ASC Hearing Ruling: Feb 28, 2019

When the CEF / DIL funds collapsed there was considerable speculation about what happened, why it happened, and if any laws were broken – what the left-hand authority of God’s agents on earth would do about it.

On Aug 31, 2018 the ASC held a hearing where staff laid out it’s case against various named respondents. The document’s “overview” section states:

1. Staff of the Commission allege that the Respondents breached Alberta securities laws in connection with a long-term, large-scale investment program. The program generally was designed to provide a means for church members to invest and earn interest on funds by pooling and loaning them to Lutheran churches and schools for capital improvement projects. However, while representing the investments to be safe, diversified, and “guaranteed”, the Respondents placed the overwhelming majority of the invested funds into a high-risk, loan-defaulting, speculative land development project without appropriate disclosure to investors. The program and the corporate Respondents collapsed financially in early 2015, with court protection under the Companies’ Creditors Arrangement Act (CCAA) being sought and granted.

2. Staff allege that the long pattern of positive representations, without including necessary risk related disclosures, amounted to misleading statements. The Respondents knew or ought to have known that the information withheld from investors was material, and meant that the statements which had been made were misleading. The Respondents knew or ought to have known that the price or value of the securities in issue was dramatically affected by the non-disclosures.

3. Investors in the program have lost many millions of dollars as a result of its collapse, with the exact value not yet determined. In recognition of investors’ losses and in order not to deplete assets that may be available in ongoing CCAA proceedings, Staff will seek no monetary administrative penalties against the corporate Respondents.

The hearing panel agreed with the ASC staff that it was in the public interest to charge the named respondents so the next question became when to hold the hearing. In the following discussion ASC Staff stated they were ready to proceed in Feb, 2019 and expected to takes six (6) weeks for testimony.

Counsel for the respondents wanted significantly longer to study the matter before holding the hearing sometime after Nov 2019 and when the case was heard they expected to call a long list of witnesses over a three month time period.

The panel split the difference and set a hearing to start in May 2019 and last six weeks with the implication that if the respondents really needed more time the hearing could be extended.


Following that notice a monthly series of pre-hearing management meetings were scheduled – it was during this time that some parties that were named in the representative class actions but not in the ASC proceeding asked to have the ASC proceeding stayed until the representative action was completed. This petition was first scheduled to be heard on Dec 8, 2018, but was then moved to Jan 5-7, 2019 when it was heard.

The arguments as I understand them was that the testimony, evidence, and decision of the ASC hearing could prejudice the applicants’ ability to defend themselves in the representative action cases. To prevent that from happening they wanted the ASC to stay their proceeding until the representative action was completed, or in lieu of a stay issue a confidentiality order for the same time period.


On Feb 28, 2019 the panel handed down its decision which:

  • Dismissed the application for standing by the Non-Party members (ie the ones named in the CEE / DIL class actions that were not named respondents in the ASC Proceeding),
  • Granted the EnCharis members standing,
  • Dismissed the Encharis and Respondent applications for a stay to the ASC proceeding or to issue a confidentiality order that would last until the representative class action was completed.
  • Dismissed the EnCharis applicants the costs related to their application as it exceeded the ASC panel’s authority.

The arguments are rather detailed – you’ll need to read the original document to get a full scope of the proceeding.


The hearing also touched on the Representative Action, specifically –

  • If it goes to trial, it will be a long and complicated one,
  • The class-action members thought the representative action would be resolved in 2 years (ie sometime in 2021) particularly if the case was settled early,
  • An inquiry of the Alberta Court of Queen’s Bench in Calgary returned that the only dates open for a long trial was in June 2021, and then in 2022 after that.
  • Given this information the ASC Staff didn’t expect the representative action case to even go to trial before 2022 much less be completed a year earlier.

Following is the names of the Respondents, the Non-Party members, and the EnCharis group.

The Respondents:

  • the Alberta-British Columbia District, Lutheran Church-Canada,
  • the Alberta-British Columbia District Investments Ltd.,
  • Donald Robert Schiemann,
  • Kurtis Francis Robinson,
  • James Theodore Kentel,
  • Mark David Ruf,
  • Harold Carl Schmidt,

The Non-Parties named in the representative action but not in the ASC proceeding:

  • Lutheran Church-Canada,
  • William Ney,
  • Harold Ruf,
  • James Schuelke,
  • Mark Beiderweiden,
  • Harold Haberstock,
  • James Heinbuch,
  • Cliff Haberstock,
  • Gene Gabert,
  • Richard Lutz,
  • David Schick,
  • Cindy Willisko,
  • Daryl Becker,
  • Randy Heide,
  • Mark Sander,
  • Judith Burns,
  • Marj Plitt,
  • Gerry Steinke,
  • Keith Kruse,
  • Forrest Stroup,
  • Keith Haberstock,
  • Melanie Kuhn,
  • David Dressler,
  • Phillip Washeim,
  • Greg Giese,
  • Wayne Lunderby,
  • Michael Gillingham,
  • Craig Tufts,
  • Rhonda Buck,
  • Vic Esperanza,
  • Lynn Gergens,
  • Deloyce Weist,
  • Janice Ruf,
  • Candace Rivet,
  • Darla Henning,
  • Ted Ulmer,
  • Frank Kobie,
  • Marvin Mutschler,
  • Stan Lee,
  • Brian Lewis,
  • Don Haberstock,
  • Mark Wolgram,
  • David Bode,
  • Roland Kubke,
  • Bill Morgan,
  • John Mueller,
  • Glenn Schaeffer,
  • Steven Grande and
  • Paul Eifert

The EnCharis members:

  •  EnCharis Community Housing and Services,
  • David Schoepp,
  • Grant McMaster,
  • Hans Heumann and
  • James Weschler

 


Update 2019-03-04: Lutheran-Church Canada was included in the respondent list in error. LCC is not a respondent to the ASC Proceeding and was included in error. My thanks to the reader that pointed out that error and my apologies to LCC for the error in categorization.

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