Investment schemers ordered to pay $29 million by OSC

Date: Tuesday, June 8, 2010
Author: Investment Executive

The Ontario Securities Commission has ordered a group of firms and individuals to disgorge $27.9 million in investor funds, plus more than $1.5 million in commissions, related to an investment scam in which investors lost millions of dollars.

An OSC order released on Monday outlines a slew of penalties against six Ontario residents: Peter Sabourin, Jeffrey Haver, Greg Irwin, Shane Smith, Andrew Lloyd and Sandra Delahaye, along with five companies: Sabourin and Sun Inc., Sabourin and Sun (BVI) Inc., Sabourin and Sun Group of Companies Inc., Camdeton Trading Ltd. and Camdeton Trading S.A.

The OSC found that between 2001 and 2006, the group was involved in investment schemes in which investors were led to believe that they would profit from substantial returns on their investments with little or no risk and with no active involvement on their part. The schemes raised up to $33.9 million of investor funds, and investors lost most of their money, according to the OSC.

Many of the investors were encouraged to mortgage their homes, draw down their lines of credit or collapse their RRSPs in order to invest in the schemes.

The bulk of the penalties were imposed against the firms and Peter Sabourin, who the OSC said “concocted and orchestrated the investment schemes and sold sham investments, directly and through Irwin, Haver, Smith, Lloyd, Delahaye and others.”

Sabourin “solicited and sold investments he knew to be a sham, lied to and misled investors, and misappropriated investors’ funds,” the OSC said. It added that Sabourin directed the entire operation, including where funds went, how investments were processed and what information and payments were sent to investors.

From the evidence, the OSC estimates that at least $3.5 million was received by Sabourin or paid to third parties for his benefit.

Sabourin and the firms have been ordered to disgorge $27.9 million, which includes the $33.9 million originally invested, minus $6 million which “appears to have been re-paid to investors,” the OSC said. Sabourin and the firms also face an administrative penalty of $1.2 million, and costs of $130,000.

The other individuals involved were penalized for their roles in soliciting clients to invest in the schemes, helping them complete the required paperwork, and accepting their money, among other violations. The OSC said that they also continued to sell the fraudulent investments after learning that the commission was investigating the matter.

Haver, Smith, Lloyd and Delahaye were all former registrants, and therefore “knew or ought to have known that they were selling securities in breach of the Act,” the OSC said. It added that Irwin had a close working relationship with Sabourin, and was also in a strong position to recognize that the investment schemes were not legitimate.

The individuals received varying levels of commissions for their involvement with the schemes, and have been ordered to disgorge these proceeds. Smith must disgorge $1 million, Haver must disgorge $345,000, Lloyd must disgorge $266,000, Delahaye must disgorge $70,000.

In addition, Haver and Smith have been ordered to pay an administrative penalty of $150,000 on a several basis, Lloyd and Delahaye must pay a penalty of $100,000, and Irwin must pay $50,000. The five individuals must also pay costs of $10,000 on a several basis.

The OSC also permanently banned all respondents from trading in securities, with the exception that each of Haver, Irwin, Smith, Lloyd and Delahaye are permitted to trade for the accounts of their respective registered retirement savings plans. Each individual is also permanently banned from acting as a director or officer of an issuer.