-07  Investor - J.V. Family Trust (Saskatchewan)  250,000.00  
15-Nov-07 Investor - K. M. M. (Alberta) 5,000.00
15-Nov-07 Investor - K. M. M. (Alberta) 25,000.00
3-Dec-07 Investor - K. M. M. (Alberta) 27,500.00
6-Dec-07 Investor - P. K. (Alberta) 5,000.00
11-Dec-07 Investor - L. M. (Alberta) - $20,000 20,000.00
12-Dec-07 Investor - D. C. (Alberta) - $10,000 and G. M. (Ontario) - $10,000 20,000.00
21-Dec-07 Investor - D & J C. (Alberta) - $20,000 and G & R M. (Ontario) - $20,000 40,000.00
31-Dec-07 Investor - K. M. M. (Alberta) 10,000.00
8-Jan-08 Investor - P. K. (Alberta) - $50,000 and PLC Co. Inc. (Alberta) - $10,000 60,000.00
14-Jan-08 Investor - G. M. (Ontario) - $10,000 10,000.00
18-Jan-08 Investor - K. M. M. (Alberta) 50,000.00
13-Feb-08 Investor - D & K G. (Alberta) 15,000.00
29-Feb-08 Investor - D & K G. (Alberta) 15,000.00
7-Mar-08 Investor - D & K G. (Alberta) 7,500.00
13-Mar-08 Investor - RI Ltd. (Alberta) 5,000.00
24-Apr-08 Investor - M & D J. (British Columbia) 10,000.00
9-May-08 Investor - Alberta Ltd. 25,000.00
16-May-08 Investor - Alberta Ltd. 25,000.00
4-Jun-08 Investor - P. K. (Alberta) 50,000.00
6-Aug-08 Investor - D. F. (Alberta) 50,000.00
Total funds Solicited by Robinson from Investors $757,500.00

44. Robinson and Khan worked together in some instances and Khan sold at least $1,114,000 worth of U308 Inc. securities to investors across Canada.  

45. There were no accurate and complete records kept by U308 Inc. as to exactly which salesperson made which sale of U308 Inc. securities and how much each salesperson was compensated as commission per sale. Accordingly, it is possible that Robinson sold more securities than the list set out above. Robinson is not even aware of how many shares of the U308 Inc. securities he sold during the Material Time.

46. During the Material Time, Robinson received compensation for his sales of U308 Inc. shares, by way of commission payments, of at least $934,890. These are the payments made to Robinson or his company that were traced by Staff. These payments can be broken down as follows:

  • $214,779.76 was paid directly to Robinson from U308 Inc. as commission payments for sales of U308 Inc. securities;
  • Robinson was the sole registered Director and owner of a company called Platinum International Investments Inc. (“Platinum”). During the Material Time, Platinum had no legitimate operations whatsoever. $61,500 was paid to Platinum during the Material Time;
  • Robinson was the sole registered Director and owner of a company called 1751564 Ontario Inc. (“1751564”). 1751564 had no operations whatsoever. U308 Inc. paid $512,360 to 1751564 during the Material Time. These payments were commission payments for sales of U308 Inc. shares by Robinson; and
  • Robinson was the sole registered Director and owner of a company called 2096516 Ontario Inc. (“2096516”), which received $146,250 from U308 Inc. as compensation for Robinson’s sales of U308 Inc. securities.

47. During a compelled examination by Staff, Robinson claimed that he paid hundreds of thousands of dollars to Khan in cash payments and by bank draft. Robinson stated that these funds came from bank accounts of 1751564 Ontario Inc. and were paid as compensation for sales of U308 Inc. securities made by Khan. Staff are not able to verify Robinson’s claims at this time.

PART IV - CONDUCT CONTRARY TO THE PUBLIC INTEREST

48. By engaging in the conduct described above, Robinson admits and acknowledges that he contravened Ontario securities law during the Material Time in the following ways:

  1. During the Material Time, Robinson engaged or participated in acts, practices or courses of conduct relating to securities of U308 Inc. that the Robinson knew or reasonably ought to have known perpetrated a fraud on persons or companies, contrary to section 126.1(b) of the Act and contrary to the public interest;
  2. During the Material Time, Robinson traded in securities without being registered to trade in securities, contrary to section 25(1)(a) of the Act and contrary to the public interest;
  3. During the Material Time, Robinson made representations without the written permission of the Director, with the intention of effecting a trade in securities of U308 Inc., that such security would be listed on a stock exchange or quoted on any quotation and trade reporting system, contrary to section 38(3) of the Act and contrary to the public interest; and
  4. During the Material Time, Robinson traded in securities of U308 Inc. when a preliminary prospectus and a prospectus had not been filed and receipts had not been issued for them by the Director, contrary to section 53(1) of the Act and contrary to the public interest.

PART V - TERMS OF SETTLEMENT

50. Robinson agrees to the terms of settlement listed below. 

51. The Commission will make an order, pursuant to sections 37, 127(1) and 127.1 of the Act, that:  

  1. the Settlement Agreement is approved;
  2. trading in any securities by Robinson cease permanently from the date of the approval of the Settlement Agreement, with the exception that Robinson is permitted to trade in securities in mutual funds through a registered dealer for the account of his registered retirement savings plan (as defined in the Income Tax Act (Canada));
  3. the acquisition of any securities by Robinson is prohibited permanently from the date of the approval of the Settlement Agreement, with the exception that Robinson is permitted to acquire securities in mutual funds through a registered dealer for the account of his registered retirement savings plan (as defined in the Income Tax Act (Canada));
  4. any exemptions contained in Ontario securities law do not apply to Robinson permanently from the date of the approval of the Settlement Agreement;
  5. Robinson is reprimanded;
  6. Robinson is prohibited permanently from the date of this Order from becoming or acting as a director or officer of any issuer, registrant, or investment fund manager;
  7. Robinson is prohibited permanently from the date of this Order from becoming or acting as a registrant, as an investment fund manager or as a promoter; and,
  8. Robinson shall disgorge to the Commission $934,890 obtained as a result of his non-compliance with Ontario securities law. The $934,890 disgorged shall be for allocation to or for the benefit of third parties, including investors who lost money as a result of purchasing U308 Inc. securities, in accordance with s. 3.4(2) of the Act;
  9. Robinson shall pay an administrative penalty of $300,000 for his failure to comply with Ontario securities law. The $300,000 administrative penalty shall be for allocation to or for the benefit of third parties, including investors who lost money as a result of purchasing U308 Inc. securities, in accordance with s. 3.4(2) of the Act;
  10. Robinson shall pay $50,000 for the costs of the investigation of this matter; and
  11. Robinson cease permanently, from the date of the approval of the Settlement Agreement, to telephone from within Ontario to any residence within or outside Ontario for the purpose of trading in any security or any class of securities.

52. Robinson undertakes to consent to a regulatory Order made by any provincial or territorial securities regulatory authority in Canada containing any or all of the prohibitions set out in sub-paragraphs 51. (a) to (k) above.  

PART VI - STAFF COMMITMENT

53. If this Settlement Agreement is approved by the Commission, Staff will not initiate any other proceeding under the Act against Robinson in relation to the facts set out in Part III herein, subject to the provisions of paragraph 54, below.

54. If this Settlement Agreement is approved by the Commission, and at any subsequent time Robinson fails to honour the terms of the Settlement Agreement, Staff reserve the right to bring proceedings under Ontario securities law against Robinson based on, but not limited to, the facts set out in Part III herein as well as the breach of the Settlement Agreement.

PART VII - PROCEDURE FOR APPROVAL OF SETTLEMENT

55. Approval of this Settlement Agreement will be sought at a hearing of the Commission scheduled on a date to be determined by the Secretary to the Commission, or such other date as may be agreed to by Staff and Robinson for the scheduling of the hearing to consider the Settlement Agreement.

56. Staff and Robinson agree that this Settlement Agreement will constitute the entirety of the agreed facts to be submitted at the settlement hearing regarding Robinson’s conduct in this matter, unless the parties agree that further facts should be submitted at the settlement hearing.

57. If this Settlement Agreement is approved by the Commission, Robinson agrees to waive all rights to a full hearing, judicial review or appeal of this matter under the Act.

58. If this Settlement Agreement is approved by the Commission, neither party will make any public statement that is inconsistent with this Settlement Agreement or inconsistent with any additional agreed facts submitted at the settlement hearing.

59. Whether or not this Settlement Agreement is approved by the Commission, Robinson agrees that he will not, in any proceeding, refer to or rely upon this Settlement Agreement or the settlement negotiations as the basis of any attack on the Commission's jurisdiction, alleged bias or appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.

PART VIII – DISCLOSURE OF SETTLEMENT AGREEMENT

60. If, for any reason whatsoever, this Settlement Agreement is not approved by the Commission or the order attached as Schedule "A" is not made by the Commission:

  1. this Settlement Agreement and its terms, including all settlement negotiations between Staff and Robinson leading up to its presentation at the settlement hearing, shall be without prejudice to Staff and Robinson; and
  2. Staff and Robinson shall be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing on the merits of the allegations in the Notice of Hearing and Statement of Allegations of Staff, unaffected by the Settlement Agreement or the settlement discussions/negotiations.

61. The terms of this Settlement Agreement will be treated as confidential by all parties hereto until approved by the Commission. Any obligations of confidentiality shall terminate upon approval of this Settlement Agreement by the Commission. The terms of the Settlement Agreement will be treated as confidential forever if the Settlement Agreement is not approved for any reason whatsoever by the Commission, except with the written consent of Robinson and Staff or as may be required by law.

PART IX. - EXECUTION OF SETTLEMENT AGREEMENT

62. This Settlement Agreement may be signed in one or more counterparts which together will constitute a binding agreement

63. A facsimile copy of any signature will be as effective as an original signature. 

Dated this 22nd day of October, 2010. 

 

Signed in the presence of:

" Melanie Webb "
Witness
" Peter Robinson "
Peter Robinson

Dated this 22nd day of October, 2010.

 

" Tom Atkinson "

STAFF OF THE ONTARIO SECURITIES COMMISSION


per Tom Atkinson
Director, Enforcement Branch

Dated this 25th day of October, 2010

 

SCHEDULE "A"

IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c.S.5, AS AMENDED

- AND -

IN THE MATTER OF
PETER ROBINSON

ORDER
(Sections 37 and 127(1))



WHEREAS on , the Ontario Securities Commission (the “Commission”) issued a Notice of Hearing pursuant to sections 37 and 127 of the Securities Act, R.S.O. 1990, c.S.5, as amended (the “Act”) in respect of Peter Robinson (“Robinson”);

AND WHEREAS Robinson entered into a Settlement Agreement with Staff of the Commission dated , 2010 (the "Settlement Agreement") in which Robinson agreed to a proposed settlement of the proceeding commenced by the Notice of Hearing, subject to the approval of the Commission;

AND UPON

reviewing the Settlement Agreement, the Notice of Hearing, and the Statement of Allegations of Staff of the Commission, and upon hearing submissions from counsel for Robinson and from Staff of the Commission;

AND WHEREAS the Commission is of the opinion that it is in the public interest to make this Order;

IT IS HEREBY ORDERED THAT:

  1. the Settlement Agreement is approved;
  2. pursuant to clause 2 of subsection 127(1) of the Act, trading in any securities by Robinson cease permanently, with the exception that Robinson is permitted to trade in securities in mutual funds through a registered dealer for the account of his registered retirement savings plan (as defined in the Income Tax Act (Canada));
  3. pursuant to clause 2.1 of section 127(1) of the Act, Robinson is prohibited permanently from the acquisition of any securities, with the exception that Robinson is permitted to acquire securities in mutual funds through a registered dealer for the account of his registered retirement savings plan (as defined in the Income Tax Act (Canada));
  4. pursuant to clause 3 of section 127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Robinson permanently;
  5. pursuant to clause 6 of subsection 127(1) of the Act, Robinson is reprimanded;
  6. pursuant to clauses 8, 8.2, and 8.4 of subsection 127(1) of the Act, Robinson is prohibited permanently from the date of this Order from becoming or acting as a director or officer of any issuer, registrant, or investment fund manager;
  7. pursuant to clause 8.5 of subsection 127(1) of the Act, Robinson is prohibited permanently from the date of this Order from becoming or acting as a registrant, as an investment fund manager or as a promoter;
  8. pursuant to clause 9 of subsection 127(1) of the Act, Robinson shall pay an administrative penalty of $300,000 for his failure to comply with Ontario securities law. The $300,000 administrative penalty shall be for allocation to or for the benefit of third parties, including investors who lost money as a result of purchasing U308 Inc. securities, in accordance with s. 3.4(2) of the Act;
  9. pursuant to clause 10 of subsection 127(1) of the Act, Robinson shall disgorge to the Commission $934,890 obtained as a result of their non-compliance with Ontario securities law. The $934,890 disgorged shall be for allocation to or for the benefit of third parties, including investors who lost money as a result of purchasing U308 Inc. securities, in accordance with s. 3.4(2) of the Act;
  10. pursuant to section 127.1 of the Act, Robinson shall pay $50,000 to the Commission to pay the costs of the investigation of this matter; and
  11. pursuant to section 37(1) of the Act of the Act, Robinson shall be prohibited permanently from telephoning from within Ontario to any residence within or outside Ontario for the purpose of trading in any security or in any class of security.

DATED AT TORONTO this day of , 2010.