Statement of Allegations: In the Matter Randy Zenovi Calmusky
IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c. S.5, AS AMENDED
- and -
IN THE MATTER OF
RANDY ZENOVI CALMUSKY
STATEMENT OF ALLEGATIONS
OF STAFF OF THE ONTARIO SECURITIES COMMISSION
TAKE NOTICE THAT the Ontario Securities Commission (the "Commission") will hold a hearing pursuant to subsections 127(1) and 127(10) of the Securities Act, RSO 1990, c S.5 (the "Act"), at the offices of the Commission, 20 Queen Street West, 17th Floor, commencing on May 30, 2016 at 10:30 a.m., or as soon thereafter as the hearing can be held;
TO CONSIDER whether, pursuant to subsections 127(1) and 127(10) of the Act, it is in the public interest for the Commission to make an order:
1. against Randy Zenovi Calmusky ("Calmusky") that:
a. trading in any securities or derivatives by Calmusky cease permanently, pursuant to paragraph 2 of subsection 127(1) of the Act;
b. the acquisition of any securities by Calmusky be prohibited permanently, pursuant to paragraph 2.1 of subsection 127(1) of the Act;
c. any exemptions contained in Ontario securities law do not apply to Calmusky permanently, pursuant to paragraph 3 of subsection 127(1) of the Act;
d. Calmusky resign any positions that he holds as a director or officer of any issuer, registrant or investment fund manager, pursuant to paragraphs 7, 8.1 and 8.3 of subsection 127(1) of the Act;
e. Calmusky be prohibited permanently from becoming or acting as a director or officer of any issuer, registrant or investment fund manager, pursuant to paragraphs 8, 8.2 and 8.4 of subsection 127(1) of the Act;
f. Calmusky be prohibited permanently from becoming or acting as a registrant, investment fund manager or promoter, pursuant to paragraph 8.5 of subsection 127(1) of the Act; and
2. such other order or orders as the Commission considers appropriate.
BY REASON of the allegations set out in the Statement of Allegations of Staff of the Commission dated May 9, 2016, and by reason of an order of the Alberta Securities Commission (the "ASC") dated January 12, 2016, and an Agreed Statement of Facts and Joint Submission on Sanction entered into between Calmusky and ASC Staff on November 24, 2015, and such additional allegations as counsel may advise and the Commission may permit;
AND TAKE FURTHER NOTICE that at the hearing on May 30, 2016 at 10:30 a.m., Staff will bring an application to proceed with the matter by written hearing, in accordance with Rule 11 of the Ontario Securities Commission Rules of Procedure (2014), 37 OSCB 4168 and section 5.1 of the Statutory Powers Procedure Act, RSO 1990, c S.22, and any party to the proceeding may make submissions in respect of the application to proceed by written hearing;
AND TAKE FURTHER NOTICE that any party to the proceeding may be represented by a representative at the hearing;
AND TAKE FURTHER NOTICE that upon failure of any party to attend at the time and place aforesaid, the hearing may proceed in the absence of the party and such party is not entitled to any further notice of the proceeding;
AND TAKE FURTHER NOTICE that the Notice of Hearing is also available in French, participation may be in either French or English and participants must notify the Secretary's Office in writing as soon as possible, and in any event, at least thirty (30) days before a hearing if the participant is requesting a proceeding to be conducted wholly or partly in French; and
ET AVIS EST ÉGALEMENT DONNÉ PAR LA PRÉSENTE que l'avis d'audience est disponible en français, que la participation à l'audience peut se faire en français ou en anglais et que les participants doivent aviser le Bureau du secrétaire par écrit le plut tôt possible et, dans tous les cas, au moins trente (30) jours avant l'audience si le participant demande qu'une instance soit tenue entièrement ou partiellement en français.
DATED at Toronto this 11th day of May, 2016.
IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED AND IN THE MATTER OF RANDY ZENOVI CALMUSKY
STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION
Staff of the Ontario Securities Commission ("Staff") allege:
I. OVERVIEW
1. Randy Zenovi Calmusky ("Calmusky") is subject to an order made by the Alberta Securities Commission ("ASC") dated January 12, 2016 (the "ASC Order") that imposes sanctions, conditions, restrictions or requirements upon him.
2. In its findings on liability and sanctions dated January 12, 2016 (the "Findings"), a panel of the ASC (the "ASC Panel") found that Calmusky engaged in a course of conduct that he knew or reasonably ought to have known would perpetrate a fraud, contrary to section 93(b) of the Alberta Securities Act, R.S.A. 2000 c. S-4 (the "Alberta Act").
3. Staff are seeking an inter-jurisdictional enforcement order, pursuant to paragraphs 4 and 5 of subsection 127(10) of the Ontario Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act").
II. THE ASC PROCEEDINGS
Agreed Statement of Facts and Joint Submission on Sanction
4. Prior to the commencement of the ASC proceedings, Calmusky and ASC Staff entered into an Agreed Statement of Facts and Joint Submission on Sanction (the "Statement"). Calmusky made admissions in the Statement concerning the allegation of fraud made against him by ASC Staff, and further admitted that his conduct was contrary to the public interest.
Background -- Agreed Facts
5. The agreed facts contained within the Statement were accepted as accurate by the ASC Panel. A summary of the agreed facts is as follows.
6. Calmusky resides in Calgary. He has not previously been sanctioned by the ASC.
7. In or about October 2008, a company (910234 Alberta Ltd. ("910")), of which Calmusky was sole voting shareholder, sole director, president and controlling mind, entered into an agreement to govern an interest-bearing loan (the "Loan") to Lifestyle Homes Inc. ("Lifestyle").
8. 910 entered into Mortgage Sale and Servicing Agreements ("MSSAs") with various investors (the "Investors") between approximately 2008 and 2009. The MSSAs involved 910 selling Investors portions of the Loan, which 910 would continue to "administer and service" for their benefit. Pursuant to the MSSAs, the Investors were to earn a specified rate of interest, which was less than what Lifestyle was to pay on the Loan, and 910's only remuneration was the spread between the interest charged to Lifestyle and what was payable to the Investors, and certain out-of-pocket expenses. The MSSAs were to mature and be fully repaid at the same time as the Loan. 910 was to remit money to the Investors promptly upon its receipt of any payments from Lifestyle in respect of the Loan.
9. 910 advanced a total of $1,750,000 to Lifestyle under the Loan in April and May 2011. At least $1,093,600 of that was funded by the Investors. There was no evidence that Calmusky personally funded any portion of the Loan.
10. Lifestyle repaid the Loan in or around the spring of 2012. The amount of $1,420,924.81 relating to this repayment made its way into a 910 trust account on May 15, 2012; however, "[r]ather than promptly remitting those funds to the Investors as required by the MSSAs, Calmusky caused $798,101.99 to be transferred ... to his personal line of credit...that same day."
11. On May 29, 2012, "Calmusky caused another $370,000 to be transferred from the [910 trust account] to his relatives," part to his mother and part to his brother. Other than possibly two $20,000 advances made by Calmusky's mother in 2006, there is no evidence that she or Calmusky's brother ever funded any portion of the Loan.
12. The transfers made on May 15 and May 29, 2012, totalling $1,168,101.99, were not disclosed to the Investors (the "Undisclosed Transfers").
13. Calmusky "had subjective knowledge" of the Undisclosed Transfers, and he "knew or ought to have known that [they] could deprive the Investors of some or all of their invested capital or increased the risk that some or all of such capital would be lost." The Undisclosed Transfers indeed "caused the Investors to lose some or all of their invested capital or increased the risk that some or all of such capital would be lost."
14. 910 went into receivership in December 2012. Bankruptcy followed in May 2013. Subsequent litigation culminated in an order (with Calmusky's consent) that he pay $966,319 to 910's receiver.
The ASC Findings
15. In its Findings, the ASC Panel concluded that Calmusky engaged in a course of conduct that he knew or reasonably ought to have known would perpetrate a fraud, contrary to section 93(b) of the Alberta Act. The ASC Panel further found that Calmusky acted contrary to the public interest.
The ASC Order
16. The ASC Order imposed the following sanctions, conditions, restrictions or requirements upon Calmusky:
a. under sections 198(1)(b) and (c) of the Alberta Act, Calmusky must cease trading in or purchasing securities or derivatives, and all exemptions contained in Alberta securities laws do not apply to him, in each case permanently;
b. under sections 198(1)(c.1), (e.1), (e.2) and (e.3) of the Alberta Act, Calmusky is permanently prohibited from engaging in investor relations activities, advising in securities or derivatives, becoming or acting as a registrant, investment fund manager or promoter, or acting in a management or consultative capacity in connection with activities in the securities market;
c. under sections 198(d) and (e) of the Alberta Act, Calmusky must immediately resign all positions he holds as, and he is permanently prohibited from becoming or acting as, a director or officer (or both) of any issuer, registrant or investment fund manager;
d. under section 199 of the Alberta Act, Calmusky must pay an administrative penalty to the ASC of $100,000; and
e. under section 202 of the Alberta Act, Calmusky must pay to the ASC $15,000 of the costs of the ASC's investigation.
III. JURISDICTION OF THE ONTARIO SECURITIES COMMISSION
17. Calmusky is subject to an order of the ASC imposing sanctions, conditions, restrictions or requirements upon him.
18. Pursuant to paragraphs 4 and 5 of subsection 127(10) of the Act, an order made by a securities regulatory authority, derivatives regulatory authority or financial regulatory authority, in any jurisdiction, that imposes sanctions, conditions, restrictions or requirements on a person or company, or an agreement with a securities regulatory authority, derivatives regulatory authority or financial regulatory authority, in any jurisdiction, to be made subject to sanctions, conditions, restrictions or requirements on a person or company may form the basis for an order in the public interest made under subsection 127(1) of the Act.
19. Staff allege that it is in the public interest to make an order against Calmusky.
20. Staff reserve the right to amend these allegations and to make such further and other allegations as Staff deem fit and the Commission may permit.
21. Staff request that this application be heard by way of a written hearing pursuant to Rules 2.6 and 11 of the Ontario Securities Commission Rules of Procedure.
DATED at Toronto, this 9th day of May, 2016.