Securities Law & Instruments

IN THE MATTER OF

THE SECURITIES ACT,

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

AND

IN THE MATTER OF

ROBERT THOMISLAV ADZIJA, LARRYALLEN AYRES, DAVID ARTHUR BENDING, MARLENE BERRY, DOUGLAS CROSS,ALLAN JOSEPH DORSEY, ALLAN EIZENGA, GUY FANGEAT, RICHARD JULESFANGEAT, MICHAEL HERSEY, GEORGE EDWARD HOLMES, TODD MICHAELJOHNSTON, MICHAEL THOMAS PETER KENNELLY, JOHN DOUGLAS KIRBY,ERNEST KISS, ARTHUR KRICK, FRANK ALAN LATAM, BRIAN LAWRENCE,LUKE JOHN MCGEE, RON MASSCHAELE, JOHN NEWMAN, RANDALL NOVAK,NORMAND RIOPELLE, ROBERT LOUIS RIZZUTO AND MICHAEL VAUGHAN

 

ORDER

(Subsection 127(1) and section127.1)

WHEREAS on September 24, 1998, the OntarioSecurities Commission (the "Commission") issued aNotice of Hearing pursuant to section 127 of the SecuritiesAct, R.S.O. 1990, c. S.5, as amended (the "Act")respecting Robert Thomislav Adzija ("Adzija") andothers;

AND WHEREAS on September 24, 1998, theCommission made a Temporary Order as against Adzija and others,such Temporary Order which was extended by Commission Ordersdated October 9, 1998 and February 5, 1999 (the "TemporaryOrder");

AND WHEREAS Adzija entered into a SettlementAgreement dated August 6, 2002 (the "Settlement Agreement")in which he agreed to a proposed settlement of the proceedings,subject to the approval of the Commission;

AND UPON reviewing the Settlement Agreementand the Statement of Allegations of Staff of the Commissionand upon hearing submissions from Adzija and from Staff of theCommission;

AND WHEREAS the Commission is of theopinion that it is in the public interest to make this Orderpursuant to subsection 127(1) and section 127.1 of the Act;

IT IS ORDERED THAT:

1. the attached Settlement Agreement is approved;

2. pursuant to subsection 127(1), paragraph2, trading in any securities by Adzija cease for four yearscommencing on the date of this Order except that after oneyear Adzija may trade securities for the account of his registeredretirement savings plan (as defined in the Income Tax Act(Canada));

3. pursuant to subsection 127(1), paragraph6, Adzija is reprimanded; and

4. the Temporary Order as against Adzija nolonger has any force or effect.

August 8, 2002.

"Robert L. Shirriff"                    "H.Lorne Morphy"

IN THE MATTER OF

THE SECURITIES ACT

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

AND

IN THE MATTER OF

ROBERT THOMISLAV ADZIJA, LARRYALLEN AYRES, DAVID ARTHUR BENDING, MARLENE BERRY, DOUGLAS CROSS,ALLAN JOSEPH DORSEY, ALLAN EIZENGA, GUY FANGEAT, RICHARD JULESFANGEAT, MICHAEL HERSEY, GEORGE EDWARD HOLMES, TODD MICHAELJOHNSTON, MICHAEL THOMAS PETER KENNELLY, JOHN DOUGLAS KIRBY,ERNEST KISS, ARTHUR KRICK, FRANK ALAN LATAM, BRIAN LAWRENCE,LUKE JOHN MCGEE, RON MASSCHAELE, JOHN NEWMAN, RANDALL NOVAK,NORMAND RIOPELLE, ROBERT LOUIS RIZZUTO AND MICHAEL VAUGHAN

 

SETTLEMENT AGREEMENT BETWEEN

STAFF OF THE ONTARIO SECURITIESCOMMISSION

AND ROBERT THOMISLAV ADZIJA

I. INTRODUCTION

1. By Notice of Hearing dated September 24,1998 (the "Notice of Hearing"), the Ontario SecuritiesCommission (the "Commission") announced that itproposed to hold a hearing to consider, among other 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 interest for the Commission to makean order that the exemptions contained in Ontario securitieslaw do not apply to the respondent Robert Thomislav Adzija("Adzija") permanently or for such time as theCommission may direct; and

(b) such other orders as the Commissiondeems appropriate.

2. By Temporary Order dated September 24,1998, the Commission ordered that trading in securities byAdzija cease immediately except for trades in mutual fundsecurities and trades for his personal account (the "TemporaryOrder"). The Temporary Order was extended by CommissionOrders dated October 9, 1998 and February 4, 1999.

II. JOINT SETTLEMENT RECOMMENDATION

3. Staff of the Commission ("Staff")agrees to recommend settlement of the proceeding respectingAdzija initiated by the Notice of Hearing in accordance withthe terms and conditions set out below. Adzija consents tothe making of an order against him in the form attached asSchedule "A" based on the facts set out in PartIII of this Settlement Agreement.

III. STATEMENT OF FACTS

Acknowledgement

4. Solely for the purposes of this proceeding,and of any other proceeding commenced by a securities regulatoryagency, Staff and Adzija agree with the facts set out in paragraphs5 through 20 of this Settlement Agreement.

Facts

5. Saxton Investment Ltd. ("Saxton")was incorporated on January 13, 1995. The respondent AllanEizenga ("Eizenga") was Saxton's registered director.Saxton and Eizenga established numerous offering corporations,as listed below (the "Offering Corporations").

The Saxton Trading Corp.
The Saxton Export Corp.
The Saxton Export (II) Corp.
The Saxton Export (III) Corp.
The Saxton Export (IV) Corp.
The Saxton Export (V) Corp.
The Saxton Export (VI) Corp.
The Saxton Export (VII) Corp.
The Saxton Export (VIII) Corp.
The Saxton Export (IX) Corp.
The Saxton Export (X) Corp.
The Saxton Export (XI) Corp.
The Saxton Export (XII) Corp.
The Saxton Export (XIII) Corp.
The Saxton Export (XIV) Corp.
The Saxton Export (XV) Corp.
The Saxton Export (XVI) Corp.
The Saxton Export (XVII) Corp.
The Saxton Export (XVIII) Corp.
The Saxton Export (XIX) Corp.
The Saxton Export (XX) Corp.
The Saxton Export (XXI) Corp.
The Saxton Export (XXII) Corp.
The Saxton Export (XXIII) Corp.
The Saxton Export (XXIV) Corp.
The Saxton Export (XXV) Corp.
The Saxton Export (XXVI) Corp.
The Saxton Export (XXVII) Corp.
The Saxton Export (XXVIII) Corp.
The Saxton Export (XXIX) Corp.
The Saxton Export (XXX) Corp.
The Saxton Export (XXXI) Corp.
The Saxton Export (XXXII) Corp.
The Saxton Export (XXXIII) Corp.
The Saxton Export (XXXIV) Corp.
The Saxton Export (XXXV) Corp.
The Saxton Export (XXXVI) Corp.
The Saxton Export (XXXVII) Corp.
The Saxton Export (XXXVIII) Corp.

6. Saxton and the Offering Corporations representedto the public that they were investing in businesses in Cubaand other Caribbean companies.

7. On or about October 7, 1998, the Courtappointed KPMG Inc. ("KPMG") as the custodian ofSaxton's assets. In early 1999, KPMG reported that the OfferingCorporations had raised approximately $37 million from investors.All funds invested in the Offering Corporations had been transferredto Saxton. At that time, KPMG held the view that the valueof the Saxton assets, at its highest (as reported by relatedcompanies), was approximately $5.5 million.

8. Adzija became registered with the Commissionunder the Act to sell mutual fund securities and limited marketproducts in September 1996. Adzija has not been registeredsince September, 2001.

9. Between March 1996 and July 1998, Adzijasold to Ontario investors securities of one or more of theOffering Corporations (the "Saxton Securities").Adzija sold the Saxton Securities to approximately 60 Ontarioinvestors for a total amount sold of approximately $2,963,790.Many of these investors were members of a small communityin the St. Thomas area.

10. All of the Offering Corporations wereincorporated pursuant to the laws of Ontario. Adzija's salesof the Saxton Securities constituted trades in securitiesof an issuer that had not been previously issued.

11. None of the Offering Corporations fileda prospectus with the Commission. By selling the Saxton Securitiesto his clients, Adzija traded in securities, which tradeswere distributions, without a prospectus being filed or receiptedby the Commission and with no exemption from the prospectusrequirements of Ontario securities law being available.

12. Adzija failed to provide his clients withaccess to substantially the same information concerning theSaxton Securities that a prospectus filed under the Act wouldprovide. Although clients who purchased Saxton's "EquityDividend Account" product were provided with an OfferingMemorandum, such Memorandum provided little information aboutSaxton other than the geographic location in which the companyconducted business. Adzija did not supplement this informationfor clients. The only documentation provided by Adzija toclients purchasing Saxton's "GIC" or "FixedDividend Account" products was vague promotional materialprepared by Saxton.

13. With respect to certain sales of the Saxtonsecurities, Adzija traded in securities without being registeredwith the Commission and with no exemption from the registrationrequirements being available to him.

14. Adzija failed to adequately assess thesuitability of his clients' investments in the Saxton Securities.He did not have a sufficient understanding of the Saxton productsto effectively evaluate the risk to his clients in purchasingthe Saxton Securities.

15. Adzija failed to inform his sponsoringfirm that he was selling the Saxton Securities. Adzija informsStaff that at no time did a compliance officer representinghis sponsoring firm visit him, review his files or discussany of the products he sold. Further, in or about the fallof 1997, the respondent Rick Fangeat ("Fangeat")informed Adzija (who shared the same sponsor) that they wereauthorized to sell the Saxton Securities.

16. Adzija received commissions of approximately$148,000 on the sales described in paragraph 9 above.

17. Adzija's conduct in selling the SaxtonSecurities was contrary to Ontario securities law and thepublic interest.

18. Adzija informs Staff that, since he hadlittle experience in the securities industry, he relied heavilyon Fangeat. Fangeat was Adzija's Branch Manager and "mentor".Fangeat had over 20 years' experience in the investment andinsurance industries. Fangeat endorsed and recommended theSaxton Securities to Adzija as suitable for a conservativeinvestor. Adzija informs Staff that he was not aware until1997 that Fangeat held a position with Saxton.

19. Adzija invested $160,000 in the SaxtonSecurities. Adzija informs Staff that he sold his parentsSaxton Securities worth approximately $265,000. Adzija andhis parents invested after he had sold the Saxton Securitiesto other clients.

20. Adzija co-operated with the Commission'sinvestigation respecting the sale of Saxton Securities.

IV. TERMS OF SETTLEMENT

21. Adzija agrees to the following terms ofsettlement:

(a) the making of an order:

(i) approving this settlement;

(ii) that trading in any securities byAdzija cease for 4 years with the exception that, afterone year from the date of the approval of this settlement,Adzija is permitted to trade securities for the accountof his registered retirement savings plan (as definedin the Income Tax Act (Canada));

(iii) reprimanding Adzija; and

(iv) that the Temporary Order no longerhas any force or effect;

(b) Adzija will undertake to the Commissionthat:

(i) he will not apply to the Commissionfor registration for 4 years; and

(ii) within one year prior to applyingto the Commission for registration Adzija will successfullycomplete the Canadian Securities Course and Conduct andPractices Handbook Course.

V. STAFF COMMITMENT

22. If this settlement is approved by theCommission, Staff will not initiate any other proceeding underthe Act against Adzija in relation to the facts set out inPart III of this Settlement Agreement.

VI. APPROVAL OF SETTLEMENT

23. Approval of the settlement set out inthis Settlement Agreement shall be sought at the public hearingof the Commission scheduled for August 8, 2002 , or such otherdate as may be agreed to by Staff and Adzija (the "SettlementHearing"). Adzija will attend in person at the SettlementHearing.

24. Counsel for Staff or Adzija may referto any part, or all, of this Settlement Agreement at the SettlementHearing. Staff and Adzija agree that this Settlement Agreementwill constitute the entirety of the evidence to be submittedat the Settlement Hearing.

25. If this settlement is approved by theCommission, Adzija agrees to waive his rights to a full hearing,judicial review or appeal of the matter under the Act.

26. Staff and Adzija agree that if this settlementis approved by the Commission, they will not make any publicstatement inconsistent with this Settlement Agreement.

27. If, for any reason whatsoever, this settlementis not approved by the Commission, or an order in the formattached as Schedule "A" is not made by the Commission:

(a) this Settlement Agreement and its terms,including all discussions and negotiations between Staffand Adzija leading up to its presentation at the SettlementHearing, shall be without prejudice to Staff and Adzija;

(b) Staff and Adzija shall be entitled toall available proceedings, remedies and challenges, includingproceeding to a hearing of the allegations in the Noticeof Hearing and Statement of Allegations of Staff, unaffectedby this Agreement or the settlement discussions/negotiations;

(c) the terms of this Settlement Agreementwill not be referred to in any subsequent proceeding, ordisclosed to any person, except with the written consentof Staff and Adzija or as may be required by law; and

(d) Adzija agrees that he will not, in anyproceeding, refer to or rely upon this Settlement Agreement,the settlement discussions/negotiations or the process ofapproval of this Settlement Agreement as the basis for anyattack on the Commission's jurisdiction, alleged bias orappearance of bias, alleged unfairness or any other remediesor challenges that may otherwise be available.

VII. DISCLOSURE OF SETTLEMENT AGREEMENT

28. Except as permitted under paragraph 24above, this Settlement Agreement and its terms will be treatedas confidential by Staff and Adzija until approved by theCommission, and forever, if for any reason whatsoever thissettlement is not approved by the Commission, except withthe consent of Staff and Adzija, or as may be required bylaw.

29. Any obligations of confidentiality shallterminate upon approval of this settlement by the Commission.

VIII. EXECUTION OF SETTLEMENT AGREEMENT

30. This Settlement Agreement may be signedin one or more counterparts which together shall constitutea binding agreement.

31. A facsimile copy of any signature shallbe as effective as an original signature.

August 6, 2002.

"Robert Thomislav Adzija"
Robert Thomislav Adzija

August 6, 2002.

"Michael Watson"
Staff of the Ontario Securities Commission
Per: Michael Watson