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News Release

Investment adviser fined for involvement in Stanhiser and Excel fraud

  • Date:

    2000-07-21

  • Number:

    2000/30

Released: 07/20/00 Contact: Dean Pelkey
NR #00/30 (604) 899-6880 or
(BC only) 1-800-373-6393

Vancouver -- A Vancouver investment adviser has agreed to pay $25,000 in penalties and costs and give up $77,000 in commissions and fees as a result of his involvement in the Gary Stanhiser and Excel stock fraud.

The penalties are spelled out in a settlement agreement between John Brian Johnston, and the British Columbia Securities Commission. As part of the settlement, Johnston also agreed to complete the Conduct and Practices exam by May 31, 2001.

Johnston acted as investment advisor for Stanhiser's Excel group of companies and more than 140 investors who opened accounts at Canaccord Capital Corporation and purchased shares in the Excel companies. Johnston is an employee at Canaccord.

Earlier this year, Canaccord reached a settlement with the BCSC for its role in the Stanhiser fraud, agreeing to pay $428,000 in penalties and investigative costs.

Stanhiser was a former pastor with the Seventh Day Adventist Church who set up several accounts at Canaccord and encouraged other investors to do so as well. Between 1995 and 1997, Stanhiser funnelled investor's money into his accounts and used it to buy shares in offshore trusts and other companies he controlled. Many of the investors never received their shares and are still owed the securities they purchased through Stanhiser.

Stanhiser's investment scheme violated the Securities Act because the securities being offered did not qualify for exempt status and a prospectus was not available.

In the settlement, Johnston admitted he did not recognize that Stanhiser's activities violated the Securities Act and as a result, he did not inform the individual investors that the scheme was illegal and their investments were at risk. Johnston said he did not attempt to conceal his participation with Stanhiser and the Excel companies from Canaccord management. The BCSC levied a $100,000 penalty on Stanhiser in March and banned him from the B.C. securities market for the rest of his life. Stanhiser bilked more than $11 million from 300 investors, many of them church members in B.C. and California.

Johnston's penalties and commissions will be paid to the commission's investor education fund.

The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities and exchange contracts within the province. Copies of the agreement can be viewed on the commission’s website www.bcsc.bc.ca or by contacting Media Relations Officer Dean Pelkey at 899-6880.

Backgrounder

Here is a list of the agreed breaches of Securities Act and Rules by John Brian Johnston. Text of the full agreement can be found at www.bcsc.bc.ca.


Breaches of theActandRules

4. Johnston agrees, only for the purpose of regulatory proceedings here or elsewhere, that he breached the Act and Securities Rules, B.C. Reg. 194/97 as follows:

4.1 as a result of Johnston’s failing to understand that the Scheme was illegal under the Act, he failed to advise the Individual Investors that they were investing in an illegal Scheme. Because of this, Johnston failed to determine the suitability of the proposed purchase of securities by those clients, in breach of section 48 of the Rules; and

4.2 by participating in the collection and payment of monies for the Scheme, and by assisting in the physical distribution of shares and warrants for the Scheme, and by acquiring securities pursuant to the Scheme, all in the absence of a prospectus or any exemption, Johnston unwittingly participated in a breach of section 61(1) of the Act.