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 John Douglas Kirby ("Kirby") and others;

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

AND WHEREAS Kirby entered into a SettlementAgreement executed September 30, 2002 and October 4, 2002 (the"Settlement Agreement") in which he agreed to a proposedsettlement of the proceedings, subject to the approval of theCommission;

AND UPON reviewing the Settlement Agreementand the Statement of Allegations of Staff of the Commissionand upon hearing submissions from Kirby 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 Kirby cease for twelve yearscommencing on the date of this Order except that, after threeyears, Kirby may trade securities for his own account andthe account of his registered retirement savings plan (asdefined in the Income Tax Act (Canada));

3. pursuant to subsection 127(1), paragraph8, Kirby is prohibited from becoming or acting as a directoror officer of any issuer for twelve years commencing on thedate of this Order;

4. pursuant to subsection 127(1), paragraph6, Kirby is reprimanded; and

5. the Temporary Order as against Kirby nolonger has any force or effect.

October 9, 2002.

"H. Lorne Morphy"                    "RobertL. Shirriff"

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 JOHN DOUGLAS KIRBY

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 John Douglas Kirby ("Kirby")permanently or for such time as the Commission 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 byKirby cease immediately except for trades in mutual fund securitiesand trades for his personal account (the "Temporary Order").The Temporary Order was extended by Commission Orders datedOctober 9, 1998 and February 4, 1999.

II. JOINT SETTLEMENT RECOMMENDATION

3. Staff of the Commission ("Staff")agrees to recommend settlement of the proceeding respectingKirby initiated by the Notice of Hearing in accordance withthe terms and conditions set out below. Kirby 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 Kirby 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. Kirby became registered with the Commissionin October 1986. During the material time, Kirby was registeredto sell mutual fund securities between January 1995 and May1, 1997. Kirby could sell mutual fund securities and limitedmarket products between May 15, 1997 and the end of 1998.Kirby has not been registered with the Commission since January1, 2000.

9. Between 1996 and 1998, Kirby sold to Ontarioinvestors securities of one or more of the Offering Corporations(the "Saxton Securities"). Kirby sold the SaxtonSecurities to approximately 140 Ontario investors for a totalamount sold of approximately $7,000,000.

10. The Offering Corporations were incorporatedpursuant to the laws of Ontario. Kirby's sales of the SaxtonSecurities constituted trades in securities of an issuer thathad not been previously issued.

11. None of the Offering Corporations fileda prospectus with the Commission. By selling the Saxton Securitiesto his clients, Kirby traded in securities, which trades weredistributions, without a prospectus being filed or receiptedby the Commission and with no available exemption from theprospectus requirements of Ontario securities law.

12. Kirby failed to provide his clients withaccess to substantially the same information concerning theSaxton Securities that a prospectus filed under the Act wouldprovide. Kirby never reviewed an Offering Memorandum or financialstatements respecting the Saxton Securities. None of Kirby'sclients received an Offering Memorandum prior to purchasingthe Saxton Securities. The only documentation provided toclients by Kirby was vague promotional material prepared bySaxton.

13. Kirby misrepresented to his clients thenature and quality of the Saxton Securities. Kirby marketedthe Saxton Securities to his clients as a GIC-like product.

14. Kirby engaged in an advertising campaignto sell the Saxton Securities. Kirby advertised the SaxtonSecurities in Maturity magazine. This magazine is directedat seniors. Kirby's advertisement introduced "the perfectalternative to Canada Savings Bonds and Bank GIC's" andoffered a "10 ¼% FIXED DIVIDEND ACCOUNT for athree (3) year term". The advertisement provided a tollfree number by which prospective clients could contact Kirby.Approximately 60 potential investors contacted Kirby throughthe advertised toll free number.

15. Kirby failed to adequately assess thesuitability of his clients' investments in the Saxton Securities.Certain elderly clients transferred existing RRIF's or redeemedmutual funds to purchase the Saxton Securities.

16. Kirby failed to inform his sponsoringfirm that he was selling the Saxton Securities.

17. Kirby received commissions of approximately$350,000 on the sales described in paragraph 9 above.

18. Kirby failed to diligently respond toconcerns from Staff of the Commission that he was sellingexempt securities without being registered to do so.

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

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

IV. TERMS OF SETTLEMENT

21. Kirby agrees to the following terms ofsettlement:

(a) the making of an order:

(i) approving this settlement;

(ii) that trading in any securities byKirby cease for twelve years with the exception that,after three years from the date of the approval of thissettlement, Kirby is permitted to trade securities forhis own account and the account of his registered retirementsavings plan (as defined in the Income Tax Act (Canada));

(iii) that Kirby is prohibited from becomingor acting as a director or officer of any issuer for twelveyears;

(iv) reprimanding Kirby;

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

(b) Kirby will undertake to the Commissionthat he will not apply to the Commission for registrationfor twelve years; and

(c) within one year prior to applying tothe Commission for registration, Kirby 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 Kirby 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 October 9, 2002, or such otherdate as may be agreed to by Staff and Kirby (the "SettlementHearing"). Kirby will attend in person at the SettlementHearing.

24. Counsel for Staff or Kirby may refer toany part, or all, of this Settlement Agreement at the SettlementHearing. Staff and Kirby 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, Kirby agrees to waive his rights to a full hearing,judicial review or appeal of the matter under the Act.

26. Staff and Kirby 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 Kirby leading up to its presentation at the SettlementHearing, shall be without prejudice to Staff and Kirby;

(b) Staff and Kirby 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 Kirby or as may be required by law; and

(d) Kirby 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 Kirby until approved by the Commission,and forever, if for any reason whatsoever this settlementis not approved by the Commission, except with the consentof Staff and Kirby, or as may be required by law.

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.

September 30, 2002.

"John Douglas Kirby"
John Douglas Kirby

October 4, 2002.

"Michael Watson"
Staff of the Ontario Securities Commission
(Per) Michael Watson

 

SCHEDULE "A"

 

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 John Douglas Kirby ("Kirby") and others;

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

AND WHEREAS Kirby entered into a SettlementAgreement dated • (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 Kirby 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 Kirby cease for twelve yearscommencing on the date of this Order except that, after threeyears, Kirby may trade securities for his own account andthe account of his registered retirement savings plan (asdefined in the Income Tax Act (Canada));

3. pursuant to subsection 127(1), paragraph8, Kirby is prohibited from becoming or acting as a directoror officer of any issuer for twelve years commencing on thedate of this Order;

4. pursuant to subsection 127(1), paragraph6, Kirby is reprimanded; and

5. the Temporary Order as against Kirby nolonger has any force or effect.

October 9, 2002.

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