A B.C. couple who manipulated stock at the expense of people’s retirement savings will still need to repay the defrauded investors, regardless of any possible future bankruptcy proceedings, the B.C. Court of Appeal has ruled.
Thalbinder Singh Poonian and Shailu Poonian are permanently barred from working in the capital markets after a British Columbia Securities Commission (BCSC) panel ruled in 2014 they misappropriated roughly $7 million from investors for their own gain.
The Poonians were ordered to repay $5.5 million to investors and another $13.5 million in administrative penalties to the commission. Since then their case has trudged through the court system on multiple matters.
The commission had successfully obtained an order from B.C. Supreme Court declaring the amounts owed by the Poonians cannot be released by an order of discharge under the Bankruptcy and Insolvency Act, as such sanctions are exempt from bankruptcy proceedings. The Poonians appealed the case; however, the appeal court denied them, according to a ruling issued Aug. 5.
This means the sanctions will remain until the Poonians repay them. So far, the couple hasn’t paid anything back to the investors, according to a commission statement Aug. 11. It's possible they could strike a repayment arrangement in the future.
Justices Hon. Peter Willcock wrote the Aug. 5 decision, agreed upon by Hon. David Harris and Hon. Lauri Ann Fenlon.
“In my opinion,” stated Willcock, “the chambers judge did not err either in his description of the principles, or in finding that both the fines and the disgorgement orders in this case fell within the exemption defined by [a section of the Bankruptcy and Insolvency Act].
“The debts arise from obtaining property or services by false pretenses or fraudulent misrepresentation. The evidence supported the conclusion that the judgment against the Poonians was founded upon the fact they had engaged in fraudulent misrepresentation and had obtained property as a result.”
Last year the Poonians lost an appeal to have their debt — including an additional $6 million in unpaid taxes to the Minister of National Revenue — discharged.
Typically, people may have their debts discharged under “fresh start” principles and if they are “honest but unfortunate debtors.”
But neither courts found this to be the case for the Poonians, who continued to deny the misconduct.
The Supreme Court concluded that the tax liabilities of the Poonians could not be attributed to any economic factor beyond their control.
The Poonians manipulated the share price of OSE Corp., an Ontario company whose shares traded on the TSX Venture Exchange.
The Poonians had sold overpriced shares to “unsophisticated investors,” in 2008, according to the Supreme Court ruling. “They had done so with the assistance of an entity in the business of advising people in debt on how to access funds from their RRSPs and retirement accounts.
“Essentially, the commission found that the Poonians pumped up the price of the shares of a publicly traded company and then offloaded those shares at inflated prices to unsophisticated investors with financial problems.”
Thalbinder Poonian directed trading of OSE shares in the brokerage accounts of Perminder Sihota — who was also penalized for contravening the Securities Act — as well as the accounts of nine secondary participants.
The Supreme Court indicated “the Poonians’ actions were morally unacceptable and harmful to society, such that they should not be rewarded with a release of those debts.”
