IN THE MATTER OF The Securities Act (S.A. 1981, c. S-6.1, as amended) (the "Act") - and -

Transcription

1 ALBERTA SECURITIES COMMISSION IN THE MATTER OF The Securities Act (S.A. 1981, c. S-6.1, as amended (the "Act" - and - IN THE MATTER OF Gary Kelemen, Daniel Lee and Robert Sparrow (the "Respondents" ORDER AND REASONS FOR DECISION 1. WHEREAS: 1.1 on April 13, 1995 the Staff of the Alberta Securities Commission (the "Staff" issued a Notice of Hearing seeking an order against the Respondents under sections 165, 166, and of the Act; 1.2 the matter was scheduled for hearing on April 19, 1995 and adjourned to July 26, 1995; 1.3 the Respondents and the Staff have entered into Settlement Agreements dated July 12, and July 25, 1995 attached as Appendices ''1 " and "2" to this Order, which set out Agreed Statements of Facts and Joint Recommendations as to Disposition; 1.4 the Alberta Securities Commission (the "Commission" has heard counsel for the Staff and counsel for the Respondents and has considered the content of the Settlement Agreements; 1.5 the Commission finds that there have been breaches of sections 54(1 and 81(1 of the Act; and 1.6 the Commission has concluded that it is in the public interest to make the following Order. 2. IT IS HEREBY ORDERED THAT: 2.1 the Settlement Agreements, attached as Appendices "1" and "2" hereto, including the Joint Recommendations as to Disposition be approved;

2 Robert Sparrow is cease traded and denied the use of exemptions found in sections 65, 66, 66.1, 107, 115, 116, 132 and 133 of the Act or in the Rules pursuant to the Act, for a period of one month from the date hereof, excepting that he be permitted to use the exemption at section 65(j of the Act; 2.3 Gary Kelemen ("Kelemen" is cease traded and denied the use of the exemptions found in sections 65, 66, 66.1, 107, 115, 116, 132 and 133 of the Act or in the Rules pursuant to the Act, for a period of one year from the date hereof, excepting that he be permitted to use the exemption at section 65(j of the Act; 2.4 Kelemen be prohibited from becoming, or acting as, a director or officer of any reporting issuer for one year from the date of any order, excepting that Kelemen be permitted to remain as a director and officer of Vision; 2.5 Daniel Lee ("Lee" is cease traded and denied the use of exemptions found in sections 65, 66, 66.1, 107, 115, 116, 132 and 133 of the Act or in the Rules pursuant to the Act, for a period of one year from the date hereof excepting that he be permitted to use the exemption at section 65(j of the Act; 2.6 Lee be prohibited from becoming, or acting as, a director or officer of any reporting issuer for one year from the date of any order, excepting that Lee be permitted to remain as a director and officer of Vision; Dated at the City of EDMONTON in the Province of ALBERTA this 26 th day of July, 1995 W. L. Hess, Q.C., Chair Ian E. W. McConnan, Member

3 Appendix 1 ALBERTA SECURITIES COMMISSION B/ INTRODUCTION IN THE MATTER OF The Securities Act S.A c.s-6.1, as amended (the "Act" - and - IN THE MATTER OF Robert Sparrow (the "Respondent" SETTLEMENT AGREEMENT 1.1 On April 13th, 1995 the Staff of the Alberta Securities Commission (the "Staff" issued a Notice of Hearing seeking an order against the Respondent (the "Notice" pursuant to sections 165, 166 and of the Act. 1.2 the Respondent and the Staff have agreed: on the evidence to be presented to the Alberta Securities Commission (the "Commission" at the hearing of the Notice against Robert Sparrow ("Sparrow"; that they will resolve the allegations against Sparrow on the terms and conditions set out herein; and that they shall make a joint recommendation with respect to an appropriate disposition of this matter. 1.3 The Staff and the Respondent acknowledge that this Agreement is subject to approval by the Commission. 2. AGREED STATEMENT OF FACTS 2.1 Vision Incorporated ("Vision" was incorporated under the laws of Alberta in 1986 under the name Pathfinder International Recreational Corporation and became a reporting issuer as a Junior Capital Pool pursuant to Alberta Securities Commission Policy 4.11 the same year; 2.2 at all material times, Gary Kelemen ("Kelemen", Daniel Lee ("Lee", Sparrow and Horst Wolff ("Wolff" were directors of the company. Sparrow was a director between May 18, 1993 and May 4, 1995 and had been asked by Kelemen and Lee to join the Board of Directors because of his previous public company experience;

4 between February 1, 1993 and May 1, 1994, Vision, Kelemen and Lee traded in securities, namely convertible preferred shares of Vision, with at least seventeen Alberta residents without being registered and where such trades were distributions, without a preliminary prospectus and a prospectus having been filed with the Agency and receipts obtained therefor, and where no exemptions were available to them, contrary to subsections 54(1 and 81(1 of the Act; 2.4 between February 1, 1993 and June 15, 1994, Vision, Kelemen and Lee traded in securities, namely investment contracts known as the "Dealer Partner Program", with at least fifty-five Alberta residents without being registered and where such trades were distributions, without a preliminary prospectus and a prospectus having been filed with the Agency and receipts obtained therefor, and where no exemptions were available to them, contrary to subsections 54(1 and 81(1 of the Act; 2.5 Sparrow, in his capacity as a director, authorized, permitted or acquiesced in the trading referred to in paragraphs 2.3 and 2.4 above, contrary to subsections 54(1 and 81(1 of the Act; 2.6 Sparrow did not receive any financial compensation and did not participate in the daily activities of Vision; 2.7 Sparrow was relatively inactive as a director, and from time to time he consulted counsel for the corporation, as well as the other directors who advised him that operations were going smoothly. They did not advise Sparrow of the investigation by Staff; 2.8 Sparrow did not recruit investors himself and had no specific knowledge of the recruitment activities of Kelemen and Lee. 2.9 Sparrow recognizes that, as a director of Vision, he had an obligation to make reasonable and sufficient inquiries as to the business of Vision to satisfy himself that Vision was carrying on good business practices and was not in potential breach of any provisions of the Act. Sparrow recognizes that he failed to meet the high standard of care required of a director of a public corporation and that this is not in the public interest; 2.10 by reason of all of the foregoing, the Respondent has acted in a manner which is contrary to the Act, the Regulation and the public interest. 3. JOINT RECOMMENDATION AS TO DISPOSITION 3.1 The Staff and the Respondent Sparrow ask the Commission to consider the following factors: Sparrow has made payment of $ to the Commission in respect of investigation costs;

5 Sparrow is now better aware of his responsibilities as a director of a public company; the public is spared the expense of a full hearing. 3.2 In light of the above, the Staff and Sparrow submit that an appropriate disposition would be for the Commission to order that the Agreed Statement of Facts be accepted and the Joint Recommendation as to Disposition be approved as follows: Sparrow be cease traded and denied the use of exemptions found in sections 65, 66, 66.1, 107, 115, 116, 132 and 133 of the Act of in the Regulation for one month from the date of the order, excepting that he be permitted to use the exemption at section 65(j of the Act; 4. EVIDENCE, WAIVER AND COMMISSION REVIEW OF SETTLEMENT TERMS 4.1 If the Agreed Statement of Facts is accepted and the Joint Recommendation as to Disposition is approved by the Commission: they will constitute the entirety of the evidence to be submitted in this matter by the Staff and by Sparrow; Sparrow waives his right to a hearing in respect of the matters set out in the Notice, any right to review, including any right to appeal or any application for judicial review of this matter, and any right to receive written reasons; this Settlement Agreement resolves all matters raised in the Notice of Hearing against Sparrow. 4.2 If the Commission accepts the Agreed Statement of Facts but does not approve the Joint Recommendation as to Disposition and decides rather to substitute its own disposition: any monies, written undertakings or other documents provided to the Staff in furtherance of the Joint Recommendation as to Disposition or negotiations that are not required to carry out the Commission's disposition shall be returned to the Respondent; the Staff and Sparrow may present submissions to the Commission as to appropriate disposition. 4.3 If the Agreed Statement of Facts is not accepted and the Joint Recommendation is not approved by the Commission:

6 this Settlement Agreement shall terminate and the Staff may proceed with a hearing in respect of the matters raised in the Notice, and the Staff and Sparrow will be unaffected by the Settlement Agreement or the settlement negotiations; any monies, written undertakings or other documents provided to the Staff in furtherance of the Settlement Agreement or negotiations shall be returned to Sparrow; the terms of the Settlement Agreement will not be raised in such proceedings or in any other proceeding; and Sparrow will not raise the Settlement Agreement or the negotiation or process of approval thereof as a basis for any allegation of bias or unfairness or any other challenge that may be available as a result of this settlement. Dated at EDMONTON, ALBERTA this 12 th day of July, 1995 Signed by Robert Sparrow at Edmonton, Alberta this 10 th day of July in the presence of: WITNESS ALBERTA SECURITIES COMMISSION H.C. Blakey Director, Market Standards Robert Sparrow

7 AFFIDAVIT OF EXECUTION (for each individual respondent I, D.O. GOSS, Solicitor (occupation, of Edmonton, Alberta SWEAR THAT: 1 I was present and saw Robert Sparrow sign the attached document. 2. The document was executed at Edmonton, Alberta, and I the witness thereto. 3. I know Robert Sparrow and believe that she is at least eighteen (18 years of age. SWORN BEFORE ME at Edmonton, Alberta, this 10 day of July, 1995 A Commissioner for Oaths in and for the Province of Alberta Isabelle Francoise Vouve My Appointment Expires December 29, 1996

8 Appendix 2 B/16135 ALBERTA SECURITIES COMMISSION IN THE MATTER OF The Securities Act S.A c.s-6.1, as amended (the "Act" - and - IN THE MATTER OF Gary Kelemen and Daniel Lee (the "Respondents" 1. INTRODUCTION SETTLEMENT AGREEMENT 1.1 On April 13th, 1995 the Staff of the Alberta Securities Commission (the "Staff" issued a Notice of Hearing seeking an order against the Respondents (the "Notice" pursuant to sections 165, 166 and of the Act. 1.2 the Respondents and the Staff have agreed: on the evidence to be presented to the Alberta Securities Commission (the "Commission" at the hearing of the Notice against Gary Kelemen ("Kelemen" and Daniel Lee ("Lee"; that they will resolve the allegations against Kelemen and Lee on the terms and conditions set out herein; and that they shall make a joint recommendation with respect to an appropriate disposition of this matter. 1.3 The Staff and the Respondents acknowledge that this Agreement is subject to approval by the Commission. 2. AGREED STATEMENT OF FACTS 2.1 Vision Incorporated ("Vision" was incorporated under the laws of Alberta in 1986 under the name Pathfinder International Recreational Corporation ("Pathfinder" and became a reporting issuer as a Junior Capital Pool pursuant to Alberta Securities Commission Policy 4.11 the same year; 2.2 Pathfinder went into receivership in 1990 and its shares were suspended, then delisted by The Alberta Stock Exchange. In 1993, Pathfinder was reactivated by means of a reverse takeover by Vision R.V. Inc., a private company founded by Kelemen and Lee. Pathfinder's shares were relisted under the new name "Vision Incorporated" on July 6, 1993;

9 at all material times, Gary Kelemen ("Kelemen", Daniel Lee ("Lee", Robert Sparrow ("Sparrow" and Horst Wolff ("Wolff" were directors of the company; 2.4 Kelemen was the founder, president, chief operating officer and, a director of Vision. Kelemen is a control person of Vision; 2.5 Lee was at all material times a founder, chairman, chief executive officer and a director of Vision. Lee had previous experience as a director of a public company as a director of Pathfinder from 1986 to Lee is a control person of Vision; 2.6 Kelemen and Lee were actively involved in the marketing and sales activities of Vision and either conducted, facilitated or supervised the trades described below; 2.7 between February 1, 1993 and May 1, 1994, Vision, Kelemen and Lee traded in securities, namely convertible preferred shares of Vision, valued at approximately $85,000, with at least seventeen Alberta residents without being registered and where such trades were distributions, without a preliminary prospectus and a prospectus having been filed with the Agency and receipts obtained therefor, and where no exemptions were available to them, contrary to subsections 54(1 and 81(1 of the Act; 2.8 between February 1, 1993 and June 15, 1994, Vision, Kelemen and Lee traded in securities, namely investment contracts known as the "Dealer Partner Program", with at least fifty-five Alberta residents without being registered and where such trades were distributions, without a preliminary prospectus and a prospectus having been filed with the Agency and receipts obtained therefor, and where no exemptions were available to them, contrary to subsections 54(1 and 81 (1 of the Act; 2.9 Vision, Kelemen and Lee offered rescission to each of the investors and out of seventeen investors, five have elected rescission. Vision, Kelemen and Lee have now refunded subscription funds in full to these five investors; 2.10 by reason of all of the foregoing, the Respondents have acted in a manner which is contrary to the Act, the Rules pursuant to the Act and the public interest. 3. JOINT RECOMMENDATION AS TO DISPOSITION 3.1 The Staff and the Respondents Kelemen and Lee ask the Commission to consider the following factors: Kelemen and Lee have made payment of $4, to the Commission in respect of investigation costs;

10 Kelemen and Lee have arranged rescission for those investors seeking same; the public is spared the expense of a full hearing. 3.2 In light of the above, the Staff and Kelemen and Lee submit that an appropriate disposition would be for the Commission to order that the Agreed Statement of Facts be accepted and the Joint Recommendation as to Disposition be approved as follows: Kelemen and Lee be cease traded and denied the use of exemptions found in sections 65, 66, 66.1, 107, 115, 116, 132 and 133 of the Act or in the Rules pursuant to the Act, for one year from the date of any order, excepting that he be permitted to use the exemption at section 65(j of the Act; Kelemen and Lee each be prohibited from becoming, or acting as, a director or officer of any reporting issuer for one year from the date of any order, excepting that Kelemen and Lee be permitted to remain as directors and officers of Vision. 4. EVIDENCE, WAIVER AND COMMISSION REVIEW OF SETTLEMENT TERMS 4.1 If the Agreed Statement of Facts is accepted and the Joint Recommendation as to Disposition is approved by the Commission: they will constitute the entirety of the evidence to be submitted in this matter by the Staff and by Kelemen and Lee; Kelemen and Lee waive their right to a hearing in respect of the matters set out in the Notice, any right to review, including any right to appeal or any application for judicial review of this matter, and any right to receive written reasons; this Settlement Agreement resolves all matters raised in the Notice of Hearing against Kelemen and Lee. 4.2 If the Commission accepts the Agreed Statement of Facts but does not approve the Joint Recommendation as to Disposition and decides rather to substitute its own disposition: any monies, written undertakings or other documents provided to the Staff in furtherance of the Joint Recommendation as to Disposition or negotiations that are not required to carry out the Commission's disposition shall be returned to the Respondents; the Staff and Kelemen and Lee may present submissions to the Commission as to appropriate disposition.

11 If the Agreed Statement of Facts is not accepted and the Joint Recommendation is not approved by the Commission: this Settlement Agreement shall terminate and the Staff may proceed with a hearing in respect of the matters raised in the Notice, and the Staff and Kelemen and Lee will be unaffected by the Settlement Agreement or the settlement negotiations; any monies, written undertakings or other documents provided to the Staff in furtherance of the Settlement Agreement or negotiations shall be returned to Kelemen and Lee; the terms of the Settlement Agreement will not be raised In such proceedings or in any other proceeding; and Kelemen and Lee will not raise the Settlement Agreement or the negotation or process of approval thereof as a basis for any allegation of bias or unfairness or any other challenge that may be available as a result of this settlement. Dated at EDMONTON, ALBERTA this 25 th day of July, 1995 Signed by Gary Kelemen at Edmonton, Alberta this 24 th day of July in the presence of: WITNESS DOUGLAS O. GOSS Signed by Gary Kelemen at Edmonton, Alberta this 24 th day of July in the presence of: WITNESS DOUGLAS O. GOSS ALBERTA SECURITIES COMMISSION H.C. Blakey Director, Market Standards Gary Kelemen Daniel Lee

12 AFFIDAVIT OF EXECUTION (for each Individual respondent I D.O. GOSS, Solicitor (occupation, of Edmonton, Alberta SWEAR THAT: 1. I was present and saw Gary Kelemen sign the attached document. 2. The document was executed at Edmonton, Alberta, and I the witness thereto. 3. I know Gary Kelemen and believe that he is at least eighteen (18 years of age. SWORN BEFORE ME at Edmonton, Alberta, this 24 day of July, 1995 A Commissioner for Oaths in and for the Province of Alberta Isabelle Francoise Vouve My Appointment Expires December 29, 1996