An Ontario Securities Commission (OSC) panel found that Crown Hill Capital Corp (CHCC) and its chief executive Wayne Pushka breached their fiduciary duty in connection with several transactions.
In its decision, the panel held that CHCC, as investment fund manager, and Pushka, the directing mind and sole shareholder of CHCC, committed multiple breaches of fiduciary duty to Crown Hill Fund (CHF) and its predecessor funds and that they acted in a manner contrary to the public interest. The panel found that Pushka’s conduct was “appalling for a person in a fiduciary relationship with CHF (and its predecessors).”
The OSC said CHCC acted in bad faith and contrary to the best interests of predecessor funds of CHF in making amendments to one fund’s declaration of trust and in making changes to the rights of the unitholders of another fund by means of a merger, so as to increase CHCC’s powers and the management fees payable to it.
The panel also found that CHCC acted in bad faith and contrary to the best interests of CHF in two transactions that had used the assets of CHF to substantially benefit CHCC, and ultimately Pushka, through increased management fees. In the first transaction, CHCC caused CHF to make a loan of 10% of its assets so CHCC could acquire another fund’s management rights and failed to address the conflicts of interest involved.
In the second transaction, CHCC caused CHF to use more than 60% of its assets to acquire indirectly management rights to the Citadel Funds. The panel found that the acquisition breached CHF’s investment strategy and created substantial risks for CHF while benefits to its unit-holders were “marginal.”
The panel found that Pushka “orchestrated” the various events and transactions and “manipulated them to obtain his intended outcomes.” It said that Pushka “misled” the independent directors of CHCC’s board of directors and the members of the independent review committee at times and failed to make full disclosure to them.
A hearing on sanctions and costs will be held at a yet to be determined date.