T.D. Canada Trust, Montreal
What is a conservatory measure?
The Superintendent of Bankruptcy puts in place conservatory measures when a bankruptcy or insolvency estate needs protection. It might be in cases of Licensed Insolvency Trustee (LIT) malfeasance or if serious wrongdoing on the part of a LIT puts estate files at risk. Conservatory measures may also be put in place if a LIT becomes ill or dies without a valid succession agreement. Finally, conservatory measures may be put in place if a LIT, for whatever reason, has allowed the administration of his or her practice to become substandard.
In the matter of:
Henry Sztern & Associés inc.
Directions For Conservatory Measures
(section 14.03 of the Bankruptcy and Insolvency Act)
Whereas the Bankruptcy and Insolvency Act (Act) provides the Superintendent with the general power to supervise the administration of all estates and matters to which the Act applies;
Whereas the Superintendent of Bankruptcy may and must, for the protection of the assets of an estate, exercise the powers referred to in subsection 14.03(1) of the Act in the circumstances stipulated in subsection 14.03(2) of the Act;
Whereas the Act provides the Superintendent with the power to examine all books, records, and documents including estate bank accounts at any reasonable time;
Whereas the Superintendent of Bankruptcy implemented the Monitoring Program to ensure uniform assessment of estate administration and the Program requires the senior bankruptcy analyst to visit the trustee's office to examine and review a representative sampling of estate files administered by the trustee including the examination of estate bank accounts;
Whereas on February 19, 2003 at the office of the trustees, a Monitoring of the trustees practice was scheduled for the period of March 18 to March 20, 2003 and Mr. Gilles-Normand Lavallée, senior bankruptcy analyst, agreed to these dates as suggested by the trustee Henry Sztern;
Whereas at the meeting of February 19, 2003, also attended by Mr. Gerry Barberio, bankruptcy analyst, explanations and documents were requested from the trustee in order to review and analyse recent complaints received by the Montreal Division office of the Superintendent of Bankruptcy from creditors in estate files administered by Mr. Sztern;
Whereas during the course of their review the analysts identified numerous deficiencies, specifically, the trustee is not making his dividend distributions, the dividend distributions are not made according to the terms of the proposals, dividend cheques are taking too long to clear the bank accounts and the dividend posted dates in the cash ledgers do not correspond with the dates the cheques are clearing the bank accounts;
Whereas in certain consumer proposal files, the trustee made cheque disbursements from bank accounts other than the trust account;
Whereas in certain consumer proposals, the trustee illegally withdrew amount of moneys;
Whereas the Montreal Division office of the Superintendent of Bankruptcy has yet to receive satisfactory explanations to the questions posed to the trustee at the meeting of February 19, 2003;
Whereas Mr. Sztern is the only trustee in the corporate trustee firm of Henry Sztern & Associés inc. which presently has over 1,300 open estate files and he declared to the official receiver that he does not have the staff nor the resources to properly administer them on a timely basis;
Whereas the trustee Henry Sztern confirmed to the official receiver that he personally interviewed all the individual debtors, stated he performed the assessment evaluations as required by Directive 6R and signed the assessment certificate indicating he performed the assessments, five recent bankrupts examined by the official receiver under section 161 of the Act stated they had not seen nor met the trustee Sztern;
Whereas during the course of the analysis the bankruptcy analysts encountered a lack of internal controls in the administration of the estates and, contrary to the Act, disbursements were made from bank accounts other than the estate trust account rendering the audit trail difficult for these transactions;
Whereas the day before the scheduled Monitoring Program visit, the trustee informed the official receiver that he would not be able to attend;
Whereas on March 19, 2003, Mr. Gilles-Normand Lavallée and Mr. Gerry Barberio from the OSB nevertheless travelled to the trustee's office for the Monitoring Program and were informed by the receptionist that the trustee is absent. The trustee via telephone informed Mr. Lavallée that he would not allow his staff to give the bankruptcy analysts access to the estate files without his presence;
Whereas the delays, the lack of cooperation, the refusal to provide timely documentation, the refusal to provide access to the files, and by other subtle means of avoiding or postponing meetings with the official receiver, Mr. Sztern has prevented the bankruptcy analysts to carry out their statutory mandate of supervising the administration of insolvency estates;
Whereas there are serious discrepancies between estate bank statements supplied by the trustees and the transactions records obtained directly from the bank specifically with respect to estate balance;
Whereas to this day these discrepancies remain unexplained by the trustees;
Whereas pursuant to paragraph 5(3)e) of the Act an investigation of the trustees' professional conduct has been undertaken;
Whereas the Superintendent of bankruptcy has delegated to the Deputy Superintendent (Policy, Programs and Standards, now Programs, Standards and Regulatory Affairs) in accordance with subsection 14.01(2) of the Act, in certain situations mentioned in subsection 14.03(2), his powers as specified at subsection 14.03 (1) o f the Act, copies of which delegation are attached along with copies of subsections 14.01(2) and 14.03(1) to (4) of the Act;
Whereas paragraphs 14.03(1)b) and c) of the Act apply;
I, Alain Lafontaine, in my capacity as Deputy Superintendent (Programs, Standards, Regulatory Affairs), direct:
TD Canada Trust, branch located at 433, rue Chabanel Ouest, bureau 101, Montréal, Québec, H2N 2J5;
- to make no debit and/or payment and/or transfer of funds credited to the estates of bankruptcies and proposals administered by Henry Sztern & Associés inc. and/or Henry Sztern, without the cheques, notes, certificates of deposit and or transfers being co-signed by Gerry Barberio or François Leblanc along with Henry Sztern;
- not to pay, out of these accounts, bills of exchange, cheques, bank drafts or other such instruments that may have been issued before the reception of these directions but which would be presented for payment after the receipt of these directions, without these bills of exchange, cheques, bank drafts or other instruments being co-signed by Gerry Barberio or François Leblanc along with Henry Sztern;
- to submit all statement of accounts, accepted cheques and/or other documents and information having to do with the above mentioned estates accounts to Gerry Barberio or François Leblanc;
- to provide, as soon as possible, the list of trust bank accounts of Henry Sztern & Associés inc. to Gerry Barberio or François Leblanc.
These directions take effect immediately and will stay in place until further notice or until a decision is rendered under section 14.01 of the Act;
In accordance with subsection 14.03(3) of the Act, these directions bind the addressee, who must comply with them;
In accordance with subsection 14.03(4) of the Act, a person who complies with the present directions is not liable for any act done by the person only to comply with them.
Signed in the City of Ottawa, Ontario, April 2, 2003
Programs, Standards and Regulatory Affairs
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