Probe into ASC conduct
Troubling allegations: Commission calls matters 'internal' and 'confidential'

 

Theresa Tedesco, Chief Business Correspondent

March 23, 2005

The board of commissioners at the Alberta Securities Commission is meeting to deal with a series of troubling allegations made by current and former staff against senior executives at the provincial regulator, the Financial Post has learned.

Sources say the 12-member board is weighing the results of an unprecedented review into the conduct of the provincial watchdog's senior executives, including claims they interfered with enforcement cases, engaged in favouritism and condoned a highly sexualized work environment.

ZORAN BOZICEVIC / NATIONAL POST

Stephen Sibold’s five-year term as chairman of the Alberta Securities Commission yesterday was extended to May 7.

A lengthy report, prepared by Calgary lawyer Perry Mack, was tabled to the ASC commissioners about six weeks ago after the provincial Finance Minister, Shirley McClellan, ordered an investigation into the extraordinary claims on Jan. 12.

The allegations were brought to the Minister's attention after her deputy minister was notified by an ASC commissioner.

Stephen Sibold, outgoing chair of the ASC, and David Linder, executive director, were singled out by the complainants for questionable management practices which fostered what they described as a "dysfunctional" agency and a "toxic" work environment.

The allegations raise questions about the credibility of one of Canada's largest securities regulators. The ASC is responsible for governing all publicly traded companies in Alberta, including some of the largest oil and gas companies in Canada. The provincial regulator administers Alberta's securities act, rules and regulations and it also oversees the TSX Venture Exchange.

Sources told the Financial Post that most of the ASC's senior management has revolted against the chair and his lieutenant over what they claim to be an oppressive work environment that has fostered deep tensions and resentment among the rank-and-file.

Sources say staff, which had been hopeful the board would take swift action, has become demoralized since Mr. Mack delivered his findings to the board. ASC commissioners are said to be divided about how to proceed.

Alan Hunter, a prominent Calgary lawyer representing the ASC's nine part-time commissioners, said yesterday, "These matters are internal to the commission and are highly confidential." In response to questions sent to Messrs. Sibold and Linder by the Post, Mr. Hunter said, "Many of your allegations are not accurate."

Yesterday, Mr. Sibold's five-year term as chair was extended to May 7, while Mr. Linder continues to operate as the regulator's chief administrative officer, a post he has held since 1997.

"Many were looking forward to the end of the Sibold era," said a source who asked not to be named for fear of reprisal.

That's what prompted a group of seven senior commission employees to gather in a rented Calgary office last December. The clandestine group telephoned Thomas Cooke, an Edmonton-based commissioner and member of the ASC's audit committee, to relay their concerns. Although worried for their jobs, the group figured Mr. Cooke would have an open mind because he'd been nominated for his appointment by the provincial government, not Mr. Sibold. ASC commission members are appointed by Cabinet.

During the two-hour conference call, the group detailed problems they claimed had deeply eroded the integrity and morale at the commission in recent years.

Sources say they outlined three main areas of concern: corporate governance, management style and treatment of staff.

"For a number of staff, the thought of Steve Sibold staying on as chair was just not tolerable because of his management practices," said an official who asked not to be named.

At the top of the list of complaints was the management practices, more specifically claims of interference from the executive floor. To support their allegations, the complainants provided specific examples of enforcement files that were quashed, including an insider-trading case against a high-profile Alberta businessman.

Mr. Sibold is also alleged to have declared that the province's rules forbidding insider trading were "unenforceable" and, as a result, directed staff to close a file.

In another matter, Mr. Sibold is said to have ordered enforcement staff to change an insider-trading case into an improper filing, which is a lesser violation of the provincial securities act.

"Every week we had to justify our cases. It was routine that staff was asked to drop cases," said a source. When a former enforcement director complained, sources say, he was told to rethink his career at the regulator.

Another example involved a letter sent by ASC corporate finance staff to a company requesting it make proper filings. According to sources, Mr. Linder demanded the letter be rescinded. "It was made clear that certain people and companies were not to be troubled and were being protected from regulatory activity," said a source. "When staff can't proceed on cases because somebody may be a friend of the chair's or the executive director, that has a very serious effect on morale." Added another: "They paid lip service to the notion that enforcement mattered but people inside knew it didn't."

Sources say the group told Mr. Cooke that such events were not daily occurrences, however, they argued it should not have happened at all.

"Calgary is a powerful oil town. There's a lot of money out there and if you are looking for a career after here [the ASC], then you should be nice to the people on the outside," is how an informed observer described the tension at the commission. "I think there's a fear that this is what's happening and people end up becoming lackeys."

The whistleblowers also alleged executive management abused staff, for example, by using repeated threats of termination for minor transgressions. They also alluded to how employees in the administrative and human resources departments were referred to as "trained monkeys," that Mr. Sibold had "tyrannical outbursts," and how executive management bypassed department managers to dole out bonuses and salary increases on an ad hoc basis.

Many also expressed resentment about what they perceived to be a clubby atmosphere that fostered favouritism, especially among female staff members who had developed personal and professional relationships with the 52-year-old chair and Mr. Linder. They cited sexually explicit e-mails that were circulated on the executive floor, an inflatable sex doll displayed in an office, and copies of Victoria's Secret lingerie catalogues annotated with comments that were often exchanged among some senior commission officials.

"It seemed that the route to the top was to be a young female with a big bust, as opposed to any intrinsic merit as a securities regulator," said an official who asked not to be named.

Staff members also complained that Mr. Sibold created the General Counsel's office in 2003 and awarded the $200,000-a-year job to a junior policy-lawyer without posting the job internally or opening it up to competition, which is the usual practice.

The December, 2004, conference call ended with an assurance from Mr. Cooke that he would pursue the group's complaints.

Mr. Cooke declined repeated requests to answer questions or comment for this article.

Sources say in early January, he provided a summary review of the conference call to his fellow commissioners and to Robert Bhatia, Alberta's deputy minister of finance. Soon after, Ms. McClellan ordered the commission to investigate the allegations and report back to her office.

In the meantime, the deputy minister instructed Messrs. Sibold and Linder to refrain from making any significant staff changes or restructurings at the provincial regulator. Both men retained their own lawyers.

The ASC commissioners hired Mr. Hunter to advise them and he enlisted Mr. Mack to probe the allegations on behalf of the board. ASC staff were encouraged to step forward with the assurance of anonymity and no reprisals. Over a three-week period, Mr. Mack interviewed about 30 current and former employees. Sources say their interviews supported much of the substance raised in the claims by the group of whistleblowers in December and provided more grist for Mr. Mack's report.

His findings, delivered to the ASC commissioners, are said to have sparked spirited debate among the board members. For one, a handful of commissioners loyal to Mr. Sibold were upset that Mr. Cooke embroiled himself in internal ASC matters. Others were stunned to learn the agency appeared to be in such disarray.

Sources say some commissioners are worried about the threat of lawsuits and have argued the board should delay making any decisions about what actions, if any, they should pursue until Mr. Sibold's term ends in two months.

"I think everyone appreciates that these are very grave allegations that can have serious repercussions on people's careers, and that has never been taken lightly," said a source familiar with the probe.

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