BCSC

Notices of Hearing & Temporary Orders

RIVER RANCH RESORT CORP., et. al. [Temp. Order and Notice]

BCSECCOM #: 2001 BCSECCOM 406	Document Type: Temp. Order and Notice
Published Date: 2001-04-17	Effective Date: 2001-04-09
Details:

2001 BCSECCOM 406

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, C. 418

AND

IN THE MATTER OF RIVER RANCH RESORT CORP., RIVER RANCH RESORT (VCC) CORP., RIVER RANCH RESORT (VCC II) CORP., RIVER RANCH LIMITED PARTNERSHIP, RIVER RANCH FINANCIAL CORP., RIVER RANCH CAPITAL CORP., STRATEGIC CONCEPTS INVESTMENT TRUST AND QUANTUM VALUE VENTURES (VCC) CORP.

(COLLECTIVELY, THE “ISSUERS”)

Temporary Order and Notice of Hearing Under Section 161

[para 1]
1. TAKE NOTICE that a hearing (the “Hearing”) will be held to give the Issuers an opportunity to be heard before the British Columbia Securities Commission (the “Commission”) considers whether it is in the public interest to make an order under section 161(1)(b) of the Securities Act, R.S.B.C. 1996, c. 418 (the “Act”) that all persons cease trading in the securities of the Issuers and any other orders as may be appropriate in the circumstances.

[para 2]
2. The Commission will be asked to consider the following facts and allegations:

Parties

2.1 River Ranch Resort Corp. ("Ranch Private Co.") was incorporated in British Columbia on November 4, 1996, under incorporation number is 0530291. Its purported business is to construct and operate a guest ranch and tourist destination resort on approximately 3,942 acres of land southeast of Vanderhoof, British Columbia (the “Property”).

2.2 River Ranch Resort (VCC) Corp. (“Ranch VCC”) and River Ranch Resort (VCC II) Corp. (“Ranch #2 VCC”) are companies registered under the Small Business Venture Capital Act, R.S.B.C. 1996, c. 429 (the “VCC Act”), and are each non-reporting issuers that have filed offering memoranda with the Commission.

2.3 River Ranch Limited Partnership (“Cow–Calf LP”) was formed as of November 12, 1998, as a limited partnership under the Partnership Act, R.S.B.C. 1996, c. 348. Cow–Calf LP has contracted with Ranch Private Co. to lease all of Ranch Private Co.’s farming lands, buildings, equipment and cattle.

2.4 River Ranch Financial Corp. (“FinCorp”) was incorporated in British Columbia as 555816 B.C. Ltd. on December 11, 1997. River Ranch Capital Corp. (“CapCorp”) was incorporated in British Columbia as 555528 B.C. Ltd. on December 5, 1997. Cow-Calf LP, FinCorp and CapCorp are non-reporting issuers that have filed a joint offering memorandum with the Commission.

2.5 Strategic Concepts Investment Trust (“Strategic Trust”) was formed by way of settlement incorporated in British Columbia on November 19, 1998. It is a non-reporting issuer that has filed an offering memorandum with the Commission.

2.6 Quantum Value Ventures (VCC) Corp. (“Quantum VCC”) is a company registered under the VCC Act and is a non-reporting issuer that has filed an offering memorandum with the Commission.

Ranch VCC and Ranch #2 VCC Offerings - $4,949,000

2.7 Under three offering memoranda dated July 15, 1997, May 19, 1998, and April 19, 1999, respectively, Ranch VCC issued common shares, pursuant to which a total of $4,805,000 was raised.

2.8 Under an offering memorandum dated January 24, 2000, Ranch #2 VCC issued common shares, pursuant to which a total of $144,000 was raised, as of July 30, 2000.

2.9 The terms and conditions of the Ranch VCC and Ranch #2 VCC offering memoranda were substantially the same. In each case, the net proceeds were to be invested in convertible preferred shares of Ranch Private Co.

2.10 Under the Ranch VCC and Ranch #2 VCC offering memoranda, the securities were offered for sale in reliance upon the prospectus exemptions contained in subsections 128(a) and 128(b) of the Securities Rules, B.C. Reg. 194/97 (the “Rules”). It appears that none of the exemptions under section 128 of the Rules was available in respect of some of the distributions made under these offerings because, among other things, the purchasers were not sophisticated and purchases were made for amounts of less than $25,000. Accordingly, those distributions appear to have been made contrary to section 61 of the Act.

2.11 The Ranch #2 VCC offering memorandum appears to contain false or misleading statements, contrary to sections 50(1)(d) and 168.1(1)(b) of the Act. It does not accurately represent the appraised value of the Property. It also falsely represents that a large hotel chain hasd been significantly involved in the design of a hotel proposed to be built on the Property.

Cow - Calf LP Offering - $4,917,500

2.12 Under an offering memorandum dated January 20, 1999, the Cow-Calf LP offered to sell units and FinCorp and CapCorp each offered to sell bonds. The offering memorandum represented that proceeds from the sale of units were to be used to finance a cattle operation on the Property. Proceeds from the sale of bonds were to be used to finance the acquisition of units, thereby making the same underlying investment eligible for registered retirement savings plans.

2.13 Between January 20, 1999, and December 29, 2000, the Cow-Calf LP, FinCorp and CapCorp issued securities in the amount of $4,917,500 under the offering memorandum.

2.14 In connection with this offering, the Cow-Calf LP, FinCorp and CapCorp purported to rely upon the prospectus exemptions contained in subsection 74(2)(4) of the Act and subsections 128(a), 128(b) and 128(c) of the Rules. It appears that neither the exemption in subsection 74(2)(4) of the Act nor any of the exemptions under section 128 of the Rules was available in respect of some of the distributions made under this offering because, among other things, the purchasers were not sophisticated and purchases were made for amounts of less than $25,000. Accordingly, those distributions appear to have been made contrary to section 61 of the Act.

Strategic Trust Offerings - $3,282,500

2.15 Under an offering memorandum dated February 11, 1999, Strategic Trust issued securities in the amount of $636,500.

2.16 Under an updated offering memorandum dated March 8, 2000, Strategic Trust issued additional securities in the amount of $2,645,000 as of December 31, 2000. Strategic Trust securities continue to be offered to investors in British Columbia under this offering memorandum.

2.17 In connection with these offerings, Strategic Trust purported to rely upon the prospectus exemptions contained in subsection 74(2)(4) of the Act and subsections 128(a), 128(b) and 128(c) of the Rules. It appears that neither the exemption in subsection 74(2)(4) of the Act nor any of the exemptions under section 128 of the Rules was available in respect of some of the distributions made under these offerings because, among other things, the purchasers were not sophisticated and purchases were made for amounts of less than $25,000. Accordingly, those distributions appear to have been made contrary to section 61 of the Act.

2.18 NNeither of the Strategic Trust offering memoranda appears to make proper disclosure concerning the nature of Strategic Trust’s business, the projects to be financed or the use of proceeds, as required by the form specifiedbe in the form required under section 133(1)(c) of the Rules. The distribution made under each offering memorandum therefore appears to have been made contrary to section 61 of the Act.

Quantum VCC Offering - $832, 000

2.19 Under an offering memorandum dated August 31, 2000, Quantum VCC issued securities in the amount of $832,000 as of December 31, 2000.

2.20 In connection with this offering, Quantum VCC purported to rely upon the prospectus exemptions contained in subsections 128(a) and 128(b) of the Rules. It appears that none of the exemptions under section 128 of the Rules was available in respect of some of the distributions made under this offering because, among other things, the purchasers were not sophisticated and purchases were made for amounts of less than $25,000. Accordingly, those distributions appear to have been made contrary to section 61 of the Act.

2.21 The Quantum VCC offering memorandum does not appear to make proper disclosure concerning the nature of Quantum VCC’s business, the projects to be financed or the use of proceeds, as required by the form specified by section 133(1)(c) of the Rules. The distribution made under the offering memorandum therefore appears to have been made contrary to section 61 of the Act.
Undisclosed Conflicts of Interest

The Issuers in their respective offering memoranda disclosed that certain conflicts of interest existed with respect to the use of proceeds. The full extent of those conflicts of interest does not appear to have been properly disclosed to all investors, contrary sections 79 and 81 of the Rules.

Fair Dealing

Current Status

2.22 To date, it appears that the Issuers have financed their operations and developments almost exclusively through distributions of securities under exempt offerings. It also appears that Ranch Private Co., in order to complete its development of the tourist destination resort on the Property, currently requires additional financing of at least several millions of dollars. Similarly, it appears that Cow-Calf LP urgently requires additional financing in order to continue its ranching operations on the Property.

2.23 At the request of staff of the Commission and considering it in the public interest, the Commission issued directions under section 151 of the Act on February 26 and 27, 2001, to freeze certain funds payable to the Cow-Calf LP.

[para 3]
3. The Executive Director considers that the length of time to hold the Hearing could be prejudicial to the public interest.

[para 4]
4. The Executive Director, considering that it would be in the public interest to do so, orders under section 161(2) of the Act (the “Temporary Order”) that all persons cease trading in the securities of the Issuers for a period expiring on April 24, 2001.

[para 5] the registrations of each of the Individual Respondents is suspended;
5. TAKE NOTICE that the Hearing will be held at the 12th Floor Hearing Room, 701 West Georgia Street, Vancouver, B.C., on Tuesday, April 24, 2001, at 10:00 a.m.

[para 6]
6. AND TAKE NOTICE that at the Hearing the staff of the Commission will bring the following applications:

6.1 that the matter be adjourned for 120 days to permit the conclusion of the investigation in this matter; and

6.2 that the Temporary Order be extended until such time as the Hearing is completed and a decision rendered.

[para 7]
7. AND TAKE NOTICE that the Issuers may be represented by counsel at the Hearing and may make representations and lead evidence. The Issuers are requested to advise the Commission of their intention to attend by contacting the Secretary to the Commission at P.O. Box 10142, Pacific Centre, 9th Floor, 701 West Georgia Street, Vancouver, BC, V7Y 1L2, telephone: (604) 899-6500.

[para 8]
8. AND TAKE NOTICE that determinations may be made in this matter if the Issuers or their counsel do not appear at the Hearing.

[para 9]
DATED at Vancouver, British Columbia, on April 9, 2001.

Steve Wilson
Executive Director