Scandal in the Alberta Stock Exchange

Updated April 28, 2005

Business community not worried about Alberta Securities controversy: Klein

Welcome to the Alberta Reich. Once again, Herr Klein has allowed the fox to run the hen house. In doing so the all too predictable has happened.

Instead of admitting that provincial regulation (or non regulation ) of the Alberta stock exchange is a FAILURE and a SCANDAL of insider trading proportions. The Alberta Reichstadt circles the wagons in defense of its own, while Ralph goes golfing.

Klein still confident of the ASC
EDMONTON - Premier Ralph Klein says he does not believe investors are worried about the performance of Alberta's securities watchdog despite its recent controversies.

The Finance Minister at first dismisses media reports on abuses and questionable practices inside the ASC. Now she is supposedly acting on them. But the ASC see's itself as being above government oversight, ah the conundrum of self regulation comes home to roost with the Tories.

Alta securities commission says auditor general can't see enforcement files
Thursday, April 28, 2005
EDMONTON (CP) - The Alberta auditor general's investigation into the Alberta Securities Commission has hit a snag. Commission officials say they failed to reach an agreement with Fred Dunn about the parameters of his probe and that if they can't find common ground, they will refuse him access to their files. ASC spokesman Rod McLeod said he's not sure where the two sides go now. "We told Mr. Dunn that his proposed scope of audit may require the ASC to breach statutes and legal obligations placed upon us by the Securities Act (and) that we cannot and will not do," McLeod told reporters in Calgary. He said they are waiting for a written response from Dunn. "If we can live with the (parameters), we'll proceed. If we cannot, we'll have no alternative but to deny Mr. Dunn access to documents we feel statutorily obligated to protect."

Finance Minister Shirley McClellan tried to referee the two provincial bodies Thursday, saying she is confident both sides can work it out and the probe will go ahead. "I have every confidence that the auditor general and the securities commission and their legal people will interpret the appropriate sections and ensure that within the bounds of the legislation that the auditor general will receive all the information that's pertinent to his investigation," she told the legislature. She pointed out that both bodies were creatures of the Alberta legislature and said she was confident they will sort out who has authority to do what.

ASC Restrictions Ruin Any Chance of Proper Investigation, Taft

Edmonton – Alberta Liberal Leader Kevin Taft is calling the Alberta Securities Commission’s efforts to restrict the Auditor General’s investigation of the commission proof positive that the review will fall well short of getting to the bottom of recent allegations.

ASC sets restrictions on audit information

By DAVE EBNER

Friday, April 29, 2005 Page B10 Globe and Mail

The Alberta Securities Commission has placed restrictions on the information the Alberta Auditor-General can look at in an audit of the regulator. The ASC, which is dealing with a controversy over questionable enforcement practices, said the Alberta Securities Acts deems all information connected to enforcement matters to be confidential. The Auditor-General is planning to release a report on its audit in July and this week outlined specific things it wanted to look at, including procedures the ASC uses to ensure that "conclusions or decisions are adequately documented." The ASC restrictions "ruin any chance of proper investigation," said Kevin Taft, leader of Alberta's Opposition Liberals.

Instead of admitting there is a serious if not criminal situation inside the ASC the Finance Minister calls on the workers to blow the whistle on their bosses. And, again predictably, when they do they get fired by their ASC bosses in order to cover up their excesses and abuses. Catch 22.

De-Regulation, self regulation, all the so called free market solutions to the crisis of the Capitalist state are applied here in Alberta with Republican-lite glee. As a result of the Wild West atmosphere of the oil boom without end, the serious flaws in the de/un regulated market are swept up under the carpet of oh look there’s another gusher.

How many failures of privatization and deregulation must occur before the Alberta Volk wake up and smell the coffee. Let me count the ways……Ralph’s offer of being hung, drawn and quartered still stands…..when will we take him up on it…..

The scandals in Alberta, the democratic deficit, the pocketing of taxpayers money for contract work that wasn’t tendered nor ever done, by a Tory insider, the failure of electrical deregulation, the current ASC scandal, every problem in Ottawa is once again mirrored in Alberta.

This is what happens when political parties are in power too long and without opposition that can defeat them. Such was the case after eight years of Mulroney’s Conservatives in Ottawa and after ten years of the Chrétien Liberals in power.

In Alberta the Party of Calgary has been in power for 33 years, and Ralph has been in power for 11 of those. Just think of all the skeletons in the Legislature that they have accumulated.

Below are the current updates, as they say watch this space as more of the facts behind this MAJOR STOCK EXCHANGE SCANDAL are revealed.

Following the updates are the April 1 and March 23 stories that exposed the scandal in the ASC. See the comments section where I have added the news updates between April 1 and April 23 when the ASC bosses began their campaign of intimidation of the staff.

Click here for Google news links to all the stories on the ASC. This just gets better and better, and the silence from the Government or at least Ralph is deafening. This is the Ad scam of Alberta.

THE ASC WITCH-HUNT BEGINS

The Alberta Government began investigating the ASC because of pressure from the media and the financial industry.

The audit they have called for has resulted in exposing ASC staff to arbitrary dismissal by their ASC bosses for being Whistle Blowers in the ASC...

According to the provincial Liberals; The Witch Hunt is On.

Internal Audit Committee an Extension of PC Party into Government

Kevin Taft, leader of the opposition Liberals, said an out-of-province investigator is needed to clear up the "sorry mess." "We basically have a clubby situation in which Tories are investigating Tories . . . and lo-and-behold the real picture never emerges," Mr. Taft said. "There is too much smoke for there not to be some serious fire burning there." Globe and Mail April 26 2005

Alberta Securities Commission staff implore finance minister to step in

Canadian Press

Thursday, April 28, 2005

EDMONTON (CP) - Alberta Finance Minister Shirley McClellan has been implored by staff at the Alberta Securities Commission to intervene in a controversy that has dogged the regulator for months.

In a two-page letter to the minister dated Monday, 35 current commission employees accuse two senior officials of "bullying and intimidating behaviour." The result, they say, is that the work of the ASC, Canada's second-largest market regulator, is suffering and staff are afraid to co-operate with three investigations currently underway.

The employees complain specifically about the actions of chairman Stephen Sibold, whose contract expires next week, and executive director David Linder. Neither man was available for comment.

Sibold and Linder have denied earlier allegations of misconduct at the ASC, including interference in investigations of Alberta Securities Act violations.

The letter from employees is the latest development in an ongoing controversy that surfaced earlier this year surrounding the commission.

Sibold previously referred to anonymous complainants as "depraved" and "cowardly" and threatened legal action against them. He has also threatened to sue newspapers that reported the allegations.

In the legislature, McClellan had urged employees to come forward with any evidence and assured them there would be no reprisals.

Last week senior ASC administrator Grahame Newton was fired for allegedly failing to co-operate with a KPMG forensic audit of commission computers.

The employees' letter says the firing has spawned greater fears among the 100-member staff and added to the "high stress levels, extreme distrust and paranoia" of recent months.

In addition to the KPMG investigation, the commission has hired consultants to address "human resources problems" discovered in an earlier probe by Calgary lawyer Perry Mack.

Finance Minister pulls a Duh oh!

McClellan says ASC needs to keep her informed

Apr 26 2005
CBC News EDMONTON – Finance Minister Shirley McClellan says someone at the Alberta Securities Commission should have informed her that a senior administrator was going to be fired. McClellan says she needs to know what's going on at the commission because she is the person answering questions about its operations.

A big Opps......now, only now, days later does the Minister demand that the ASC answer to her. A bit of a back hand slap, for their arbitrary firing of a whistle blower. Hmm arbitrary actions is one of the things the ASC insiders are accused of doing........

ASC administrative head dismissed

CBC News

CALGARY – The Alberta Securities Commission's director of administrative services has been fired. Grahame Newton said he was informed of his dismissal in a letter couriered to his home Thursday night, but that the reasons cited are without foundation. He wouldn't elaborate, but said he believes the real reason he was let go is that he was one of the people who spoke out about problems at the commission.

Alberta Liberals attack ASC computer investigation
Globe and Mail
By DAVE EBNER
Friday, April 22, 2005
A forensic computer probe at the Alberta Securities Commission is producing a "fearful and intimidating climate," said Alberta's Liberal Opposition Leader Kevin Taft in the legislature's question period yesterday. Finance Minister Shirley McClellan said Mr. Taft had "a great deal of ignorance" about how the computer probe is being conducted. The ASC said this week that it hired KPMG to assess the security of its computer systems, particularly e-mail. Ms. McClellan said the probe was in no way trying to expose ASC employees who provided anonymous allegations of lax enforcement practices at the commission for in an investigation earlier this year. Those allegation were found to be untrue.

OFFICIAL TERMINATED FOR CAUSE, ASC SAYS
By DAVE EBNER and KATHERINE HARDING
Globe and Mail
Saturday, April 23, 2005
Controversy at the Alberta Securities Commission intensified yesterday with the official announcement that one senior employee at the regulator has been fired. The part-time commissioners who oversee the ASC said in a press release that Grahame Newton, the commission's director of administrative services, was terminated for cause because he did not co-operate with an audit of the ASC's computer systems and admitted to "the interception of several private e-mail communications among ASC staff." A lawyer for Mr. Newton said there were no grounds to terminate for cause, adding that Mr. Newton co-operated fully with the computer audit. The ASC has been rocked by anonymous allegations of lax enforcement and unprofessional behaviour. The computer audit was started as part of an investigation into those allegations, most of which have been declared unfounded by the part-time commissioners.

Alberta Securities Commission says it had just cause to fire employee

April 23, 2005

Investor advocate Diane Urquhart said Friday that the firing of Newton in the midst of the turmoil at the securities commission will not go over well with the investing public. "If in fact someone has had a remedial termination because of an allegation of providing information . . . it's unacceptable and the investing public should be very concerned," she said. Urquhart was skeptical of the timing of the KPMG audit. "It's entirely reasonable for a forensic audit to occur . . . but right in the middle of a human-resources fiasco makes no sense from a management point of view. It's oil on a fire." Newton was fired the same day Alberta Finance Minister Shirley McClellan told the legislature there was no witch hunt underway.

APRIL 1, 2005

The 'top brass' are covering their ass in fine old Troy tradition, must be Tories they deny like Klein. The Alberta Securities Commission proves the need for ONE NATIONAL REGULATOR, like the SEC in the US. Here we have five, count 'em five stock markets across Canada no uniform rules, and no single body responsible for those exchanges.

"Unlike the U.S. and its powerful SEC, there is no national regulator in Canada. It's an international anomaly that dates to the British North America Act of 1867, which divvied up government responsibilities and decreed property a provincial matter. Until the late 1990s, the stock market followed a similar pattern: there were five separate exchanges in Canada. They've consolidated somewhat, but the regulators who oversee the markets haven't managed to move in tandem. Instead, they've been bogged down by an ages-old Canadian political game, that tug of war for power between Ottawa and the provinces." Canada needs a securities watchdog with teeth

The Alberta exchange has had scandals before,Bre-X being the most infamous, fraudulent penny stocks, insider trading, in fact in the 1980's and '90's the Alberta and the Vancouver Stock exchanges were known as the bad boys of the marketplace, promoting boiler room stock operations which were documented in the Financial Post, which is now part of the National Post.

The Infamous Vancouver Stock Exchange

In the novel, the company established by Granger McAdam to exploit his diamond find in Vietnam is listed on the Vancouver Stock Exchange (VSE) which specialised in the financing of junior mining companies all over the world. However it was also one of the most controversial stock exchanges in the world and had been described as the Sodom and Gommorah of modern day financial markets. Its reputation makes Cassie Stewart's task of raising money to finance a diamond mine more difficult.

"Vancouver has all sorts of dodgy companies on the Exchange, cowboys, fly-by-nights."

"This market's not like London. It's pretty wild, with all sorts of unscrupulous operators, lots of manipulation."

Despite her confidence, Cassie discovers that the Vancouver Stock Exchange's notoriety is not exaggerated! Nevertheless the risks she runs in tangling with the sharks in Vancouver are as nothing compared with those that await Eva when she returns to Vietnam ...

N.B. In reality on November 29th, 1999 the Vancouver and Alberta stock exchanges merged to form the Canadian Venture Exchange (CDNX). The reputation of the Alberta Stock Exchange had been greatly damaged by the BRE-X scandal. It is to be hoped that the CDNX will enjoy a much better reputation than its two predecessors!"

With the Klein revolution of getting government out of the business of regulation or oversight, what do you expect in an oil rich speculative market place but speculation. Welcome to the wild west, where anything goes, investor beware you will get screwed and don't go to the sheriff cause he's on the take.

NO FOOLING

ASC issues raised year ago

Letter to government: Former senior enforcement officer outlined concerns

Theresa Tedesco, Chief Business Correspondent

Financial Post
Friday, April 01, 2005

The Alberta government was warned about "significant ethical shortcomings" in the executive offices at the Alberta Securities Commission last year, according to a confidential letter obtained by the Financial Post.

The four-page missive delivered in January, 2004, to Greg Melchin, Alberta's former revenue minister, claimed there was a "two-tier regulatory regime" with one set of rules for "normal" people and another for the "powerful." The letter also alleged senior executives engaged in favouritism among staff, exchanged "erotic" e-mails, and condoned an "open display of sex toys" in the regulator's offices.

The letter, written on Jan. 9, 2004, by Wayne Alford, a former ASC enforcement director, lists four incidents of what he described as "significant ethical failing," and warned that "should they become public knowledge, would certainly bring the administration of Alberta's securities laws into disrepute if not open ridicule."

Mr. Alford, who resigned from the securities watchdog in December, 2003, urged Mr. Melchin to "intercede" and "address the abuses at the ASC."

In one case, Mr. Alford claimed Mr. Sibold decided whether the commission would pursue an enforcement action against a Calgary lawyer, who was also a former law partner of Mr. Sibold, in connection with an insider trading case. In the end, according to Mr. Alford, enforcement staff "received instruction from Sibold and Linder not to pursue this case even though the case was strong and in the opinion of staff, completely sustainable."

Mr. Sibold is also alleged to have become involved in a case involving another Calgary lawyer who had been investigated for providing misleading information to the Toronto Stock Exchange. The unnamed lawyer was also a partner at Mr. Sibold's former law firm in Calgary. Mr. Alford wrote that Messrs. Sibold and Linder instructed enforcement staff to "discontinue enforcement action" against the individual. Instead, the ASC issued a public notice that provided guidelines for lawyers about their obligations when dealing with regulators.

"The enforcement action was terminated notwithstanding staff's opinion that the case was strong and completely sustainable," Mr. Alford wrote.

In the third example, Mr. Alford claimed Mr. Sibold "objected strenuously to staff" who commenced an enforcement action against an unnamed, prominent Canadian businessman for alleged insider trading. After reviewing the file, Mr. Sibold's view, according to the letter, was that "there was no case" against the businessman, and he ordered his staff to "seek a quick and very insignificant settlement to the file." However, ASC enforcement lawyers involved in the case objected in writing to Mr. Sibold. In any event, the businessman subsequently "admitted to all of staff's allegations relating to insider trading."

ASC SCANDAL BACKGROUND

Alberta regulator lashes out at 'depraved' accusers
Globe and Mail Thursday, March 24, 2005

CALGARY -- Stephen Sibold, the embattled chairman of the Alberta Securities Commission, denied allegations of misconduct yesterday, calling his accusers "depraved."

"I challenge these cowardly and depraved individuals who are hiding behind anonymity to come forward, identify themselves and present what they take to be evidence supporting their baseless and false allegations," Mr. Sibold said during a brief press conference held at the ASC offices in Calgary.

He answered no questions about the allegations, on the advice of his lawyer.

In an e-mail to commission staff yesterday morning, Mr. Sibold called the allegations "malicious and vicious," ending the four-paragraph missive by saying he wanted to "prosecute these depraved individuals."

Mr. Sibold announced that he was serving a defamation notice to the National Post and the reporter who authored two stories that appeared in the paper yesterday.

The articles, citing unnamed sources, described the commission as dysfunctional, specifically saying that the regulator's top executives interfered in enforcement cases.

Mr. Sibold, whose term as chairman ends in May, and David Linder, the commission's executive director, were identified by the unnamed sources at the commission, according to the articles.

The accusations have thrown one of Canada's largest securities regulators -- the overseer of the country's oil and gas business -- into disarray.

Mr. Sibold forbade his communications staff to talk about the issue to reporters.

Meanwhile, the Alberta government is continuing its search for a new chairman, but a spokeswoman for the Finance Minister said only one round of interviews has been completed.

Mr. Sibold's five-year term ends in May.

All this is occurring as the province awaits the results of an investigation it requested in January over the ASC's regulatory practices.

The vigour with which the commission has pursued enforcement cases is at the heart of the allegations against Mr. Sibold and Mr. Linder, several securities lawyers said. Some believe the commission hasn't been tough enough.

Mr. Linder, who has been executive director since late 1997, said in a statement that the allegations had "no merit," adding that the commission during his tenure has operated under "the very highest standards of propriety, professionalism, fairness, respect and integrity."

The province's investigation into the allegations began in January when Alberta Finance Minister Shirley McClellan asked the ASC's nine part-time commissioners to look into suggestions of wrongdoing.

Calgary lawyer Perry Mack was hired to interview the complainants, whose accusations were submitted to the part-time commissioners on Feb. 16. On Monday, a report with Mr. Sibold and Mr. Linder's responses to the complaints was submitted.

"There's nothing I can tell you," said Mr. Mack when contacted yesterday.

The reports will likely be part of a package and will be handed to Ms. McClellan soon, but not this week, said Alan Hunter, a partner at Code Hunter LLP in Calgary who is representing the nine commissioners.

Meanwhile, players in Alberta's capital markets await a decision on the Blue Range Resource Corp. scandal, a much-anticipated ruling that has been long delayed and is expected at the end of April. (The ASC alleges that Blue Range executives misled investors over the company's oil and gas production and reserves.)

Mr. Sibold was appointed chairman of the commission in May, 2000, for a five-year term. It was announced last October that his tenure would not be extended.

This week, the Alberta cabinet passed an order-in-council that makes this May the official end of his term.

A previous order-in-council had the end of his term as March 31, even though his contract with the commission had the term's end as May.

Tracy Balash, the spokeswoman for the Finance Minister, said the order was "just correcting an administrative error."

She said she believed that no one had noticed the inconsistency between the original order and the contract until recently.

Asked why the Alberta cabinet would make the order given the accusations against Mr. Sibold, Ms. Balash said: "You can't make decisions on a human resource matter when you're dealing with allegations that haven't been proven."

Mr. Sibold, in his e-mail to the commission staff of about 120, said he was "gratified" that the government "has clarified my term of office."

His last day is May 7.


Securities watchdog turmoil
Alberta commission facing review, lawyer denies claims
Theresa Tedesco
National Post
Wednesday, March 23, 2005

Senior officials at the Alberta Securities Commission interfered with enforcement cases, engaged in favouritism and condoned lewd conduct among staff, according to allegations contained in a confidential report prepared for the regulator's commissioners.

The National Post has learned that an unprecedented review into the conduct of the provincial watchdog's executive ranks, including Stephen Sibold, outgoing chair of the ASC, and David Linder, executive director, revealed a "dysfunctional" agency with questionable management practices, lax governance and a "toxic" atmosphere that contributed to staff departures in recent years.

According to sources, a detailed report prepared by prominent Calgary lawyer Perry Mack for the ASC's board of commissioners is based on claims made by a group of about six whistleblowers and supported in subsequent interviews by about 30 former and current employees. Mr. Mack, who was hired by the ASC's 12-member board of commissioners in January, tabled his findings in mid-February.

The extraordinary probe was ordered by Shirley McClellan, Alberta's Deputy Premier and Finance Minister, after she was advised about "allegations" into the conduct of the ASC's chair and executive director two months ago. According to a one-page letter sent to the ASC's board of commissioners on Jan. 12, Ms. McClellan stated "the allegations appear to be sufficiently serious to justify further investigation." The Finance Minister, who is responsible for the ASC, told the board to report back to her on "what actions the commission intends to take with respect to these complaints."

Among the complaints current and former staff reported to Mr. Mack, sources say, are allegations that executive managers obstructed the work of enforcement staff by directly influencing whether the regulator would pursue cases against certain companies and individuals.

"Every week we had to justify our cases. It was routine that staff was asked to drop cases," said a source familiar with the regulator who asked not to be named for fear of reprisal. "It was made clear that certain people and companies were not to be troubled and were being protected from regulatory activity."

Messrs. Sibold and Linder did not respond to repeated calls or e-mails. However, Alan Hunter, a lawyer representing the ASC's nine part-time commissioners, said yesterday that "the matters are internal to the commission and are highly confidential."

In response to questions sent to Messrs. Sibold and Linder by the National Post, Mr. Hunter said, "Many of your allegations are not accurate."

The allegations raise troubling questions about the credibility of one of Canada's largest securities regulators. The ASC is responsible for governing all publicly traded companies in Alberta, including some of the largest oil and gas companies in Canada. The provincial regulator administers Alberta's securities act, rules and regulations and it also oversees the TSX Venture Exchange.

Sources told the Post that most of the ASC's senior management have revolted against the chair and his lieutenant over what they claim to be an oppressive work environment that has fostered deep tensions and resentment among the rank-and-file.

Since Mr. Mack tabled his report to the ASC board of commissioners almost six weeks ago, sources say a rift has ensued and that the most senior executives are now barely communicating with the rest of the staff.

"The atmosphere has become such that we cannot carry out our business," said a source familiar with the regulator who asked not to be named. Another official described the atmosphere as "untenable" and "poisonous," saying that "there isn't much work getting done these days. People are hunkered down."

According to sources familiar with the complaints, Messrs. Sibold and Linder are said to have fostered a "cowboy mentality" that encouraged favouritism, especially among female members. "The chair acts like a horny teenager," said a source who asked not to be named.

At the same time, sources say senior lawyers, accountants and investigators at the ASC chafed at what they described as inappropriate sexual behaviour in the fourth-floor executive suites, including the frequent circulation of lascivious e-mails on the regulator's computer system and an inflatable sex doll prominently displayed in the offices.

"Skill and intrinsic ability didn't have much to do with how you were evaluated in performance appraisals and remunerated," said a source who filed a complaint with Mr. Mack. "The route to the top was to flatter the chair, wear low-cut blouses and shake what you've got."

Mr. Mack, a well-regarded corporate lawyer, declined to comment for this article, saying, "everything I do or don't do is confidential."

Messrs. Sibold and Linder are said to have responded to the allegations in Mr. Mack's report. The board of commissioners has been meeting this week to decide its next course of action. The group is also required to report back to the Finance Minister.

In the meantime, many of the ASC's 119 employees fear recriminations in the wake of the unprecedented investigation and ensuing scandal. Members of the staff are particularly worried that Messrs. Sibold and Linder are currently conducting performance reviews of all employees, which will determine their salaries and bonuses for fiscal 2005, beginning on April 1.

"Generally, people are feeling harassed," said an insider who asked not to be named. "I think a number of people expect life to become unpleasant."

Beleaguered commission employees blame the board of commissioners for failing to address their concerns, especially because the human resources committee of the board receives all exit interviews of senior managers who quit. Sources say those interviews were littered with serious complaints against the ASC's executive management. "If there had been any kind of oversight, these things wouldn't be happening," said a disgruntled official.

Meanwhile, Finance Ministry officials are currently assessing candidates to replace Mr. Sibold. Last October, the provincial government announced it would not reappoint Mr. Sibold to a second five-year term. He was expected to leave the ASC at the end of March, however, Mr. Sibold's employment contract entitled him to stay on until May 7 and an order-in-council was signed yesterday to accommodate an extension. (His two-year term as chair of the Canadian Securities Administrators ends next week.)

Mr. Linder continues to function as the commission's chief administrative officer, a post he has held since 1997. Unlike Mr. Sibold, he does not sit on the board of commissioners.

© National Post 2005