Canada Payphone Corp - Street Wire
BCSC-banned Kuhn was fired by Union and IPO Capital
Canada Payphone Corp CPY
Shares issued 23,031,194 Sep 17 2002 close $ 0.20
Wednesday September 18 2002 Street Wire
See B.C. Securities Commission (*BCSC) Street Wire..
by Brent Mudry
The British Columbia Securities Commission's seven-year ban on former Howe Street broker Brian Paul Kuhn, for stuffing client accounts with unregistered shares of a car tire polishing promotion, is the latest setback for the former booster of Canada Payphone. Mr. Kuhn has been featured in three lawsuits with former employers Union Securities and IPO Capital in the past 10 months.
In a consent settlement released Monday, the BCSC notes that in mid-1999, while working at a mystery brokerage, Mr. Kuhn touted and sold $175,000 worth of purported seed shares of North American Marketing, a private company promoting Tire Tux and Tire-Glo tire polishers. Although the regulatory decision made no mention of any brokerages, Mr. Kuhn was working at IPO Capital at the time, after being fired by Union Securities.
Mr. Kuhn made quite a mark during his brief brokerage career. He became a broker in February, 1996, with a short stint at Wolverton Securities, moved that October to Union, which dismissed him on July 15, 1998, effective Sept. 15, 1998. IPO Capital hired Mr. Kuhn a week after Union fired him, but he left the industry a year later, on Aug. 31, 1999.
Mr. Kuhn was already in trouble, if Union is to be believed, before joining IPO, although the BCSC gave him credit for having no previous disciplinary history and for co-operating with its investigation of him.
Union made unflattering allegations against its former broker in a $120,000 suit it filed against him last November. Union claims that sometime after it dismissed Brian Kuhn in mid-1998, it discovered a pattern of regulatory breaches when a number of his clients complained. The allegations have not yet been proven in court.
While the reasons for Mr. Kuhn's termination are not disclosed, Union claims in in its suit that after his departure, a number of former clients stepped forward with claims against the brokerage arising from conduct of Mr. Kuhn that was unlawful, in violation of securities rules and regulations, dishonest, reckless and negligent.
By the time it filed suit, Union had already paid out claims to four clients, totaling $97,000, including $77,200 paid to Haibeck Communications Group Inc. after Mr. Kuhn refused to obey instructions to sell this client's holdings in Canada Payphone, an in-house promotion at Union. Union also paid out about $20,000 to three clients who bought shares of Capital Technologies, which was not registered for trading in B.C.: $7,500 (U.S.) to an unidentified client, $2,500 (U.S.) to Craig Fraser and $3,600 to John Kos.
While this suit has not yet been proven or dismissed, Mr. Kuhn was featured in two other actions, a 1999 suit in which he sued Union and a 2000 suit in which IPO sued him, in which judgments were rendered in the past six months.
In the first suit, Union won a liability decision in July, effectively dismissing Mr. Kuhn's claims against it. Madam Justice Donna Martinson ruled, amongst other things, that Union was entitled to use Mr. Kuhn's reserve account to pay his clients' bad debts. The ruling, which came six months after a six-day hearing ended Jan. 18, was a win for defence lawyer Henning Weibach, representing Union Securities and Rex Thompson, and a loss for Bob Breivik, Mr. Kuhn's counsel.
According to court testimony, Mr. Kuhn was hired by Mr. Thompson on the recommendation of Raymond Sampson, a good friend of Mr. Thompson's and the investor relations representative and a co-founder of Canada Payphone. From Wolverton, Mr. Kuhn brought over 75 per cent to 80 per cent of his book, or about $500,000, almost entirely Canada Payphone shares.
"From the time he was hired (at Union), Mr. Kuhn built his book primarily with CPY stock and he received no pressure during this time frame. Approximately half a million CPY shares were owned by Union and Mr. Thompson personally. CPY traded for over a year at approximately $6 a share, representing a value of that combined position of approximately three million dollars," stated Judge Martinson, based on the testimony of Mr. Kuhn's co-plaintiff, Dana Ratzlaff.
Alas, Mr. Kuhn's star dimmed as Canada Payphone shares eventually collapsed.
"Mr. Kuhn aggressively promoted CPY shares while at Union. He also purchased shares himself, on margin. Initially, the CPY shares did very well, then levelled off and eventually began to fall in value. As a result Mr. Kuhn s client debts accumulated," stated the judge.
Amazingly, Mr. Kuhn claimed he had no clue what brokers' reserve accounts are for, and he testified that he thought his reserve account was a savings account for the broker. Mr. Kuhn also had trouble remembering that he signed several Union documents specifying reserve account details. His former employers, Brent Wolverton of Wolverton Securities, and Union's Mr. Thompson, testified that reserve accounts are standard in the industry and are used largely to offset client account debits.
In the second suit, before a different judge but on a similar issue, IPO failed this spring to win a preliminary summary judgment of $34,225 against Mr. Kuhn.
All of this, of course, is now in the past as Mr. Kuhn has been kicked out of the industry by the BCSC. Hopefully, a new career path might emerge. Mr. Kuhn's BCSC settlement was witnessed in the offshore haven of the Cayman Islands by career coach Kevin Pidwerbeski. "I can truly boast that ALL my clients have risen to the challenge and surpass their own goals whether they are personal or professional," states coach Pidwerbeski on the Web site of Kyosei Consulting International, his employer.
