Myron Claridge, for the Superintendent of Brokers.

   H.A. (Sandy) McCandless and Murray Morrison, for Gerald Emile Sklar.

   REASONS FOR DECISION:-- This matter was brought before the Commission by the Superintendent of Brokers (the "Superintendent") in a notice of hearing dated March 23, 1989 (the "Notice") in connection with certain matters disclosed in news releases and other disclosure documents by Intercontinental Ventures Inc. ("INQ") and Max Minerals Inc. ("Max").  The Notice stated that the Commission would be asked to determine whether it should make orders:

1.		under section 145(1) of the Securities Act S.B.C. 1985, c. 83 (the "Act"), that the exemptions described in sections 30 to 32, 55, 58, 81 and 82 do not apply to Gerald Emile Sklar;
2.		under section 145.1 of the Act, that Sklar resign as a director and officer of all reporting issuers and be prohibited from acting as a director or officer of any reporting issuer; and
3.		under section 154.2 of the Act, that Sklar pay costs related to the hearing.

   According to the recital in the Notice, the Commission was to consider whether Sklar caused the issue of news releases and other documents by INQ and Max, which stated that private placements had been negotiated with DG Bank. (Switzerland) Ltd. ("DG Bank").  DG Bank subsequently advised the Vancouver Stock Exchange (the "Exchange") that it had no such agreements with INQ or Max.  In addition, the Commission was to consider whether Sklar, in a telephone conversation with a registrant, offered to sell corporate assets of Max with the proceeds to be applied to settle a trading account in which Sklar had a personal interest.

BACKGROUND

   Sklar is a fifty year old businessman who resides in Calgary. He has an education in accounting, economics and business finance.  He has been active at the management level in the oil and gas business and has been a director and officer of public companies since 1986.

   INQ was incorporated under the Company Act of British Columbia on January 22, 1987.  It is a reporting issuer under the Act and its shares are listed on the Exchange. INQ is a natural resource company with oil and gas interests in Alberta and mining properties in British Columbia.

   Max was incorporated under the Company Act of British Columbia on August 29, 1986 and is a reporting issuer under the Act.  Its shares are listed on the Exchange and it has natural resource interests similar to those of INQ.

   Sklar became involved with INQ and Max in the summer of 1988, at the initiative of Lakhwinder Janda of Vancouver. Janda had experience as a broker with Pacific International Securities Inc. ("Pacific International"), a Vancouver brokerage firm, and since 1985 had been active as a director of and investor in public companies.

   On August 15, 1988, INQ issued a news release stating that its escrow shares had been transferred and that Alan Wilson had been appointed president and elected as a director.  Other directors elected were Sklar, Janda and David Young.

   On June 27, 1988, Max had announced that its escrow shares were to be acquired by Dexx Energy Corporation ("Dexx"), a public resource company based in Calgary, of which Sklar was the chief executive officer.  At Max's annual meeting on September 16, 1988, Sklar, Janda, Young and Wilson were elected as directors and Sklar was named as the president and chief executive officer.  In a news release issued on November 11, 1988, Max stated that its escrow shares would be transferred not to Dexx, but to Mediterranean Ventures Ltd. ("Mediterranean"), a private company controlled by Sklar, Janda and Young.

EVIDENCE

   On November 21, 1988, INQ issued a news release announcing that a private placement of its shares had been negotiated with a European financial institution.  400,000 units were to be issued at a price of $0.26 per unit, with each unit consisting of one common share and one warrant.  The release went on to say that the placement was "being done on an exempt purchaser basis" and was subject to the approval of the regulatory authorities.  The funds were to be used to meet INQ's cash call commitments on a joint venture with Minnova Inc., a major mineral exploration company.  Also on November 21, INQ forwarded copies of the news release and a material change report to the Exchange.

   By letter from INQ dated November 22, Sklar, as president, advised the Exchange that it had entered into an agreement dated November 21 regarding the private placement.  The letter described the proposed transaction, named DG Bank as the placee and described an agreement made with Mossbrand Limited, of Downsview, Ontario ("Mossbrand") to pay it a finder's fee of 40,000 shares for acting as agent in arranging the private placement.

   On November 25, Sklar issued a news release on behalf of Max which announced that "an exempt private placement has been negotiated with DG Bank (Switzerland) Ltd." Max was to issue 500,000 units at $0.21 Per unit, with each unit consisting of one common share and one warrant.  The release stated that a finder's fee would be paid and that the transaction would be subject to regulatory approval. Copies of this news release and a material change report were forwarded to the Exchange.

   Karen Thompson, a listings assistant at the Exchange, testified that she was involved in frequent telephone conversations with Sklar after she received INQ's letter of November 22, which she described as a notice letter. Thompson said Sklar called her on virtually a daily basis and, in response to her questions, INQ sent the Exchange a letter on November 28 confirming DG Bank as the placee and naming Larry and Barbara Skolnik as the principals of Mossbrand.

   Following further discussions which Thompson had with both Sklar and Joseph Tarnowski, INQ's legal counsel, INQ sent another letter to the Exchange on December 8.  The December 8 letter stated that the placement was to be made to European clients of DG Bank's Zurich office, managed by Paul Ledermann, Vice President of Finance.  The letter also confirmed that Mossbrand had arranged the placement and stated that INQ had asked for the names of the parties involved to be divulged but that DG Bank was not prepared to do so.

   These communications culminated with a letter from the Exchange to INQ dated December 12 in which it advised that the "proposed private placement" was acceptable in principle to the Exchange, subject to a restriction on the number of shares to be issued to Mossbrand, and the filing of additional documentation as required by the Exchange's policy.

   Max sent its notice letter to the Exchange on November 22. The matter was dealt with by Sandra Tannas, a listings assistant, who did not testify at the hearing.  The procedures followed were similar to those described for INQ.  The Exchange notified Max of its approval in principle in a letter dated December 16.

   The Exchange's procedures for reviewing applications for approvals of private placements begin with the filing of a notice of the placement by the issuer.  The notice is reviewed by the Exchange and if it is acceptable, the issuer is given an approval in principle.  The issuer then has thirty days to file the additional documents necessary to obtain final approval. There are two alternative methods for obtaining final approval and the documentation varies with each method, but in both cases it requires documentation signed by the purchaser. Neither INQ's nor Max's application ever proceeded beyond the first stage to final approval and no documents signed by purchasers were ever filed.

   On December 21, trading in the shares of INQ was halted by the Exchange because of a sudden escalation in price and volume.  Janda issued a news release on behalf of INQ saying there had been no material change and that the private placement had been approved in principle by the Exchange, subject to completion of documentation to obtain final approval.  Trading resumed on December 22.

   In late December and early January, 1989, Sklar was also having discussions with Richard Oddy, a listings officer at the Exchange, regarding the acquisition by Max of certain oil and gas properties.  Oddy testified that, on or about January 12, he received a call from Bill Reid, Manager of Corporate Finance for Pacific International, who told him that DG Bank had advised Pacific International that it had not entered into any agreement regarding Max's private placement.  After a discussion with Mary Beck, a supervisor at the Exchange, Oddy requested Reid to contact DG Bank and ask them to put their statement in writing.

   The Exchange then received a letter from DG Bank by fax, dated January 17, in which DG Bank confirmed it had no agreement with regard to a private placement by Max at the time it had issued the November 25 news release.  DG Bank advised that it had been approached some ten days later in that regard but had declined to participate.

   On January 17, the Exchange halted trading in the shares of Max pending a clarification of its affairs.  It also halted trading in the shares of INQ.  In a letter dated January 17 to DG Bank, Beck enquired about the INQ private placement in view of the overlapping directorships between INQ and Max.  The Exchange received a reply from Ledermann on January 19 in which he confirmed that DG Bank had had no discussions regarding a private placement with INQ and, in fact, had not previously been aware of INQ's existence.

   In letters dated January 19 to Tarnowski and Bernhard Zinkhofer, legal counsel for Max, Beck set up a meeting for January 23 between INQ and Max representatives and the Exchange.  Beck requested that all documentation related to the placements, including directors' resolutions, executed and draft agreements and any other records, be provided to the Exchange by January 20.

   The January 23 meeting was attended by Beck, Oddy and Warren Funt from the Exchange, Lang Evans, who represented the Superintendent of Brokers, and Sklar, Janda, Tarnowski, Zinkhofer, Larry Skolnik and Sandy McCandless for INQ and Max. During the meeting, the representatives of INQ and Max were advised of the letters dated January 17 and 19 from DG Bank. Evans said that Sklar, Janda and Skolnik were "very surprised" and displayed shock.

   On January 24, Beck wrote INQ and Max to say that the Exchange required confirmation by DG Bank of its intention to participate in the placements, copies of the Mossbrand agency agreements and certain other information before their shares would resume trading.  She also requested a complete explanation of DG Bank's role in the private placements.

   On January 25, the Exchange issued a news release with respect to each of INQ and Max which said that trading in their shares would be suspended pending clarification of their affairs.  The shares of INQ and Max remained suspended at the time of the hearing.

   INQ's share price had declined from $1.00 in August, 1988, to $0.35 in September.  The price rose to $0.90 in mid-October, but declined again to trade briefly at $0.25 at approximately the same time the private placement was announced at $0.26. The price then varied between $0.25 and $0.75 in December on heavy volume and had declined to $0.50 on January 17 when it was halted by the Exchange.

   The price of Max's shares had declined from appoximately $1.35 in August to trade in the range of $0.30 at the time the private placement was announced at $0.21.  They traded at about this level until the halt on January 17.

Events Preceding the News Releases

   Sklar testified that, by October 1988, INQ and Max each required about $100,000 for the Minnova joint venture, in the case of INQ, and for drilling commitments, in the case of Max. He said he was not in favour of private placements but Janda was.

   Janda testified that his role in Vancouver was to carry out Sklar's instructions, to deal with lawyers and accountants and to bring investors to the market.  He and Sklar talked to each other by phone several times a day. Janda met Skolnik in Toronto in early 1987 and again in Vancouver in October, 1988, at which time Skolnik said he was looking for opportunities to do private placements for public companies.  Janda introduced Sklar to Skolnik by telephone conference call on November 11. Sklar agreed to meet with Skolnik in Toronto on November 16.

   Shortly after Sklar arrived in Toronto, Skolnik introduced him over the phone to some brokers in New York, namely Revcon (U.S.A.) Ltd. ("Revcon") and Robert Ainbinder Securities ("Ainbinder").  To Sklar's surprise, he said, the New York brokers already held positions in Max, and some discussion about the private placements took place. Sklar stated that within a few days the arrangements for the private placements were settled and the purchaser was to be DG Bank.  No formal agreement was drawn up or contemplated and Sklar did not talk to anyone at DG Bank. Instead, Sklar said he relied on Skolnik's assurances that DG Bank would participate in the private placements. Skolnik told Sklar that he was acquainted with Ledermann, through previous contact with him when Ledermann was involved in the lumber business in Germany. Sklar said he suggested a conference call with DG Bank at this time but Skolnik said it was not a good idea.  Sklar said he was looking for assurances that the private placements would not create problems as far as the rules were concerned.

   On Sklar's return to Calgary, he stated that a conference call took place among the directors of INQ.  Sklar claimed he received an assurance from the brokers at Revcon in New York that they would "partake" in the private placements and, on or about November 18, Sklar said he received further telephone assurances with respect to the private placements from Skolnik, to whom he had sent a copy of the proposed INQ news release. The news release announcing the private placement was then issued on November 21.

   Sklar said he had a further conversation with Skolnik between November 21 and 25 and received assurances regarding the private placement for Max.  The Max news release was issued on November 25.

Events Following the News Releases

   On November 28, Max Meier, President of Pacific International, called Ledermann in Zurich to tell him about the Max news release which mentioned DG Bank by name and which had been published in Vancouver Stockwatch. Meier and his firm had acted as agent for DG Bank in a semi-exclusive capacity arranging some thirty private placements for Exchange companies over a period of eight years, and Meier had been surprised to see Max's announcement.  He had not paid particular attention to the announcement of the INQ private placement since DG Bank was not named in the INQ news release.  He said Ledermann professed no knowledge of Max's private placement, and Meier suggested that DG Bank advise the Exchange. Ledermann said he wanted to think about it first and said he would phone Meier on December 6.  On that date, Ledermann called back to say he had had a meeting with Skolnik.  He had previously met with Skolnik during October, and had told him that if he had any worthwhile investments he should run them past Pacific International. Meier said that when Ledermann asked Skolnik about the Max news release Skolnik replied that he had intended to discuss the private placement with DG Bank but that the people in Vancouver had mistakenly issued a news release.

   On December 7, Skolnik called Meier from Zurich, at Ledermann's suggestion, to tell Meier about the Max proposal and to say he would be in Vancouver.  Meier asked for references for Skolnik and Sklar, to which Skolnik responded by saying that they gave Pacific International lots of business through Revcon.  Meier said he checked out Skolnik and Sklar and could not find anything positive. On December 12 he advised DG Bank not to get involved.

   On December 13, Skolnik sent a fax to Ledermann to say he would be arriving in Zurich on December 19 with a principal of Max and INQ.  He asked him which day would be best for a visit and gave telephone numbers where he could be reached in New York the following day.  Sklar joined Skolnik in Toronto and they went on to New York together on December 14 or 15.  In New York Sklar met with Stephen Gellas, of Revcon, and Robert Ainbinder, of Ainbinder. Sklar said he presented them with information packages on INQ and Max and answered their questions.

   Sklar said that although he and Skolnik had intended to go on to Zurich, it was not until Friday, December 16, that he received a copy of the Exchange's approval in principle of Max's private placement.  According to Sklar, Skolnik would not travel between sundown on Friday and sundown on Saturday and this led to a decision to cancel the planned trip to Zurich. Sklar and Skolnik returned to Canada on Dccember 21.

   While still in New York, on December 21, Skolnik again sent a note to Ledermann.  This time he suggested December 27 or January 3 as dates for a meeting in Zurich.  No mention was made of the aborted visit on December 19.  He gave two New York telephone numbers where he could be reached that day. Ledermann responded to Skolnik on December 21 at 5:45 p.m. Zurich time, (11:45 a.m. New York time), saying that he was free on January 3.  In this note he also said the following:

"We do not make the private placement of Max Minerals. This is for your information.  Please make arrangements for a note in the Vanc. Stock Watch.  Regards Paul."

   Meier said that on January 4, Skolnik came to the offices of Pacific International.  Meier had agreed to the meeting so he could bring up the matter of Revcon's account with Pacific International where a loss had been incurred, in part due to trading in Max shares held for Revcon's account.  He knew that Skolnik was involved with the Revcon people.  There was some discussion of the private placements and, in the course of it, Meier offered the opinion that the private placements for INQ and Max were against the spirit of the "exempt purchaser" provisions.

   The initial call from Pacific International to the Exchange about DG Bank's position took place on January 12, following which the Exchange received written confirmation from DG Bank that no discussions had taken place with anyone regarding the private placements prior to the issue of the news releases by INQ and Max announcing the private placements.

   On January 30, Janda and Sklar held a conference call with Ledermann in Zurich, the key points of which Sklar claims to have confirmed in a letter of the same date to Ledermann.  This was the first direct contact between INQ and Max and DG Bank. According to Sklar's letter, the conversation established that Skolnik had discussed private placements on a general basis with Ledermann in mid-November, that only Max had been specifically discussed and that was some time later.

The Brown Incident

   Peter Brown, the Chairman of Canarim Investment Corporation Ltd. ("Canarim"), gave evidence about an incident with Sklar which occurred in February and March, 1989.  Brown said that Canarim was owed about $30,000 by Mediterranean and between $40,000 and $50,000 by Canal Springs, another account controlled by Sklar, Janda and Young.  After several weeks of trying to reach Sklar, Brown did receive a call from him, on March 1, 1989, during which Sklar offered to sell certain properties owned by Max for $50,000 and apply the proceeds to the Mediterranean debt.  He said Sklar made the offer on the condition that Brown assist him to get the trading suspensions against INQ and Max lifted.

   Sklar said he and Brown had known each other since university.  They had even been neighbors at one time. They did not always get along very well and on this occasion he felt Brown goaded him with threats to use his influence with the regulatory authorities.  Sklar said he made the comment regarding the sale of Max's properties out of anger and exasperation.

ARGUMENT

   Myron Claridge, counsel for the Superintendent, said that there were two principle issues to be addressed by the Commission. The first is whether Sklar knew, or ought to have known, if there was a private placement by each of INQ and Max with DG Bank.  Secondly, did Sklar, in his capacity as a director and officer, exercise the care, diligence and skill of a reasonably prudent person in the light of the circumstances surrounding his activities with INQ and Max?

   Mr. Claridge emphasized that the obligation to make continuous disclosure is the cornerstone of the securities regulatory framework.  One of the most critical documents for continuous disclosure is the news release and there is an obligation on directors to make sure news releases are based on fact.

   Mr. McCandless conducted a painstaking and detailed review of the evidence to show everything that happened was consistent with Sklar's belief that the private placements by INQ and Max were proceeding.  He argued that the meticulous, thorough and continuing efforts made by Sklar to prepare the necessary paperwork to secure the approval of the Exchange could only have that interpretation. Indeed, Mr. McCandless went further and said that the cvidence tended to suggcst that DG Bank agreed to a private placcment, but later backed away when Mcier moved in and "kiboshed" it in response to the threat posed by Skolnik to Meier's agency relationship with DG Bank.  In support of his argument he referred in particular to Ledermann's failure to contact the Exchange until mid-January, long after the Max news release first came to his attention.

   If Sklar did not know the information he was disclosing was false, then according to Mr. McCandless the only remaining basis for liability is a finding by the Commission that he ought to have known it was false.  He argued that in all the circumstances, and given Sklar's skills, knowledge and background, one should not conclude that he ought to have known there was no agreement to do the private placements with the DG Bank.  There were no red flags to alert his client to the fact that the private placements had not been agreed to.  If there had been, his client would not have mindlessly carried on as though the private placements were proceeding.

FINDINGS AND DECISION

   The INQ news release of November 21, the Max news release of November 25 and the documents filed by INQ and Max with the Exchange in connection with the private placements were false and misleading.  Sklar directed the release of the information without taking adequate precautions to ensure that it was true. He did not exercise the care, diligence and skill of a reasonably prudent person. Sklar's story is that he relied on Skolnik's verbal assurances.  Sklar had known Skolnik for approximately a week when he negotiated the terms for the private placements.  Janda, who introduced them, had only met Skolnik briefly on two occasions.  Skolnik was described by Janda as a man who "talked in circles", one who "never gave a straight answer".  Based on Sklar's own evidence, Skolnik certainly lived up to this description.

   At some point in time, certainly no later than December 21, Sklar became aware that the information in the news releases and documents filed with the Exchange was false. Instead of disclosing the truth of the situation, he participated in a last minute effort to strike an agreement with DG Bank.  He acted dishonestly and completely ignored his duties as a director and officer of a reporting issuer.

   Neither Skolnik nor Mossbrand had authority to make commitments on behalf of DG Bank.  DG Bank itself did not even hear about the private placements until Meier's phone call on November 28, at which time only the Max private placement was mentioned.  Ledermann's hesitation in reporting the matter to the Exchange after the telephone conversation on November 28 is all that is offered by Sklar in support of the notion that there was an agreement by DG Bank to enter into the private placement. We see nothing so extraordinary in DG Bank's reaction as to warrant the inference that there was a deal to do a private placement with Max, which later collapsed as a result of Meier's intervention.

   In our judgment Skolnik was never under any misconception as to DG Bank's position with respect to the private placements. During his meeting with Ledermann in Zurich on December 6, he acknowledged to Ledermann that the news release announcing the Max private placement was a mistake.  The INQ news release did not come up in the conversation because it did not mention DG Bank by name.

   While Skolnik was able to convince DG Bank to consider the Max private placement, that was all DG Bank agreed to do and on December 21 DG Bank decided not to do the private placement.

   We do not accept the explanation offered by Sklar for cancelling the planned trip to Zurich. Skolnik's religious convictions may have precluded him from travelling certain hours during December 16 and 17, but their original plan was to arrive in Zurich on December 19 and travel arrangements could have been made to accommodate this time schedule.

   The Commission rejects Sklar's evidence that Skolnik did not receive Ledermann's fax in New York on December 21.  A subsequent communication to Sklar from his office in Calgary was faxed a few hours later on the same day to the same telephone number in New York and was received by him, notwithstanding the alleged confusion because Revcon was moving its offices.  Moreover, the message Ledermann sent to Skolnik was a response to an inquiry from Skolnik to settle the time for a meeting either on December 27 or January 3.  If Skolnik did not receive the reply on December 21, as he claims, one would have expected some follow up on his part and some pressure from Sklar to obtain DG Bank's signatures to documents required by the Exchange for final approval of the private placements. Instead, communication between Skolnik and Ledermann appeared to come to a halt, and Skolnik met with Meier in Vancouver on January 4.

   The more likely explanation of the series of events in New York is that Skolnik received the note from Ledermann on December 21, communicated the information to Sklar and they decided to abandon their trip to Zurich and return to Canada. They had concluded there was no longer any point in meeting with Ledermann in Zurich, so they decided instead to pursue the matter with Meier in Vancouver. Sklar's credibility was a significant issue in the proceedings.

   At one point Sklar categorically denied having been advised by Tarnowski and Zinkhofer, after the January 23 meeting at the Exchange, to issue a news release verifying the status of the private placements.  Both Tarnowski and Zinkhofer were called as witnesses and each of them confirmed having given such advice to Sklar.

   Sklar offered no explanation of why he spent so much time and effort on Revcon and Ainbinder other than to say that he either assumed or was told that they had European clients who were participating in the placements through the DG Bank.  We are not satisfied with this explanation and believe that Sklar's understanding of the role played by Revcon and Ainbinder went far beyond what he admitted to in his evidence.

   Sklar prepared and kept current due diligence packages for Max, INQ and Dexx.  In the Dexx package, Sklar was described as a chartered accountant.  At the hearing he acknowledged that he was not and never had been a chartered accountant, and that the description was inaccurate.

   Sklar and Skolnik were both surprised when they were told of the letters from DG Bank during the meeting at the Exchange on January 23.  In our judgment, their surprise was learning of the existence of the letters rather than the information which they contained.

   We find it peculiar that, although documentation of every collateral aspect of the private placements was both plentiful and meticulous, there was nothing in writing confirming DG Bank's commitment to participate in the private placements.

   The incident with Brown, in which Sklar offered to apply corporate assets to settle a personal account, is further evidence of a failure to adhere to the standards required of an officer and director of an issuer and, in our judgment, was not merely an isolated, angry outburst.  We consider the incident quite consistent with the general pattern of irresponsible and dishonest conduct which Sklar displayed throughout the period under review.

   Continuous disclosure of material information about reporting issuers is fundamental to an effective and credible securities market.  The false and misleading disclosure in this case was occasioned by Sklar's failure to fulfill his duties as a director and officer of a reporting issuer.  Initially, he failed to ensure that the information he was releasing was true.  Later, he failed to act honestly after he knew the information was false. His behaviour was prejudicial to the public interest. Accordingly, the Commission orders:

1.		under section 145(1) of the Act, that the exemptions described in sections 30 to 32, 55, 58, 81 and 82 do not apply to Sklar for a period of three years;
2.		under section 145.1, that Sklar resign as a director and officer of all reporting issuers and is prohibited from becoming or acting as a director or officer of any reporting issuer for a period of three years; and
3.		under section 154.1, that Sklar pay for the costs of or related to the hearing that are incurred by or on behalf of the Commission or the Superintendent, such costs to be determined by the Commission.