A group of five B.C. residents face nearly $30-million in fines and repayments to victims after the province's securities regulator found they were behind a stock-trading manipulation scheme that left victims, including many indebted clients of a Toronto-area credit counselling outfit, owning worthless shares.
In a sanctions decision released on Wednesday, a B.C. Securities Commission panel reserved the highest individual fine, $10-million, for Thalbinder Singh Poonian, the "mastermind of the scheme," whose conduct the panel described as "the most egregious."
Reached on Wednesday by phone in Vancouver, Mr. Poonian -- who had no lawyer at his hearings -- denied manipulating the shares, claimed the BCSC had withheld key documents from him and vowed to appeal the ruling: "This entire process has been totally unfair."
The group, which was originally found to have been behind the scheme in a BCSC decision last August, was also ordered to pay back the $7-million in profits the regulator says they made from the victims of the scheme, which ran from 2007 to 2009.
Wednesday's BCSC decision concludes that Mr. Poonian's wife Shailu Sharon Poonian and three other B.C. investors, Robert Joseph Leyk, Manjit Singh Sihota and his wife, Perminder Sihota, were all "directly involved" in the manipulation. Ms. Poonian, Mr. Leyk and Mr. Sihota were each ordered to pay $3.5-million in fines. Ms. Sihota's fine was set at $1-million.
According to the BCSC, the scheme centred on a small oil and gas company called OSE Corp., trading on the TSX Venture Exchange with a head office at a property owned by Ms. Sihota in Delta, B.C.
The BCSC ruled that the group bought a majority of the company's shares and then used various techniques – including so-called "wash" trades between the same buyer and seller and "high closing" or trading right before the markets closed – to artificially boost its price. The shares climbed from 21 cents a share in September 2007, to almost $2 a share in mid-2008 before plummeting to less than a nickel a share in 2009 as the scheme unravelled.
During the share's rise, highly indebted clients of a Richmond Hill, Ont., credit-counselling agency called Phoenix Credit Risk Management Consulting Inc. and its affiliates were advised to unlock their registered retirement savings plans and invest in the stock to generate cash. According to the BCSC rulings, Phoenix salespeople reaped commissions of up to 28 per cent from Mr. Poonian and his group for selling the shares. But when the scheme collapsed, their already indebted clients' retirement savings were lost.
Phoenix and three of its senior personnel settled allegations with the Ontario Securities Commission in 2011, admitting they acted contrary to the public interest and agreeing to pay more than $3.3-million.
In its sanctions decision, the BCSC panel also ordered the five permanently banned from holding a position as a director or officer of a public company, with limited exceptions, and banned them from trading securities or exchange contracts. They are also permanently banned from acting as promoters, engaging in "investor relations activities" or acting as managers or consultants in the securities industry.