Yorkton Securities sacks CEO
Brokerage had 'legal cause,' director says
David Baines
Vancouver Sun
Saturday, December 15, 2001
Scott Paterson has been fired as chairman and chief executive of Yorkton Securities, a Bay Street investment house that has become entangled in complaints of fast-and-loose dealings.
"Today is one of the saddest days of my life," said Paterson, 38, who is also chairman of the Canadian Venture Exchange and co-vice-chairman of the Toronto Stock Exchange, in an e-mail to employees Friday.
Yorkton director Alan Schwartz said 23 of Yorkton's 25 directors voted to fire Paterson, who has been CEO since 1995. Paterson himself didn't vote, leaving only one director who wanted to keep him.
Schwartz declined to say why he was sacked, except to say the brokerage firm had "legal cause." Paterson also declined comment.
Steve Kee, speaking for the Toronto Stock Exchange, owner of the CDNX, said no decision has been made on Paterson's future at the exchange.
In March 2000, The Vancouver Sun revealed that Paterson and his firm had played multiple roles as investor, promoter and underwriter of CDNX-listed Book4golf.com Corp., raising questions of conflict of interest.
After the story was published, the Ontario Securities Commission commenced an investigation into Yorkton's underwriting methods.
OSC spokesman Frank Switzer confirmed Friday that the commission is "nearing the end of our investigation into Yorkton," but refused to confirm or deny that Paterson is part of that probe.
Last summer, Yorkton and two former employees were fined more than $500,000 last summer for trading violations and other offences -- a major embarrassment for Paterson.
"If a new IPO cycle had started, we would have been asking ourselves if this is the kind of firm we want to do business with," said portfolio manager Fred Pynn of Bissett & Associates Investment Management, which uses Yorkton for some trading.
It has been an abrupt descent for Paterson. During his 61/2 years as CEO, Yorkton one of the last Canadian dealers not owned by a bank or other large institution -- expanded rapidly as a leading financier of Canadian technology and biotechnology businesses.
"We have helped shape the direction of Canada's future," Paterson said in his farewell memo, which gave no details or reasons for his departure.
"Our vision altered the bank dealers' strategies and afforded entrepreneurs from coast to coast the confidence that their efforts would not be in vain. This is Yorkton's legacy to date."
The firm's revenue surged as high as $127 million in the first quarter of 2000, only to plunge to $8.6 million in August of this year as the appetite for dot-com and other high-tech start-ups dwindled.
After circulating the memo, Paterson walked through Yorkton's Bay Street office, shaking hands and saying personal goodbyes.
"My colleagues and I were saddened," said David Ekmekjian, a Yorkton portfolio manager.
"I like the man, and he certainly made significant contributions in terms of the niche that Yorkton established."
In his memo, Paterson recalled high points, among them "the story book tale of Robert Lantos agreeing with me after an hour of intense negotiating in his tomato garden that Yorkton would lead a $62-million Alliance Communications bought deal."
At the other extreme, "I experienced the humility and personal financial pain of believing that Book4Golf would trade at $100 -- irrational exuberance! -- and watching it drift to pennies."
Some of his clients said they liked his exuberant style and venture capital savvy.
"If you want to raise money for a technology-related company in Canada, Scott was always one of the people you'd want to talk to," said Greg Taylor, a vice-president of investor relations at Engineering.com Inc., a company for which Paterson helped raise $12 million about two years ago.
"He's always been enthusiastic and knows a hell of a lot more about raising capital than some people in corporate finance do."
Paterson graduated in 1985 from University of Western Ontario with a bachelor's degree in economics. He is a former vice-president of Midland Walwyn Capital Inc., which was later bought by Merrill Lynch & Co.
Earlier this year, National Post Business magazine named him one of the 40 richest Canadians under the age of 40.
In recent months, Paterson has been trying to sell the brokerage firm. He held talks with Desjardins Securities, a unit of Mouvement Desjardins, and with Robert Schultz, a Toronto financier and former CEO of Merrill Lynch & Co.'s Canadian unit, but there have been no deals to date.
"There has been a lot of talk that Yorkton is going to be history when the dust settles," said David Cockfield, who manages money for individual clients at Glen Ardith-Frazer Corp. in Toronto.
"There's a lot of people that feel they won't be around in six to nine months."
dbaines@pacpress.southam.ca |
