AG PROBE - Alberta Securities Commission

FROM THE EDMONTON JOURNAL

EDMONTON JOURNAL

Minister asks auditor general to probe ASC
Allegations of misconduct cited by complainants

By DARCY HENTON
The Canadian Press - Wednesday, April 20, 2005

EDMONTON (CP) - In the face of a flood of complaints, Alberta's finance minister has asked the provincial auditor general to investigate the embattled Alberta Securities Commission.Shirley McClellan sent a letter to auditor general Fred Dunn to request the investigation last week, finance department spokeswoman Tracy Balash revealed Tuesday. She said McClellan asked Dunn to report back as soon as possible.

"We would be looking at the process that occurs when there is an enforcement issue and how it is investigated and ensure those processes are being followed and whether or not improvements are required," Balash said.

McClellan had invited Albertans with "actual examples of enforcement issues" to come forward after Liberal leader Kevin Taft earlier this month called for an independent inquiry into the commission.The probe comes in the wake of allegations of misconduct and improprieties in the commission hierarchy.

Stan Buell, president of the Small Investors Protection Association, applauded the decision."I think it is fundamentally important nationally because the ASC is one of the largest security commissions in the country," he said.

Although the Alberta Stock Exchange merged with Vancouver Stock Exchange in March 1999 to form the CDNX Canadian Venture Exchange, the Alberta Securities Commission is still responsible for enforcing the Alberta Securities Act.

Edmonton businessman Jason Cowan, who is suing the commission for its handling of an alleged fraud, had called for the probe in a letter he sent to the minister Tuesday. He was excited by the news that an investigation is already underway.

"If they proceed the way they should proceed, I think everything will come to the surface," he said. "It will end eight years of fighting with a multitude of lawyers when the evidence has always been there."

Cowan claims he and his business partner were swindled out of $2.4 million on the defunct Alberta Stock Exchange in 1997 and are still waiting for action to be taken. Cowan, 68, and business partner Barb Trosin lost the money when they signed over their shares in Northside Minerals International, a company they set up to develop a piece of oilfield equipment.

Another Northside Minerals investor, Moe Siemieniuk, had also urged the minister in an April 7 letter to "investigate this outrageous situation." Siemieniuk, a chartered accountant in Thunder Bay, Ont., said many of his friends and relatives lost everything they invested in the project and neither the provincial regulator nor the police are doing anything about it.

A prototype of a blowout preventer was developed in Thunder Bay and still sits crated in an industrial yard ensnarled in legal tape. Siemieniuk said he found out only recently that Northside Minerals never did have legal possession of the technology."We've all got our money tied up in a company that was trading with no assets and we don't know how that happened and we want it investigated," he said.

James Denzine, of Thorp, Wis., who also invested in Northside, called the Alberta Securities investigation a "sham" and a "coverup" in a letter he sent McClellan last week. He said he and his son lost $35,000 US in Northside when it was the subject of a 1999 cease trading order. "When you get into the securities market you would expect the public would at least be given some protection - that to be allowed to trade on the Alberta Stock Exchange that company would have to go through some type of scrutiny," he said.

McClellan hired Calgary lawyer Perry Mack last January to investigate allegations from current and former securities commission employees that senior officials were interfering with enforcement activities, but his report dismissed the allegations.

Investor advocate Diane Urquhart has criticized that process and called for an independent investigation by a forensic accountant. Urquhart, who also wrote to McClellan April 11, said the situation cries out for creation of a national securities commission with a separate adjudication branch. She said provincial security commissions should be stripped of investigation powers and the RCMP should be given that role.

Urquhart said provincial security commissions as they now function are accountable to no one except the chairman and the finance minister. "When the public makes a complaint, it goes into a black hole."

Former broker Larry Elford, of Lethbridge, Alta., called the Alberta Securities Commission "a dysfunctional organization." He is urging the finance minister to go one step further and immediately call a public inquiry.