Proceedings

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IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990 c.S.5, AS AMENDED  

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IN THE MATTER OF THOMAS HINKE  

SETTLEMENT AGREEMENT

 

I. INTRODUCTION

1. By Notice of Hearing dated March 6, 2006, the Ontario Securities Commission (the “Commission”) announced it would hold a hearing on April 12, 2006 to consider whether it is in the public interest to make an order that:

(a) pursuant to section 127(1) clause 2 of the Act, Thomas Hinke (“Hinke”) cease trading in securities of Thermal Energy International Inc. (“TEI”) permanently or for such period or under such conditions as the Commission directs;

(b) pursuant to section 127(1) clause 2 of the Act, Hinke cease trading for five years in securities of any reporting issuer in which Hinke holds more than 5% of any class of securities or for which he is deemed an insider pursuant to the Act;

(c) pursuant to section 127(1) clause 9 of the Act, Hinke pay an administrative penalty of $32,000;

(d) pursuant to section 127(1) clause 6 of the Act, Hinke be reprimanded;

(e) pursuant to section 127.1 of the Act, Hinke pay $5,000 towards costs of the investigation and this proceeding;

(f) such other order as the Commission may deem appropriate.

2.At the return date of the Hearing on April 12, 2006, the Commission accepted an Agreed Statement of Facts and, based on that Agreed Statement of Facts, made a finding that Hinke had breached Ontario securities law and engaged in conduct contrary to the public interest. The Agreed Statement of Facts is attached hereto as Schedule “A”. The Commission adjourned the sanctions portion of the Hearing to May 1, 2006.

II. JOINT SETTLEMENT RECOMMENDATION AS TO SANCTIONS

3. Staff of the Commission (“Staff”) recommend settlement of the sanctioning terms in respect of Hinke in accordance with the terms and conditions set out below. Hinke consents to the making of an order against him in the form attached as Schedule “B” on the basis of the Agreed Statement of Facts.

III. STATEMENT OF FACTS

4. The basis of the Commission’s findings of conduct contrary to the public interest on April 12, 2005 was the Agreed Statement of Facts wherein Hinke agreed as follows.

5. Hinke is an individual residing in Ontario. Thermal Energy International Inc. (“TEI”) is a reporting issuer, as defined in the Securities Act, R.S.O. 1990, c.S.5. During the time period April 11, 2005 to January 3, 2006 (the “Material Period”), Hinke held in excess of 10% of the shares of TEI and was therefore an insider, as defined in the Act.

6. During the Material Period, Hinke executed trades over 32 time periods in TEI, reducing his holdings in TEI from 16.1% to 10.9% and resulting in the sale of 870,050 shares for a value of $ 188,518.40.

7. For each of the above noted trades in TEI, Hinke failed to file an insider report as required by s. 107(2) of the Act.

8. On December 12, 2005, Hinke was notified by Staff of the forgoing matter. Notwithstanding the forgoing, subsequent to Staff notification on December 12, 2005, Hinke continued to trade in shares of TEI and continued to file reports on a delinquent basis. Prior to the return date of the Hearing, Hinke filed all insider reports.

9. In addition, Hinke breached a prior Settlement Agreement dated April 9, 2002 entered into between Hinke and the Executive Director of the Commission (the “Agreement”). In the Agreement, Hinke acknowledged that he had contravened Ontario Securities law by failing to file insider reports pursuant to s. 107(2) for trades of shares in TEI. Pursuant to the terms of the Agreement, Hinke undertook to comply with all regulatory filing requirements in relation to TEI and was ordered to pay $8,000 to the Ontario Securities Commission’s Investor Education Fund.

IV. ADDITIONAL FACTS RELATING TO THE SANCTION HEARING

10. As of February 15, 2006, Hinke was no longer an insider of TEI in that he held less than 10% of the shares and is no longer employed by TEI.

11. Hinke advises that his last trade in TEI was on February 15, 2006.

12. By Court Order dated March 2, 2006, the Canadian Revenue Agency (“CRA”) obtained an Order of the Federal Court of Canada seizing all of Hinkes’ shares in TEI. The CRA seizure is currently under appeal by Hinke in Federal Court- Trial Division, Court File No. T-580-06. Hinke advises that pending the outcome of the appeal, all of Hinke’s remaining TEI shares are being held, in trust, with Gowling Strathy Henderson LLP in Ottawa.

V. TERMS OF SETTLEMENT

13. Hinke consents to an order by the Commission containing the following terms:

(a) pursuant to section 127(1) clause 2 of the Act, Thomas Hinke shall cease trading in securities of Thermal Energy International Inc. (“TEI”) for a period of six months commencing from the date of his last trade, being February 15, 2006;

(b) pursuant to section 127(1) clause 2 of the Act, Hinke shall cease trading in securities of any other reporting issuer in which Hinke holds more than 5% of any class of securities or for which he is deemed an insider pursuant to the Act for one year;

(c) pursuant to section 127(1) clause 9 of the Act, Hinke pay an administrative penalty of $32,000;

(d) pursuant to section 127(1) clause 6 of the Act, Hinke be reprimanded;

(e) pursuant to section 127.1 of the Act, Hinke pay $5,000 towards costs of the investigation and this proceeding;

(f) Hinke shall provide a copy of the order issued by the Commission to any registrant with whom he deals for the next year;

(g) prior to becoming an insider or officer and director of a reporting issuer, Mr. Hinke agrees to take a relevant corporate governance course, which shall include insider trading obligations.

VI. STAFF COMMITMENT

14. If this Settlement Agreement is approved by the Commission, Staff will not initiate any proceeding under Ontario securities law in respect of any conduct or alleged conduct of Hinke in relation to the facts set out in Part III of this Settlement Agreement, subject to the provisions of paragraph 18 below.

VII. PROCEDURE FOR APPROVAL OF SETTLEMENT

15. Approval of this Settlement Agreement shall be sought at the sanctioning portion of the public hearing of the Commission returnable on May 1, 2005, or such other date as may be agreed to by Staff and in accordance with the procedures described in this Settlement Agreement.

16. Staff and Hinke agree that if this Settlement Agreement is approved by the Commission, it, combined with the Agreed Statement of Facts, will constitute the entirety of the evidence to be submitted respecting the respondent in this matter, and Hinke agrees to waive his rights to a full sanctioning hearing, judicial review, or appeal of the matter under the Act.

17. Staff and Hinke agree that if this Settlement Agreement is approved by the Commission, neither Staff nor Hinke will make any public statement inconsistent with this Settlement Agreement.

18. If Hinke fails to honour any of the terms contained in paragraph 13 of this Settlement Agreement, Staff reserve the right to bring proceedings under Ontario securities law against Hinke based on the Commission’s finding of conduct on April 12, 2006 and this Settlement Agreement or, in regards to paragraphs 13(c) and (e), to enforce the Order approving the terms as permitted by law.

19. If, for any reason whatsoever, this Settlement Agreement is not approved by the Commission or an order in substantially the form attached as Schedule “B” is not made by the Commission, each of Staff and Hinke will be entitled to all available proceedings, remedies and challenges regarding the appropriate sanction to be made against the Respondent, including proceeding to a sanctions hearing unaffected by this Settlement Agreement or the settlement negotiations as to sanctions.

20. Whether or not this Settlement Agreement is approved by the Commission, Hinke agrees that he will not, in any proceeding, refer to or rely upon this Settlement Agreement or the negotiation or process of approval of this Settlement Agreement as the basis for any attack on the Commission’s jurisdiction, alleged bias, appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.

VIII. DISCLOSURE OF AGREEMENT

21. The terms of this Settlement Agreement will be treated as confidential by all parties hereto until approved by the Commission, and forever if, for any reason whatsoever, this Settlement Agreement is not approved by the Commission, except with the written consent of Hinke and Staff or as may be required by law.

22. Any obligations of confidentiality shall terminate upon approval of this Settlement Agreement by the Commission.

IX. EXECUTION OF SETTLEMENT AGREEMENT

23. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement.

24. A facsimile copy of any signature shall be as effective as an original signature.

 
DATED this 1st day of May, 2006

Signed in the presence of:

“Allan Morrison”
Witness

“Thomas Hinke”
Thomas Hinke

 

DATED this 1st day of May, 2006

STAFF OF THE ONTARIO SECURITIES COMMISSION

Per:

“Kelley McKinnon” per
_________________________
Michael Watson
Director, Enforcement Branch

 

 

Schedule “A”

IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c.S.5, AS AMENDED

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IN THE MATTER OF
THOMAS HINKE

AGREED STATEMENT OF FACTS

Staff of the Ontario Securities Commission and the Respondent, Thomas Hinke (“Hinke”), admit to the following facts as set out in paragraphs 1 through 10 below:

1. Thomas Hinke (“Hinke”) is an individual residing in Ontario. During the time period April 11, 2005 to January 3, 2006 (the “Material Period”), Hinke held in excess of 10% of the shares of Thermal Energy International Inc. (“TEI”).

2. TEI was incorporated pursuant to the laws of Ontario and is a reporting issuer, as defined in the Securities Act, R.S.O. 1990 c. S.5.

3. Prior to the Material Period, Hinke held a number of senior officer and director positions at TEI, including the position of Director and Co-Chair. Hinke remained employed by TEI until his termination on June 21, 2005.

Failure to File Insider Trades

4. During the Material Period Hinke executed trades over 32 time periods in TEI, which resulted in the reduction of Hinke’s holdings in TEI from 16.1% to 11.5%. The trades resulted in the sale of 870,050 shares valued at a total of $188,518.40 in TEI during the Material Period. The sales were executed through the following accounts:

a) account no. BC 12346C held by Hinke at Bolder Investment Partners (“Bolder”);

b) account no. 04306160 held by Hinke at Global Securities Corporation (“Global”);

c) account no. 5650471013 held by Hinke at CIBC World Markets Inc. (“CIBC”).

5. For each of the above-noted trades in TEI, Hinke failed to file an insider report as required by the Act.

6. On December 12, 2005, Hinke was notified by Staff of the Commission of the failure to file reports as noted above. Notwithstanding this notice, Hinke continued to trade in shares of TEI and continued to file insider reports on a delinquent basis, as more particularly detailed in Schedule “A” attached hereto. Hinke admits to the accuracy of the information contained in Schedule “A” attached hereto. Subsequently, Hinke brought current all insider reports for the Material Period, as set out in Schedule “A”.

7. Section 107(2) of the Ontario Securities Act, R.S.O. 1990, c.S.5, as amended requires Hinke to file a report of each change in his direct or indirect beneficial ownership of the reporting issuer, TEI. Section 107(2) requires Hinke to file the reports within 10 days from the day the change in ownership took place.

Breach of Prior Settlement Agreement

8. Pursuant to a an Executive Director’s Settlement Agreement dated April 9, 2002 between Hinke and the Executive Director of the Commission (the “Agreement”), Hinke acknowledged that he had contravened Ontario Securities law by failing to file insider reports pursuant to s. 107(2) for trades of shares in TEI. A copy of the Agreement is attached hereto as Schedule “B”. Pursuant to the terms of the Agreement, Hinke undertook to comply with all regulatory filing requirements in relation to TEI and was ordered to pay $8,000 to the Ontario Securities Commission’s Investor Education Fund.

Conduct Contrary to the Public Interest

9. The failure to file insider trading reports as set out above was a failure to comply with his

Agreement and undertaking.

10. By failing to file insider trading reports as required by section 107(2) and by breaching the express terms of the Agreement, Hinke acknowledges that pursuant to the facts set out in paragraphs 1 to 9 above he has breached Ontario securities law and engaged in conduct contrary to the public interest.

11. Mr. Hinke expressly acknowledges that he has had the opportunity to receive legal advise in regards to the within Agreed Statement of Facts. In addition, Mr. Hinke expressly acknowledges that the within Agreed Statement of Facts is made voluntarily and without any commitment or promise, in any form whatsoever, in regards to sanctions which may be requested by Staff.

12. The parties agree that the Schedules “A” and “B” referenced above form part of the within Agreed Statement of Facts that is agreed to.

13. This Agreed Statement of Facts may be signed in one or more counterparts and a facsimile signature shall be effective as an original signature.

THE PARTIES HEREBY ACCEPT THE FACTS SET OUT ABOVE AND ADMIT THE FACTS AND DOCUMENTS AS EVIDENCE. THE PARTIES CONSENT TO THE FILING OF THIS DOCUMENT WITH ATTACHED SCHEDULES WITH THE COMMISSION IN ADVANCE OF THE HEARING.  

 

DATED this 10th day of April, 2006.

 


“Anne Sonnen”

Staff of the Ontario Securities Commission


“Thomas Hinke”

Thomas Hinke

 

 

 

Schedule B  

IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c.S.5, AS AMENDED

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IN THE MATTER OF THOMAS HINKE

ORDER

    WHEREAS on March 6, 2006, the Ontario Securities Commission (the “Commission”) issued a Notice of Hearing pursuant to sections 127 and 127.1 of the Securities Act (the “Act”) in respect of Thomas Hinke (“Hinke”);

    AND WHEREAS on April 12, 2006, the Commission found, on the basis of an agreed statement of facts, filed, that Hinke breached Ontario securities law and engaged in conduct contrary to the public interest;

    AND WHEREAS Hinke entered into a settlement agreement dated May 1, 2006 (the “Settlement Agreement”), in which Hinke agreed to a proposed settlement on sanctions of this matter, subject to approval of the Commission;

    AND UPON reviewing the Settlement Agreement and upon hearing submissions from counsel for Hinke and from Staff of the Commission;

    AND UPON Hinke agreeing to provide a copy of this Order to any registrant with whom he deals for the next year from the date of this Order;

    AND UPON Hinke agreeing to take a relevant corporate governance course prior to becoming an insider, as defined in the Act, or an officer or director of a reporting issuer;

    AND WHEREAS the Commission is of the opinion that it is in the public interest to make this Order;

    IT IS HEREBY ORDERED THAT:

1. The Settlement Agreement dated May 1, 2006 is approved;

2. Pursuant to Clause 2 of subsection 127(1) of the Act that trading by Thomas Hinke shall cease:

(i) in the securities of Thermal Energy International Inc. (“TEI”) for a six month period commencing from the date of his last trade in TEI, being February 15, 2006;

(ii) in securities of all other reporting issuers, in which Hinke holds in excess of 5% of any class of securities or for which he is deemed an insider pursuant to the Act, for one year from the date of this Order;

3. Pursuant to clause 6 of subsection 127(1) of the Act that Hinke be reprimanded;

4. Pursuant to clause 9 of subsection 127(1) that Hinke pay an administrative penalty of $ 32,000 to be allocated by the Commission to or for the benefit of third parties under s. 3.4(2)(b) of the Act; and

5. Pursuant to section 127.1 of the Act, that Hinke pay $5,000 in costs.

    IT IS HEREBY FURTHER ORDERED that a person or company affected by this Order may apply to the Commission for an order revoking or varying the terms of the Order pursuant to s. 144 of the Act.

Dated at Toronto, Ontario this day of May, 2006

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