IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER
OF MICHAEL OMER BOURGON
1. By Notice of Hearing dated January 15, 2001 (the "Notice of Hearing"), the Ontario Securities Commission (the "Commission") announced that it proposed to hold a hearing to consider whether, pursuant to sections 127 and 127.1 of the Securities Act, R.S.O. 1990, Chap. S.5, as amended (the "Act"), it is in the public interest for the Commission to make an order that:
(a) the registration of the Respondent, Michael Omer Bourgon ("Bourgon") be suspended or restricted permanently or for such time as the Commission may direct or be terminated, or that terms and conditions be imposed on Bourgon's registration;
(b) Bourgon cease trading in securities permanently or for such period as the Commission may direct;
(c) Bourgon be prohibited from becoming or acting as a director or officer of any issuer;
(d) Bourgon be reprimanded;
(e) Bourgon pay the costs of the Commission's investigation;
(f) Bourgon pay the Commission's costs of this hearing; and
(g) contains such other terms and conditions as the Commission deems appropriate.
II. JOINT SETTLEMENT RECOMMENDATION
2. Staff of the Commission ("Staff") agree to recommend settlement of the proceeding initiated in respect of Bourgon by the Notice of Hearing in accordance with the terms and conditions set out below. Bourgon consents to the making of an order against him in the form attached as Schedule "A" on the basis of the facts set out below.
III. STATEMENT OF FACTS
3. For the purposes of this proceeding, and any other proceeding commenced by a securities regulatory agency in Canada, Bourgon agrees with the facts set out in Part III of this Settlement Agreement.
4. Between August 1987 and February 4, 1999 (the "material time"), Bourgon was registered with the Commission to sell mutual funds and limited market products, which he did from his offices located in Milton, Ontario under a sponsorship and agency agreement with The Investment Centre Financial Corporation ("ICFC"). ICFC is based in London, Ontario and is registered with the Commission as a mutual fund and limited market dealer.
5. During the material time, Bourgon carried on business through two successive companies. Between August 1987 and September 1998, Bourgon and another registrant, Helena Donaldson, operated Donaldson Bourgon Financial Services ("DBFS"). Effective October 1998, Bourgon and Donaldson parted ways. They agreed to a corporate reorganization of DBFS which effectively split the business into two parts so that each of Bourgon and Donaldson could continue separately under different business names. Bourgon's new company was named Bourgon Financial Services ("BFS").
6. Bourgon was the designated branch manager of both DBFS and BFS and in that capacity reported directly to the President and the Executive Vice President of ICFC. Bourgon was also licensed by other regulators to sell other types of financial products, such as life and disability insurance. Bourgon provided all of these services through first, DBFS, and then later, BFS.
7. In January 1999, as a result of numerous complaints received from clients of Bourgon, ICFC retained a forensic accounting firm to investigate Bourgon's business activities.
8. The ICFC investigation revealed numerous serious improprieties relating to Bourgon's dealings with his clients during the material time, including misappropriation of client funds. Effective February 4, 1999, ICFC terminated Bourgon as a sales agent and withdrew its sponsorship of his registration.
9. The ICFC investigation revealed that Bourgon:
(a) caused redemptions to occur in client accounts without the knowledge or consent of such clients. In some cases, these unauthorized redemptions created unanticipated tax liabilities for clients;
(b) carried out unauthorized transactions in client accounts, on occasion using blank Authorization Forms signed by his clients ostensibly for "emergency purposes" to do so;
(c) concealed or misrepresented the purposes for which he had clients provide him with funds from time to time;
(d) concealed or misrepresented the status of his clients' accounts;
(e) concealed or withheld cheques and/or funds payable to his clients' accounts; and
(f) caused funds from his clients' accounts to be transferred to accounts controlled by him or by non-arm's length third parties, including a numbered company controlled by him, for his use.
10. The Halton Regional Police conducted its own investigation of Bourgon. On February 28, 2000, Bourgon was charged with twenty-five counts under the Criminal Code relating to his dealings with his clients as described above. The twenty-five counts consisted of twelve counts of theft over $5,000.00, twelve counts of fraud over $5,000.00, and one count of uttering a forged document.
11. On September 18, 2000, Bourgon appeared in Ontario Superior Court (Criminal Division) in Milton and pleaded guilty to the twelve counts of fraud over $5,000.00. The twelve counts of theft over $5000 were withdrawn by the Crown on the basis that those charges arose out of the same facts giving rise to the fraud convictions. Bourgon advises that he later pleaded guilty to the single count of uttering a forged document (a client's tax return) as part of his overall conviction and sentence.
12. The facts on which Bourgon's plea of guilty to the twelve charges of fraud over $5000 was accepted included that eleven different clients of Bourgon were defrauded of losses which totalled in excess of $750,000 and that, in numerous instances, Bourgon diverted client funds to a private company owned by him.
13. On March 27, 2001, Bourgon appeared in Ontario Superior Court (Criminal Division) in Milton and was sentenced to a custodial term of two years less a day, placed on two years probation and was made the subject of a restitution order in the amount of $488,000. Bourgon started serving his custodial sentence immediately and was released six months later on September 28, 2001 under a supervised release program.
14. Based on their respective investigations into of this matter, neither the police nor Staff felt that proceedings against Donaldson were warranted and none have been commenced.
IV. REPRESENTATIONS OF THE RESPONDENT
15. Bourgon hereby acknowledges that he has reviewed the terms of this proposed Settlement Agreement with his counsel.
16. Bourgon states that he is no longer in business as a salesman of mutual funds or limited market products or as financial adviser or planner and that he does not intend to be engaged in any way in the trading of securities in Ontario.
17. Bourgon advises Staff that he is attempting to satisfy the restitution order made against him but confirms that no payments have been made by him to date. Bourgon advises Staff that partial restitution has been made to some of his clients through policies of insurance applicable to their losses.
V. CONDUCT CONTRARY TO THE PUBLIC INTEREST
18 Bourgon agrees that his conduct as described above in Part III contravened Ontario securities law and was contrary to the public interest.
VI. TERMS OF SETTLEMENT
19. Bourgon agrees to the following terms of settlement:
(a) pursuant to clause 1 of subsection 127(1) of the Act, Bourgon's registration will be terminated permanently;
(b) pursuant to clause 2 of subsection 127(1) of the Act, Bourgon shall permanently cease trading in all securities, whether for his account or for the account of, or on behalf of, any other person or party, effective from the date that this Settlement Agreement is approved by the Commission;
(c) pursuant to clause 7 of subsection 127(1) of the Act, Bourgon shall resign any positions that he holds as a director or officer of an issuer, effective from the date that this Settlement Agreement is approved by the Commission;
(d) pursuant to clause 8 of subsection 127(1) of the Act, Bourgon is permanently prohibited from becoming or acting as a director or officer of any issuer, effective from the date that this Settlement Agreement is approved by the Commission; and
(e) pursuant to section 127.1 of the Act, Bourgon shall be subject to an order to pay $5,000 to the Commission in satisfaction of the Commission's costs of its investigation and these proceedings;
VII. STAFF COMMITMENT
20. If this settlement is approved by the Commission, Staff will not initiate any complaint to the Commission or request the Commission to hold a hearing or issue any other order in respect of any conduct or alleged conduct of Bourgon in relation to the facts set out in Part III of this agreement.
21. If this settlement is approved by the Commission, Staff will not initiate any other proceeding against Bourgon in relation to the facts set out in Part III of this agreement.
VIII. PROCEDURE FOR APPROVAL OF SETTLEMENT
22. Approval of the settlement set out in this agreement shall be sought at the public hearing of the Commission scheduled to commence at 10 am on Monday, November 26, 2001 at the offices of the Commission, in accordance with the procedures described in this agreement.
23. Staff and Bourgon agree that this agreement will constitute the entirety of the evidence to be referred to at the hearing to consider this settlement, subject to any further evidence which the parties may, on consent, agree to adduce, whether in the course of responding to questions from the tribunal or for any other purpose. If this settlement is approved, Staff and Bourgon agree that this settlement agreement will constitute the entirety of the evidence against Bourgon in this proceeding. Bourgon agrees to waive his rights under the Act to a full hearing and appeal of this matter.
24. Staff and Bourgon agree that if this settlement is approved by the Commission, neither Staff nor Bourgon will make any public statement inconsistent with this agreement.
25. If, at the conclusion of the settlement hearing, and for any reason whatsoever, this settlement is not approved by the Commission, or an order in the form attached as Schedule "A" is not made by the Commission:
(a) each of Staff and Bourgon will be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing of the allegations in the Notice of Hearing and Statement of Allegations, unaffected by this agreement or the settlement negotiations;
(b) the terms of this agreement will not be referred to in any subsequent proceeding, or disclosed to any person, except with the written consent of Staff and Bourgon or as may be required by law; and
(c) Bourgon agrees that he will not, in any proceeding, refer to or rely upon this agreement or the negotiation of this agreement or the process of approval of this agreement as the basis for any attack on the Commission's jurisdiction, alleged bias, appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.
IX. DISCLOSURE OF AGREEMENT
26. Counsel for Staff or for Bourgon may refer to any part or all of this settlement agreement in the course of the hearing convened to consider this settlement. Otherwise, this settlement agreement and its terms will be treated as confidential by all parties to the agreement until approved by the Commission, and forever if, for any reason whatsoever, this settlement is not approved by the Commission, except with the written consent of Staff and Bourgon or as may be required by law.
27. Any obligations of confidentiality concerning the terms of this settlement shall terminate upon approval of this settlement by the Commission.
X. EXECUTION OF AGREEMENT
28. This agreement may be signed in one or more counterparts which together shall constitute a binding agreement.
DATED this 23rd day of November, 2001.
MICHAEL OMER BOURGON
ONTARIO SECURITIES COMMISSION
Michael Watson, Director of Enforcement
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
MICHAEL OMER BOURGON
WHEREAS on January 15, 2001, the Ontario Securities Commission (the "Commission") issued a notice of hearing pursuant to subsection 127(1) of the Securities Act, R.S.O. 1990, Chap. S.5, as amended (the "Act"), in respect of Michael Omer Bourgon ("Bourgon");
AND WHEREAS Bourgon entered into a settlement agreement, dated November 23, 2001 (the "Settlement Agreement") in which he agreed to a proposed settlement of the proceeding, subject to the approval of the Commission;
AND UPON reviewing the Settlement Agreement and the Statement of Allegations of Staff of the Commission, and upon hearing submissions by counsel for Bourgon and for 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, dated November 23, 2001, a copy of which is attached to this Order, is approved;
(2) pursuant to clause 1 of subsection 127(1) of the Act, Bourgon's registration is terminated permanently;
(3) pursuant to clause 2 of subsection 127(1) of the Act, Bourgon shall permanently cease trading in all securities for his own account or for the account of, or on behalf of, any other person or party, effective as of the date of this Order;
(4) pursuant to clause 7 of subsection 127(1) of the Act, Bourgon is ordered to resign any positions which he holds as a director or officer of any issuer, effective as of the date of this Order;
(5) pursuant to clause 8 of subsection 127(1) of the Act, Bourgon is permanently prohibited from becoming or acting as a director or officer of any issuer, effective as of the date of this Order.
(6) pursuant to subsection 127.1(1) and (2) of the Act, Bourgon shall pay $5,000 in satisfaction of the Commission's costs of its investigation and this proceeding.
DATED at Toronto this 26th day of November, 2001.