Statement of Allegations: In the Matter of Patrick Joseph Kinlin

IN THE MATTER OF THE SECURITIES ACT
R.S.O. 1990, c.S.5, as amended

AND

IN THE MATTER OF
PATRICK JOSEPH KINLIN

STATEMENT OF ALLEGATIONS OF STAFF OF THE ONTARIO SECURITIES COMMISSION

Staff of the Ontario Securities Commission (the "Commission") make the followingallegations:

1. Patrick Joseph Kinlin (the "Respondent") was registered with the Commission asa salesperson with Toronto securities dealers Mutual Investco Inc. ("Mutual") (fromDecember 1, 1984 to December 31, 1992), WealthWorks Financial Inc.("WealthWorks") (from November 26, 1997 to July 20, 1998) and KeybaseInvestments Inc. ("Keybase") (from August 17, 1998 to June 22, 1999).

2. The Respondent was terminated by Mutual on December 31, 1992. In theirtermination letter, Mutual advised the Commission that the Respondent "carries onbusiness in a manner inconsistent with Mutual Life Policies."

3. When WealthWorks dismissed the Respondent on July 20, 1998, WealthWorksadvised the Commission that the Respondent had been dismissed for cause,specifically, for the following reasons:

- Failure ... to make [himself] available for training and supervision

- Use of "cookie cutter" portfolios and failure to address [Wealthwork's]concerns over this approach

- Length of time [the Respondent] left substantial funds sitting in cash despitenumerous reminders

- Misrepresentation to dealership with regard to in-house complianceprocedures

4. When Keybase dismissed the Respondent on June 22, 1999, Keybase advised theCommission that the Respondent had been dismissed with cause. Keybaseattached to its Notice of Termination a copy of a letter from Keybase to theRespondent, the text of which is as follows:

In the past few days we have received calls from various parties inquiringabout your whereabouts and some client calls questioning the status of theirinvestments. We are very concerned about these inquiries and have triedto contact you by telephone at numerous times to no avail.

Based on the serious nature of these inquiries which stipulate yourinvolvement in undisclosed activities outside of Keybase's offerings, thoughto parties other than Keybase's clients, are deemed improper by that of aKeybase representative [sic]. By doing so, you are evading Keybase'ssupervision. Keybase will not tolerate such behaviour and we are herebygiving you notice that effective immediately your mutual fund licence with usis terminated.

5. During his tenure as a registrant, the Respondent was authorized to sell mutualfunds and other securities to members of the public. However, while theRespondent did invest some of his clients' money in these securities, much of it wasdiverted by the Respondent for his own personal use.

6. On January 10, 2000, before the Honourable Mr. Justice Porter of the Ontario Courtof Justice, the Respondent entered a plea of guilty to 28 counts of fraud over$5,000.00 contrary to the Criminal Code. Mr. Justice Porter accepted that plea,entered convictions and sentenced the Respondent to 5 years in prison. TheRespondent was also ordered to make compensation in the amount of$12,582,820.75 to 63 separate individuals or couples, the victims of theRespondent's frauds.

7. The Respondent admitted before the Court that, in respect of the each of thesevictims, he employed a similar method of defrauding them of their money. TheRespondent agreed that the following summary of his conduct, read in by Counselfor the Crown, was an accurate accounting:

The method of the [Respondent's] scheme is consistent, and essentiallyapplies to each and every unfortunate victim.

[The Respondent] was the sole director of Kinlin Financial ServicesIncorporated, located at 357 Bay Street, Suite 600, in the City of Toronto.[The Respondent] was licensed in the Province of Ontario to sell lifeinsurance, mutual funds, and guaranteed investment certificates. He wasnot licensed to broker stocks or bonds.

Through an extensive network of social contacts and personal friends, thatbegan almost thirty years ago, [the Respondent] actively sought funds fromprivate individuals to invest in the markets described, including those forwhich he was not licensed.

[The Respondent] offered a wide range of financial services to his clientsthat included retirement planning, investment counselling, personal andbusiness insurance, estate planning, and estate administration. Annualinformation statements were provided, purporting to provide his clients witha concise picture of their financial progress, and were statements uponwhich his clients relied to access their investment progress, and to assessit as well.

[The Respondent] also augmented his familiarity and access to his clients'affairs by preparing and filing their personal income tax returns, preparingwills that named him as the executor and often trustee of the estate, and byacquiring power of attorney.

In his role, [the Respondent] often directly received cash funds from hisclients, with the understanding that they'd be invested in the client's nameand to their benefit. These transactions included converting existing RRSPfunds, RRIF funds, GIC's and other investments into purportedly higher-yieldaccounts chosen by [the Respondent]. The client would provide [theRespondent] with a cheque in the amount the client intended to invest. [TheRespondent] was told to invest the money, and he undertook to do so to thebenefit of the client from whom he had received the money.

[The Respondent] frequently advised the client verbally as to the specificsof the pending investment, and financial statements were sent out thereafterby Kinlin's company. In actuality, the financial statements were simplyfabrications from blank sheets of paper tailored to reflect the falserepresentations that [the Respondent] had made to his clients, and designedto satisfy a client's request for documentation of the transactions.

All of the revenue that [the Respondent] received over the course of theyears from his clients was directed to a Toronto Dominion Bank account,located on the Queensway, in the City of Etobicoke. As the money enteredthat account, [the Respondent] immediately withdrew the funds to supporthis own lavish lifestyle.

.........

At approximately the end of May of 1999, it appeared obvious to [theRespondent] that his fraudulent transactions were soon to be discovered.He was in dire need of money. [...]

By June 5, 1999, [the Respondent] had desperately attempted to raise fundsby demanding money of some of his friends. When this failed, he fled thecountry to the U.S..

..........

A Provisional Warrant was obtained for the arrest of [the Respondent] inJune of 1999. American police, acting on the authority of the ProvisionalWarrant, arrested [the Respondent] in a hospital in Norristown,Pennsylvania, a suburb of Philadelphia.

In August of 1999, the Canadian government commenced extraditionproceedings for the return of [the Respondent] to face criminal charges.

On September 9, 1999, [the Respondent] was returned to Canada, and onSeptember 10 he appeared in a Toronto court to face the criminal chargesoutlined in the information before Your Honour today.

8. In addition to this general summary of the Respondent's modus operandi, Counselfor the Crown read in facts in relation to individual victims. These facts were alsoadmitted by the Respondent. Reference was also made to Victim ImpactStatements filed by the Crown. Some victims also made oral statements to theCourt.

9. In the course of delivering his Reasons for Sentence, Mr. Justice Porter made thefollowing comments:

I must say in my experience on the bench I have not run into such a loss asI have encountered today in this matter. It is mind-boggling to say the least.

You have heard counsel talk about trust. Essentially, our society is basedon trust, and when people fail in their trust it is very disturbing to say theleast.

I have listened to the people who were good enough to put their words onpaper or speak to me, and I am brokenhearted for you, quite frankly. I wishI could wave a wand and say, "Here we are. Here's your money. Go home",but unfortunately you realize I can't do that, and unfortunately from what I'veheard I don't think [the Respondent] is going to be able to do that either.

..........

But we get back to this horrendous breach of trust and the pain that it hasoccasioned to you. I heard the word "despicable". I couldn't agree with youmore, and although as [counsel for the Respondent] points out perhaps allthese funds weren't for personal use. I find that difficult to believe.

10. It is the position of Staff that the conduct alleged above, which conduct theRespondent admitted to the Court, constitutes conduct contrary to the publicinterest.

DATED at Toronto this 30th day of June, 2000.