Two Vancouver businessmen have been ordered to pay penalties totalling almost $52-million after fraudulently raising almost $22-million from investors without revealing their company was near insolvency.
The British Columbia Securities Commission said Michael Lathigee and Earle Pasquill, who operated the Freedom Investment Club (FIC) Group of companies, have also been permanently banned from trading securities, serving as directors or officers of companies or working as registrants in the financial industry.
The regulator ruled the men sold securities to 698 investors in 2008 without telling them FIC Group had severe cash-flow problems, including an unfunded $8-million cost overrun on its biggest real estate project in Alberta.
A hearing panel said Mr. Lathigee wrote private e-mails in 2008, saying FIC Group needed $10-million "to stay solvent" and was in "the worst situation [it has] ever been in" but did not disclose the information to investors, who lost almost their entire investment.
"The magnitude of the fraud perpetrated in this case is among the largest in British Columbia history," the panel said in its sanctions decision.
Both men were ordered to each pay a $15-million administrative penalty – for a total of $30-million – and the hearing panel ordered them and their companies to "disgorge" the money they obtained as a result of their misconduct, totalling $21.7-million.
The sanctions decision said Mr. Lathigee and Mr. Pasquill have "a history of regulatory misconduct" that shows "they do not respect securities laws."
"They were not deterred by orders and sanctions from prior infractions," the decision notes.
The BCSC imposed a cease trade order on two FIC Group companies in 2005 after concluding their offering memoranda did not comply with securities rules. The two men and two of their companies reached another settlement agreement with the BCSC in 2007 after admitting to certain securities rules violations. In 2008, they faced a further cease-trade order for inadequate disclosure in offering memorandum.
Since FIC Group was shut down, the panel said Mr. Lathigee has co-founded an investment club in Las Vegas with a business model similar to FIC's. He posted a promotional video on YouTube in 2014 where he said he built the largest investment club in North America that grew to $100-million of assets under management, but did not mention his B.C. regulatory history.
"We find the respondents to be a serious ongoing risk to the capital markets and permanent market bans are warranted," the BCSC panel said.