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HCG also did not timely disclose that, for a number of years, it sold some of the loans it made to a company partially owned by its lead outside counsel (who later joined HCG’s board of directors). If HCG was selling its assets to a friendly insider (such as its own lawyer), then investors would want to know that — because related-party transactions must be disclosed under the securities laws. Why? Because related-party transactions may reflect financial manipulations to make assets look more valuable than they really are. That’s what the management of Enron did, and people went to prison for it.

Is there still a problem at HCG?

Mr. Corcoran complained that information about Trillium was old news and he was puzzled that the OSC would take action this year, when the events in question were several years old. But the OSC — like any other law-enforcement agency — investigates before it prosecutes. That’s what we should expect from regulators. In any event, there is still a big problem at HCG.

First, by extending loans to unqualified buyers, HCG has exacerbated the housing bubble in Canada and, particularly, in Toronto. HCG has enabled excessive demand in the market by lending money to unqualified buyers to purchase homes, resulting in pushing otherwise qualified buyers out of the housing market and increasing home prices. That problem is very much still alive today.

Second, the HCG board is flawed, even after some members were replaced. There are six board members who were on the board during the Trillium era. According to the OSC staff, they (a) presided over the flawed underwriting review process, (b) failed to detect the $2 billion in fraudulent mortgage applications for at least two years, (c) failed to disclose to the public the problems for over a year, (d) oversaw managers who provided false information about why loan originations were weak in late 2014 and early 2015, (e) sold stock to the public knowing that Trillium had never been disclosed, (f) retained CFO Robert Morton, who the OSC staff accused of boasting about hiding Trillium deep within the disclosures to investors, (g) failed to correct Chairman Kevin Smith’s statement, on April 21, 2017, that “the business is robust” when, in fact, several banks had already limited their clients’ ability to invest in HCG (and Scotiabank had already suspended all sales of HCG GICs to their clients), and (h) entered into a financing agreement with Healthcare of Ontario Pension Plan without disclosing key provisions of the deal to investors — and investors only learned that the loan was “effectively a DIP (debtor in possession) loan” when HOOPP CEO Jim Keohane described it in a BNN interview.