An Alberta Securities Commission panel has ordered two former executives of Calgary-based merchant bank Proprietary Industries Inc. to pay $1.5 million in administrative penalties and costs for breaching Alberta securities laws.

The panel found that Peter J. Workum and Theodor Hennig failed to make fair, accurate public disclosure of material information for 1998, 1999 and 2000. Their behaviour involved “some of the most egregious misconduct imaginable on the part of individuals entrusted with the stewardship of a public company,” the panel said.

“We believe it is imperative not only that the Individual Respondents be removed for significant periods from access to the capital market but also that they incur a sharp, direct monetary sanction. Any other result would, in our view, fail to provide the necessary specific and general deterrence,” the panel stated.

Workum faces permanent bans on trading, denial of exemptions and on acting as a director and officer, as well as a $750,000 administrative penalty and $200,000 in costs.

Hennig faces a permanent director and officer ban, 20-year trading and denial of exemptions bans, a $400,000 administrative penalty and $175,000 in costs.

The sanction decision follows a decision by the ASC panel in June that found Workum and Hennig responsible for structuring transactions to produce a misleading impression of Proprietary Industries’ financial position and results. The panel also found that Proprietary Industries failed to follow Canadian generally accepted accounting principles in reporting gains on transactions in its 1998, 1999 and 2000 financial statements and in other financial disclosure.

The two executives also engaged in conduct that created an artificial price for the securities of Newmex Minerals Inc.; concealed financial benefits they obtained from commissions paid by Proprietary Industries; failed to file insider trading reports; and made numerous misrepresentations to ASC staff, according to the panel.

Strategic Investments Fund and Cheshire Capital Inc. also received sanctions in this case for their role in the market manipulation that took place.

The ASC panel issued permanent trading and exemption bans against Strategic Investments Fund and Cheshire Capital as well as a permanent ban on trading in their securities and exchange contracts.

Strategic Investments Fund and Cheshire Capital were also ordered to each pay $25,000 towards costs.

IE