A Burnaby woman who defrauded a group of investors in a troubled building-materials company in 2010 and 2011 has been charged with violating an order permanently banning her from B.C.’s capital markets.
In February 2017, the B.C. Securities Commission permanently banned Enna Keller and slapped her with a $2.42-million penalty for fraud, trading without registration and violating two previous BCSC orders.
She has now been charged with violating that order only a few months after it was imposed.
She made her first appearance in Vancouver Provincial Court last week.
'Dismay and betrayal'
Keller was a director and former CEO of Lexicon Building Systems Ltd., an American manufacturer and distributor of a building material called PolyBlock, according to BCSC documents.
The company went bankrupt in 2009 and was under a cease-trade order when Keller and Richard Lian, an American consultant working for Lexicon, launched a scheme to raise money purportedly to bring it out of bankruptcy and get the cease-trade order lifted.
Through a “friends and family” program, they raised $3.2 million from about 315 people, including about 140 B.C. residents, promising them Lexicon shares and warrants once the cease-trade order was lifted.
But the people who bought in weren’t told Lexicon wasn’t even aware of the scheme and that the money was going into the accounts of companies controlled entirely by Lian, who used only about $600,000 of it to pay Lexicon’s debts, expenses and other liabilities.
Another $180,000 was used to repay friends and family program participants who demanded a refund.
The rest – about $2.4 million – Lian spent on things that were of “no benefit” to the people who had bought in, according to a 2017 B.C. Securities Commission ruling.
Lian was originally accused of spending the money on payments for a Ferrari and other exotic cars, cosmetic surgery and luxury retail purchases.
Defrauded investors were left with only a “sense of dismay and betrayal,” according to the ruling.
Keller, meanwhile, was the face of the program and “actively facilitated the fraud in multiple ways,” according to the commission, including informing participants and prospective participants of the chance to invest in Lexicon shares and warrants through the scheme, providing investors with false and misleading updates on progress in rehabilitating Lexicon, recording the purported entitlements of the investors to Lexicon shares and warrants and failing to inform investors of a temporary order made in December 2011 banning trade in Lexicon securities.
“Often, when participants expressed concern about lack of progress in receiving their promised Lexicon shares and warrants, Keller tried to alleviate their concerns with false platitudes about how well Lian was doing and the progress being made,” stated the ruling.
Keller was paid only about $50,000 of the investors’ money, however, and there was no evidence as to what the payments were for.
As a “substantial shareholder” in Lexicon, the main way Keller could have benefitted from the fraud would have been if Lian could have righted Lexicon, according to the commission.
Unpaid $2.42-million penalty
Besides engaging in fraud, the commission found Keller had traded in securities without being registered to do so and – with Lian – violated the cease-trade order Lexicon was under.
The pair then went on to violate the temporary December 2011 order banning anyone from trading in Lexicon securities, the commission found.
In the end, the commission permanently banned Lian and Keller from B.C.’s capital markets and issued them each with administrative penalties of $2.42-million.
Both penalties remain unpaid, according to the BCSC website.
Last month, Keller was charged with violating her ban twice in June 2017 by “trading in a security and/or acting in a consultative capacity in connection with activities in the security market.”
The BCSC wouldn’t say whether the breaches were related to Lexicon.
The quasi-criminal offences carry a maximum sentence of three years jail and/or a fine of up to $3 million per offence.
Keller’s next court appearance is on Aug. 7.