Securities Law & Instruments

INTHE MATTER OF

THESECURITIES ACT,

R.S.O.1990, c. S.5, AS AMENDED

AND

INTHE MATTER OF

ROBERTTHOMISLAV ADZIJA, LARRY ALLEN AYRES, DAVID ARTHUR

BENDING,MARLENE BERRY, DOUGLAS CROSS, ALLAN JOSEPH DORSEY,

ALLANEIZENGA, GUY FANGEAT, RICHARD JULES FANGEAT, MICHAEL

HERSEY,GEORGE EDWARD HOLMES, TODD MICHAEL JOHNSTON, MICHAEL

THOMASPETER KENNELLY, JOHN DOUGLAS KIRBY, ERNEST KISS,

ARTHURKRICK, FRANK ALAN LATAM, BRIAN LAWRENCE, LUKE JOHN

MCGEE,RON MASSCHAELE, JOHN NEWMAN, RANDALL NOVAK, NORMAND

RIOPELLE,ROBERT LOUIS RIZZUTO AND MICHAEL VAUGHAN

ORDER

(Subsection127(1))

WHEREASon September 24, 1998, the Ontario Securities Commission (the"Commission") issued a Notice of Hearing pursuant to section127 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the"Act") respecting Michael Vaughan ("Vaughan") and others;

ANDWHEREAS on September 24, 1998, the Commission madea Temporary Order as against Vaughan and others, such TemporaryOrder which was extended by Commission Orders dated October9, 1998 and February 5, 1999 (the "Temporary Order");

ANDWHEREAS Vaughan entered into a Settlement Agreementin which he agreed to a proposed settlement of the proceedings,subject to the approval of the Commission;

ANDUPON reviewing the Settlement Agreement and the Statementof Allegations of Staff of the Commission and upon hearing submissionsfrom Vaughan and from Staff of the Commission;

ANDWHEREAS the Commission is of the opinion that it isin the public interest to make this Order pursuant to subsection127(1) of the Act;

ITIS ORDERED THAT:

1.the attached Settlement Agreement executed February 28 and March1, 2002 is approved;

2.pursuant to subsection 127(1), paragraph 2, trading in any securitiesby Vaughan cease for 90 days commencing on the date of thisOrder;

3.pursuant to subsection 127(1), paragraph 6, Vaughan is reprimanded;and

4.the Temporary Order as against Vaughan no longer has any forceor effect.

March4, 2002.

"PaulMoore"   "R. Stephen Paddon"   "K.D. Adams"

 


INTHE MATTER OF

THESECURITIES ACT,

R.S.O.1990, c. S.5, AS AMENDED

AND

INTHE MATTER OF

ROBERTTHOMISLAV ADZIJA, LARRY ALLEN AYRES, DAVID ARTHUR

BENDING,MARLENE BERRY, DOUGLAS CROSS, ALLAN JOSEPH DORSEY,

ALLANEIZENGA, GUY FANGEAT, RICHARD JULES FANGEAT, MICHAEL

HERSEY,GEORGE EDWARD HOLMES, TODD MICHAEL JOHNSTON, MICHAEL

THOMASPETER KENNELLY, JOHN DOUGLAS KIRBY, ERNEST KISS,

ARTHURKRICK, FRANK ALAN LATAM, BRIAN LAWRENCE, LUKE JOHN

MCGEE,RON MASSCHAELE, JOHN NEWMAN, RANDALL NOVAK, NORMAND

RIOPELLE,ROBERT LOUIS RIZZUTO AND MICHAEL VAUGHAN

SETTLEMENTAGREEMENT BETWEEN

STAFFOF THE ONTARIO SECURITIES COMMISSION

ANDMICHAEL VAUGHAN


I.INTRODUCTION

1.By Notice of Hearing dated September 24, 1998 (the "Notice ofHearing"), the Ontario Securities Commission (the "Commission")announced that it proposed to hold a hearing to consider, amongother things:

(a)whether, pursuant to subsection 127(1) of the Securities Act,R.S.O. 1990, c. S.5 (the "Act"), it is in the public interestfor the Commission to make an order that the exemptions containedin Ontario securities law do not apply to the respondent MichaelVaughan ("Vaughan") permanently or for such time as the Commissionmay direct; and

(b)such other orders as the Commission deems appropriate.

II.JOINT SETTLEMENT RECOMMENDATION

2.Staff of the Commission ("Staff") agrees to recommend settlementof the proceeding respecting Vaughan initiated by the Notice ofHearing in accordance with the terms and conditions set out below.Vaughan consents to the making of an order against him in theform attached as Schedule "A" based on the facts set out in PartIII of this Settlement Agreement.

III.STATEMENT OF FACTS

Acknowledgement

3.Solely for the purposes of this proceeding, and of any other proceedingcommenced by a securities regulatory agency, Staff and Vaughanagree with the facts set out in paragraphs 4 through 14 of thisSettlement Agreement.

Facts

4.Saxton Investment Ltd. ("Saxton") was incorporated on January13, 1995. Alan Eizenga ("Eizenga") was Saxton's registered director.Saxton and Eizenga established numerous offering corporations,as listed below (the "Offering Corporations").

TheSaxton Trading Corp.

TheSaxton Export Corp.

TheSaxton Export (II) Corp.

TheSaxton Export (III) Corp.

TheSaxton Export (IV) Corp.

TheSaxton Export (V) Corp.

TheSaxton Export (VI) Corp.

TheSaxton Export (VII) Corp.

TheSaxton Export (VIII) Corp.

TheSaxton Export (IX) Corp.

TheSaxton Export (X) Corp.

TheSaxton Export (XI) Corp.

TheSaxton Export (XII) Corp.

TheSaxton Export (XIII) Corp.

TheSaxton Export (XIV) Corp.

TheSaxton Export (XV) Corp.

TheSaxton Export (XVI) Corp.

TheSaxton Export (XVII) Corp.

TheSaxton Export (XVIII) Corp.

TheSaxton Export (XIX) Corp.

TheSaxton Export (XX) Corp.

TheSaxton Export (XXI) Corp.

TheSaxton Export (XXII) Corp.

TheSaxton Export (XXIII) Corp.

TheSaxton Export (XXIV) Corp.

TheSaxton Export (XXV) Corp.

TheSaxton Export (XXVI) Corp.

The Saxton Export (XXVII) Corp.

TheSaxton Export (XXVIII) Corp.

TheSaxton Export (XXIX) Corp.

TheSaxton Export (XXX) Corp.

TheSaxton Export (XXXI) Corp.

TheSaxton Export (XXXII) Corp.

TheSaxton Export (XXXIII) Corp.

TheSaxton Export (XXXIV) Corp.

TheSaxton Export (XXXV) Corp.

TheSaxton Export (XXXVI) Corp.

TheSaxton Export (XXXVII) Corp.

TheSaxton Export (XXXVIII) Corp.

5. Saxtonand the Offering Corporations represented to the public that theywere investing in businesses in Cuba and other Caribbean companies.

6.On or about October 7, 1998, the Court appointed KPMG Inc. ("KPMG")as the custodian of Saxton's assets. In early 1999, KPMG reportedthat the Offering Corporations had raised approximately $37 millionfrom investors. All funds invested in the Offering Corporationshad been transferred to Saxton. At that time, KPMG held the viewthat the value of the Saxton assets, at its highest (as reportedby related companies), was approximately $5.5 million.

7.During the material time, Vaughan was a life insurance agent.He has never been registered with the Commission under the Actto trade in securities.

8.Between 1996 and 1998, Vaughan sold to Ontario investors securitiesof one or more of the Offering Corporations (the "Saxton Securities").Vaughan sold the Saxton Securities to two Ontario investors fora total amount sold of approximately $35,000.

9.All of the Offering Corporations were incorporated pursuant tothe laws of Ontario. Vaughan's sales of the Saxton Securitiesconstituted trades in securities of an issuer that had not beenpreviously issued.

10.None of the Offering Corporations filed a prospectus with theCommission. By selling the Saxton Securities to his clients, Vaughantraded in securities, which trades were distributions, withouta prospectus being filed or receipted by the Commission and withno exemption from the prospectus requirements of Ontario securitieslaw being available.

11.Further, by selling the Saxton Securities to his clients, Vaughantraded in securities without being registered with the Commissionand with no exemption from the registration requirements beingavailable to him.

12.Vaughan received commissions of approximately $855 on the salesdescribed in paragraph 8 above.

13.Vaughan co-operated with Staff's investigation of this matter.

14.Vaughan's conduct in selling the Saxton Securities was contraryto the public interest.

IV.TERMS OF SETTLEMENT

15.Vaughan agrees to the following terms of settlement:

(a)the making of an order:

(i)approving this settlement;

(ii)that trading in any securities by Vaughan cease for 90 days;

(iii)reprimanding Vaughan; and

(iv)that the Temporary Order of the Commission dated September 24,1998 as against Vaughan no longer has any force or effect.

V.STAFF COMMITMENT

16.If this settlement is approved by the Commission, Staff will notinitiate any other proceeding under the Act against Vaughan inrelation to the facts set out in Part III of this Settlement Agreement.

VI.APPROVAL OF SETTLEMENT

17.Approval of the settlement set out in this Settlement Agreementshall be sought at the public hearing of the Commission scheduledfor March 4, 2002, or such other date as may be agreed to by Staffand Vaughan (the "Settlement Hearing").

18.Counsel for Staff or Vaughan may refer to any part, or all, ofthis Settlement Agreement at the Settlement Hearing. Staff andVaughan agree that this Settlement Agreement will constitute theentirety of the evidence to be submitted at the Settlement Hearing.

19.If this settlement is approved by the Commission, Vaughan agreesto waive his rights to a full hearing, judicial review or appealof the matter under the Act.

20.Staff and Vaughan agree that if this settlement is approved bythe Commission, they will not make any public statement inconsistentwith this Settlement Agreement.

21.If, for any reason whatsoever, this settlement is not approvedby the Commission, or an order in the form attached as Schedule"A" is not made by the Commission:

(a)this Settlement Agreement and its terms, including all discussionsand negotiations between Staff and Vaughan leading up to its presentationat the Settlement Hearing, shall be without prejudice to Staffand Vaughan;

(b)Staff and Vaughan shall be entitled to all available proceedings,remedies and challenges, including proceeding to a hearing ofthe allegations in the Notice of Hearing and Statement of Allegationsof Staff, unaffected by this Agreement or the settlement discussions/negotiations;

(c)the terms of this Settlement Agreement will not be referred toin any subsequent proceeding, or disclosed to any person, exceptwith the written consent of Staff and Vaughan or as may be requiredby law; and

(d)Vaughan agrees that he will not, in any proceeding, refer to orrely upon this Settlement Agreement, the settlement discussions/negotiationsor the process of approval of this Settlement Agreement as thebasis for any attack on the Commission's jurisdiction, allegedbias or appearance of bias, alleged unfairness or any other remediesor challenges that may otherwise be available.

VII.DISCLOSURE OF SETTLEMENT AGREEMENT

22.Except as permitted under paragraph 18 above, this SettlementAgreement and its terms will be treated as confidential by Staffand Vaughan until approved by the Commission, and forever, iffor any reason whatsoever this settlement is not approved by theCommission, except with the consent of Staff and Vaughan, or asmay be required by law.

23.Any obligations of confidentiality shall terminate upon approvalof this settlement by the Commission.

VIII.EXECUTION OF SETTLEMENT AGREEMENT

24.This Settlement Agreement may be signed in one or more counterpartswhich together shall constitute a binding agreement.

25.A facsimile copy of any signature shall be as effective as anoriginal signature.

February28, 2002.

"Witness""Michael Vaughan"

March12, 2002.

STAFFOF THE ONTARIO

SECURITIES COMMISSION

"MichaelWatson"

 


Schedule"A"


INTHE MATTER OF

THESECURITIES ACT,

R.S.O.1990, c. S.5, AS AMENDED

AND

INTHE MATTER OF

ROBERTTHOMISLAV ADZIJA, LARRY ALLEN AYRES, DAVID ARTHUR

BENDING,MARLENE BERRY, DOUGLAS CROSS, ALLAN JOSEPH DORSEY,

ALLANEIZENGA, GUY FANGEAT, RICHARD JULES FANGEAT, MICHAEL

HERSEY,GEORGE EDWARD HOLMES, TODD MICHAEL JOHNSTON, MICHAEL

THOMASPETER KENNELLY, JOHN DOUGLAS KIRBY, ERNEST KISS,

ARTHURKRICK, FRANK ALAN LATAM, BRIAN LAWRENCE, LUKE JOHN

MCGEE,RON MASSCHAELE, JOHN NEWMAN, RANDALL NOVAK, NORMAND

RIOPELLE,ROBERT LOUIS RIZZUTO AND MICHAEL VAUGHAN

ORDER

(Subsection127(1))

WHEREASon September 24, 1998, the Ontario Securities Commission (the"Commission") issued a Notice of Hearing pursuant to section127 of the Securities Act, R.S.O. 1990, c. S.5, as amended (the"Act") respecting Michael Vaughan ("Vaughan") and others;

ANDWHEREAS on September 24, 1998, the Commission madea Temporary Order as against Vaughan and others, such TemporaryOrder which was extended by Commission Orders dated October9, 1998 and February 5, 1999 (the "Temporary Order");

ANDWHEREAS Vaughan entered into a Settlement Agreementin which he agreed to a proposed settlement of the proceedings,subject to the approval of the Commission;

ANDUPON reviewing the Settlement Agreement and the Statementof Allegations of Staff of the Commission and upon hearing submissionsfrom Vaughan and from Staff of the Commission;

ANDWHEREAS the Commission is of the opinion that it isin the public interest to make this Order pursuant to subsection127(1) of the Act;

ITIS ORDERED THAT:

1.the attached Settlement Agreement executed February 28 and March1, 2002 is approved;

2. pursuantto subsection 127(1), paragraph 2, trading in any securities byVaughan cease for 90 days commencing on the date of this Order;

3.pursuant to subsection 127(1), paragraph 6, Vaughan is reprimanded;and

4.the Temporary Order as against Vaughan no longer has any forceor effect.

DATEDat Toronto this day of , 2002



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