Scales of justice
Douglas Wayne Schneider has been sentenced to a year in jail for his role in a failed mortgage venture that raised more than $27-million from investors.
The Alberta Securities Commission said Mr. Schneider pleaded guilty in Alberta Provincial Court to illegal distribution of securities, trading securities without registration and making misleading or untrue statements to investors for his role in The Investment Exchange (TIE) Mortgage Corp.
Although provincial court judge Mark Tyndale handed down a one-year sentence, Mr. Schneider will only serve an additional 60 days after receiving credit for time he served in custody.
Mr. Schneider was extradited to Alberta in June, 2014, after he was arrested by U.S. marshals in California in a rare case involving a Canadian securities regulator seeking an extradition from another country for securities-related offences.
There is still an outstanding arrest warrant for company founder Kenneth Charles Fowler, who has not co-operated with investigators since TIE Mortgage collapsed. The ASC is seeking the public's help locating Mr. Fowler and asked Tuesday for anyone with information about his whereabouts to contact regulator's public inquiries line.
The ASC halted trading in TIE Mortgage securities in 2012 and an Alberta court appointed an inspector to locate and seize any remaining property owned by the company or Mr. Fowler.
The inspectors found evidence the company had raised more than $27-million from 166 investors, which was supposed to be used to provide short-term mortgage loans to third parties. Investors were told their funds would be secure and would earn high rates of return from the loans.
A receiver's report by Grant Thornton Ltd., which was filed in court in 2013, said an inspector's review of the company's financial information found the company had made "no legitimate mortgage investments" and said investors' money had been "diverted" to unauthorized parties or used for purposes unrelated to mortgage investments.
For example, the review found records indicating Mr. Fowler bought a $115,000 diamond engagement ring for his girlfriend using money transferred from company accounts. The report said there was evidence of a regular flow of funds from the company's accounts into Mr. Fowler's own accounts, and evidence he was making payments on a Porsche 911 Carrera.
The inspectors seized and sold a house in Calgary that had belonged to Mr. Fowler, along with the Porsche and a collection of expensive Scotch, but investors still lost most of their money.
As part of his guilty plea, Mr. Schneider admitted he made representations to investors about the legitimacy of the investments "without any due diligence as to the accuracy of his statements," the ASC said.
In addition to the jail sentence, Judge Tyndale also permanently banned Mr. Schneider from trading securities in Alberta, working as a registrant in the financial industry, or acting as a manager or consultant "in connection with the securities market."
He was not ordered to make financial payments.
Janet McFarland