Pump-and-dump couple must pay $19 million in penalties
Stock manipulators' bankruptcy is no shelter, Supreme Court rules
A husband and wife involved in a stock-manipulation scheme will never be released from the millions of dollars in penalties owed to the B.C. Securities Commission despite filing for bankruptcy, a B.C. Supreme Court judge has ruled.
Thalbinder (Thal) Singh Poonian and his wife, Shailu (Sharon) Poonian, owe $19 million in penalties to the B.C. Securities Commission as a result of a tribunal decision in 2015 that found they were involved in a pump-and-dump stock scheme where investors lost millions.
The B.C. Securities Commission applied to the courts for an order that the amounts owed by the Poonians to the commission would not be released by any filing or discharge granted to them in bankruptcy. The Poonians had earlier sought bankruptcy as a way to clear their debts by having a trustee take control of their assets and sell them. The Poonians' assets amounted to just $3,189.16.
In a 41-page decision, B.C. Supreme Court Justice David Crerar ruled the amounts owed by the Poonians related to the 2015 securities commission tribunal ruling “shall not be released by any order or discharge granted to the bankrupts.”
The securities commission had argued the bankruptcy act had exemptions that allowed some debts not to be erased, including any debt resulting from false pretences or fraudulent misrepresentation.
The Poonians argued those exceptions did not include the securities commission's penalties.
Crerar disagreed.
“The court is satisfied that the Poonians' actions were morally unacceptable and harmful to society, such that they should not be rewarded with a release of those debts through the statutory discharge under the (Bankruptcy and Insolvency Act),” wrote Crerar.
The Poonians' lawyer has indicated the couple plan to appeal.
Earlier, the B.C. Supreme Court had rejected an application from the Poonians from a discharge of their debts in bankruptcy.
The Poonians had wanted an absolute discharge, which would have completely wiped out all their debts, meaning they would have no obligation to pay off the millions in securities penalties or $4 million in tax arrears. If they were unable to get an absolute discharge, they had wanted a suspended discharge, which would have removed their debts after a requested three- to six-month period.
The Poonians are appealing that decision as well.
The B.C. Securities Commission issued the penalties against the Poonians after a tribunal found they had been involved with others in securing a majority position in an oil and gas company, OSE Corp., inflating its stock price and then selling off shares to unsophisticated investors between 2007 and 2009.
The price was inflated by various means, including trading among themselves. The stock was sold with the help of an entity called the Phoenix Group, which advised people in debt how to use funds from their RRSPs and retirement accounts in hopes of a higher rate of return. The investors lost an estimated $7.1 million.