Proprietary Industries Inc. is denying allegations from staff of the Alberta Securities Commission suggesting that its financial statements for 1998, 1999 and 2000 contain significant accounting irregularities.

In its Notice of Hearing, the ASC alleges that Proprietary’s financial statements for these years were not prepared in accordance with generally accepted accounting principles and contained material misrepresentations. ASC staff say that the financial statements, prepared under the direction of CEO Peter Workum and CFO Theodor Hennig, reported significant gains on the sale of Proprietary’s interest in several companies, all of which were reported contrary to GAAP.

They also allege that these transactions were not legitimate commercial transactions but were structured for the primary purpose of allowing Proprietary to recognize significant gains in these financial years. The accounting treatment of the transactions resulted in Proprietary reporting approximately $17.5 million of gains over the three year period.

Proprietary Industries says that it categorically denies the ASC allegations. “The allegations have no merit, and Proprietary will vigorously contest them. Proprietary and its management are and have always been committed to full compliance with the letter and the spirit of GAAP and have made every effort to publish Proprietary’s financial statements so as to achieve full, true and plain disclosure. Proprietary looks forward to having the opportunity to present the facts and to refute the ASC staff’s allegations.”

Proprietary considers as especially unmeritorious the ASC allegation that the transactions “were not legitimate commercial transactions”. It says, “The transactions were sales of active businesses. The transactions were supported by independent business valuations. Voluminous documentation has been provided to support the legitimacy of the transactions. Proprietary has not been presented with any contrary evidence by the ASC.” Proprietary says it has cooperated fully with the ASC. The hearing to set a date will take place on February 22, 2002 at 9:30 ET.