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Canadian regulators have longer memories....

BCSC sues over $1,500 fine

2009-03-16 17:47 ET - Street Wire

by Mike Caswell

The B.C. Securities Commission has filed another lawsuit seeking to collect an old unpaid fine. The suit targets Kenneth Hrappstead, a Victoria resident who allegedly has not paid a $1,500 penalty from April 7, 1999. The BCSC fined him for offering an unregistered investment in a trading program, which had a purported return of 2,100 per cent. The fine was small because no investors gave him money.

The BCSC filed a statement of claim against Mr. Hrappstead in the Supreme Court of British Columbia on March 12, 2009. The two-page claim alleges that the BCSC ordered Mr. Hrappstead to pay $1,500 on April 7, 1999, but he has not paid the fine, despite demand. The regulator seeks a $1,500 judgment, plus costs and interest. The commission is represented by William Roberts of Lawson Lundell LLP.

BCSC's Hrappstead decision

The suit comes nearly 10 years after the BCSC handed down a decision against Mr. Hrappstead. According to the April 7, 1999, decision, he had had been operating under the name North American Group, offering a purported leveraged investment through a European bank. He said that for each $300,000 (U.S.) he raised, he could secure a $10-million (U.S.) "commitment" from the bank. He only needed to provide a copy of a cashier's cheque showing evidence that the $300,000 (U.S.) was available.

The program ended after the RCMP learned about it in May, 1997. An RCMP officer, posing as a potential investor, approached him and asked him about the program. Mr. Hrappstead told the officer that he had two investment programs available. The first required an investment of $300,000 (U.S.), and would yield $1-million (U.S.) in four months. The second required $125,000 (U.S.) and would yield $600,000 (U.S.) in one month. He also told the officer that one of the key features of his programs was that the investor's principal was secure.

The next day, another officer, Corporal George Pemberton (now IMET's Inspector Pemberton), visited Mr. Hrappstead at home and informed him that he was under investigation. Mr. Hrappstead told the officer that he had been holding investor information sessions, and showed him information materials that he provided to investors. After some discussion, Corporal Pemberton advised Mr. Hrappstead that he was violating the B.C. Securities Act and he could not continue to provide advice or distribute securities without the consent of the BCSC. Mr. Hrappstead agreed to cease his program.

Mr. Hrappstead also told Corporal Pemberton that he had not placed any investor funds yet because he had not found a satisfactory investment program. "There was no evidence to suggest that any investors actually invested any money in any of Hrappstead's Investment Programs, and Commission staff does not believe that any money was raised from investors," the decision reads.

In addition to the $1,500 fine, the BCSC banned him from performing investor relations and from serving as a director or officer of a company for two years. Mr. Hrappstead did not attend the BCSC's one-day hearing, held on Jan. 26, 1999.

Prior BCSC suits

The lawsuit against Mr. Hrappstead is not the first collection suit the BCSC has filed. Recent attempts to collect old fines included a case against Dan Fisher, a Texas man who ran ads in The Vancouver Sun in 1990 promising a 700-per-cent return on an oil investment. The BCSC fined him $56,000, and banned him for 10 years. On Aug. 7, 2008, the regulator filed a statement of claim alleging that Mr. Fisher had not paid the fine. It said his current occupation was unknown, and his last known address was in Texas. Mr. Fisher did not defend the case, and the BCSC won a default judgment against him on Feb. 4, 2009.

The BCSC filed a similar suit on Jan. 16, 2009, against Norman Armstrong, 71, a con artist last known to live in Surrey. The regulator had fined him $100,000 for defrauding 10 investors with a purported investment in Dia Met Minerals Ltd., but he had not paid. In a related criminal case, the judge sentenced him to eight years in jail, but declined to order any restitution because "I see no realistic prospect for him being able to pay these people back short of winning the lottery."

In its collection lawsuit, the BCSC said that it had demanded he pay the fine, but received nothing. Mr. Armstrong has not responded to the suit, and there has been no activity on the file since the BCSC's initial statement of claim.

http://www.stockwatch.com/newsit/newsit_newsit.aspx?bid=Z-C:*BCSC-1583712&symbol=*BCSC&news_region=C

http://www2.canada.com/vancouversun/businessbc/extras/bcsc_defaulters.pdf