COR #93/191

1.		under section 144(1)(c) of the Securities Act, S.B.C. 1985, c. 83, that the exemptions described in sections 30 to 32, 55, 58, 80 and 81 do not apply to Gerry Hargitai for 25 years from the date of the decision;
2.		under section 144(1)(d) of the Act, that Hargitai is prohibited from becoming or acting as a director or officer of any reporting issuer, or of any issuer that provides management, administrative, promotional or consulting services to a reporting issuer, for 25 years from the date of the decision;
3.		under section 144(1)(d) of the Act, that John Czinege is prohibited from becoming or acting as a director or officer of any reporting issuer, or of any issuer that provides management, administrative, promotional or consulting services to a reporting issuer, for 15 years from the date of the decision; and
4.		under section 154.2 of the Act, that Hargitai and Czinege pay prescribed fees or charges for the costs of or related to the hearing incurred by the Commission and the Superintendent, the amounts to be determined following further submissions from the parties.

   Commission staff have submitted a bill of costs totalling $48,120, comprised of $43,005 for staff time on the investigation and hearing, $3,115 for disbursements and $2,000 for the two days of hearing.  Staff submits that this sum should be apportioned between Hargitai and Czinege on a 5:3 ratio, based on the relative terms of the orders made against them.  On this basis, staff submits that Hargitai should be ordered to pay $30,075 and that Czinege should be ordered to pay $18,045.

   Czinege submits that the Commission ought not to make an order for costs, on the basis that he has a reasonable apprehension of bias arising from the assessment of costs by the Commission.

   The submission of a reasonable apprehension of bias rests on an assertion that the Commission is sitting in judgment of its own claim for costs and that this violates the principles of fundamental justice under section 7 of the Canadian Charter of Rights and Freedoms.  Czinege says that circumstances where an authority sits in judgment in a proceeding in which it has a direct pecuniary interest would give rise, in the minds of right thinking Canadians, to a reasonable apprehension of bias. He says that, in these circumstances it is improper for the authority to rule on the issue before it.  The process by which the Commission may order payment of costs is specifically provided for under section 154.1 of the Act, which states:

The person presiding at a hearing required or permitted under this Act or the regulations may order a person whose affairs are the subject of the hearing to pay prescribed fees or charges for the costs of or related to the hearing that are incurred by or, on behalf of the commission or the superintendent including, without limiting this,

(a)		costs of matters preliminary to the hearing,
(b)		costs for time spent by the commission or the superintendent or the staff of either of them,
(c)		fees paid to an expert or witness, and
(d)		costs of legal services.

   In the alternative, Czinege submits that the costs sought by staff are not justifiable and not based on a proper accounting. This submission rests on several arguments.  For convenience, we have divided these into five points.  We will deal with these in turn.

1.

Czinege argues that the Commission's finding that he ought to have been aware of Hargitai's conduct was incorrect.  He says his degree of culpability was in fact similar to that of Thomas Barnard, another director who settled with Commission staff.  He notes that the Commission made no order removing Czinege's exemptions, suggesting that he was, in fact, less culpable than Barnard.

   Accordingly, we will adjust the allocation of costs between Hargitai and Czinege from the 5:3 ratio suggested by Commission staff to a 10:3 ratio.

2.

Czinege argues that he agreed to a statement of facts to expedite the hearing and should not be held responsible for the fact that Hargitai decided to testify and therefore lengthened the hearing.

3.

Czinege argues that there should be an accounting of costs related to Barnard and that the amount received from Barnard should be deducted from the costs claimed against Czinege.

4.

Czinege argues that Commission staff have failed to properly account for the time claimed.  He specifically notes the "block billing" of 480 hours by two staff members, with no detailed accounting for the time.  This is contrasted with the remaining time claimed, which is accounted for in a detailed manner.  Czinege argues that this portion of the bill ought not to be accepted by the Commission.

   Our decision noted that Commission staff first became aware in November 1990 that the proceeds of Rainforest's public offering had been paid to Hargitai, not transferred to a trust account in Hungary as Hargitai and Czinege had represented during the earlier stages of the investigation.  Staff's explanation of the additional investigation required following this revelation appears reasonable.  We find that, since this additional investigation resulted directly from the efforts of Hargitai and Czinege to conceal from staff the misappropriation of Rainforest's funds, it is appropriate that Hargitai and Czinege pay the cost of the investigation.  However, because of the lack of detail concerning the time spent on the investigation during these periods, we will reduce the allocation of time to a more conservative four hours per day.

5.

Finally, Czinege argues that we should take into account his personal circumstances and the damage to his reputation that has resulted from this matter.  He says he is a man of modest means and that "some accommodation should be made in relation to the costs that this Panel awards against him."

   As a result of the adjustments noted above, the bill of costs is varied as follows:

Item

Staff Bill

Revised Bill

	Staff time	$43,005	$35,005
	Disbursements	3,115	3,115
	Hearing	2,000	2,000
	Barnard costs		(2,000)
		-------	--------
	TOTAL	$48,120	$38,120
		-------	--------

   Hargitai - 10/13 x $37,120 + $1,000 = $29,554

Czinege -  3/13 x $37,120

=

$8,566

	G. Gerry Hargitai	$29,554
	John Czinege	$ 8,566.