ALBERTA SECURITIES COMMISSION DECISION. Citation: Re Global 8 Environmental Technologies, Inc., 2015 ABASC 734 Date:

Transcription

1 ALBERTA SECURITIES COMMISSION DECISION Citation: Re Global 8 Environmental Technologies, Inc., 2015 ABASC 734 Date: Global 8 Environmental Technologies, Inc., Halo Property Services Inc., Canadian Alternative Resources Inc., Milverton Capital Corporation, Rene Joseph Branconnier and Chad Delbert Burback Panel: Kenneth Potter, QC Fred Snell, FCA Appearing: Robert Stack, Liam Oddie and Heather Currie for Commission Staff H. Roderick Anderson for René Joseph Branconnier Patricia Taylor for Chad Delbert Burback Daniel Wolf for Global 8 Environmental Technologies, Inc. Submissions Completed: 26 November 2014 Decision: 5 June

2 TABLE OF CONTENTS I. OVERVIEW... 1 A. Introduction G Halo and CAR...2 B. History of the Proceedings... 2 C. Certain Prior Orders... 3 D. Summary of Conclusion... 3 II. PROCEDURAL AND EVIDENTIARY MATTERS... 4 A. Standard of Proof... 4 B. Hearsay Evidence... 4 C. Credibility and Conflicting Evidence... 4 III. THE RESPONDENTS... 5 A. G B. Halo... 6 C. CAR... 7 D. Milverton... 7 E. Branconnier... 8 F. Burback IV. OTHER INDIVIDUALS AND ENTITIES A. Dennis Branconnier B. Michael Brown and HDR C. Church D. Dyer E. Ferreira F. Gardner G. Glow Marketing H. Hansen I. Kroeker J. Tina Morin K. Thibault L. Cameron Willier M. Wolf V. G A. General Directors and Officers G8 Board Meetings and Directors' Resolutions G8 Banking History and Administration of G8's Business...28 B. Business Model of G C. Fundraising for G Amount Raised G8 Fundraising Process G8 Fundraising Documentation...30 D. G8 Marketing Material General...32

3 ii 2. G8 Website G8 Video Printed Marketing Material Other Marketing Communications Branconnier's Role in G8 Marketing Material...35 E. Status of G8's Business Revenue and Projects...36 (a) General...36 (b) Evidence Relating to Projects...36 (c) Conclusion on Existence of Projects and Business Financial Difficulties...38 F. G8's Arrangements with Milverton and Others Agreements with and Payments to Milverton Payments by G8 to Others Transfers to Milverton from the G8 Bank Account...40 VI. HALO AND CAR A. General Origin of Halo/CAR Operation Directors and Officers of Halo and CAR ZEEOT Agreement ZEEOT Technology...42 B. The Halo/Milverton Agreement C. Fundraising for Halo/CAR Amount Raised Halo/CAR Fundraising Process Halo/CAR Fundraising Documentation...45 D. Halo/CAR Marketing Material E. Status of Halo's and CAR's Business F. Financial Information VII. INVESTOR EVIDENCE: G A. Investors B. Initial Contact and Investments GR KM BH IS RE MW TD Church...53 C. Potential Exemptions GR KM BH IS RE...55

4 iii 6. MW TD Church...56 D. Impact on Investors GR KM BH IS RE MW Church...57 E. What Investors Learned or Were Told About the Business...57 (a) GR...57 (b) KM...58 (c) BH...59 (d) IS...60 (e) RE...60 (f) MW...61 (g) TD...61 (h) Church About Name Changes and Industry Changes...62 (a) GR...62 (b) KM...62 (c) BH...62 (d) IS...63 (e) MW About the Share Price...63 (a) GR...63 (b) KM...63 (c) BH...63 (d) IS...63 (e) MW...63 (f) Church...63 F. Information about or Interactions with Branconnier GR KM BH IS RE MW TD Church...65 VIII. INVESTOR-RELATED EVIDENCE: Halo A. Church B. GN... 66

5 iv C. Investor KD D. Investor DH IX. SUMMARY OF ALLEGATIONS X. ANALYSIS A. Branconnier's Role Branconnier's Role with Milverton...74 (a) Summary of Certain Evidence...74 (b) Staff's Position...75 (c) Branconnier's Position...75 (d) Conclusion Branconnier's Role with G (a) Summary of Certain Evidence...75 (b) Staff's Position...78 (c) Branconnier's Position...78 (d) Conclusion Branconnier's Role with Halo/CAR...80 (a) Summary of Certain Evidence...80 (b) Staff's Position...81 (c) Branconnier's Position...81 (d) Conclusion...82 B. Illegal Trades and Distributions Allegations Law...83 (a) Definition of "Security", "Trade" and "Distribution"...83 (b) Trading and Distribution Requirements...83 (i) Registration Requirement...83 (ii) Prospectus Requirement...84 (iii) Registration and Prospectus Exemptions G8 Securities...85 (a) "Security", "Trade" and "Distribution"...86 (b) Illegal Trades and Distributions...86 (c) Illegal Trades and Distributions by G (d) Illegal Trades and Distributions by Burback...87 (e) Illegal Trades and Distributions by Branconnier...89 (f) Conclusion Halo/CAR Securities...93 (a) "Security", "Trade" and "Distribution"...93 (b) Illegal Distributions...93 (c) Illegal Distributions by Halo and CAR...94 (d) Illegal Distributions by Burback...94 (e) Illegal Distributions by Branconnier...95 (f) Conclusion...97 C. Prohibited Representations Allegations under Section 92(3) of the Act...97 (a) Law...97 (b) G8...97

6 v (c) Halo/CAR Allegations under Section 92(4.1) of the Act (a) Law (b) G8 Evidence (i) G8 Website (ii) G8 Video (iii) The Primary G8 Brochure (iv) Other Documents Given to Investors (A) Document Received by KM (B) Document Received by IS (C) Documents Shown to MW (v) Oral Statements Made to Investors (A) Specific Statements (B) Thibault's Evidence (c) G8 Analysis of Misrepresentation Allegations (i) Scope of Misrepresentation Allegations (ii) G8's Business Plan (iii) Secure and Guaranteed Investment; Guaranteed Internal Rate of Return Produced on Projects (A) Allegations (B) Evidence (C) Misleading or Untrue (D) Expectation of Significant Effect (E) Knowledge of Misleading or Untrue Statements.114 (iv) Extensive History of Building Waste Management Facilities (A) Allegations (B) Evidence (C) Misleading or Untrue (D) Expectation of Significant Effect (E) Knowledge of Misleading or Untrue Statements.117 (v) G8 Was Working on Projects and Selling Products (A) Allegations (B) Evidence (C) Misleading or Untrue (D) Expectation of Significant Effect (E) Knowledge of Misleading or Untrue Statements.119 (vi) G8 Possessed Environmental Management Expertise and Technology (A) Allegations (B) Evidence (C) Misleading or Untrue (D) Expectation of Significant Effect (E) Knowledge of Misleading or Untrue Statements.123 (vii) G8's Share Price Would Soon Increase (A) Allegation...123

7 vi (B) Evidence (C) Misleading or Untrue (viii) Failure to Clarify, Qualify or Correct (A) Scope of Allegations (B) Discussion I) General II) Name Change III) Payments to Milverton (ix) Conclusion (d) Halo/CAR Evidence (e) Halo/CAR Analysis of Allegations (i) Viability of Generator (A) Allegations (B) Evidence (C) Misleading or Untrue (D) Expectation of Significant Effect (E) Knowledge of Misleading or Untrue Statements.132 (ii) Contracts with Municipalities and Other Third Parties (A) Allegation (B) Evidence (iii) Revenue and Income Projections (A) Allegations (B) Evidence (C) Misleading or Untrue (D) Expectation of Significant Effect (E) Knowledge of Misleading or Untrue Statements.134 (iv) Use of Investment Capital (A) Allegation (B) Evidence (C) Misleading or Untrue (v) Conclusion D. Fraud Law G (a) Scope of Fraud Allegation (i) Dispute (ii) Conclusion (b) Evidence and Arguments (c) Analysis and Conclusion Halo/CAR (a) Scope of Fraud Allegation (i) Dispute (ii) Conclusion (b) Evidence and Arguments (c) Analysis and Conclusion E. Authorizing or Acquiescing in Contraventions of the Act

8 vii F. Conduct Contrary to the Public Interest Allegations Law Contraventions of Alberta Securities Laws Attempted Interference with Investigation and Hearing (a) Evidence (i) MW (ii) Church (iii) Gardner (b) Conclusion XI. CONCLUSION AND NEXT STEPS

9 viii GLOSSARY This is a non-exhaustive list of certain defined terms and names appearing in various places in the accompanying Decision. It is designed for the reader's ease of reference in identifying and placing in context such abbreviated terms and names as they occur. It is not comprehensive and does not form part of the Decision SEC Filing means a G8 SEC filing for the year ended 30 September Act means the Securities Act (Alberta). April 2008 Consulting Contract means the 1 April 2008 "Consulting Contract" between Milverton and G8. April 2008 Contractor Agreement means the 1 April 2008 "Contractor Agreement" between Milverton and G8. ASC means the Alberta Securities Commission. BC means British Columbia. BCSC means the BC Securities Commission. Bedminster means one type of technology relevant to G8. Branconnier means René Joseph Branconnier. Branconnier Interview means Staff's investigative interviews of Branconnier. Brown means Michael Brown. Burback means Chad Delbert Burback. Burback Interview means Staff's investigative interviews of Burback. CAR means Canadian Alternative Resources Inc. CEO means chief executive officer. CFO means chief financial officer. Church means David Church. Churches means Church and his spouse. Cook means Tim Cook.

10 ix Distribution Reports means Reports of Exempt Distribution. Dyer means Donald Dyer. EDGAR means the SEC's Electronic Data Gathering, Analysis, and Retrieval system. ETC means Environmental Technology Centre. Ferreira means Julio Ferreira. G8 means Global 8 Environmental Technologies, Inc. G8EM means Global 8 Environmental Management, Inc., a wholly-owned subsidiary of G8. G8 Bank Account means G8's Canadian dollar bank account. G8 Board means G8's board of directors. G8 Interim Order means the G8-related temporary order issued by the ASC on 30 July 2009 (later extended). G8 Securities means the G8 shares and warrants. G8 Subscription Agreements means the two types of subscription agreement used for an investment in G8 Securities (G8 Agreement A and G8 Agreement B). G8 Video means the G8 marketing video available as of 20 May G8 Website means the G8 website available as of 20 May Gardner means Peter Gardner. Glow means Glow Marketing. GN's Notes means documents generated from the computer note-recording system of GN (a witness at the Hearing). Halo means Halo Property Services Inc. Halo Brochure means a marketing brochure for Halo and CAR. Halo Financial Statements means Halo's unaudited financial statements for the years ended 30 November 2006 through 2010.

11 x Halo/Burback Consulting Agreement means the "Consulting Contract" made as of 1 November 2009 between Burback and Halo. Halo/CAR Interim Order means the Halo/CAR-related temporary order issued by the ASC on 28 May 2010 (later varied and extended). Halo/CAR Loan Agreement means the "Loan Agreement" used for an investment in Halo/CAR. Halo/CAR Option Agreement means the "Option Agreement" used for an investment in Halo/CAR. Halo/CAR Securities means the loans to Halo, backed by CAR shares and options to purchase CAR shares. Halo/Milverton Agreement means an agreement dated 1 September 2009 between Milverton and Halo. Hansen means Wayne Hansen. HDR means HDR Engineering, Inc. Khazali means Javan Khazali. Kroeker means Ed Kroeker. Langley Address means a business address in Langley, BC. Lynn means Chandra Lynn, Brown's daughter. MI means Multilateral Instrument Capital Raising Exemptions. Milverton means Milverton Capital Corporation. Milverton Bank Account means Milverton's bank account. Morin means Tina Morin, Branconnier's step-daughter (also known as Tina Henderson). NI means National Instrument Prospectus and Registration Exemptions. NOH means the notice of hearing dated 1 May Olulana means George Olulana. ORCY means Organic Recycling Technologies Inc.

12 xi Osaw Maskwa means Osaw Maskwa Consulting Ltd. Petruzzo means Ralph Petruzzo. Primary G8 Brochure means a marketing brochure for G8. Respondents means G8, Halo, CAR, Milverton, Branconnier and Burback. Samaroden means Jim Samaroden. Samaroden's Retirement Party means a 2008 event in Fort McMurray, Alberta. Sanclair means Sanclair Holdings Ltd. SEC means the US Securities and Exchange Commission. SEDAR means the System for Electronic Document Analysis and Retrieval. Sharon Branconnier means Branconnier's spouse. Simmons means Tad Simmons. Staff means ASC staff. Thermo Tech means Thermo Tech Technologies. Thibault means Shane Eli Lucien Thibault. Thibault Notes means notes Thibault made of various conversations and meetings. Thibault Settlement Agreement means the settlement agreement between Staff and Thibault. US means the United States. Willier means Cameron Willier. Wolf means Daniel Wolf. ZEEOT means ZEEOT, Inc. ZEEOT Agreement means the October 2009 licence agreement between Halo and ZEEOT.

13 1 I. OVERVIEW A. Introduction [1] Global 8 Environmental Technologies, Inc. (G8), Halo Property Services Inc. (Halo), Canadian Alternative Resources Inc. (CAR), Milverton Capital Corporation (Milverton), René Joseph Branconnier (Branconnier) and Chad Delbert Burback (Burback) (collectively, the Respondents) were alleged by staff (Staff) of the Alberta Securities Commission (the ASC) to have contravened Alberta securities laws and acted contrary to the public interest. Allegations against a third individual, Shane Eli Lucien Thibault (Thibault), were resolved by settlement (the Thibault Settlement Agreement) shortly after this hearing (the Hearing) began. [2] The 1 May 2012 notice of hearing (the NOH) set out Staff's various allegations against the Respondents (the NOH used "Rene" for Branconnier's first name; we use "René"). Allegations were made relating to two operations: G8 and Halo/CAR. We generally deal with these operations separately. 1. G8 [3] G8 had evolved through various corporate names and businesses, but at the relevant times promoted itself as an environmental business which would develop "Environmental Technology Centres" (ETCs) to meet clients' needs. At the heart of the allegations involving G8 were sales of certain of its shares and warrants (together, the G8 Securities) to Alberta investors in the period May 2005 to June 2009 (the original commencement date of 2003 was effectively amended by Staff in argument). Despite our use of the term "G8 Securities", we refer to G8 shares or G8 warrants as required by the context. Staff alleged that some of the trades and distributions of G8 Securities during the relevant period contravened the Securities Act (Alberta) (the Act), that prohibited representations and materially misleading or untrue statements were made relating to the G8 Securities, and that a fraud on G8 investors was perpetrated. That conduct was alleged to be contrary to the public interest, and Branconnier and Burback were alleged to have authorized or acquiesced in certain contraventions of the Act. In addition, Staff alleged that certain conduct by Branconnier in connection with prospective witnesses was contrary to the public interest. [4] For reasons set out below, we conclude that Branconnier was the guiding mind of G8, as well as a de facto director and officer; Burback was a director and, at times, the chief financial officer (CFO) of G8; Thibault was, at least, a selling agent for G8; and G8 had actual business operations (although no established ETCs and no generation of revenue). We also conclude that a significant amount of G8 investor money was paid to Milverton, G8's consultant; and Milverton was controlled by Branconnier, its guiding mind. We further conclude that the administrative work for G8 was conducted primarily, if not exclusively, at a business address (the Langley Address) in Langley, British Columbia (BC), at which address Branconnier also had a home. The Langley Address property was apparently owned by Sanclair Holdings Ltd. (Sanclair), itself described as owned by Branconnier's spouse, Sharon (Sharon Branconnier). Various people held the position of president and chief executive officer (CEO) of G8 during the relevant times. The corporate address for G8 appeared to vary according to the city in which the then-current president and CEO was based. Daniel Wolf (Wolf) was the chair and CEO of G8 during the Hearing, attaining those positions after the end of the period relevant to the allegations.

14 2 2. Halo and CAR [5] Halo and CAR were companies connected to each other, and their planned operations also had an environmental aspect. Halo was to be merged with Milverton, according to a 1 September 2009 agreement (the Halo/Milverton Agreement), although that merger was not completed. [6] Halo had arranged for a licence from a United States (US) company for the "exclusive" right to sell in Canada "Liquid Nitrogen Powered Energy Storage Systems", primarily through the use of generators. That US company, ZEEOT, Inc. (ZEEOT), was apparently introduced to Branconnier by Tim Cook (Cook). The allegations involving Halo and CAR centred on alleged illegal distributions of certain securities (the Halo/CAR Securities, structured as loans to Halo backed by CAR shares and options to purchase CAR shares) in the period November 2009 to March 2012, along with alleged prohibited representations and materially misleading or untrue statements relating to the Halo/CAR Securities, and an alleged fraud perpetrated on Halo/CAR investors. That conduct was alleged to be contrary to the public interest, and Branconnier and Burback were alleged to have authorized or acquiesced in certain contraventions of the Act. In addition, Staff alleged that certain conduct by Branconnier in connection with prospective witnesses was contrary to the public interest. [7] For reasons set out below, we conclude that Branconnier was the guiding mind of Halo and CAR and of the Halo/CAR operation; and Burback was a director and officer (treasurer) of Halo, and a director of CAR. We also conclude that most (if not all) Halo/CAR investor money was deposited directly into Milverton's bank account (the Milverton Bank Account); and Milverton was a party to an intended merger with Halo. We further conclude that the administrative work for Halo/CAR was conducted primarily, if not exclusively, at the Langley Address. B. History of the Proceedings [8] The Hearing began on 11 February We received documentary evidence and heard testimony from several witnesses, including the Respondent Burback. In these reasons we refer to some non-party individuals by their initials rather than by their respective names to protect their privacy interests in personal information about them. Included in the documentary evidence were transcripts of August 2010 investigative interviews of Branconnier (affirmed and represented by counsel; the Branconnier Interview) and of Burback (sworn or represented by counsel, or both, for three days in 2010 (for one day of which we had only excerpts) and two days in 2012; the Burback Interview). In this decision, references to statements by Branconnier are to statements he made in the Branconnier Interview. We received written submissions from Staff and from Branconnier (through counsel), Burback (representing himself) and Wolf (as agent for G8). We also heard oral submissions from the same, with Burback represented by counsel at that time. [9] Halo, CAR and Milverton were not represented and no submissions were made on their behalf. Those three Respondents were served with the NOH, which stated that the Hearing may proceed in their absence and orders may be made against them. We are satisfied, despite the

15 3 absence of Halo, CAR and Milverton from the Hearing, that the Hearing could proceed against them. [10] Former Vice-Chair Glenda Campbell, QC, who was a member of the panel designated to conduct the hearing of this proceeding, was appointed a Justice of the Court of Queen's Bench of Alberta on 8 November This proceeding continued before, and this decision was made by, the two remaining panel members, Kenneth Potter, QC and Fred Snell, FCA. [11] In this decision, dollar amounts not specified to be in a particular currency refer to amounts in Canadian dollars, either because the evidence clearly indicated Canadian dollars as the relevant currency or because that was assumed when no currency was specified; amounts known to be in US currency are specified as such. C. Certain Prior Orders [12] Before the Hearing began, certain orders were issued relating to G8 and to Halo/CAR. [13] On 30 July 2009 the ASC issued a temporary order (the G8 Interim Order) prohibiting trading in securities of G8 and prohibiting G8 from trading in all securities and from using the exemptions provided under Alberta securities laws (Re Global 8 Environmental Technologies, Inc., 2009 ABASC 369). On 14 August 2009 the G8 Interim Order was extended until the hearing of the matter is concluded and a decision is rendered, unless otherwise ordered (Re Global 8 Environmental Technologies, Inc., 2009 ABASC 412). [14] On 28 May 2010 the ASC issued a temporary order (the Halo/CAR Interim Order) prohibiting trading in securities of Halo and CAR and prohibiting Halo, CAR and Burback from trading in all securities and from using the exemptions provided under Alberta securities laws (Re Halo Property Services Inc., 2010 ABASC 243). On 11 June 2010 the Halo/CAR Interim Order was extended until the hearing of the matter is concluded and a decision is rendered, unless otherwise ordered (Re Halo Property Services Inc., 2010 ABASC 262). At the same time, the Halo/CAR Interim Order was varied to permit Burback to trade in securities in his own personal accounts through a registrant who had been given a copy of the Halo/CAR Interim Order as extended and varied. D. Summary of Conclusion [15] Our detailed findings and reasons are set out below. Stated briefly, we find (having dismissed certain allegations) that: G8, Branconnier and Burback engaged in illegal trades and distributions of G8 Securities; Halo, CAR, Branconnier and Burback engaged in illegal distributions of Halo/CAR Securities; Halo, CAR, Branconnier and Burback made a prohibited representation;

16 4 G8, Halo, CAR, Branconnier and Burback made materially misleading or untrue statements; Branconnier and Burback authorized or acquiesced in certain misconduct by G8, Halo and CAR; and by contravening Alberta securities laws as found, G8, Halo, CAR, Branconnier and Burback also acted contrary to the public interest. [16] This proceeding now moves to a second phase to determine, what, if any, orders ought to be made against each of G8, Halo, CAR, Branconnier and Burback under sections 198, 199 and 202 of the Act. II. PROCEDURAL AND EVIDENTIARY MATTERS A. Standard of Proof [17] The standard of proof in the Hearing is the balance of probabilities requiring a determination of "whether it is more likely than not that an alleged event occurred" (F.H. v. McDougall, 2008 SCC 53 at para. 49). The evidence must be sufficiently clear, convincing and cogent to satisfy this standard of proof (McDougall at para. 46). [18] Some of the evidence admitted we ultimately determined to be irrelevant or of little (or no) weight. We have highlighted in this decision the most significant of such determinations. B. Hearsay Evidence [19] Under section 29(f) of the Act, the laws of evidence applicable to judicial proceedings do not apply to ASC enforcement proceedings; section 29(e) requires relevant evidence to be heard. Thus, relevant hearsay evidence is admissible in ASC enforcement hearings, provided the rules of natural justice and procedural fairness are observed. We determined the weight, if any, to accord any hearsay evidence admitted in the Hearing by examining the content of such evidence and taking into account indicators of its reliability, such as its consistency with other evidence before us. C. Credibility and Conflicting Evidence [20] Credibility of several witnesses including Burback (who testified) and Branconnier (for whom we have the Branconnier Interview) was particularly at issue in this proceeding. [21] The ASC discussed credibility in Re Holtby, 2013 ABASC 45 (at paras ): In deciding the weight to give certain evidence before us, we have assessed the credibility of various witnesses from whom we heard, or grappled with conflicting evidence, or both. In our assessments and determinations, we have taken guidance from R. v. Boyle, 2001 ABPC 152 at para. 107, citing Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.) at 357: The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanour of the particular witness carried conviction of truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real

17 5 test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions. To similar effect are the words of O'Halloran J.A. of the British Columbia Court of Appeal in R. v. Pressley, 1948 CarswellBC 123 at para. 13 (referenced in Springer v. Aird & Berlis LLP, 2009 CarswellOnt 1832 (S.C.J.) at para. 14 and in [Re Suman (2012), 35 OSCB 2809] at para. 315):... The Judge is not given a divine insight into the hearts and minds of the witnesses appearing before him. Justice does not descend automatically upon the best actor in the witness box. The most satisfactory judicial test of truth lies in its harmony or lack of harmony with the preponderance of probabilities disclosed by the facts and circumstances in the conditions of the particular case. Whenever assessing the credibility of witnesses in general or on particular points, we have taken into account all facts and circumstances. We have not decided any allegations on credibility findings alone but rather have considered credibility in conjunction with the totality of the evidence. [22] In Walton v. Alberta (Securities Commission), 2014 ABCA 273 (leave to appeal to the Supreme Court of Canada refused (sub nom. Alberta (Securities Commission) v. Walton) [2014] S.C.C.A. No. 476), the Alberta Court of Appeal overturned some of the findings in Holtby, but did not restate the ASC's discussion of credibility. The Court of Appeal did emphasize (at para. 36) that it would be "an error for a tribunal to turn disbelief of a particular witness into positive proof of the opposite proposition.... The fact that a witness's evidence is disbelieved on a particular point may have an impact on his overall credibility, but in order to prove the opposite of what he said, some positive evidence is needed". [23] We have taken into account all of the above principles in analyzing the evidence and reaching our conclusions. III. THE RESPONDENTS A. G8 [24] G8 is a Nevada company incorporated under a different name on 15 September 1995 and, in the relevant period, administratively based at the Langley Address. G8 changed names and businesses over the years before moving into the environmental field as Organic Recycling Technologies Inc. (ORCY) in 2005, changing to its current name, G8, in May 2008 (we use the term "G8" throughout). [25] As of 29 July 2009, G8 had never been registered under the Act, been a reporting issuer in Alberta or filed a prospectus with the ASC. A Staff investigative accountant testified that those statements were still true as of February G8 filed several Reports of Exempt Distribution (Distribution Reports) in July 2009, covering distributions for 2003 and for 2005 to 2009, all of which claimed to rely on the family, friends and business associates exemption (discussed below). G8 has been subject to the G8 Interim Order since 30 July The British Columbia Securities Commission (BCSC) on 24 June 2009 ordered trading to cease in all G8 securities for G8's failure to file certain required documents.

18 6 [26] According to the Staff investigative accountant, G8 was a reporting issuer and "an overthe-counter trader" in the US. In evidence were certain G8 disclosure documents filed with the US Securities and Exchange Commission (SEC) and available on the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR). He stated that no such filings were made with Canadian securities regulatory authorities or available on the System for Electronic Document Analysis and Retrieval (SEDAR). [27] G8 had subsidiaries relevant to this Hearing, including the wholly-owned Global 8 Environmental Management, Inc. (G8EM) and four other companies one for each of earth, air, fire and water. G8EM provided contact information as the Langley Address. [28] Milverton and Sanclair each had consulting agreements with G8, apparently renewed over time. Milverton's arrangements are discussed later in detail. Branconnier stated that Sanclair "provided... about a dozen offices, a great big warehouse", and that Sharon Branconnier (who ostensibly owned Sanclair) worked on data entry and mail-outs, as well as consulted. [29] Branconnier acknowledged that G8 had no technology or patents, and that although "[i]t was raising money for" ETCs, it had built none and had earned no revenue. He stated that HDR Engineering, Inc. (HDR) would have determined at the technical report stage what technology to use and "referred" or "recommended" it, but he did not know whether HDR owned technology. Two specific technologies mentioned throughout the Hearing in connection with G8 were: the Thermo Tech Technologies (Thermo Tech) technology (a thermophilic process, with the patent apparently owned by Branconnier and dating back to Thermo Tech); and the Bedminster technology (Bedminster, apparently to be used in the proposed facilities in China, and identified by Wayne Hansen (Hansen) as "an organic waste conversion process"). G8's move into the environmental field apparently coincided with Branconnier getting the Thermo Tech technology back after a lawsuit. [30] As of the time of the Branconnier Interview (approximately one year after the G8 Interim Order was issued), Branconnier thought the value of G8 shares "on the pink sheets" was two cents (although they were not trading in Alberta). B. Halo [31] Halo was incorporated in BC on 28 November 2005 by Lyle Veilett (related to Branconnier), using the Langley Address. A 28 November 2008 document indicated that Lyle Veilett was the sole voting shareholder and a director of Halo. David Church (Church, who had earlier been involved with G8) consented to act for Halo as a director or officer (or both) effective 1 September 2009, according to documents in evidence: one dated 1 September 2009 (both director and officer); the other effective 1 September 2009 (director only; dated 27 April 2010). Similar documents were in evidence for Burback: a "Consent to Act as a Director" of Halo effective 1 September 2009 (dated 27 April 2010); and a "Consent to Act as an Officer and or [sic] Director" effective 1 September 2009 (also dated 1 September 2009). [32] A "Company Summary" document with a "Currency Date" of 15 March 2012 (after the relevant period) showed names and addresses linked to Branconnier: a Vancouver registered and

19 7 records office address (the same address as for Sanclair); Donald Dyer (Dyer), care of the Langley Address, listed as a director (with no start date given); and Renee Branconnier (Branconnier's daughter), using the Langley Address, listed as president and secretary ("as at" 28 November 2010). [33] As of 20 May 2010, Halo had never been registered under the Act, been a reporting issuer in Alberta or filed a prospectus with the ASC. As of 25 May 2010, no Distribution Reports or other documents had been filed with the ASC by Halo. The Staff investigative accountant testified that those statements were still true as of February Halo has been subject to the Halo/CAR Interim Order since 28 May [34] The Halo/Milverton Agreement indicated Halo was to be merged with Milverton, although that merger was not completed. C. CAR [35] CAR was incorporated in Yukon by Church, the president, although he testified that Branconnier determined the location and "did all the legwork". The incorporation date appeared to be 17 March 2010; some evidence indicated a "Start Date" of 1 April [36] As of 2012, Church was listed as president and a director. Church stated that he did not know if there had been another director he thought perhaps Burback had been a director at some point and resigned or who had held shares in CAR. Church testified that he had never received a share certificate. As noted, Burback acknowledged being a director of CAR. [37] As of 20 May 2010, CAR had never been registered under the Act, been a reporting issuer in Alberta or filed a prospectus with the ASC. As of 25 May 2010, no Distribution Reports or other documents had been filed with the ASC by CAR. The Staff investigative accountant testified that those statements were still true as of February CAR has been subject to the Halo/CAR Interim Order since 28 May [38] Church testified that nothing was ever "done with CAR" because it "really couldn't get going until such time as the money was raised through Halo", and that there were no directors' meetings of CAR. He described CAR as the company that would sell the generator and the one in which investors would receive shares. He "kinda considered CAR/Halo the same thing", with "a very tight relationship between the two corporations" a relationship or structure he said was decided on by Branconnier. D. Milverton [39] Milverton was incorporated in Ontario on 1 December 1999, with extraprovincial registration in BC on 14 November Milverton's registration was cancelled on 5 December 2011 for failure to file required documents. [40] Milverton was a consultant to G8, Halo and CAR. Branconnier described Milverton as being "in the consulting business of all aspects of business". Written agreements were in (or referred to in) evidence for Milverton's consulting arrangement with G8, but Branconnier stated there was only an oral consulting arrangement with each of Halo and CAR (we conclude that

20 8 those oral arrangements would have been with Milverton, not with Branconnier personally). Over several years, G8 paid to Milverton millions of dollars in consulting fees from investorgenerated money, as set out below. Milverton owned some G8 shares at the relevant time, and some of the investor witnesses obtained G8 shares from Milverton (such transactions were not the subject of allegations in the Hearing). Halo/CAR investor money, almost exclusively made payable to Halo, was deposited directly into the Milverton Bank Account, presumably on the strength of the Halo/Milverton Agreement. [41] Milverton was described in a G8 SEC filing for the fiscal year ended 30 September 2008 (the 2008 SEC Filing, dated 2 October 2009) as being "owned and controlled by a shareholder and creditor of [G8] that SEC classifies as a promoter". We conclude that clearly referred to Branconnier because that document later identified Branconnier as "a controlling shareholder" of Milverton, and Milverton as a private company owned by Branconnier. Branconnier expressed confusion about the description of his ownership, stating that he had no shareholdings in Milverton, which he described as wholly owned by Sanclair, in turn wholly owned by Sharon Branconnier. The 2008 SEC Filing confirmed that Sanclair was owned by Sharon Branconnier. [42] The evidence indicated that Branconnier was a director of Milverton from 16 March 2000 and president and secretary from 10 October At the time of the Branconnier Interview (August 2010), Branconnier stated that he had been the president of and "a consultant" to Milverton from 1999 or Branconnier stated that Sharon Branconnier was not active in Milverton in any way. Peter Gardner (Gardner) confirmed that he did not see Sharon Branconnier involved with G8, Milverton or Sanclair, and testified that Branconnier referred to Milverton and Sanclair as "my companies". [43] One G8 directors' resolution in evidence approved G8 selling 3.3 million G8 shares to Milverton "at a discounted rate of [US]$0.25 per share with an equal number of warrants" at the same price, apparently in exchange for Milverton writing off $750,000 of debt owed by G8 to Milverton (with another $800,000 of debt paid by G8 to Milverton). E. Branconnier [44] Branconnier did not testify at the Hearing, although transcripts from the Branconnier Interview were in evidence. [45] We have concluded (discussed below) that Branconnier was the guiding mind of G8, Halo, CAR, the Halo/CAR operation and Milverton. We find that Branconnier, a BC resident, controlled all significant events and activities at the Langley Address. Branconnier acknowledged consulting, through Milverton, for G8, Halo and CAR. Branconnier stated that he had never been registered (with the ASC or any regulatory body) to sell securities. Other evidence confirmed he had not been registered with the ASC. [46] Branconnier had a background as a tradesman and in management, with no professional designations and limited formal education. He stated that he had been "a business consultant" since Counsel for Branconnier described Branconnier as "the founder and visionary of ORCY and subsequently [G8]", who provided consulting services to G8. Branconnier stated that, until August, September or October of 2009, he "consulted" for G8, after being asked to

21 9 consult by the G8 board of directors (the G8 Board; then Gardner, Ralph Petruzzo (Petruzzo) and another person). Branconnier acknowledged that certain G8 filings with the SEC identified him as a "promoter" of G8, which he considered to be a "marketing" role. In that context, he stated that he "provided consulting services for [raising capital], but I didn't directly raise capital". Elaborating, he stated that he "consulted to agents and to officers and directors" of G8. [47] When asked what consulting involved, he initially evaded the question, then stated: "I'd look for businesses, I'd look for opportunities, I'd look for market technology. I've been involved in the environmental business since '85, so I was involved in technologies, in products, recycling." The written consulting arrangements between Milverton and G8, discussed below, were more specific as to what the consulting entailed. As noted, there were no written agreements for the Halo and CAR consulting. [48] The 2008 SEC Filing listed Branconnier as a 21.9% shareholder of G8. That shareholding included 6,716,060 G8 shares (and warrants to purchase that same number of G8 shares) owned by Milverton "of which [Branconnier] is a controlling shareholder"; 379,000 G8 shares owned by Sharon Branconnier; 674,884 G8 shares owned by a company "of which [Branconnier] is a controlling shareholder"; and 680,435 G8 shares owned by another company "of which [Sharon] Branconnier is a controlling shareholder through Sanclair". When referred to a comparable description, Branconnier stated that his percentage and number of shares were, to the best of his knowledge, accurately represented there, although he disputed that he was, or ever had been, a controlling shareholder of Milverton. Although at one point agreeing he was "probably" "the major shareholder" of G8, he later claimed he did not know if he was a major shareholder of G8 in 2003, nor did he recall how many G8 shares he held in 2003 or even at the time of the Branconnier Interview. [49] Branconnier stated that he was a director of G8 "[p]robably '92 to '93" well before the relevant period. He had some previous experience as an officer or director: CEO and chair of Thermo Tech between 1987 and 1999; president of Milverton (from 1999 or 2000); and a director of Sanclair (since approximately 1985 or 1986). [50] Branconnier described himself as "the founder" of G8 because he "had seen an opportunity in the environmental business". He stated that he was called the founder by the "group of us" (not he alone) who made the decision to move the company from gaming to recycling. [51] Branconnier stated that Dyer was Halo's president and a director, was in control of it, and made its strategic and day-to-day business decisions. Branconnier claimed that Church was in a comparable position for CAR, with others working there whose names Branconnier could not recall. Church denied dealing with Dyer on Halo/CAR matters, claiming that Branconnier was in charge. Branconnier stated that Burback was also involved in both companies. Although claiming not to recall Burback's role, Branconnier stated it may have been as a director and consultant. [52] It was evident throughout many portions of the Branconnier Interview that Branconnier avoided or evaded answering certain questions, and that he at times presented a contrary and

22 10 obstructionist attitude. Beyond that, however, some of his answers were simply not believable, given the overwhelming evidence to the contrary from several other sources. [53] An example illustrates the point. Branconnier stated that those who did consultant work for G8 through Milverton including Branconnier himself reported to the then-president, because that was "the business structure". According to Branconnier, the president (in his example, Ed Kroeker (Kroeker)) reported to the G8 Board. Branconnier stated that he himself reported to the G8 Board, to the then-president, and to the CFO, as well as to "whoever would contact me". In contrast to Branconnier's assertions and as we discuss and conclude elsewhere in these reasons the evidence satisfies us that Branconnier was the guiding mind of G8 (and Milverton). Branconnier's statements to the contrary were not believable. [54] Given our conclusions on Branconnier's credibility, we accept Branconnier's statements as truthful only to the extent that they were undisputed or were consistent with credible evidence. F. Burback [55] Burback, Branconnier's nephew, testified at the Hearing. Burback had moved to Red Deer in 2006, although he also spent time in Fort McMurray during the relevant times. He had been (perhaps still was) a director of a family farming company and in 1996 had his own consulting company; however, he had never been a director or officer of a public company until G8. Burback had not been registered under the Act as of 20 May Since 28 May 2010, Burback has been subject to the Halo/CAR Interim Order. [56] In 1995, having contacted Branconnier about a job, Burback began working in Ontario as a labourer for Thermo Tech, then worked his way up in the company. Burback eventually worked a great deal with Kroeker, then vice-president. After control of Thermo Tech changed in autumn 2000, Burback returned to Saskatchewan to farm. [57] Burback was both a director and at times an officer of G8 during the relevant period, and we so find. The evidence indicated that he became a director of G8 in 2001 or as early as 2000, apparently becoming secretary at the same time. Despite his lack of relevant background, he became CFO in June 2007, taking over from Dean Branconnier (Branconnier's nephew). Burback was replaced as CFO by Carl Mennie (Mennie) in May 2008, but Burback testified that Mennie soon resigned and Burback became "acting CFO once again". Burback was reluctant to admit to being CFO, attempting to characterize his participation as "acting CFO", although eventually conceding that he "was CFO at that time [before Mennie's appointment], and I delegated all the work out to professionals". As of 2 October 2009, Burback was still listed as CFO, as well as treasurer and a director. Burback testified that he resigned from G8 on 21 October [58] Burback attempted to downplay his role and involvement as CFO of G8. For example, he testified that G8 "hired a company to prepare all the [SEC] filings.... And then they would go, of course, to the lawyer, review, and then they get submitted." He also testified that he went "through the records" with the auditors, although he was not an accountant and did not "understand accounting to the fullest". We do not accept his minimization or even abdication of responsibility of his role as CFO. We note, in this regard, that Burback was involved in the

23 11 December 2007 "final review and approval" of a US filing form. This was an indication that Burback directly exercised some of the functions of a CFO. Moreover, had he not wished to be in that role, he should have declined it, rather than accepting and retaining the position. [59] Burback was also a consultant to G8. According to the 2008 SEC Filing, G8 renewed on 1 October 2008 for one year a consulting agreement with Burback to serve as CFO for $7,000 per month, as under the original agreement dated 1 October [60] Burback described his focus at G8 as "getting projects in" "call it the operation level of employees and invoicing and all that stuff". He testified that he had 600,000 G8 shares, collected a salary (out of which he paid a considerable amount for expenses), and had not been paid "tens of thousands of dollars" owed to him by G8. In other words, he stated that he was building the business, implying that he would receive a significant financial return only if the business were developed and successful. [61] Regarding Halo and CAR, there was a "Consulting Contract" (the Halo/Burback Consulting Agreement) made as of 1 November 2009 between Burback (as the "Consultant") and Halo (signed by Dyer as president). Under the Halo/Burback Consulting Agreement, Burback was also to be a director and the treasurer for Halo and "arrange financing for various projects (if need be)". Burback testified that he had those positions despite telling Dyer that he did not have much experience as a director or "any schooling to be a director or officer". (We note that Burback had been a director and officer of G8 for many years by then.) Burback denied being CFO of Halo. [62] Burback testified that he was a director of CAR, but did not know if he was a shareholder. [63] Church described Burback's role (in relation to Halo and CAR) as "to take his direction from his boss, his uncle, [Branconnier], and do as he was told". Despite our reservations regarding some of Church's testimony, we accept his evidence on this point as consistent with the evidence as a whole relating not only to Burback's actions but also to Branconnier's control. This does not, however, diminish Burback's responsibility for his own actions. [64] Entered into evidence, mostly through Burback, was a binder containing dozens of documents relating to G8 and Halo/CAR. [65] For both G8 and Halo/CAR, Burback testified as to his interactions with various investors. Although acknowledging that he was responsible for some investments, he also characterized his involvement with other investors as essentially insignificant: telling a prospective investor about an investment, signing their investment paperwork, or collecting their payments for their investments. He apparently considered none of these to constitute bringing the particular investor into the investment. As set out below, we have found that such acts were acts in furtherance of trades in the G8 Securities and the Halo/CAR Securities. [66] We find Burback's evidence was evasive and, at times, self-serving. For example, although it was evident that he played an extensive and significant role in G8's operations and

24 12 fundraising, and a significant (although less extensive) role in Halo/CAR's operations and fundraising, he often attempted to diminish the degree of his involvement in both. He also tried to deflect responsibility to unnamed lawyers (relating to fundraising documentation and the use of exemptions) and to accounting professionals (relating to financial disclosure, including financial statements). [67] We conclude that at least some of Burback's testimony was calculated to protect his uncle, Branconnier. Many of Burback's statements were, however, confirmed by other evidence, both documentary and oral for example, the extensive evidence he presented surrounding G8's prospective projects. We generally do not accept Burback's evidence relating to his own role as truthful, unless on points that were undisputed or were consistent with other evidence. Relating to history, background, chronology, and such matters, we generally accept Burback's evidence as credible, although we treat with caution such evidence that minimized Branconnier's role. IV. OTHER INDIVIDUALS AND ENTITIES [68] There were many other individuals and entities involved in the complex circumstances of G8 and Halo/CAR. We briefly describe some here, with further details set out below. A. Dennis Branconnier [69] Dennis Branconnier, Branconnier's nephew, was involved with both G8 and Halo/CAR. Thibault testified that Dennis Branconnier worked in the same Red Deer office as Thibault and Burback, providing support and "fill[ing] gaps wherever the need was". Dennis Branconnier also worked on Halo/CAR matters and signed some documentation. Church did not think that Dennis Branconnier had an official role or was a director, but "would just try to be helpful" and do what Burback or Branconnier asked him to do. B. Michael Brown and HDR [70] Michael Brown (Brown) was a principal of HDR, an architectural and engineering firm involved in the G8 business model. Gardner and Burback both stated that Petruzzo brought Brown into G8. Hansen described Brown as "a highly skilled engineer with experience in waste production and... wind power". [71] Brown was listed in various documents as a director of G8, apparently appointed on 8 November 2005 (although a directors' resolution appointing Brown was dated 8 November 2006). However, a document in evidence noted that G8 received on or after 13 October 2009 communication from Brown indicating "that he should never have been represented in filings or to the public as having been on" the G8 Board at all. He apparently acknowledged that he had provided consulting services to G8's subsidiary, G8EM. This was inconsistent with the overwhelming evidence before us that Brown acted as a director, including signing SEC filings and participating on the G8 Board. Also in evidence was an invoice, dated 25 May 2007 from Brown, asking to "send to me" 350,000 shares "For Participation on the [G8] Board of Directors" and referring to a 2 November 2006 agreement. We find that Brown was a director of G8 from November 2005 or 2006 to October 2009.