Proprietary Industries has denied allegations by the Alberta Securities Commission (ASC) that it misrepresented its profits in financial statements.
In a notice of hearing released last week, the ASC said that the Calgary merchant bank’s financial statements for 1998, 1999 and 2000 contained significant accounting irregularities.
The ASC alleges that Proprietary’s statements for these years were not prepared in accordance with generally accepted accounting principles (GAAP) and contained material misrepresentations.
The financial statements reported significant gains on the sale of Proprietary’s interest in several companies, all of which were reported contrary to GAAP, said the ASC.
The ASC alleges that these transactions were not legitimate commercial transactions, but were structured for the primary purpose of allowing Proprietary to recognize significant gains in these financial years.
The accounting treatment of the transactions resulted in Proprietary reporting approximately $17.5 million in gains over the three-year period.
The ASC will hold a hearing into the claims on Feb. 22.
In a statement last week, Proprietary, which trades on the Toronto Stock Exchange under the symbol PPI, said the three transactions referred to by the ASC were bona fide commercial transactions.
Proprietary’s financial statements were audited and given unqualified opinions for all years in question, it said.
The company also said it was profitable in each of the years in question, without the impugned transactions.
