My Thoughts about the LCC – ASC Settlement

To start – here’s the timeline of the ASC’s actions along with the documentation that was released along the way. I’ve made backup copies of all the original documents and provided links to them ‘just in case’.

ASC: Alberta Securities
COQB: AB Court of Queens Bench
ABC BOD: ABC District Board of Directors

• 2018-06-27 ASC Notice of Hearing with allegations (original, backup)
• 2018-08-23 ABC BOD Letter re ASC Notice of Hearing (backup)
• 2019-02-28 ASC Ruling – Stay of Proceedings Petition (original, backup)
• 2019-05-13 COQB Decision – Application for stay of proceeding (CanLII)
• 2019-09-11 ASC Notice of Withdrawal of Notice of Hearing (original, backup)
• 2019-09-11 ASC Settlement Agreement/Undertaking (original, backup)

The June 27, 2018 Notice of Hearing, the ASC recounted CEF / DIL’s history to establish a pattern of behavior that concluded with the following charge:

Making misleading statements contrary to section 92(4.1) of the Act
55. Staff allege that each of the Respondents breached, or authorized, permitted, or acquiesced in the breach of section 92(4.1) of the Act.

56. In particular, each of the Respondents made statements, or authorized, permitted, or acquiesced in the making of statements, in circumstances where they knew or reasonably ought to have known that:

56.1 The General Statements and, in the case of Schmidt, also the Individual Statement, were misleading or untrue in the absence of disclosure of the Undisclosed Facts; and

56.2 These misleading or untrue statements would reasonably be expected to have a significant effect on the market price or value of the securities in the District and DIL.

These paragraphs could be summarized as “it was your responsibility to ensure that District complied with the Act. When it breached the Act, you’re the one who’ll be punished for it.”  No “if”s, “and”s or “but”s about it. In particular paragraph 56 makes it abundantly clear that it was the respondents job to know what was going on and that ignorance was no excuse. (1)

Here ends the text. 🙂

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First – this is a clear vindication of the people defrauded by this travesty. The respondents have admitted in a legally binding venue that they misrepresented the state of the fund and that people were harmed as a result.

Period.

End of story.

The specious arguments that somehow the depositors were at fault for trusting District with their funds should be definitively put to rest. Ditto the ABC Board’s assertion that the ASC allegations should somehow be looked at with a “critical eye.”

 

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Second – the respondents stated they believed they could’ve recovered the money if they’d been given enough time. My question in response is – how?  Even with expert management by seasoned professionals, Prince of Peace was in such a state that it still isn’t making enough profit to cover the interest payments much less pay down the principal on the loan. The respondents continued belief they could’ve done better reflects a position that holds about much water as a colander.

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Third – I expect this to be the opening act in a series of legal proceedings still to come. I think the CEF and DIL Representative Actions will get moving later this year and the RCMP will weigh in sometime in 2020.

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Fourth – some questions I had included “Why just this one charge? Why not charge them with selling securities without a license? Or any of the other financial misconduct I’ve documented here?”

I suspect the answer is two-fold.

1. There’s only so much money to be gotten from the respondents and they’re already banned from trading, so if the ASC got convictions on more charges, would the end result still be the same?
2. There are other civil and law-enforcement actions to come with charges of their own. An admission of guilt here will go a long way towards getting a conviction in these other cases.

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Fifth – I don’t see how anyone can justify the retaining such faithless people as members in good standing with Synod. I look forward to hearing what Synod has to say about their disposition.

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Finally – When Synod has posted a notice about the ASC settlement on the “Lutheran Church Canada” FB group, it didn’t provide any context beyond a simple ‘this happened.’

Reaction to the post included

• deflection (let’s focus on eternity),
• conviction (are the pastors still on the clergy roster?),
• an assertion that a pastor that’s misled the public on a secular matter can still be a clergy member in good standing if their theology doesn’t violate scripture and Lutheran teachings, and
• a request for more information before making any allegations given the damage unfounded allegations can cause.

This is exactly what I warned about in “When Silence Becomes Assent.”

Quoting from that article:

And as bad as this direct action is, I’m seeing another dangerous, insidious malaise creeping into the wider church membership. “The church” has not policed itself, has not condemned behavior that has no place in any community of believers, and is giving the general impression this is “not a big deal.” Because the church is treating its members like illegitimate children and not discharging its duty to discipline and correct its members, people are getting the impression that the people that brought about this disaster, that misrepresented CEF and DIL’s financial position, that publicly told trusting souls their money was safe while privately considering bankruptcy, that abused member’s trust and put their faith at risk – or watched it all happen – are somehow still fit to serve in the church.

Synod’s lack of communication is leaving the flock wandering around without a guide – helpless to know what to make of this or what to do about it:

When he saw the crowds, he had compassion for them, because they were harassed and helpless, like sheep without a shepherd. Matthew 9:36

 If Synod and the pastorate had educated the flock about this in all its unvarnished unpleasantness and provided god-pleasing instruction about what this all means, the sheep would be well informed and better able to weather what has happened and what is to come.

I pray that day comes soon.

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Notes:

1. Contrast this with how SP Bugbee repeatedly claimed “nobody told me.” It is the President’s responsibility to stay informed about what is going on across Synod. If something seems “off”, it is the President’s responsibility to drill down, find out what’s going on, and set things right. Asserting “nobody told me” attempts to deflect this responsibility from the speaker onto some other nameless person. It also means the speaker is neglecting instead of doing their job.