Decisions
PAUL SCHILLER AND BETTY SCHILLER [Hearing]
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BCSECCOM #:
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Document Type:
Hearing
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Published Date:
2000-08-18
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Effective Date:
2000-08-11
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Details:
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- IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF PAUL SCHILLER AND BETTY SCHILLER
HEARING
PANEL
Adrienne R. Salvail-Lopez, Member
John K. Graf, Member
Roy Wares, Member
DATE OF HEARING
July 17, 2000
DATE OF DECISION
August 11, 2000
APPEARING FOR COMMISSION STAFF
J.A. (Sasha) Angus
K. M. Mactaggart
APPEARING FOR PAUL SCHILLER AND BETTY SCHILLER
H.C. Ritchie Clark, Q.C.
FINDINGS OF THE COMMISSION
1. INTRODUCTION
This decision relates to a hearing under sections 161(1) and 162 of the Securities Act, R.S.B.C. 1996, c. 418. On March 12, 1999, the Executive Director issued a Notice of Hearing alleging, in substance, that:
1) Paul Schiller and Betty Schiller distributed shares of The Quinto Mining Corporation without being registered and without filing or obtaining a receipt for a prospectus;
2) Paul Schiller certified a document filed by Quinto with the Commission that contained statements that were false and misleading;
3) Paul Schiller and Betty Schiller caused Quinto to breach its Listing Agreement with the Vancouver Stock Exchange and a listings policy of the Exchange;
4) Paul Schiller exchanged free trading shares of Quinto, held by him, for Quinto shares subject to a 12 month hold period, held by other shareholders of Quinto; and
5) Paul Schiller and Betty Schiller perpetrated a fraud on Quinto and Betty Schiller perpetrated a fraud on Wallis Wood, a shareholder of Quinto, in connection with the exercise by Betty Schiller of Quinto share purchase warrants.
The hearing was scheduled for October 25, 1999. It was adjourned, by consent, until July 17, 2000, due to medical problems of Betty Schiller.
At the commencement of the hearing on July 17, 2000, counsel for the Schillers sought another adjournment, again on the basis of Betty Schiller’s medical problems. We denied the application on the ground that the medical evidence submitted in support of the application was inadequate.
In response to a second application by counsel for the Schillers, we ruled that, at the completion of the hearing, we would first render our findings. Should we determine that some or all of the allegations against the Schillers have been proven, we will hear further submissions before issuing final orders in this matter.
After our rulings, counsel for the Schillers withdrew and the hearing proceeded. Neither Paul Schiller nor Betty Schiller attended the hearing. The only witness was a member of Commission staff.
2. BACKGROUND
Paul Schiller became president and a director of Quinto on December 14, 1978. At all times relevant to this proceeding Betty Schiller, who is Paul Schiller’s wife, was the office manager of Quinto. Neither has ever been registered to trade or advise in securities in British Columbia.
The shares of Quinto have been listed on the Exchange since October 1985. In its Listing Agreement with the Exchange, Quinto agreed that it would comply with all applicable by-laws, rules and policies of the Exchange.
On March 19, 1993, Quinto issued a news release, signed by Paul Schiller, announcing a proposed private placement of 150,000 units, consisting of one share and one share purchase warrant, at $.81 per unit, to Betty Schiller, wife of the president of Quinto.
During March, (and, in one case, April) 1993, Quinto received letters and cheques payable to Quinto from several investors in the United States and Ontario indicating their intention to participate in a private placement of Quinto shares and warrants and referring, in all but one case, to discussions they had had concerning the placement with a Giles Kavanagh, a resident of California. These investors provided funds to Quinto in the following amounts:
| Cree, David | 2,000 USD |
| Howell, Charles | 7,000 USD |
| Kavanagh, Giles | ~ 34,000 USD |
| Kratzer, Philip | 15,000 USD |
| MacInnes, David & Gail | 5,000 USD |
| Mazzotta, Douglas | 12,000 USD |
| Ness, Robert | 3,000 USD |
| Ovies, Robert & Kathleen | 15,000 USD |
| Pingle, Charles | 6,000 USD |
| Wood, Wallis | 6,000 USD |
TOTAL | 105,000 USD |
| Canadian Exchange Rate at March 1993 $1.20 | 126,000 CDN |
The amount shown for Kavanagh is an estimate as the evidence is unclear as to the funds he actually provided.
On March 31, 1993, Quinto sent a letter to at least three of the investors, signed on behalf of Quinto by Betty Schiller. The letter confirms receipt of their funds and continues:
“We would like to bring you up to date on what has transpired. Our Company lawyer has submitted to the Vancouver Stock Exchange, documents for the approval of the Private Placement, under the following terms:-
a) $0.81 (Can) per share;
b) A Warrant exercisable within 7 months;
c) Each Warrant represents one share at a price of $0.81 (Can).
We expect this to be approved within 2-3 weeks.
We wish to thank you for your interest and your participation in “QUINTO”.”
In May 1993, Quinto filed with the Exchange the following documents in connection with the proposed distribution of units to Betty Schiller:
1) a Declaration of Certified Filing, signed by Paul Schiller, in which he certifies that the filing accords in all respects with the Exchange’s Listings Policy Statement No. 11, Private Placement of Equity Shares;
2) a Private Placement Subscription Agreement signed by Betty Schiller and by Paul Schiller, on behalf of Quinto, in which
- - they agree that Betty Schiller will purchase 150,000 units, consisting of one share and one share purchase warrant, at a price of $.84 per unit, for a total purchase price of $126,000, and
- Betty Schiller represents that she is purchasing the units as principal and that no other person will have a beneficial interest in the units; and
3) a Private Placement Questionnaire and Undertaking, signed by Betty Schiller, in which she undertakes not to sell or otherwise dispose of any of the shares or warrants for 12 months without the consent of the Exchange and any other regulatory body having jurisdiction.
In a letter dated May 25, 1993, the Exchange advised that it accepted these documents for filing, thereby authorizing the distribution to proceed.
On May 27, 1993, Quinto delivered to its transfer agent a treasury order, signed by Paul Schiller on behalf of Quinto, directing the issuance of 150,000 shares and 150,000 warrants to Betty Schiller. The shares and warrants were issued the same day. The shares were represented by certificate number 005573.
On June 3, 1993, counsel for Quinto filed with the Commission a Form 20, Report of Exempt Distribution, certified on May 27, 1993, by Paul Schiller, on behalf of Quinto, to be true and correct. The form indicated that a distribution of 150,000 units had been made to Betty Schiller under section 55(2)(4) of the Securities Act, S.B.C. 1985, c. 83 (the “former Act”) and section 117(i) of the Securities Regulation, B.C. Reg. 270/86.
On June 18, 1993, Betty Schiller and Kavanagh entered into a Pledge/Put/Option Agreement. The agreement acknowledged that Betty Schiller had purchased 150,000 units of Quinto and that she was indebted to Kavanagh in the amount of $126,000. The agreement pledged the 150,000 shares to Kavanagh as collateral for the loan, granted Betty Schiller the right to put the shares to Kavanagh at any time prior to the loan’s repayment and granted Kavanagh an option to purchase the shares at any time prior to the loan’s repayment. There is no other documentary evidence before us respecting the loan referred to in the agreement. Nor is there any evidence that Betty Schiller ever put the shares to Kavanagh or that Kavanagh ever attempted to exercise his option to purchase the shares.
In fact, in an authorization dated July 13, 1993, Betty Schiller directed Quinto’s transfer agent to “transfer restricted stock certificate #05573 in the amount of 150,000 shares” to the following individuals:
| Cree, David | 1,432 |
| Howell, Charles | 5,000 |
| Kavanagh, Giles | 20,587 |
| Kratzer, Philip | 10,714 |
| MacInnes, Gail | 3,573 |
| Mazzotta, Douglas | 8,573 |
| Ness, Robert | 2,143 |
| Ovies, Robert & Kathleen | 10,714 |
| Pingle, Charles | 4,286 |
| Schiller, Betty | 78,692 |
| Wood, Wallis | 4,286 |
In another authorization dated July 13, 1993, Paul Schiller directed Quinto’s transfer agent to “transfer free stock certificate #04955 in the amount of 87,180 shares” to the following individuals:
| Cree, David | 1,425 |
| Howell, Charles | 5,000 |
| Kavanagh, Giles | 15,600 |
| Kratzer, Philip | 10,715 |
| MacInnes, Gail | 3,570 |
| Mazzotta, Douglas | 8,570 |
| Ness, Robert | 2,143 |
| Ovies, Robert & Kathleen | 10,715 |
| Pingle, Charles | 4,285 |
| Schiller, Paul | 20,872 |
| Wood, Wallis | 4,285 |
On July 14, 1993, Paul Schiller sent a double registered letter to the Ovies, which reads as follows:
“We thank you for your participation and patience in putting together and finalizing the Private Placement. In this case it is called the Pledge/Put/Option Agreement.
[There is no evidence that the Ovies lent money to either of the Schillers or that they ever executed a Pledge/Put/Option Agreement.]
Usually, an agreement of this kind is restricted from trading for a twelve month period from the date of issue. The date of issue being March 23rd, 1993, held to March 23rd, 1994.
As agreed with Giles Kavanagh, I am personally exchanging half of the restricted stock for free trading shares.
A reminder - you have warrants equal to the amount of shares.
Your contribution is as follows: -
F U N D S |  | CERTIFICATES ENCLOSED |
U.S. | CAN | UNITSFREERESTRICTED |
$15,000 | $18,000 | 21,42910,71510,714 |
It is also to be noted that the Vancouver Stock Exchange would not accept $0.81 and settled for $0.84 per share.”
On the same date, Paul Schiller sent a double registered letter to Mazzotta. The letter is identical to the Ovies letter, except that Mazzaotta’s contribution is shown to be US$12,000 (CDN$14,400) for 17,143 units, with 8,570 “free” and 8,573 “restricted” certificates enclosed.
On July 16, 1993, a facsimile was sent to Kavanagh, signed “Betty”, which reads as follows:
“RE: BETTY SCHILLER PRIVATE PLACEMENT
Thank goodness its [sic] all over and I have put this baby to bed.
Double registered all mail-outs to subcribers [sic] with the exception of Wood and Kratzer. Instructions to me were to hand over stock certificates to Ken Muir of Brink Hudson & Lefever.
As requested, Mr. Ness will receive his certificates from you. Please see that he signs the enclosed release and forward same to me.”
On September 15, 1993, Commission staff sent a letter to Quinto’s counsel respecting the Form 20 signed on May 27, 1993. Among other things, staff was seeking clarification as to which exemption Quinto had relied upon in making the distribution to Betty Schiller. On September 22, 1993, Quinto filed an Amended Form 20, which indicated that it had relied solely on the exemption in section 55(2)(4) of the former Act.
The share purchase warrant for 150,000 shares that had been issued to Betty Schiller on May 27, 1993, had an expiry date of March 23, 1994. On March 22, 1994, Quinto sent to its transfer agent a treasury order, signed by Paul Schiller, authorizing the issuance of 150,000 shares to the following individuals:
| Cree, David & Dries, Helen | 2,857 |
| Howell, Charles | 10,000 |
| Kavanagh, Giles | 41,187 |
| Kratzer, Philip | 21,429 |
| MacInnes, Gail | 7,143 |
| Mazzotta, Douglas & David | 17,143 |
| Ness, Robert | 4,286 |
| Ovies, Robert & Kathleen | 21,429 |
| Pingle, Charles & Claudia | 8,571 |
| Schiller, Betty | 15,955 |
The shares were issued the same day and picked up by Betty Schiller.
None of these shares were issued to Wood.
Wood retained counsel, who sent a letter to Quinto, Paul Schiller and Betty Schiller, dated June 12, 1994. The letter reads, in part, as follows:
“We are advised by Mr. Wood that you did not provide Mr. Wood with either a subscription agreement, a B.C. private placement questionnaire and undertaking, a U.S. private placement questionnaire or a Form 20A. Mr. Wood was never given a warrant certificate representing the warrants which were to be part of the units which he purchased. No filings appear to have been made with the United States Securities and Exchange Commission and the United States mail service was used, in part, to complete the private placement. If this is the case, then the private placement was not in compliance with either the policies of the Exchange, the provisions of the British Columbia Securities Act or the provisions of the United States Securities Act of 1933.
We note that you have advised that some of the shares were free-trading and some were “restricted” shares. This again is a breach of the terms of the private placement questionnaire & undertaking, a breach of the policies of the Exchange, a breach of the provisions of the British Columbia Securities Act and a breach of the provisions of the United States Securities Act of 1933.
Mr. Wood and others were advised that they were participating in a private placement with Quinto and they made their cheques out to Quinto. What appears to have actually happened is that the Company filed documentation stating that Betty Schiller was the private placee. No documentation filed with the British Columbia Securities Commission shows Mr. Wood or any others as participating in the private placement . . .
. . .
It is our client’s position that you and the Company have wrongfully denied Mr. Wood the right to exercise his “warrants”. You must immediately make Mr. Wood whole for the loss that he has suffered.
The closing price of the shares of the Company was $4.60 on March 23, 1994. The exercise price is presumably $0.84 (you have never provided Mr. Wood with his warrant certificate). The profit per share would have been $3.76. The total profit for the 8,715 shares would be $32,768.40. We hereby demand that you make full payment to our firm in trust by trust cheque, certified cheque or bank draft by noon, June 16, 1994 failing which we will advise our client as to the appropriate remedies against the Company and its directors and any officers who aided or collaborated in this improper private placement.”
In response to the letter, Wood’s counsel received a certified cheque dated July 11, 1994, for $30,000 payable to his firm in trust. The cheque was issued by Quinto and signed by Paul Schiller and Betty Schiller.
Wood’s counsel subsequently noted on his copy of his letter of June 12, 1994, that: “In respect to this letter, the Schillers settled INSTANTLY the same day”.
3. FINDINGS
Commission staff allege that:
1. Paul Schiller and Betty Schiller distributed securities without being registered and without filing or obtaining a receipt for a prospectus, contrary to sections 20 and 42 of the former Act (now sections 34 and 61 of the Act);
2. Paul Schiller certified a document filed by Quinto with the Commission that contained statements that were false and misleading;
3. Paul Schiller and Betty Schiller caused Quinto to breach its Listing Agreement with the Exchange and a listings policy of the Exchange;
4. Paul Schiller exchanged free trading shares of Quinto, held by him, for Quinto shares subject to a 12 month hold period, held by other shareholders of Quinto; and
5. Paul Schiller and Betty Schiller perpetrated a fraud on Quinto and Betty Schiller perpetrated a fraud on Wood in connection with the exercise by Betty Schiller of Quinto share purchase warrants, contrary to section 41.1(c) of the former Act (now section 57(c) of the Act).
3.1 Distribution Without Registration or Prospectus
Sections 1, 20 and 42 of the former Act provide as follows:
“20(1) No person shall
- (a) trade in a security unless he is registered as
- (i) a dealer, or
(ii) a salesman, partner, director or officer of a registered dealer and is acting on behalf of that dealer,”
A trade is defined in section 1(1) of the former Act to include a disposition of a security for valuable consideration and any act, advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of such a disposition.
“42(1) Unless exempted under this Act or the regulations, a person shall not distribute a security unless a preliminary prospectus and a prospectus respecting that security
- (a) have been filed with, and
(b) receipts obtained for them from,
A distribution is defined in section 1(1) of the former Act to include a trade in a security of an issuer that has not been previously issued.
Quinto’s filings with the Exchange and the Commission characterized Quinto’s issuance of the 150,000 units as a private placement to Betty Schiller. In its Amended Form 20, signed by Paul Schiller, Quinto claimed to have issued the units to Betty Schiller under the exemption in section 55(2)(4) of the former Act, which provides as follows:
“55(2) Subject to the regulations, section 42 does not apply to a distribution where
- (4) the person is purchasing as principal, and the trade is in a security which has an aggregate acquisition cost to the purchaser of not less than a prescribed amount [$97,000],”
A corresponding registration exemption is provided in section 31(2)(5) of the former Act.
As well, the Pledge/Put/Option Agreement between Betty Schiller and Kavanagh represented that the 150,000 units had been purchased by Betty Schiller.
Despite the fact that Quinto and the Schillers have characterized Quinto’s issuance of the 150,000 units as a distribution to Betty Schiller, it is clear that the shares were intended to end up in the hands of the investors. The cheques sent in by the investors were payable to Quinto and their letters referred to their participation in a private placement by Quinto. Betty Schiller’s letter of March 31, 1993, thanked the investors for their “participation” in Quinto and her facsimile of July 16, 1993, to Kavanagh referred to having completed the mail-outs to “subscribers”. Paul Schiller’s letter of July 14, 1993, again thanked them for their participation in their private placement, reminded them that they had warrants equal to the number of shares and enclosed the certificates for those shares. Those share certificates had been issued pursuant to the various treasury orders and authorizations signed by the Schillers and sent to Quinto’s transfer agent.
We find that Quinto distributed the 150,000 shares not to Betty Schiller, but to the investors. As none of the investors had an aggregate acquisition cost of $97,000, we also find that these shares were distributed to the investors in circumstances where the exemptions in sections 31(2)(5) and 55(2)(4) of the former Act were not available.
We are of the view that both Paul Schiller and Betty Schiller carried out acts and conduct in furtherance of these distributions.
Paul Schiller was president and a director of Quinto during the period in question. He signed, on behalf of Quinto, all documents that the company filed with the Commission and the Exchange respecting the distribution. He signed the treasury order directing the issuance of the 150,000 shares and warrants to his wife and the authorization to transfer his own free-trading shares to the investors. He also signed the letter of July 14, 1993, to the Ovies and Mazzotta enclosing their share certificates.
As well as being the ostensible purchaser of the 150,000 units, Betty Schiller was office manager of Quinto. She signed the letter of March 31, 1993, to the investors, in which she thanked them for their participation in Quinto, and the facsimile of July 16, 1993, to Kavanagh, in which she referred to having completed the mail-outs to “subscribers”. She also signed the authorization to transfer most of her 150,000 shares to the investors.
Neither of the Schillers was registered under the former Act, no prospectus was filed with respect to the units and we have found that the registration and prospectus exemptions purported to be relied upon were unavailable for the distribution to the investors. Therefore, we find that Paul Schiller and Betty Schiller traded in securities without being registered, contrary to section 20(1) of the former Act, and distributed securities without filing a prospectus with, and obtaining a receipt for it from, the Superintendent, contrary to section 42(1) of the former Act.
3.2 Certification of False Document
The Amended Form 20 filed by Quinto with the Commission on September 22, 1993, was certified by Paul Schiller to be true and correct. That Form 20 indicated that the 150,000 units had been distributed to Betty Schiller and that the distribution had been made pursuant to section 55(2)(4) of the former Act. We have found that the distribution was, in fact, made to the investors and that the exemption in section 55(2)(4) was unavailable to Quinto in the circumstances. Therefore, the statements made in the Amended Form 20 were not true or correct, as certified by Paul Schiller.
It is clear that Paul Schiller knew at the time that the Amended Form 20 was filed that the shares had been distributed to the investors. On July 13, 1993, he had directed Quinto’s transfer agent to transfer his own free-trading shares to the investors. On July 14, 1993, he had sent a letter to the Ovies and to Mazzotta referring to the private placement, reminding them that they had warrants and sending them their share certificates.
We find that in certifying the Amended Form 20 filed by Quinto on September 22, 1993, to be true and correct, when he knew that it was not, Paul Schiller acted contrary to the public interest.
3.3 Breach of Exchange Listing Agreement and Policy
In its Listing Agreement with the Exchange, Quinto agreed that it would comply with all applicable by-laws, rules and policies of the Exchange.
Listings Policy Statement No. 11, Private Placement of Equity Shares, provides in section 2 that a company must give the Exchange written notice of a proposed private placement.
In May 1993, Quinto filed with the Exchange three documents respecting the proposed private placement. In those documents, Betty Schiller is shown to be the placee. In the Private Placement Subscription Agreement, Betty Schiller represents that she is purchasing the units as principal and that no other person will have a beneficial interest in the units. In the Private Placement Questionnaire and Undertaking, Betty Schiller undertakes not to sell or dispose of any of the units for 12 months without the consent of the Exchange.
It is clear that Betty Schiller knew at the time these documents were filed with the Exchange in May that she was not the placee and therefore that others had a beneficial interest in the units. She also knew that she would be disposing of the shares within the 12 month hold period. We are also of the view that Paul Schiller knew at the time he certified that the filing was in all respects in accordance with Exchange Policy 11, that certain information provided in the documents was not true. We find that by causing Quinto to file these documents with the Exchange and, in the case of Paul Schiller, certifying them to accord with Exchange Policy 11 and, in the case of Betty Schiller, making incorrect representations and undertakings, Paul Schiller and Betty Schiller acted contrary to the public interest.
3.4 Paul Schiller’s Exchange of Free Trading Shares for Restricted Shares
On July 13, 1993, Paul Schiller authorized the transfer of 66,308 of his free trading shares to the investors. The next day, in a letter to the Ovies and Mazzotta, he confirmed that he was “personally exchanging half of the restricted stock for free-trading shares”.
In doing so, Paul Schiller enabled the investors to do an end run around the 12 month hold period attaching to their shares pursuant to both the former Act and Exchange requirements. We find that, in doing so, Paul Schiller acted contrary to the public interest.
3.5 Fraud
Section 41.1(c) of the former Act provides as follows:
“41.1 No person, directly or indirectly, shall engage in or participate in a transaction or scheme relating to a trade or acquisition of a security if the person knows or ought reasonably to know that the transaction or scheme
. . .
- (c) perpetrates a fraud of any person anywhere in connection with the securities of a reporting issuer.”
In In the Matter of Excel Asset Management Inc. et al [1999] 18 B.C.S.C. Weekly Summary 29, the Commission considered at page 51 the corresponding section under the current Act:
“The test for fraud under section 57 of the Act was considered by the Commission In the Matter of Timothy James Pinchin, [1996] 41 B.C.S.C. Weekly Summary 7 and In the Matter of Mindoro Corporation et al., [1997] 7 B.C.S.C. Weekly Summary 13. In both of those decisions, the Commission referred to the decision of the Supreme Court of Canada in R. v. Olan, Hudson and Hartnett (1978) 41 C.C.C. (2d) 145 in which Dickson J. stated at page 150:
‘Courts, for good reason, have been loath to attempt anything in the nature of an exhaustive definition of “defraud” but one may safely say, upon the authorities, that two elements are essential, “dishonesty” and “deprivation.” To succeed, the Crown must establish dishonest deprivation.’
With regard to the element of dishonesty, in R. v. Zlatic, [1993] 2 S.C.R. 29, the Supreme Court of Canada considered the concept of dishonesty in the context of an allegation of fraud pursuant to section 380 of the Criminal Code. McLachlin J. observed at page 45:
‘…Would the reasonable person stigmatize what was done as dishonest? Dishonesty is, of course, difficult to define with precision. It does, however, connote an underhanded design which has the effect, or which engenders the risk, of depriving others of what is theirs. J.D. Ewart, in his Criminal Fraud, (1986), defines dishonest conduct as that “which ordinary, decent people would feel is discreditable as being clearly at variance with straightforward or honourable dealings” (p. 99)’
. . .
With regard to the element of deprivation, Dickson J. observed at page 150 of Olan that:
‘The element of deprivation is satisfied on proof of detriment, prejudice, or risk of prejudice to the economic interest of the victim. It is not essential that there be actual economic loss as the outcome of the fraud.’ “
Commission staff allege that Betty Schiller perpetrated a fraud on Wood. The evidence indicates that Wood was entitled to 8,715 warrants; had those warrants been exercised on March 23, 1994, and the shares sold the same day, Wood would have realized a profit of $32,768.40.
Instead, the warrants were exercised on March 22, 1994, by Betty Schiller and the shares issued to her. We are of the view that the conduct of Betty Schiller was dishonest; she knew that 8,715 of the warrants belonged to Wood and yet exercised those warrants and took the shares in her name. We are also of the view that Wood was deprived due to this conduct; had Wood not taken steps to protect his interests, he would have lost $32,768.40, assuming that he exercised the warrants and sold the shares on March 23, 1994.
Therefore, we find that, through her involvement in the exercise of the 8,715 warrants belonging to Wood, Betty Schiller perpetrated a fraud on Wood, contrary to section 41.1(c) of the former Act.
Commission staff also allege that both Paul Schiller and Betty Schiller perpetrated a fraud on Quinto in connection with this transaction. In response to the letter from Wood’s counsel, Quinto issued a cheque to Wood for $30,000. That cheque was signed by both Paul Schiller and Betty Schiller. Yet the shares issued on the exercise of Wood’s warrants went to Betty Schiller. Thus, though Quinto, in substance, paid Wood market value for the 8,715 shares Wood would have received on exercise of his warrants, Betty Schiller was the actual recipient of those shares. We are of the view that both Paul Schiller and Betty Schiller acted dishonestly in signing the cheque on behalf of Quinto and that Quinto suffered a deprivation, namely a loss of $30,000, as a result of their dishonesty.
Therefore, we find that, by signing that cheque on behalf of Quinto, Paul Schiller and Betty Schiller perpetrated a fraud on Quinto, contrary to section 41.1(c) of the former Act.
4. ORDERS
We have found that Paul Schiller and Betty Schiller contravened sections 20(1), 42(1) and 41.1(c) of the former Act and that both carried out other activities contrary to the public interest in connection with the distribution of Quinto securities.
In accordance with our earlier ruling, we will hear further submissions before issuing orders in respect of our findings. If the parties wish to make oral submissions, we direct them to fix a date for the hearing of those submissions before September 30, 2000. If the parties wish to make written submissions only, we direct Commission staff to file their submissions and send a copy of them to the Schillers by September 1, 2000, and the Schillers to file their submissions and send a copy to Commission staff by September 30, 2000.
DATED August 11, 2000.
FOR THE COMMISSION
Adrienne Salvail-Lopez, Member
John K. Graf, Member
Roy Wares, Member