Securities Law & Instruments

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

MARLENE BERRY, ALLAN EIZENGA,RICHARD JULES FANGEAT, MICHAEL HERSEY, LUKE JOHN MCGEE,

NORMAND RIOPELLE AND ROBERTLOUIS RIZZUTO

 

ORDER

(Subsection 127(1) and section127.1)

WHEREAS on September 24, 1998 the OntarioSecurities Commission (the "Commission") issued aNotice of Hearing and on February 7, 2003 issued an AmendedNotice of Hearing pursuant to section 127 of the SecuritiesAct, R.S.O. 1990, c. S.5, as amended (the "Act")respecting Normand Riopelle ("Riopelle") and others;

AND WHEREAS on September 24, 1998, theCommission made a Temporary Order as against Riopelle and others,such Temporary Order which was extended by Commission Ordersdated October 9, 1998 and February 5, 1999 (the "TemporaryOrder");

AND WHEREAS Riopelle entered into a SettlementAgreement executed September 22 and 25, 2003 (the "SettlementAgreement") in which he agreed to a proposed settlementof the proceedings subject to the approval of the Commission;

AND UPON reviewing the Settlement Agreementand the Statement of Allegations of Staff of the Commissionand upon hearing submissions from Riopelle and from Staff ofthe Commission;

AND WHEREAS the Commission is of theopinion that it is in the public interest to make this Orderpursuant to subsection 127(1) of the Act;

IT IS ORDERED THAT:

1. the attached Settlement Agreement is approved;

2. pursuant to subsection 127(1), paragraph2, trading in any securities by Riopelle cease for elevenmonths commencing on the date of this Order;

3. pursuant to subsection 127(1), paragraph6, Riopelle is reprimanded; and

4. the Temporary Order as against Riopelleno longer has any force or effect.

October 1, 2003.

"H. Lorne Morphy"
"Robert W. Davis"

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

MARLENE BERRY, ALLAN EIZENGA,RICHARD JULES FANGEAT, MICHAEL HERSEY, LUKE JOHN MCGEE,

NORMAND RIOPELLE AND ROBERTLOUIS RIZZUTO

SETTLEMENT AGREEMENT BETWEENSTAFF OF THE

ONTARIO SECURITIES COMMISSION

AND NORMAND RIOPELLE

I. INTRODUCTION

1. By Notice of Hearing dated September 24,1998 and Amended Notice of Hearing dated February 7, 2003(the "Notice of Hearing"), the Ontario SecuritiesCommission (the "Commission") announced that itproposed to hold a hearing to consider, among other things,whether, pursuant to subsection 127(1) of the SecuritiesAct, R.S.O. 1990, c. S.5 (the "Act"), it isin the public interest for the Commission to make an orderthat the exemptions contained in Ontario securities law donot apply to the respondent Normand Riopelle ("Riopelle")permanently or for such time as the Commission may director such other orders as the Commission deems appropriate.

2. By Temporary Order dated September 24,1998, the Commission ordered that the exemptions containedin subsections 35(1)21 and 35(2)10 of the Act do not applyto Riopelle (the "Temporary Order"). The TemporaryOrder was extended by Commission Orders dated October 9, 1998and February 4, 1999.

II. JOINT SETTLEMENT RECOMMENDATION

3. Staff of the Commission ("Staff")agrees to recommend settlement of the proceeding respectingRiopelle initiated by the Notice of Hearing in accordancewith the terms and conditions set out below. Riopelle consentsto the making of an order against him in the form attachedas Schedule "A" based on the facts set out in PartIII of this Settlement Agreement.

III. STATEMENT OF FACTS

Acknowledgement

4. Solely for the purposes of this proceeding,and of any other proceeding commenced by a securities regulatoryagency, Staff and Riopelle agree with the facts set out inparagraphs 5 through 20 of this Settlement Agreement.

Facts

5. Saxton Investments Ltd. ("Saxton")was incorporated on January 13, 1995. Allan Eizenga ("Eizenga")was Saxton's registered director. Saxton and Eizenga establishednumerous offering corporations, as listed below (the "OfferingCorporations").

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.

6. Saxton and the Offering Corporations representedto the public that they were investing in businesses in Cubaand other Caribbean companies.

7. On or about October 7, 1998, the Courtappointed KPMG Inc. ("KPMG") as the custodian ofSaxton's assets. In early 1999, KPMG reported that the OfferingCorporations had raised approximately $37 million from investors.All funds invested in the Offering Corporations had been transferredto Saxton. At that time, KPMG held the view that the valueof the Saxton assets, at its highest (as reported by relatedcompanies), was approximately $5.5 million.

8. During the material time, Riopelle wasa level two life insurance agent. He has never been registeredwith the Commission under the Act to trade in securities.

9. Riopelle sold two Saxton investment productsnamely: (i) a "Fixed Dividend Account" product;and (ii) an "Equity Dividend Account" product. Ineither case, the investor purchased securities in one or moreof the Offering Corporations (the "Saxton Securities").

10. Riopelle sold the Saxton Securities to11 Ontario investors for a total amount sold of approximately$505,700. Each of the investors was an existing client ofRiopelle.

11. The Offering Corporations were incorporatedpursuant to the laws of Ontario. Riopelle's sales of the SaxtonSecurities constituted trades in securities of an issuer thathad not been previously issued. None of the Offering Corporationsfiled a prospectus with the Commission.

12. By selling the Saxton Securities to hisclients, Riopelle traded in securities, which trades weredistributions, without a prospectus being filed or receiptedby the Commission and with no available exemption from theprospectus requirements of Ontario securities law.

13. Further, by selling the Saxton Securitiesto his clients, Riopelle traded in securities without beingregistered with the Commission and with no exemption fromthe registration requirements being available to him.

14. Riopelle failed to provide his clientswith access to substantially the same information concerningthe Saxton Securities that a prospectus filed under the Actwould provide. Although investors were provided with an OfferingMemorandum, such Memorandum provided little information aboutSaxton other than the geographic location in which the companyconducted business. Further, Riopelle never received any financialstatements from Saxton.

15. Riopelle did not have a sufficient understandingof the Saxton products. He failed to conduct the appropriatedue diligence respecting the nature and quality of the Saxtonproducts and the regulatory requirements to sell such products.

16. Riopelle told his clients that the Saxtonproducts were similar in nature to an insurance segregatedfund notwithstanding that the Saxton Securities were describedin the Offering Memoranda as "speculative".

17. The Fixed Dividend Account product wasmarketed by Saxton and sold by Riopelle as providing an annualrate of return of 10.25% for a three year term compoundedor 12% for a five year term compounded. Investors' quarterlyaccount statements reflected this rate of return.

18. Riopelle told investors that the Saxtonproducts had been available for purchase for five years. Healso told investors that a dividend of 30% had been paid onthe Equity Dividend Account in each of the last two years.Investors' quarterly account statements reflected a marketincrease of between 25% to 30%.

19. Riopelle received commissions of approximately$25,000 on the sales described in paragraph 10 above.

20. Riopelle's conduct was contrary to Ontariosecurities law and the public interest.

IV. RIOPELLE'S POSITION

21. Riopelle takes the position and representsto Staff that:

(a) Rick Fangeat ("Fangeat") andEizenga told him that he did not need a license to sellthe Saxton Securities;

(b) With reference to paragraph 18, he wastold by Fangeat and Eizenga that Saxton had been in operationfor five years and a dividend of 30% had been paid in eachof the last two years. Fangeat and Eizenga showed him accountstatements that reflected a 30% dividend. He passed thatinformation on to his clients;

(c) He took comfort in the involvement ofthe Laurentian Bank. He received an agent number from, andinvestors opened accounts at, the Bank in order to purchaseSaxton RRSP products. He assumed that the Bank had donedue diligence on Saxton and the agents' licensing requirements;and

(d) He did not move clients' money out ofsecure investments to purchase the Saxton Securities.

V. TERMS OF SETTLEMENT

22. Riopelle agrees to the following termsof settlement:

(a) the making of an order:

(i) approving this settlement;

(ii) that trading in any securities byRiopelle cease for eleven months;

(iii) reprimanding Riopelle; and

(iv) that the Temporary Order no longerhas any force or effect.

VI. STAFF COMMITMENT

23. If this Settlement Agreement is approvedby the Commission, Staff will not initiate any proceedingunder Ontario securities law respecting any conduct or allegedconduct of Riopelle in relation to the facts set out in PartIII of this Settlement Agreement.

VII. APPROVAL OF SETTLEMENT

24. Approval of the settlement set out inthis Settlement Agreement shall be sought at the public hearingof the Commission scheduled for October 1, 2003 or such otherdate as may be agreed to by Staff and Riopelle (the "SettlementHearing") in accordance with the procedures describedin this Settlement Agreement. Riopelle will attend the SettlementHearing in person.

25. Counsel for Staff or for Riopelle mayrefer to any part, or all, of this Settlement Agreement atthe Settlement Hearing. Staff and Riopelle agree that thisSettlement Agreement will constitute the entirety of the evidenceto be submitted at the Settlement Hearing.

26. If this settlement is approved by theCommission, Riopelle agrees to waive his rights to a fullhearing, judicial review or appeal of the matter under theAct.

27. Staff and Riopelle agree that if thissettlement is approved by the Commission, they will not makeany public statement inconsistent with this Settlement Agreement.

28. If, for any reason whatsoever, this settlementis not approved by the Commission, or an order in the formattached as Schedule "A" is not made by the Commission:

(a) this Settlement Agreement and its terms,including all discussions and negotiations between Staffand Riopelle leading up to its presentation at the SettlementHearing, shall be without prejudice to Staff and Riopelle;

(b) Staff and Riopelle shall be entitledto all available proceedings, remedies and challenges, includingproceeding to a hearing of the allegations in the Noticeof Hearing and Statement of Allegations of Staff, unaffectedby this Agreement or the settlement discussions/negotiations;

(c) the terms of this Settlement Agreementwill not be referred to in any subsequent proceeding, ordisclosed to any person, except with the written consentof Staff and Riopelle or as may be required by law; and

(d) Riopelle agrees that he will not, inany proceeding, refer to or rely upon this Settlement Agreement,the settlement discussions/negotiations or the process ofapproval of this Settlement Agreement as the basis for anyattack on the Commission's jurisdiction, alleged bias orappearance of bias, alleged unfairness or any other remediesor challenges that may otherwise be available.

VIII. DISCLOSURE OF SETTLEMENT AGREEMENT

29. Subject to paragraph 25 above, this SettlementAgreement and its terms will be treated as confidential byStaff and Riopelle until approved by the Commission, and foreverif, for any reason whatsoever, this settlement is not approvedby the Commission, except with the written consent of Staffand Riopelle, or as may be required by law.

30. Any obligations of confidentiality shallterminate upon approval of this settlement by the Commission.

IX. EXECUTION OF SETTLEMENT AGREEMENT

31. This Settlement Agreement may be signedin one or more counterparts which together shall constitutea binding agreement.

32. A facsimile copy of any signature shallbe as effective as an original signature.

September 22, 2003.

"Normand Riopelle"
Normand Riopelle

October 1, 2003.

"Michael Watson"
Staff of the Ontario Securities Commission
Per: Michael Watson