News Release

Released: February 17, 2000 Contact: Michael Bernard
899-6500 or
(BC only) 1-800-373-6393

Vancouver – The British Columbia Securities Commission has banned two Eron Mortgage executives and four Eron companies from securities markets and imposed penalties totalling $1.8 million after finding they perpetrated a “massive fraud” on British Columbia residents.

“Investors were seriously misled about the nature of their investments, the level of risk associated with the investments and how their money was being invested and spent,” the panel said in its decision released today. “Eron encouraged investors, many of whom were unsophisticated, to trust Eron and they did so.

“As is apparent from our Findings, this trust was abused by the respondents, who acted dishonestly, contrary to the public interest and contrary to the fundamental provisions of the Act. As a result of the respondents’ actions, the investors’ financial losses will exceed $170 million. The loss of investors’ health, their happiness and the security they expected to enjoy in their retirement years is incalculable.”

In imposing penalties against Eron president Brian Slobogian, the panel said “dishonesty was apparent from Slobogian’s conduct and knowledge.” The panel ordered that Slobogian be denied access to securities markets for the rest of his life, including acting as a director or officer of any issuer, or engaging in investor relations activities. Slobogian did not appear during the commission’s hearings into the case last spring. He must also pay $300,000 in administrative penalties.

Frank Biller, Eron vice-president, was denied access to securities markets for 10 years, including acting as director or officer of any issuer or engaging in any investor relations activities. Biller was also ordered to pay $300,000 in administrative penalties.

The panel differentiated between Slobogian’s and Biller’s conduct in imposing less severe penalties on Biller.

“Biller knowingly made misrepresentations with the intention of effecting trades in securities and acted fraudulently. There is a difference, however, made clear in our Findings, in the culpability of Biller from that of Slobogian and the corporate respondents.

“Although we found dishonesty with respect to some of Biller’s conduct, we did not find that Biller had actual knowledge of all of the wrongdoing at Eron,” the panel said.

“Although his conduct demands his removal from the markets for a substantial period of time, we are not convinced that Biller is a permanent risk to the markets. Biller is a young man and we do not believe it will serve the public interest to permanently deprive him of career opportunities that will bring him into contact with participants in the public markets.”

The commission ordered the four Eron companies be permanently cease-traded and denied access to securities markets in B.C. and pay $300,000 each in administrative penalties.

The maximum administrative penalty permitted for each breach of the B.C. Securities Act is $100,000. This maximum amount was levied against each respondent for three breaches of the Act: failing to be registered and to file a prospectus; making misrepresentations, and perpetrating fraud.

The panel also ordered the two men and the four companies to pay the costs of the 31-day hearing, which began in May and ended Sept. 13. Biller’s share of those costs was limited to 25 per cent of the total.

In Findings released last November, the commission found that the Eron companies, Slobogian and Biller breached the B.C. Securities Act when they:

· traded and distributed securities without being registered and without filing a prospectus
· made misrepresentations and
· perpetrated a fraud on persons in British Columbia.

The Commission noted that it imposed orders for administrative penalties and costs notwithstanding arguments that all available funds ought to go to Eron investors.

“It is the Commission’s responsibility to make orders that are appropriate in the circumstances,” the Commission said. “We leave collection to the discretion of the Executive Director.”


The British Columbia Securities Commission is the independent provincial government agency responsible for regulating trading in securities and exchange contracts within the province.

A copy of this decision can be viewed on the commission’s Web site (www.bcsc.bc.ca) or obtained by contacting Communications Manager Michael Bernard at (604) 899-6524. A complete text of the Findings, which are summarized below, were posted to the Web site on Nov. 29, 1999. (NR99-45)

Eron operated from January 1993 until October 1997, when the Financial Institutions Commission suspended Eron’s registration as a mortgage broker, froze its bank accounts and put it into receivership. In that period, Eron Mortgage Corporation and its related companies, Eron Investment Corporation, Capital Productions Inc. and Eron Financial Service Ltd. raised over $240 million from investors. PricewaterhouseCoopers Inc., Eron’s receiver, estimates that less than $72 million of this investment will be recovered.

The Executive Director of the British Columbia Securities Commission issued a notice of hearing and temporary orders in October 1997. The commission sat for 31 days in a hearing that began April 12, 1999 and ended Sept. 13, 1999. The commission’s findings of fact and law were released Nov. 29, 1999.

Brian Slobogian was president of Eron and owned or controlled all of the Eron companies and directed their affairs. He negotiated the loans with borrowers and managed the investors’ investments in the real estate projects. Frank Biller, an Eron vice president, raised funds from investors.

The commission found that Slobogian and the Eron companies:

· distributed securities without being registered and without filing a prospectus
· made misrepresentations to investors
· promised investors returns of up to 24% per annum that they knew were not realistic promised investors terms of repayment that they knew were not achievable
· placed investors into mortgages with a lower priority than promised without the investors’ knowledge or consent
· placed investors into mortgages with higher face values than promised without the investors’ knowledge or consent
· raised funds from investors for mortgages with face values that they knew exceeded the amounts secured by those mortgages
· told investors that their funds would be properly spent on the projects, and then spent those funds in other ways, without the investors’ knowledge or consent and
· used the funds of subsequent investors to make interest or principal payments to existing investors without the knowledge of the investors.

The commission went on to find that Slobogian and the Eron companies contravened the Securities Act by perpetrating a fraud on persons in British Columbia, by making misrepresentations with the intention of selling securities and by distributing securities without being registered and without using the appropriate exemptions.