Securities Law & Instruments

IN THE MATTER OF

THE SECURITIES ACT

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

AND

IN THE MATTER OF

LYDIA DIAMOND EXPLORATIONOF CANADA LTD.,

JURGEN VON ANHALT, EMILIAVON ANHALT

 

ORDER

(Sections 127 and 127.1)

WHEREAS on April 1, 2002, the OntarioSecurities Commission (the Commission) issued a Notice of Hearingpursuant to sections 127 and 127.1 of the Securities Act(the Act) in respect of Lydia Diamond Exploration ofCanada Ltd. (Lydia), Jurgen von Anhalt, and Emilia von Anhalt;

AND WHEREAS the Commission conducteda hearing into this matter on June 28, July 3-5, September 18-20,October 10-11 and 15-16, and November 4, 2002;

AND WHEREAS the Commission is satisfiedthat Lydia, Jurgen von Anhalt and Emilia von Anhalt have notcomplied with Ontario securities law and have not acted in thepublic interest;

AND WHEREAS the Commission is of theopinion that it is in the public interest to make this order;

IT IS ORDERED THAT:

Lydia

(1) Pursuant to clause 2 of subsection 127(1)of the Act, except as permitted in A, B and C below,trading in any securities of Lydia by Lydia cease for threeyears from the date of this order:

A. Lydia may issue securities to Jurgenvon Anhalt, Emilia von Anhalt, any bank, trust company,loan company, insurance company, or any other entity withassets of at least $100 million, if condition (7) is met.

B. Lydia may issue securities under a prospectusthat is filed and receipted under the Act, if conditions(7) and (8) are met.

C. Lydia may issue securities under an exemptionfrom the prospectus requirements of the Act, if conditions(7), (8) and (9) are met.

(2) Pursuant to clause 6 of subsection 127(1)of the Act, Lydia is reprimanded.

Jurgen von Anhalt and Emilia von Anhalt

(3) Pursuant to clause 2 of subsection 127(1)of the Act, except as permitted in A and B below, tradingby each of Jurgen von Anhalt and Emilia von Anhalt in anysecurities of any issuer - other than a government, an agencyof a government, or a corporation with share capital in excessof $100 million at the time of acquisition of the securityby Jurgen von Anhalt or Emilia von Anhalt - cease for 12 yearsfrom the date of this order:

A. Jurgen von Anhalt and Emilia von Anhaltmay sell securities of Lydia under a prospectus that isfiled and receipted under the Act, if conditions(7) and (8) are met.

B. Jurgen von Anhalt and Emilia von Anhaltmay sell securities of Lydia under an exemption from theprospectus requirements of the Act, to a person:

1. who is acquiring all the securitiesof Lydia owned by Jurgen von Anhalt and Emilia von Anhalt,alone or together; or

2. who is acquiring securities of Lydiafrom Jurgen von Anhalt or Emilia von Anhalt, or both ofthem, for an aggregate purchase price of at least $500,000;

if condition (7) is met.

C. Notwithstanding the limitation in (3),Jurgen von Anhalt and Emilia von Anhalt may sell securitiesof any issuer, other than Lydia, held on the date of thisorder which are made within 60 days after this date.

(4) Pursuant to clause 7 of subsection 127(1)of the Act, each of Jurgen von Anhalt and Emilia vonAnhalt resign all positions that he or she holds as a directoror officer of any issuer.

(5) Pursuant to clause 8 of subsection 127(1)of the Act, each of Jurgen von Anhalt and Emilia vonAnhalt is prohibited from becoming or acting as a directoror officer of any issuer for 15 years from the date of thisorder.

(6) Pursuant to clause 6 of subsection 127(1)of the Act, each of Jurgen von Anhalt and Emilia vonAnhalt is reprimanded.

Conditions

The following are the conditions referred toin this order:

(7) Condition (7):

From the day after this order to the timeof a trade:

A. neither of Jurgen von Anhalt and Emiliavon Anhalt:

1. is a director, officer, employee,agent or paid consultant of Lydia or of any associateor affiliate of Lydia or of any corporation, partnership,joint venturer or other entity that has a business relationshipwith Lydia or an associate or affiliate of Lydia;

2. acts as a director or officer ofLydia; or

3. attends directors meetings of Lydia;

B. a majority of the directors of Lydiaare independent from Jurgen von Anhalt and Emilia vonAnhalt; and,

C. the business and affairs of Lydia aremanaged, or the management thereof is supervised, exclusivelyby a committee of directors of Lydia all of whom are independentfrom Jurgen von Anhalt and Emilia von Anhalt.

(8) Condition (8):

A. Lydia has obtained a report of an independentforensic accountant not associated with Mintz & Partnerscontaining recommendations for adjustments, if any, tothe financial statements of Lydia for all completed fiscalyears of Lydia. The report should address, but not belimited to, the following:

1. with respect to expenses incurredby Jurgen von Anhalt or Emilia von Anhalt and allowedas corporate expenses or reflected in the shareholders'advance (loan) or cash clearing account: the reasonablenessof amounts of expenses claimed; the validity of expenses,or the portions thereof, allowed as being for propercorporate purposes; the satisfactory nature of documentation(or other independent verification) proving paymentof the expenses to the suppliers;

2. with respect to investors' moneyspaid for share subscriptions: the receipt by Lydia ofsuch funds and the proper application by or for Lydiaof such funds to proper obligations of Lydia;

3. the current balance of amounts owing,if any, by Jurgen von Anhalt and/or Emilia von Anhaltto Lydia or by Lydia to Jurgen von Anhalt and/or Emiliavon Anhalt; and,

4. adjustments, if any, required tothe financial statements of Lydia, to reflect properlythe matters arising from the foregoing, including adjustments,if any, to the shareholders' advance (loan) or cashclearing account, the net income (deficit), and theassets accounts of Lydia for any fiscal period.

In this regard, items for examinationby the forensic accountant should include, but not belimited to: (a) amounts recorded as travel and entertainmentexpenses of Lydia incurred by Jurgen von Anhalt and/orEmilia von Anhalt during the pre-incorporation period;(b) amounts recorded throughout as expenses of Lydia incurredby Jurgen von Anhalt and/or Emilia von Anhalt with respectto travel, accommodation and car rental; (c) the proportionof expenses, such as rent, incurred by Jurgen von Anhaltand/or Emilia von Anhalt which was attributed to businesspurposes; (d) charges to Lydia's bank accounts and visaaccounts incurred by Jurgen von Anhalt and/or Emilia vonAnhalt for non-business (personal) expenses; and (e) investors'subscription moneys, if any, not paid to or for the accountof Lydia.

B. The directors of Lydia cause the financialstatements to be restated, if required, in light of thereport.

C. The report and any restated financialstatements are filed with the Commission.

(9) Condition (9):

Any trade permitted by (1)C may only be madeif, in addition to the requirements of the Act andRule 45-501, before entering into an agreement of purchaseand sale, Lydia causes to be delivered to the prospectivepurchaser an offering memorandum that:

A. contains sufficient information thatthe investor can form a reasoned decision with regardto its investment in Lydia;

B. attaches Lydia's audited financialstatements for all fiscal years, as restated if requiredin light of the report of the independent forensic accountant;

C. is accompanied by each material changereport of Lydia filed since the date of the offering memorandum;

D. is accompanied by the interim financialstatements for Lydia's most recently completed financialperiod for which Lydia prepares interim financial statementsthat are required to be filed; and

E. describes Lydia's corporate governancepractices and the circumstances under which they wereput in place in 2002, and any subsequent changes.

Costs

(10) Pursuant to section 127.1 of the Act,Lydia pay $25,000, Jurgen von Anhalt pay $100,000 and Emiliavon Anhalt pay $100,000 of the costs of the Commission of,or related to, the hearing in this matter.

November 19, 2002.

"Paul M. Moore"   "MaryTheresa McLeod"   "H. Lorne Morphy"