A B.C. mining company has become the third of 11 companies formerly cited in the Bridgemark Group consulting case to admit to misrepresentations and filing misleading statements, while avoiding sanction proposals from the B.C. Securities Commission (BCSC).
Meanwhile, an independent commission hearing panel determined, in its April 14 decision, that former New Point Exploration Corp. CEO Bryn Gardener-Evans also made misrepresentations and filed misleading statements.
In exchange for the company’s pre-hearing admissions, BCSC executive director Peter Brady agreed not to propose any penalties against New Point — a decision which aligns with two similar cases where such admissions were ultimately made without any fines imposed by a sanctions panel.
Findings rooted in Bridgemark case
In November 2018, New Point was one of 11 Canadian Securities Exchange-listed companies (issuers) named as respondents in a joint hearing notice, along with over two dozen consultants and their respective companies, for alleged illegal distribution of securities and conduct abusive to the capital markets.
Then, Brady alleged the companies raised over $50 million in private placement proceeds from the consultants only to return much of the money back to the consulting firms as consulting fees “when little or no consulting services had been or were intended to be performed.”
The commission’s April 29, 2021 notice of discontinuance against much of the group ended what had been one of the largest proceedings against a single group of market actors in B.C. history. Instead, the commission issued new hearing notices to seven companies and their leaders for misrepresentations and cited four consultants from the Bridgemark case for insider trading and conduct abusive to the capital markets, in an amended hearing notice.
Two companies, Beleave Inc. and Speakeasy Cannabis Corp., have already admitted violations and with the panel’s April 14 ruling, New Point formally becomes the third from the original 11 companies to do so. The commission has hearings scheduled this year for four other companies (Blok, Affinor, Green 2 Blue and Preveceutical).
$5 million to consultants not fully disclosed to investors, panel rules
According to the panel’s findings, New Point (now known as Majuba Hill Copper Corp.) raised $6.3 million by selling close to 44 million shares in two private placements, in 2018.
However, the company did not disclose it had already cut cheques for $5 million to the consultants who had purchased the shares.
“The panel said that New Point had created a strong expectation among its investors and would-be investors that if it raised a material amount of new capital, most of the funds would be used for mining projects that it had mentioned in previous news releases,” the commission summarized in a news release.
“An omission becomes misleading when there is a marked and undisclosed divergence in use of proceeds from what the market expected,” the panel wrote.
The commission noted the panel found Gardener-Evans “was the company’s decision-maker, had reviewed and approved the news releases, was aware that the consulting fees were undisclosed, had signed the share transaction forms, and was listed as the executive officer knowledgeable about the material change in the company’s material change reports.”
According to the panel’s decision, Gardener-Evans met with a group representing the consultants before the second and largest private placement in August 2018, and engaged in a “cheque swap.”
Gardener-Evans was told by the consultants that he would be given a cheque for $4 million for the financing and at the same time Gardener-Evans was to write cheques to the individual consultants.
“Gardener-Evans and [the company’s CFO Norman George Wilfred] Wareham signed the cheques to the consultants and provided them to the consultants’ representative before New Point was given the private placement funds from those consultants,” noted the panel.
At the hearing in June and November of 2022, Gardener-Evans represented himself and argued, in his defence, according to the panel’s summary, “that no established rule or standard exists regarding the disclosure that must be made relating to amounts paid or owed to consultants and, accordingly, a new legal standard is going to be required.”
Gardener-Evans argued the disclosures he made were accurate by stating the funds raised were to be used for “general corporate purposes.”
He also said it was unfair for the commission to proceed against him considering it had halted trading in the company before the consultants had an opportunity to carry out any work.
According to the panel, Gardener-Evans further “suggested that the Commission has found difficulties with its regulations and is changing them after the fact while using him as a scapegoat.”
In its decision, the panel noted Brady’s submissions on the consulting contracts, based on the hearing notice: “It is not alleged that there was any impropriety with respect to the consulting agreements themselves, and as a result the validity of those agreements and the amounts paid is not in issue."
Nevertheless, the decision on misrepresentations and improper filings ultimately rested on how the panel interpreted those terms’ meanings, leaning on prior administrative and court decisions, such as the very class-action lawsuit filed by investors against many of the companies and most of the consultants:
In Tietz v. Cryptobloc Technologies Corp.,“it is clear that the definition of misrepresentation encompasses ‘half-truths,’” ruled B.C. Supreme Court Madam Justice Sandra Wilkinson, adding an “issuer cannot escape liability by only stating facts that are, strictly speaking, true, but which become misleading when considered alongside the omitted information.”
While New Point has a deal with the commission to not face sanctions, Gardener-Evans does not and his former colleague Wareham has already been fined $10,000 and handed a three-year suspension from stock market activity.
Meanwhile, related to the Bridgemark case, West Vancouver residents (and their respective companies) Anthony Kevin Jackson (BridgeMark Financial Corp. and Jackson & Company Professional Corp.), Justin Edgar Liu (Lukor Capital Corp. and Asiatic Management Consultants Ltd.) and Cameron Robert Paddock (Rockshore Advisors Ltd.) are alleged, in an amended hearing notice, to have conducted themselves contrary to the public interest as company directors and performed illegal insider trading.
The trio face a hearing this September, following lengthy delays.
A fourth accused, Robert John Lawrence, has already admitted to illegal insider trading and been fined $200,000 with three-year trading prohibitions.