Tahera Corp -
Ontario Securities Commission in the matter of Crabbe Huson and Tahera
Tahera Corp
TAH
Shares issued 159,300,000
1999-07-22 close $0.225
Friday Jul 23 1999
See Ontario Securities Commission (OSC) News Release
Mr. Frank Switzer reports
The Ontario Securities Commission has issued a notice of hearing and related
statement of allegations in respect of the Crabbe Huson Group, Inc.
In the statement of allegations, staff of the commission allege that Crabbe Huson
contravened the takeover bid, early warning reporting requirements and insider
trading reporting requirements contained in Parts XX and XXI of the Securities
Act in connection with certain acquisitions by Crabbe Huson of the common
shares of Lytton Minerals Limited.
The hearing will commence at 3 p.m. on Tuesday, August 10, 1999. Staff of the
commission and Crabbe Huson have agreed upon a proposed settlement of the
matter. The purpose of the hearing will be for the commission to consider whether
to approve the proposed settlement. Terms of the proposed settlement will only
be released if and when the commission approves the proposal.
Staff of the Ontario Securities Commission make the following allegations:
Introduction
The Crabbe Huson Group is an investment management firm carrying on business
in the United States based in Portland, Ore., and is a registered investment adviser
under the laws of the United States. Crabbe Huson has been carrying on business
for 19 years and provides investment management services to a variety of clients,
primarily based in the United States. Crabbe Huson also manages pooled funds
on behalf of investors. Crabbe Huson has represented to staff that during the
material times the assets under its management rose from approximately
$4.1-billion (U.S.) to approximately $5.1-billion (U.S.), including over
approximately $1-billion (U.S.) in its family of nine mutual funds.
At all material times, Lytton Minerals Limited was a reporting issuer within the
meaning of subsection 1(1) of the Securities Act, R.S.O. 1990, c.S.5, as
amended. Lytton was a Canadian corporation engaged in the exploration and
development of various diamond interests in the Northwest Territories. At all
material times, the common shares of Lytton were listed on the Toronto Stock
Exchange.
At all material times, New Indigo Resources was a corporation incorporated
under the laws of Alberta. New Indigo was also engaged in diamond exploration
and development in the Northwest Territories, primarily in joint ventures with
Lytton. New Indigo's common shares were listed on the Alberta Stock Exchange.
Tahera Corporation is a Canadian corporation resulting from the amalgamation of
Lytton and New Indigo, which amalgamation occurred on Feb. 28, 1999.
Tahera's common shares are listed on the TSE. Tahera is a reporting issuer within
the meaning of subsection1(1) of the act.
Acquisition of Lytton common shares by Crabbe Huson
In or about April, 1996, Crabbe Huson commenced purchasing common shares
of Lytton on behalf of its fully managed accounts. All purchases were made
through the facilities of the TSE through Canadian securities dealers.
By April 30, 1997, Crabbe Huson had acquired a total of 9,805,900 common
shares of Lytton and on May 8, 1997, Crabbe Huson acquired an additional
1,274,000 common shares, thereby giving Crabbe Huson control or direction
over more than 10 per cent of the then outstanding common shares of Lytton.
Crabbe Huson has represented to staff that all of such shares were purchased by
Crabbe Huson on behalf of its managed accounts.
Crabbe Huson continued to acquire common shares of Lytton on behalf of its
managed accounts, and by May 4, 1998, Crabbe Huson had acquired control or
direction over a total of 29,872,000 common shares of Lytton, representing
approximately 25.87 per cent of the then outstanding common shares of Lytton.
Crabbe Huson has represented to staff that the following table sets forth the net
acquisitions or dispositions of common shares of Lytton by Crabbe Huson on
behalf of the managed accounts during the periods indicated:
Net Acquisitions (Dispositions)
of Common Shares of Lytton Minerals
Net Monthly Cumulative % of
Acquisitions Outstanding
(Dispositions) Common
Shares of
Lytton Held
by Crabbe
Huson
1996
April 2,331,800 2,331,800 2.58%
May 5,322,300 7,654,100 8.48%
June 965,800 8,619,900 8.64%
July 369,800 8,989,700 9.01%
Aug. 0 8,989,700 9.01%
Sept. 100,000 9,089,700 9.11%
Oct. 92,300 9,182,000 9.21%
Nov. 0 9,182,000 9.21%
Dec. 138,900 9,320,900 9.35%
1997
Jan. 0 9,320,900 9.32%
Feb. 0 9,320,900 9.32%
March 142,600 9,463,500 9.46%
April 342,400 9,805,900 9.81%
May 1,300,500 11,106,400 11.11%
June 536,000 11,642,400 11.64%
July 2,395,500 14,037,900 14.04%
Aug. 2,612,100 16,650,000 16.65%
Sept. 3,234,700 19,884,700 19.88%
Oct. 2,062,800 21,947,500 21.95%
Nov. 307,600 22,255,100 22.25%
Dec. 2,948,700 25,203,800 25.20%
1998
Jan. 662,100 25,865,900 23.10%
Feb. 2,843,800 28,709,700 25.64%
March 1,037,300 29,747,000 26.57%
April (1,218,200) 28,528,800 25.48%
May 1,343,200 29,872,000 25.87%
June (1,395,000) 28,477,000 24.66%
During the material times, net purchases of Lytton common shares by Crabbe
Huson accounted for approximately 55 per cent of the total volume of Lytton
common shares traded on the TSE. Lytton common shares traded on the TSE at
prices ranging from a high of $4.10 per share in or about April, 1996, to a low of
42 cents in or about June, 1998.
During the material times, Crabbe Huson managed up to 68 accounts, including
pooled funds, which held Lytton common shares. All purchases of Lytton
common shares by Crabbe Huson were discretionary purchases for its managed
accounts. At all material times, Crabbe Huson had discretionary authority to vote
the Lytton common shares held by its managed accounts with the exception of
eleven accounts (holding a total of 1,523,500 Lytton shares) which reserved the
power to vote securities. Crabbe Huson also had the power to dispose of shares
of Lytton held by accounts under its management. In respect of the 68 managed
accounts, no one account of Crabbe Huson owned 10 per cent or more of the
outstanding common shares of Lytton.
Crabbe Huson did not own any Lytton common shares for its own account.
During the material times, Crabbe Huson was the general partner (with a
1.41-per-cent interest) of an investment partnership which owned 100,000 Lytton
common shares.
The portfolio manager of Crabbe Huson who was responsible for the acquisitions
of Lytton common shares, and the compliance officer of Crabbe Huson who was
responsible for preparing monthly position reports in respect of Crabbe Huson's
holdings in a number of companies, including Lytton, were each aware of the
following:
i)
By May, 1997, accounts managed by Crabbe Huson held more than 10 per
cent of the then outstanding common shares of Lytton; and
ii)
By January, 1998, accounts managed by Crabbe Huson held more than 20
per cent of the then outstanding common shares of Lytton. Crabbe Huson has
represented to staff that neither the portfolio manager nor the compliance
officer of Crabbe Huson referred to above was aware of the requirements of
Ontario securities law applicable to such acquisitions of Lytton common
shares.
Crabbe Huson announcement on June 23, 1998
On or about June 23, 1998, Crabbe Huson publicly announced that as a result of
open market purchases made for a number of managed investment accounts over
a period of months, it had acquired control or direction over 29,872,000 common
shares of Lytton. Crabbe Huson stated in its press release dated June 23, 1998,
that the purchases were made for investment purposes. By this date, Crabbe
Huson's holdings represented approximately 25.87 per cent of the then
outstanding common shares of Lytton.
or about June 23, 1998, Crabbe Huson filed a report of acquisition under section
101 of the act.
On or about June 23, 1998, Crabbe Huson also filed a report as an insider of a
reporting issuer under section 107 of the act, and continued thereafter to file
reports under section 107 of the act.
Crabbe Huson has represented to staff that during the material times it was
unaware of the early warning reporting provisions and takeover bid provisions
contained in Part XX of the act, and the insider reporting provisions contained in
Part XXI of the act. Further, Crabbe Huson has represented to staff that the firm
did not take steps to inquire as to the requirements of Ontario securities law
applicable to Crabbe Huson's acquisitions of Lytton common shares until shortly
before it made the announcement.
Events subsequent to Crabbe Huson's announcement
Crabbe Huson has not purchased shares in Lytton since the announcement. The
holdings by Crabbe Huson decreased from an amount representing approximately
25.87 per cent of the then outstanding common shares of Lytton to a level of
approximately 23.9 per cent, as a result of the withdrawal of Lytton common
shares from the control of Crabbe Huson by certain of its clients, and not as a
result of trading by Crabbe Huson in Lytton's common shares.
Crabbe Huson's holdings were further reduced to a level of approximately 15.9
per cent of the outstanding common shares in Tahera as a result of the
amalgamation of Lytton and New Indigo on or about Feb. 28, 1999. Since
February, 1999, a total of 5,591,000 common shares of Tahera have been sold
on behalf of the managed accounts either at the discretion of Crabbe Huson or as
a result of the withdrawal of Tahera common shares from the control or direction
of Crabbe Huson.
Conduct contrary to the public interest
The conduct of Crabbe Huson was contrary to the public interest by reason of the
following:
i)
Certain acquisitions of Lytton common shares made by Crabbe Huson in and
after October, 1997, each constituted a takeover bid within the meaning of
Part XX of the act, and were made in contravention of the applicable
requirements of Part XX of the act.
ii)
Crabbe Huson failed to issue and file a news release and failed to file a report
as required under subsection 101(1) of the act when it had acquired power to
exercise control or direction over 10 per cent or more of the outstanding
common shares of Lytton. (As outlined above, Crabbe Huson issued a press
release and filed a report on June 23, 1998, once it had acquired control or
direction over approximately 25.87 per cent of the then outstanding common
shares of Lytton.)
iii)
Crabbe Huson failed to issue and file a news release and failed to file a report
in respect of each additional 2 per cent holding in Lytton common shares over
which it had acquired power to exercise control or direction as required under
subsection 101(2) of the act;
iv)
Crabbe Huson further failed to comply with the trading moratorium rules
provided for in subsection 101(3) of the act.
v)
Crabbe Huson, as an insider of a reporting issuer, failed to file the reports
required by section 107 of the act. (As outlined above, Crabbe Huson filed an
insider report under section 107 of the act on or about June 23, 1998, and
thereafter reported trading activity in accordance with section 107 of the act.)
The Ontario Securities Commission will hold the hearing to consider whether,
pursuant to section 127 of the act, it is in the public interest for the commission to
make an order that:
i)
The Crabbe Huson Group, Inc. cease trading in securities permanently or for
such time as the commission may direct;
ii)
the exemptions provided for in sections 35, 72, 73 and 93 of the act shall not
apply to Crabbe Huson until such time as the commission may direct; and/or
iii)
such further and other order as the commission may deem appropriate.
(c) Copyright 1999 Canjex Publishing Ltd. canada-stockwatch.com
old url (better for printing) |
