Globe and Mail focuses on PACE credit union
FSRA leadership group, from website
AWARE News Network
The Globe and Mail reveals details of an investigation by the Financial Services Regulator Authority of Ontario. FSRA plans to hold a town hall today to address PACE members.
Web of deals: PACE credit union executives committed civil fraud with years of ‘secret’ payments, regulator alleges
By James Bradshaw The Globe and Mail November 23 2019
It is a convoluted web of suspect dealings and payments that stretches back more than two decades. For years, Larry Smith, the man at the top of a sizable Ontario credit union, arranged loans and business deals, as was his job. But Mr. Smith and a number of his family members and associates – including one former provincial cabinet minister – also pocketed millions in “consulting fees” and other benefits in connection with those deals, according to an extraordinary set of allegations levied by a financial regulator.
The alleged misconduct appears to have been so pervasive that the regulator, the Financial Services Regulator Authority of Ontario (FSRA), is now investigating itself. It has retained an external law firm to conduct a formal review of its own actions to learn why it wasn’t discovered sooner.
The financial institution in question, PACE Savings & Credit Union Ltd., was seized last year by the Deposit Insurance Corporation of Ontario (DICO), which invoked a rarely used power reserved for stabilizing firms in serious distress. Two months later, regulators fired Mr. Smith, who had been PACE’s chief executive for 28 years and was still its president, and his son Phillip, who succeeded him as CEO in 2015, without severance.
In its early court filings, the regulator focused on PACE’s questionable purchase of a currency-exchange business in 2017. But the credit union’s 40,000 members have had little access to the real story of what happened behind the scenes. Until now.
Confidential regulatory documents and newly unsealed court filings obtained by The Globe and Mail show that investigators allege that they uncovered a broader pattern of secret commissions and self-dealing by the father-son duo that was facilitated by a complicit board of directors at PACE.
Officials at FSRA, which absorbed DICO this past June as part of a restructuring of financial regulation in the province, allege that Larry and Phillip Smith both committed “civil fraud” against the credit union. None of the allegations have been proven in court and Larry and Phillip Smith deny the allegations against them.