One of the executives accused of violating securities rules by transferring funds from a publicly traded company to pay the bills of a related private company — without telling investors — has settled with the Alberta Securities Commission (ASC).
In January, the ASC brought allegations against Colin Garfield Wagner, the former chief financial officer of Target Capital Inc. — a public company now called Westgate Energy Inc. — and Shahin “Sonny” Mottahed, the firm’s chairman, president and CEO. The regulator alleged the pair had defrauded Target investors by using $2.3 million of the company’s cash to finance the operations of Performance CBD Brands Corp., a separate private company where they also served as CFO and CEO, respectively.
According to the allegations, starting in October 2019, they began using Target’s cash to pay invoices for Performance from third-party vendors, and later made transfers from Target’s accounts to Performance’s accounts.
“The transfers were undocumented and unsecured, and they were made without the approval of Target’s board of directors,” the regulator alleged — noting that Target’s independent directors didn’t learn about the transfers until February 2021.
On Tuesday, the regulator settled with Wagner, who admitted to breaching securities rules by using one company’s assets to support the other company. He also admitted to breaching disclosure requirements by certifying the company’s financials and regulatory filings, and issuing news releases that didn’t disclose the transfers.
“CFOs play a central role in ensuring compliance with continuous disclosure obligations. In particular, they must certify that financial disclosures fairly present the financial condition, financial performance and cash flows of the issuer, and they do not contain misrepresentations,” the settlement said.
“They must act independently of the CEO in fulfilling those obligations. By certifying false and misleading disclosures, Wagner fell far short of meeting his obligations,” it added.
To resolve the allegations, Wagner paid $100,000 to the ASC and agreed to be banned for 15 years.
The allegations against Mottahed have not been proven. A hearing into those allegations is scheduled to proceed this month.