By ALJE KAMMINGA
The Alberta Securities Commission has ruled that a prominent Penticton developer and businessman engaged in illegal insider trading.
The ASC determined that Randy Kowalchuk, past president of Penticton's B.C. Liberal riding association and former president of the Penticton and Wine Country Chamber of Commerce, illegally traded in shares of Edmonton-based Eveready Inc. in 2009. The trades took place shortly before it was announced that Eveready was being sold to U.S.-owned Clean Harbors Inc. for $176-million in stock and cash.
Others named in the ASC ruling were Bert and Dale Holtby, John Shepert and Kenneth Burdeyney.
The ASC found that Bert Holtby, a member of Eveready’s board of directors – as well as Dale Holtby and Burdeyney – told others about the proposed acquisition before it was publicly disclosed. Among those that Bert Holtby informed of the impending sale was Randy’s brother, Richard Bruce Kowalchuk, a broker with CIBC World Markets. Eveready was Richard Kowalchuk’s client at the time.
According to ASC documents, Randy Kowalchuk denied being told of the sale by his brother. However, in Richard's testimony before the ASC documents, Richard said that in early March, he did inform Randy and others about the impending acquisition of Eveready. Richard testified he also encouraged a number of his clients to purchase Eveready shares before the acquisition of Eveready was announced.
The ASC dismissed Randy’s denial. It found that despite living in separate provinces (Richard lives in Medicine Hat, AB), the brothers had a close relationship and spoke frequently. The ASC determined that it was reasonable to assume that Richard had told Randy about the Eveready deal.
The ASC further alleges that after being told of the impending sale, Randy Kowalchuk used two accounts belonging to his wife to purchase 7,000 shares of Eveready for between $2.12 and $2.35 each in mid-April. When the takeover was officially announced on April 29, the stock closed at $10.40 a share. For Kowalchuk, that represented a profit of more than $50,000.
The ASC ruling determined that when he bought the stock, Randy Kowalchuk was in a "special relationship" with Eveready by virtue of his early knowledge of the takeover.
In a telephone interview, Randy maintains that his brother did not inform him of the impending sale. He points out that he had been trading in Eveready shares “four or five years before” the company’s sale was even considered.
“No doubt, my brother made some errors in judgment. He was told a secret and repeated it. Unfortunately, I got caught up in the downdraft.”
He also regretted that the story was going to run before he and the ASC had the opportunity to meet and discuss possible sanctions and/or fines.
The final decision on those sanctions or fines will be made later this spring after a series of meetings and submissions between Kowalchuk and the ASC.
For his part in the insider trading charges, Randy’s brother, Richard, faces a 10-year ban from trading in securities, and penalties and costs totalling some $210,000.
Randy Kowalchuk is currently president of Naramata Benchlands Properties, a high-end residential development. He was formerly a managing partner at Locations West Investment Group.
The ASC is the regulatory agency responsible for administering Alberta’s securities laws. A detailed report on this case is posted on its website.
Meanwhile, the status of a similar complaint against Kowalchuk, now before the Columbia Securities Commission (BSC), is unclear. Randy says the BSC dropped the allegations in April of last year. However, a BSC spokesperson told The Herald the commission still has two options: it can apply to have any sanctions imposed in Alberta also applied in B.C. or it can choose to hold its own hearing.
While unwilling to comment on this specific case, a BSC spokesperson said it probably makes more sense to apply to have the ASC sanctions imposed in B.C. “That way we don’t have to hold our own hearing,” the spokesperson said. “And it means those involved won’t have to go through the whole process again.”