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OSC charges Kinlin

OSC - Commission Issues Notice of Hearing Against Patrick Joseph Kinlin

TORONTO, July 19 /CNW/ - The Ontario Securities Commission has issued a
Notice of Hearing and Statement of Allegations against Patrick Joseph Kinlin.
Kinlin was a registered salesperson under Ontario securities law until June of
    On January 10, 2000, Kinlin pleaded guilty in the Superior Court of
Ontario to 28 counts of fraud over $5000, contrary to the Criminal Code.
Kinlin was sentenced to five years' imprisonment and was ordered to make
restitution to his victims in amounts totaling over $12.5 million. In the
proceeding before the Commission, Staff have asked for an order prohibiting
Kinlin from trading in securities permanently.
    The hearing will take place at the offices of the Commission on the 17th
floor, 20 Queen Street West, Toronto, Ontario, at 10am on August 22, 2000.
    Copies of the Notice of Hearing and the Statement of Allegations are
available at

                       R.S.O. 1990, c.S.5, as amended

                                  -  and -

                            PATRICK JOSEPH KINLIN

                          STATEMENT OF ALLEGATIONS
                               OF STAFF OF THE

    Staff of the Ontario Securities Commission (the "Commission") make the
following allegations:

    1.  Patrick Joseph Kinlin (the "Respondent") was registered with the
        Commission as a salesperson with Toronto securities dealers Mutual
        Investco Inc. ("Mutual") (from December 1, 1984 to December 31,
        1992), WealthWorks Financial Inc. ("WealthWorks") (from November 26,
        1997 to July 20, 1998) and Keybase Investments Inc. ("Keybase") (from
        August 17, 1998 to June 22, 1999).

    2.  The Respondent was terminated by Mutual on December 31, 1992. In
        their termination letter, Mutual advised the Commission that the
        Respondent "carries on business in a manner inconsistent with Mutual
        Life Policies."

    3.  When WealthWorks dismissed the Respondent on July 20, 1998,
        WealthWorks advised the Commission that the Respondent had been
        dismissed for cause, specifically, for the following reasons:

        - Failure ... to make (himself) available for training and

        - Use of "cookie cutter" portfolios and failure to address
          (Wealthwork's) concerns over this approach

        - Length of time (the Respondent) left substantial funds sitting in
          cash despite numerous reminders

        - Misrepresentation to dealership with regard to in-house compliance

    4.  When Keybase dismissed the Respondent on June 22, 1999, Keybase
        advised the Commission that the Respondent had been dismissed with
        cause. Keybase attached to its Notice of Termination a copy of a
        letter from Keybase to the Respondent, the text of which is as

            In the past few days we have received calls from various parties
            inquiring about your whereabouts and some client calls
            questioning the status of their investments. We are very
            concerned about these inquiries and have tried to contact you by
            telephone at numerous times to no avail.

            Based on the serious nature of these inquiries which stipulate
            your involvement in undisclosed activities outside of Keybase's
            offerings, though to parties other than Keybase's clients, are
            deemed improper by that of a Keybase representative (sic). By
            doing so, you are evading Keybase's supervision. Keybase will not
            tolerate such behaviour and we are hereby giving you notice that
            effective immediately your mutual fund licence with us is

    5.  During his tenure as a registrant, the Respondent was authorized to
        sell mutual funds and other securities to members of the public.
        However, while the Respondent did invest some of his clients' money
        in these securities, much of it was diverted by the Respondent for
        his own personal use.

    6.  On January 10, 2000, before the Honourable Mr. Justice Porter of the
        Ontario Court of Justice, the Respondent entered a plea of guilty to
        28 counts of fraud over $5,000.00 contrary to the Criminal Code. Mr.
        Justice Porter accepted that plea, entered convictions and sentenced
        the Respondent to 5 years in prison. The Respondent was also ordered
        to make compensation in the amount of $12,582,820.75 to 63 separate
        individuals or couples, the victims of the Respondent's frauds.

    7.  The Respondent admitted before the Court that, in respect of the each
        of these victims, he employed a similar method of defrauding them of
        their money. The Respondent agreed that the following summary of his
        conduct, read in by Counsel for the Crown, was an accurate

            The method of the (Respondent's) scheme is consistent, and
            essentially applies to each and every unfortunate victim.

            (The Respondent) was the sole director of Kinlin Financial
            Services Incorporated, located at 357 Bay Street, Suite 600, in
            the City of Toronto. (The Respondent) was licensed in the
            Province of Ontario to sell life insurance, mutual funds, and
            guaranteed investment certificates. He was not licensed to broker
            stocks or bonds.

            Through an extensive network of social contacts and personal
            friends, that began almost thirty years ago, (the Respondent)
            actively sought funds from private individuals to invest in the
            markets described, including those for which he was not licensed.

            (The Respondent) offered a wide range of financial services to
            his clients that included retirement planning, investment
            counselling, personal and business insurance, estate planning,
            and estate administration. Annual information statements were
            provided, purporting to provide his clients with a concise
            picture of their financial progress, and were statements upon
            which his clients relied to access their investment progress, and
            to assess it as well.

            (The Respondent) also augmented his familiarity and access to his
            clients' affairs by preparing and filing their personal income
            tax returns, preparing wills that named him as the executor and
            often trustee of the estate, and by acquiring power of attorney.

            In his role, (the Respondent) often directly received cash funds
            from his clients, with the understanding that they'd be invested
            in the client's name and to their benefit. These transactions
            included converting existing RRSP funds, RRIF funds, GIC's and
            other investments into purportedly higher-yield accounts chosen
            by (the Respondent). The client would provide (the Respondent)
            with a cheque in the amount the client intended to invest. (The
            Respondent) was told to invest the money, and he undertook to do
            so to the benefit of the client from whom he had received the

            (The Respondent) frequently advised the client verbally as to the
            specifics of the pending investment, and financial statements
            were sent out thereafter by Kinlin's company. In actuality, the
            financial statements were simply fabrications from blank sheets
            of paper tailored to reflect the false representations that (the
            Respondent) had made to his clients, and designed to satisfy a
            client's request for documentation of the transactions.

            All of the revenue that (the Respondent) received over the course
            of the years from his clients was directed to a Toronto Dominion
            Bank account, located on the Queensway, in the City of Etobicoke.
            As the money entered that account, (the Respondent) immediately
            withdrew the funds to support his own lavish lifestyle.


            At approximately the end of May of 1999, it appeared obvious to
            (the Respondent) that his fraudulent transactions were soon to be
            discovered. He was in dire need of money. (...)

            By June 5, 1999, (the Respondent) had desperately attempted to
            raise funds by demanding money of some of his friends. When this
            failed, he fled the country to the U.S..


            A Provisional Warrant was obtained for the arrest of (the
            Respondent) in June of 1999. American police, acting on the
            authority of the Provisional Warrant, arrested (the Respondent)
            in a hospital in Norristown, Pennsylvania, a suburb of

            In August of 1999, the Canadian government commenced extradition
            proceedings for the return of (the Respondent) to face criminal

            On September 9, 1999, (the Respondent) was returned to Canada,
            and on September 10 he appeared in a Toronto court to face the
            criminal charges outlined in the information before Your Honour

    8.  In addition to this general summary of the Respondent's modus
        operandi, Counsel for the Crown read in facts in relation to
        individual victims. These facts were also admitted by the Respondent.
        Reference was also made to Victim Impact Statements filed by the
        Crown. Some victims also made oral statements to the Court.

    9.  In the course of delivering his Reasons for Sentence, Mr. Justice
        Porter made the following comments:

            I must say in my experience on the bench I have not run into such
            a loss as I have encountered today in this matter. It is mind-
            boggling to say the least.

            You have heard counsel talk about trust. Essentially, our society
            is based on trust, and when people fail in their trust it is very
            disturbing to say the least.

            I have listened to the people who were good enough to put their
            words on paper or speak to me, and I am brokenhearted for you,
            quite frankly. I wish I could wave a wand and say, "Here we are.
            Here's your money. Go home", but unfortunately you realize I
            can't do that, and unfortunately from what I've heard I don't
            think (the Respondent) is going to be able to do that either.


            But we get back to this horrendous breach of trust and the pain
            that it has occasioned to you. I heard the word "despicable". I
            couldn't agree with you more, and although as (counsel for the
            Respondent) points out perhaps all these funds weren't for
            personal use. I find that difficult to believe.

    10. It is the position of Staff that the conduct alleged above, which
        conduct the Respondent admitted to the Court, constitutes conduct
        contrary to the public interest.

        Dated at Toronto this 30th day of June, 2000.

                       R.S.O. 1990, c.S.5, as amended

                                   - and -

                            PATRICK JOSEPH KINLIN

                              NOTICE OF HEARING

    TAKE NOTICE THAT the Ontario Securities Commission (the "Commission")
will hold a hearing pursuant to section 127 of the Securities Act, R.S.O.
1990, c.S.5, as amended (the "Act") at the Large Hearing Room on the 17th
floor, 20 Queen Street West, Toronto, Ontario, commencing on the 22nd day of
August, 2000 at 10:00 a.m. or so soon thereafter as the hearing can be held:


    (a)  whether in the opinion of the Commission it is in the public
         interest to make an order pursuant to section 127(1) clause 2 of the
         Act, that trading in any securities by Patrick Joseph Kinlin cease
         permanently; and

    (b)  such further orders as the Commission may deem appropriate.

    BY REASON of the allegations as set out in the attached Statement of
Allegations made by Staff of the Commission dated June 30, 2000;

    AND TAKE FURTHER NOTICE THAT any party to the proceedings may be
represented by counsel at the hearing;

    AND TAKE FURTHER NOTICE THAT, upon failure of any party to attend at the
time and place aforesaid, the hearing may proceed in the absence of that party
and such party is not entitled to any further notice of the proceeding.

    DATED at Toronto this ____ day of July, 2000.

        Secretary to the Commission

           c/o Frontenac Institution
           455 Bath Road
           P.O. Bag 7500
           Kingston, Ontario
           K7L 5E6

For further information: Frank Switzer, Manager, Corporate Relations, 
(416) 593-8120; Brian Butler, Acting Director, Enforcement Branch, 
(416) 593-8286