IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c. S. 5, as amended
IN THE MATTER OF MICHAEL ANTHONY TIBOLLO
STATEMENT OF ALLEGATIONS OF STAFF OF THE
ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission ("Staff") make the following allegations:
1. The respondent, Michael Anthony Tibollo ("Tibollo"), is a lawyer and businessperson. Tibollo has never been registered with the Ontario Securities Commission (the "Commission").
THE ILLEGAL DISTRIBUTIONS OF THE SAXTON SECURITIES
2. Saxton Investment Ltd. ("Saxton") was incorporated on January 13, 1995. Allan Eizenga was Saxton's registered director and president. Saxton and Eizenga established numerous other corporations.
3. Between January 1995 and the summer of 1998, Saxton salespeople sold to Ontario investors securities of one or more of the following companies (the "Offering Corporations"):
The Saxton Trading Corp.
The Saxton Export Corp.
The Saxton Export (II) Corp.
The Saxton Export (III) Corp.
The Saxton Export (IV) Corp.
The Saxton Export (V) Corp.
The Saxton Export (VI) Corp.
The Saxton Export (VII) Corp.
The Saxton Export (VIII) Corp.
The Saxton Export (IX) Corp.
The Saxton Export (X) Corp.
The Saxton Export (XI) Corp.
The Saxton Export (XII) Corp.
The Saxton Export (XIII) Corp.
The Saxton Export (XIV) Corp.
The Saxton Export (XV) Corp.
The Saxton Export (XVI) Corp.
The Saxton Export (XVII) Corp.
The Saxton Export (XVIII) Corp.
The Saxton Export (XIX) Corp.
The Saxton Export (XX) Corp.
The Saxton Export (XXI) Corp.
The Saxton Export (XXII) Corp.
The Saxton Export (XXIII) Corp.
The Saxton Export (XXIV) Corp.
The Saxton Export (XXV) Corp.
The Saxton Export (XXVI) Corp.
The Saxton Export (XXVII) Corp.
The Saxton Export (XXVIII) Corp.
The Saxton Export (XXIX) Corp.
The Saxton Export (XXX) Corp.
The Saxton Export (XXXI) Corp.
The Saxton Export (XXXII) Corp.
The Saxton Export (XXXIII) Corp.
The Saxton Export (XXXIV) Corp.
The Saxton Export (XXXV) Corp.
The Saxton Export (XXXVI) Corp.
The Saxton Export (XXXVII) Corp.
The Saxton Export (XXXVIII) Corp.
4. The Offering Corporations offered to the Ontario public two investment products:
a "GIC" which was later renamed a "Fixed Dividend Account"; and
an "Equity Dividend Account".
In either case, an investor purchased shares in the respective private company (the "Saxton Securities").
5. Although the Offering Corporations prepared Offering Memoranda, such Memoranda provided little information about Saxton other than the geographic location in which the company conducted business.
6. The Saxton Securities were marketed as no, or low, risk notwithstanding that the Offering Memoranda described the Securities as "speculative". It was also represented to investors that Saxton intended to go public (by way of a reverse take-over) and be listed on a recognized stock exchange. This never occurred.
7. All of the Offering Corporations were incorporated pursuant to the laws of Ontario. The sales of shares of the Saxton Securities constituted trades in securities of an issuer that had not been previously issued.
8. The distribution of the Saxton Securities contravened Ontario securities law. None of the Offering Corporations filed a preliminary prospectus or a prospectus with the Commission. No Offering Corporation was issued a receipt for a prospectus by the Commission.
9. The Offering Corporations purported to rely on the "seed capital" prospectus exemption contained in subparagraph 72(1)(p) of the Securities Act, R.S.O. 1990, c. S.5 (the "Act"). Neither this exemption, nor any other prospectus exemption, was available to them.
10. None of the exemptions from the registration requirements in Ontario securities law was available for the sale of the Saxton Securities.
11. On or about October 7, 1998, the Court appointed KPMG Inc. ("KPMG") as the custodian of Saxton's assets. In early 1999, KPMG reported that the Offering Corporations raised approximately $37 million from Ontario investors. At that time, KPMG held the view that the value of the Saxton assets, at its highest (as reported by related companies), was approximately $5.5 million.
12. Saxton was part of a complicated corporate structure. The Offering Corporations' primary function was to raise investment capital for the Saxton Group's operations in Cuba, the Caribbean and elsewhere. Investor funds were pooled and transferred to Saxton.
13. Saxton, in turn, invested in the Saxton Group's various businesses. The Saxton Group's core business in Cuba and the Caribbean was the development and manufacturing of beverage and food products for the hospitality and tourist industries.
14. Tibollo initially became involved with Saxton through James Sylvester ("Sylvester"). Sylvester was involved with a number of companies with business interests in Cuba and elsewhere.
15. Sylvester retained Tibollo as a legal/business consultant. Tibollo speaks Spanish. He had important contacts and relationships with several Cuban government officials. Tibollo also was a trained and practising commercial lawyer, with an emphasis on international transactions.
16. Sylvester and Export Investors Group Ltd. ("Export") also raised funds from Ontario investors. These monies, along with funds raised through the sale of the Saxton Securities, purported to be invested in the same Cuban and other operations.
17. Sussex Admiral Group Limited (Barbados), later re-named Sussex Group Ltd. ("Sussex"), was Saxton's operating company. Among other things, Sussex held the Saxton Group's economic associations, operating contracts and supply agreements. Saxton, and to a much smaller extent Export, funded Sussex's activities.
18. Commencing in or about the fall of 1996, the relationship between Saxton's Eizenga and Export's Sylvester deteriorated. As a result, in the summer of 1997, Tibollo become Sussex's President. In this role, among other things, Tibollo ran the Cuban beverage and printing operations. He reported to Eizenga and Sylvester.
19. Tibollo also participated in the going-public process. It was contemplated that, by way of a reverse take-over, Sussex's assets would be vended in to F.S.P.I Technologies Corp., an Alberta Stock Exchange listed company. Tibollo knew that the Saxton Securities (and Export) investors would become shareholders in the anticipated public company.
20. Between July 1996 and August 1998, Tibollo participated in the illegal distributions, and engaged in unregistered trading, of the Saxton Securities by, among other things,
Marketing/advertising the sale of the Saxton Securities to the Ontario public by drafting promotional and investor relations material concerning Saxton's Cuban operations; and
soliciting the sale of the Saxton Securities through meetings with, and presentations to, Saxton sales representatives and investors concerning the Cuban business and its growth potential.
21. Tibollo knew, or ought to have known, that the investing public and Saxton salespeople, relied upon his representations. His professional status and strong links with the Cuban government gave credibility to the Saxton Securities.
22. As Sussex's President, Tibollo failed to conduct the appropriate due diligence and make the necessary inquiries concerning the investment capital used by the Sussex operations, including whether or not Saxton's corporate structure, its distribution of securities and its sales representatives' conduct complied with Ontario securities law.
23. In the course of the going public process, concerns regarding the means by which the Saxton Securities were being distributed, the legality of such distributions and other securities law issues were brought to Tibollo's attention.
24. Further, to Tibollo's knowledge, in the summer of 1997, Saxton received a legal opinion enumerating several serious violations of the Act. Notwithstanding these circumstances, Tibollo failed to:
contact the Commission; or
take any steps to immediately curtail the securities violations.
25. Tibollo benefited financially from his misconduct. Between January and October 1997 alone, Saxton paid him in excess of $400,000.
26. Tibollo's conduct was contrary to Ontario securities law and the public interest.
27. Such other allegations as Staff may make and the Commission may permit.
Date: March 11, 2003.