Statement of Allegations: In the Matter of Gordon-Daly Grenadier Securities et al.

IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF
GORDON-DALY GRENADIER SECURITIES, DAVID BREGMAN, ALAN GREENBERG, ORON STERNHILL AND WANGYAL TULOTSANG

STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION

Staff of the Ontario Securities Commission ("Staff") make the following allegations:

1. The Respondent, Gordon-Daly Grenadier Securities ("Gordon-Daly") is, and was at allmaterial times, registered under Ontario securities law as a securities dealer. Gordon Dalyis a partnership of three corporations, Bethmark Investments Limited, ALG InvestmentsLimited and Alon Investments Limited. The three corporations are wholly owned by eachof David Bregman ("Bregman"), Alan Greenberg ("Greenberg") and Oron Sternhill("Sternhill"), respectively.

2. The Respondent Bregman is, and was at all material times, registered under Ontariosecurities law as an officer of Gordon-Daly, and is the "executive partner" of Gordon-Daly.The Respondent Greenberg is, and was at all material times, registered under Ontariosecurities law as an officer of Gordon-Daly, and is the "executive general partner" ofGordon-Daly. The Respondent Sternhill is, and was at all material times, registered underOntario securities law as an officer of Gordon-Daly, and is the "executive partner" of Gordon-Daly. TheRespondent Wangyal Tulotsang ("Tulotsang") has been registered under Ontario securitieslaw since March 10, 1998 as an officer of Gordon-Daly, and is, and was during this time, thecontroller and the compliance officer of Gordon-Daly.

3. During the period from 1996 to 1999 (the "material time"), virtually all of Gordon-Daly'sbusiness consisted of it acquiring stock for its own account and selling that same stock to itsclients (referred to below as "principal trading"). During this same period, in excess of 90%of Gordon-Daly's revenue was derived from principal trading in the stock of thirteen issuers(the "Thirteen Issuers") referred to below, all of which traded through the Canadian DealingNetwork Inc. (the "CDN").

4. The Thirteen Issuers are as follows:

1. Black Mountain Minerals Inc. ("Black Mountain");

2. CD Rom Network Inc. ("CD Rom");

3. Century Financial Capital Group Inc. ("Century Financial");

4. Magra Computer Technologies Corp. ("Magra");

5. Olympic Rom World Inc. ("Olympic");

6. Pan Pacific Strategies Corp. ("Pan Pacific");

7. PlanetSafe Enviro Corp. ("PlanetSafe");

8. Polar Innovative Capital Corp. ("Polar Innovative");

9. Southern Reef Ventures Inc. ("Southern Reef");

10. The Streetwear Corporation ("Streetwear");

11. United Pacific Capital Resources Inc. ("United");

12. Westhope Capital Corp. ("Westhope"); and

13. World Wide Interactive Disks Inc. ("World Wide").

5. In the case of the Thirteen Issuers, Gordon-Daly either held stock in its inventory or had exercisedoption agreements to acquire the stock in the issuer immediately prior to the commencement ofprincipal trading in the stock with its clients. Gordon-Daly acquired stock in the Thirteen Issuersat prices significantly lower than the selling price to its clients. Gordon-Daly re-sold this stock toits own clients at mark-ups above acquisition costs ranging from approximately 56% toapproximately 324%, which mark-ups were excessive.

6. During the material time, Gordon-Daly's gross revenue (i.e. revenue from the sale of stockless acquisition costs) earned from principal trading in the stock of the Thirteen Issuers wasapproximately $31 million.

7. Particulars of the principal trading in the Thirteen Issuers by Gordon-Daly are set out below.

Black Mountain Minerals Inc. ("Black Mountain")

8. Black Mountain is a reporting issuer in Ontario. During the period from January 14, 1998to May 28, 1999, Gordon-Daly acquired 5.1 million shares of Black Mountain at a weightedaverage cost of $0.70 per share.

9. During the period of September 1, 1997 to December 30, 1999, Gordon-Daly soldsubstantially all of its Black Mountain shares to its own clients at a weighted average priceof $1.91 per share, generating a gross profit of approximately $5.5 million. The term"weighted average price", as referred to hereafter, is defined as the total dollar value of sharespurchased by all clients, divided by the total number of shares purchased by all clients,excluding cancellations and reversals of trades. During this time, Gordon-Daly accountedfor approximately 99% of the reported trading of the Black Mountain shares.

10. Gordon-Daly sold Black Mountain shares to its own clients at a mark-up of approximately173%, which mark-up was excessive. Black Mountain last traded on June 29, 2000 at $0.20.

CD Rom Network Inc. ("CD Rom")

11. CD Rom is a reporting issuer in Ontario. During the period between November 29, 1994 toMay 6, 1997, Gordon-Daily acquired 3.6 million shares of CD Rom at a weighted averageprice of $0.59 per share.

12. During the period from October 2, 1995 to December 23, 1999, Gordon-Daly soldsubstantially all of its CD Rom shares to its own clients at a weighted average price of $0.92per share, generating a gross profit of approximately $600,000. During this time, Gordon-Daly accounted for approximately 94% of the reported trading of CD Rom shares.

13. Gordon-Daly sold CD Rom shares to its own clients at a mark-up of approximately 56%,which mark-up was excessive. CD Rom last traded on June 23, 2000 at $0.05.

Century Financial Capital Group Inc. ("Century Financial")

14. Century Financial is a reporting issuer in Ontario. During the period from April 30, 1999 toOctober 26, 1999, Gordon-Daly acquired 252,000 shares of Century Financial at a weightedaverage price of $1.69 per share.

15. During the period from February 4, 1999 to December 30, 1999, Gordon-Daly soldsubstantially all of its Century Financial shares to its own clients at a weighted average priceof $2.77 per share, generating a gross profit of approximately $600,000. During this time,Gordon-Daly accounted for approximately 99% of the reported trading in Century Financialshares.

16. Gordon-Daly sold Century Financial shares to its own clients at a mark-up of approximately64%, which mark-up was excessive.

17. On or about November 1, 1998, Olympic ROM World Inc. ("Olympic") (referred to below)amalgamated with four companies to form Century Financial. Ten shares of Olympic wereexchanged for one new share of Century Financial. Century Financial last traded on July 5,2000 at $1.97 per share, which is equivalent to approximately $.20 per Olympic share.

Magra Computer Technologies Corp. ("Magra")

18. Magra is a reporting issuer in Ontario. During the period from October 10, 1996 toAugust 28, 1998, Gordon-Daly acquired 8.1 million shares of Magra at a weighted averageprice of $0.66 per share.

19. During the period from September 12, 1996 to December 31, 1999, Gordon-Daly soldsubstantially all of its Magra shares to its own clients at a weighted average price of $1.68per share, generating a gross profit of approximately $3.9 million. During this time, Gordon-Daly accounted for approximately 97% of the reporting trading of Magra shares.

20. Gordon-Daly sold Magra shares to its own clients at a mark-up of approximately 155%,which mark-up was excessive. Magra last traded on June 29, 2000 at $0.09.

Olympic Rom World Inc. ("Olympic")

21. Olympic (referred to in paragraph 17) is a reporting issuer in Ontario. During the periodfrom March 28, 1995 to December 8, 1997, Gordon-Daily acquired 5.4 million shares ofOlympic at a weighted average price of $0.54 per share.

22. During the period from August 2, 1995 to December 18, 1998, Gordon-Daly soldsubstantially all of its Olympic shares to its own clients at a weighted average price of $1.16per share, generating a gross profit of approximately $1.7 million. During this time, Gordon-Daly accounted for approximately 95% of the reported trading of Olympic shares.

23. Gordon-Daly sold Olympic shares to its own clients at a mark-up of approximately 115%,which mark-up was excessive. As noted above in paragraph 17, on or about November 1,1998 Olympic amalgamated with four companies to form Century Financial. Ten shares ofOlympic were exchanged for one new share of Century Financial. Century Financial lasttraded on July 5, 2000 at $1.97 per share, which is equivalent to approximately $.20 perOlympic share.

Pan Pacific Strategies Corp. ("Pan Pacific")

24. Pan Pacific is a reporting issuer in Ontario. During the period from November 20, 1995 toDecember 8, 1997, Gordon-Daly acquired 6.3 million shares of Pan Pacific at a weightedaverage price of $0.70 per share.

25. During the period from October 3, 1995 to January 19, 1998, Gordon-Daly sold substantiallyall of its Pan Pacific shares to its own clients at a weighted average price of $1.30 per share,generating a gross profit of approximately $2 million. During this time, Gordon-Dalyaccounted for approximately 80% of the reported trading of Pan Pacific shares.

26. Gordon-Daly sold Pan Pacific shares to its own clients at a mark-up of approximately 86%,which mark-up was excessive . On January 28, 1998 the Commission ordered Pan Pacificto cease trading in securities for failure to file its annual financial statements for the yearended August 31, 1997. Pan Pacific last traded on January 28, 1998 at $0.40.

PlanetSafe Enviro Corp. ("PlanetSafe")

27. PlanetSafe is a reporting issuer in Ontario. During the period from May 25, 1995 toAugust 22, 1996, Gordon-Daly acquired 4.9 million shares of PlanetSafe at a weightedaverage cost of $0.29 per share.

28. During the period from October 2, 1995 to December 29, 1999, Gordon-Daly soldsubstantially all of its PlanetSafe shares to its own clients at a weighted average price of$1.23 per share, generating a gross profit of approximately $800,000. During this time,Gordon-Daly accounted for approximately 81% of the reported trading in PlanetSafe shares.

29. Gordon-Daly sold PlanetSafe shares to its own clients at a mark-up of approximately 324%,which mark-up was excessive. PlanetSafe last traded on April 18, 2000 at $0.01.

Polar Innovative Capital Corp. ("Polar Innovative")

29. Polar Innovative is a reporting issuer in Ontario. During the period from March 17, 1999 toOctober 28, 1999, Gordon-Daly acquired 1.7 million shares of Polar Innovative at a weightedaverage price of $0.62 per share.

30. During the period from January 8, 1999 to December 30, 1999, Gordon-Daly soldsubstantially all of its Polar Innovative shares to its own clients at a weighted average priceof $2.00 per share, generating a gross profit of approximately $1.8 million. During this time,Gordon-Daly accounted for 99% of the reported trading in Polar Innovative shares.

31. Gordon-Daly sold Polar Innovative shares to its own clients at a mark-up of approximately223%, which mark-up was excessive. Polar Innovative last traded on July 5, 2000 at $2.00.As at July 6, 2000, Gordon-Daly accounted for approximately 95% of the reported tradingin Polor Innovative.

Southern Reef Venture Inc. ("Southern Reef")

32. Southern Reef is a reporting issuer in Ontario. During the period from October 15, 1996 toApril 29, 1999 Gordon-Daly acquired 7.9 million shares of Southern Reef at a weightedaverage price of $0.50 per share.

33. During the period from September 10, 1996 to December 31, 1999, Gordon-Daly soldsubstantially all of its Southern Reef shares to its own clients at a weighted average price of$1.22 per share, generating a gross profit of approximately $4.1 million. During this time,Gordon-Daly accounted for 97% of the reported trading of Southern Reef shares.

34. Gordon-Daly sold Southern Reef shares to its own clients at a mark-up of approximately144%, which mark-up was excessive. Southern Reef last traded on June 26, 2000 at $0.10.

The Streetwear Corporation ("Streetwear")

35. Streetwear is a reporting issuer in Ontario. On October 29, 1999, Gordon-Daly acquired250,000 shares of Streetwear at a weighted average cost of $1.05 per share.

36. During the period from July 14, 1999 to December 31, 1999, Gordon-Daly sold substantiallyall of its Streetwear shares to its own clients at a weighted average price of $3.15 per share,generating a gross profit of approximately $500,000. During this time, Gordon-Dalyaccounted for 88% of the reported trading in Streetwear shares.

37. Gordon-Daly sold Streetwear shares to its own clients at a mark-up of approximately 200%,which mark-up was excessive. Streetwear last traded on July 5, 2000 at $2.45. As at July6, 2000 Gordon-Daly accounted for 95% of the reported trading in Streetwear shares.

United Pacific Capital Resources Inc. ("United")

38. United is a reporting issuer in Ontario. During the period from January 11, 1999 toOctober 8, 1999 Gordon-Daly acquired 1.2 million shares of United Class "B" shares at aweighted average price of $1.24 per share.

39. During the period from August 28, 1998 to December 23, 1999, Gordon-Daly soldsubstantially all of its United Class "B" shares to its own clients at a weighted average priceof $2.88 per share, generating a gross profit of approximately $1.4 million. During this time,Gordon-Daly accounted for approximately 98% of the reported trading of United Class "B"shares.

40. Gordon-Daly sold United shares to its own clients at a mark-up of approximately 132%,which mark-up was excessive. United last traded on March 22, 2000 at $1.72. As at March22, 2000, Gordon-Daly accounted for 97% of the reported trading in United.

Westhope Capital Corp. ("Westhope")

41. Westhope is a reporting issuer in Ontario. During the period from June 25, 1997 to March9, 1999, Gordon-Daly acquired 5 million shares of Westhope at a weighted average price of$0.51 per share.

42. During the period from May 12, 1997 to December 24, 1999, Gordon-Daly sold substantiallyall of its Westhope shares to its own clients at a weighted average price of $1.55 per share,generating a gross profit of approximately $4.1 million. During this time, Gordon-Dalyaccounted for approximately 98% of the reported trading in Westhope shares.

43. Gordon-Daly sold Westhope shares to its own clients at a mark-up of approximately 204%,which mark-up was excessive. Westhope last traded on June 13, 2000 at $0.15.

World Wide Interactive Disks Inc. ("World Wide")

44. World Wide is a reporting issuer in Ontario. During the period from April 25, 1997 to April1, 1999, Gordon-Daly acquired 5.1 million shares of World Wide at a weighted average priceof $0.50 per share.

45. During the period from January 13, 1997 to December 30, 1999, Gordon-Daly soldsubstantially all of its World Wide shares to its own clients at a weighted average price of$1.47 per share, generating a gross profit of approximately $3.8 million. During this time,Gordon-Daly accounted for approximately 97% of the reported trading in World Wideshares.

46. Gordon-Daly sold World Wide shares to its own clients at a mark-up of approximately194%, which mark-up was excessive. World Wide last traded on June 8, 2000 at $0.15.

Misrepresentations Made or Authorized by Bregman, Greenberg and Sternhill

47. Gordon-Daly acted as market-maker for a number of the Thirteen Issuers. Pursuant to s. 155of the Regulation to the Securities Act (the "Act"), a registered dealer who wishes to act asa market-maker must make application for approval to so act in accordance with Form 41.

48. Form 41 requires the applicant to state whether or not it has a relationship with the promoterof the issuer. In each application made, either Bregman or Sternhill stated that Gordon-Dalyhad no direct or indirect association, dealings or arrangements with the issuer or anypromoter of the issuer.

49. In respect of eight of the Thirteen Issuers for which Gordon-Daly was market-maker, thepromoter of the issuer was Harry Bregman. Harry Bregman was an original founder ofGordon-Daly and is the father of Bregman and the father-in-law of Sternhill.

50. The eight issuers for which Gordon-Daly was market-maker and Harry Bregman waspromoter are:

Black Mountain Minerals Inc.

CD Rom Network Inc.

Olympic World Inc.

Polar Innovative Capital Corp.

Southern Reef Ventures Inc.

United Pacific Capital Resources Inc.

Westhope Capital Corp.

World Wide Interactive Disks Inc.

52. In making the statement that Gordon-Daly had no direct or indirect association, dealings orarrangements with a promoter of the issuer, in respect of those issuers listed above, each ofSternhill and Bregman made statements in certain applications that in a material respect andin light of the circumstances under which the statements were made, were misleading oruntrue. Greenberg knew, or ought to have known, that Sternhill and Bregman were makingthe misleading statements and either authorized, permitted or acquiesced in the making ofthe misstatements by Sternhill and Bregman. In so doing, each of Sternhill, Bregman andGreenberg acted in breach of Ontario securities law, and in particular section 122(1)(b) ofthe Act, and contrary to the public interest.

53. Form 41 also requires the applicant to state whether or not the insiders or promoters of theissuer, which are known to the applicant, after reasonable enquiry, are trading clients of theapplicant. In each application made, either Bregman or Sternhill stated that the insiders ofthe issuer are not trading clients of the applicant, Gordon-Daly.

54. In respect of those issuers listed below, insiders of the issuer were trading clients of Gordon-Daly at the time the application to be a market-maker, Form 41, was filed.

Issuer		Insider/Client of Gordon-Daly
1.	Black Mountain Minerals Inc.	James McCannell, President & Director Milton Klyman, Director Fred Munger, Secretary-Treasurer & Director Gerald Iscove, Director
2.	CD Rom Network Inc.	Gordon Wilton, President & Director Samuel Greenberg, Secretary-Treasurer & Director
3.	Olympic Rom World Inc.	Gordon Wilton, President & Director Samuel Greenberg, Secretary-Treasurer & Director Gerald Iscove, Director Milton Klyman, Director
4.	PlanetSafe Enviro Corp.	Gerald Iscove, Director Milton Klyman, Director
5.	Polar Innovative Capital Corp.	James McCannell, President & Director Milton Klyman Fred Munger, Secretary-Treasurer & Director Gerald Iscove, Director
6.	Southern Reef Ventures Inc.	Milton Klyman, President, Secretary-Treasurer & Director Gordon Magrill, Director
7.	United Pacific Capital Resources Inc.	James McCannell, President & Director Milton Klyman, Secretary-Treasurer & Director Fred Munger, Director Gerald Iscove, Director
8.	Westhope Capital Corp.	James McCannell, President & Director Milton Klyman, Secretary-Treasurer & Director Fred Munger, Director Gordon Magrill, Director
9.	World Wide Interactive Disks Inc.	Gordon Wilton, President & Director Milton Klyman, Secretary-Treasurer & Director

 

55. In making the statement that the insiders of the issuers listed above were not trading clientsof Gordon-Daly, Sternhill and Bregman made statements in an application that in a materialrespect and in light of the circumstances under which the statements were made, weremisleading or untrue. Greenberg knew, or ought to have known, that Sternhill and Bregmanwere making the misleading statements and either authorized, permitted or acquiesced in themaking of the misstatements by Sternhill and Bregman. In so doing, each of Sternhill,Bregman and Greenberg acted in breach of Ontario securities law, and in particular, section122(1)(b) of the Act, and contrary to the public interest.

Failure to Keep Books and Records Required Under Ontario Securities Law

56. During the material time, Gordon-Daly failed to keep such books, records and otherdocuments as are required under Ontario securities law, and in particular, as are requiredunder section 19 of the Act. In particular, in response to Staff's request to deliver certainbooks and records pursuant to an order under subsection 19(3) of the Act, Gordon-Dalyadvised that it was unable to retrieve and produce to Staff the following documents:

(i) All New Client Application Forms, including updates, and all other account openingdocumentation for all accounts in the name of Harry Bregman, Jim McCannell,Milton Klyman, Gordon Magrill, Fidelity Commerce Securities Corp., Fred Munger,Gordon Wilton, Jerry Iscove, Irwin Singer in Trust, Double A.J. Limited, J.C. DavidSecurities Ltd. and Sam Greenberg; and

(ii) The account opening date(s) and, where applicable, closing date(s) for each accountof Harry Bregman, Jim McCannell, Milton Klyman, Gordon Magrill, FidelityCommerce Securities Corp., Fred Munger, Gordon Wilton, Jerry Iscove, Irwin Singerin Trust, Double A.J. Limited, J.C. David Securities Ltd. and Sam Greenberg.

Conduct Contrary to Public Interest

57. In engaging in the conduct described above, the respondents may have failed to deal fairly,honestly and in good faith with their clients, in breach of the requirements set out in Ontariosecurities law, and in particular, subsections 2.1(1) and (2) of Rule 31-505, may not haveacted in the best interests of their clients, and acted contrary to the public interest. Therespondents, Bregman, Greenberg, Sternhill and Tulotsang authorized, permitted oracquiesced in the contraventions by Gordon-Daly, as described above, and acted contrary tothe public interest.

58. Further, as described above, Sternhill and Bregman made statements in certain Form 41applications, that in a material respect and in light of the circumstances under which thestatements were made, were misleading or untrue, and in breach of Ontario securities law,and contrary to the public interest. Greenberg, as a registered officer of Gordon-Daly, eitherauthorized, permitted or acquiesced in the making of the misstatements by Sternhill andBregman.

59. As described above, Gordon-Daly failed to keep such books, records and other documentsas are required under Ontario securities law, and in particular, as are required under section19 of the Act. The respondents, Bregman, Greenberg, Sternhill and Tulotsang authorized,permitted or acquiesced in the contraventions by Gordon-Daly to keep such records as arerequired under Ontario securities law.

60. Such additional allegations as Staff may make and the Commission may permit.