Two Burns Lake men found guilty by the B.C. Securities Commission of fraud and misrepresentation recently had the decision overturned by the B.C. Court of Appeal.
Between 1996 and 2002, Carl Glenn Anderson and Douglas Victor Montaldi made loans to individuals and small businesses through the company 439288 B.C. Ltd. The company sold promissory notes to investors and granted loans on a casual basis.
The business grew by 2002 to a portfolio of about 1,475 loans with a book value of around $32 million.
Court documents show the company failed to collect on a number of loans and frequently ran a deficit, but because of the flow of new investment and the reinvestment of interest by investors, the company never ran short of cash.
In 2001, the British Columbia Financial Institution Commission (FICOM) investigated, found the two men were in breach of the Financial Institutions Act and the Mortgage Brokers Act, and ordered them to cease operations. The B.C. Securities Commission also investigated, and found they had committed misrepresentation and fraud.
The two men, who do not contest the findings that they traded in securities without registration and distributed securities without filing a prospectus, filed an appeal to the court against the findings of misrepresentation, fraud and acting contrary to the public interest. They also claimed the penalties – $200,000 each and 12-year prohibitions from acting as director or officer of an issuer (with one exception) – were unduly punitive.
This month, the appeal court found that “the appellants became victims of their own success as the business expanded beyond the limits of their competence,” but that the evidence provided could not support a finding of fraud or misrepresentation. The two findings were set aside, along with the sanctions. The matter of failing to act in the public interest was sent back to the commission for reconsideration.