TORONTO – Securities regulators in Ontario have fined former Canadian Football League player Adrion (Pee Wee) Smith $50,000 and banned him for working in the investment industry for eight years in connection with the illegal distribution of securities.
The Ontario Securities Commission levied the fine, along with $7,500 in investigation costs, in connection with the distribution of securities involving an Oklahoma-based oil drilling company called Armadillo Energy Inc.
However, Smith has advised the commission that he is its currently without the means to satisfy the financial terms arising from the settlement agreement and “has provided staff with evidence in support of his financial position,” the OSC said in a statement issued Friday.
A Missouri native and a defensive back who played 12 seasons, including 10 years with the Toronto Argonauts in which the team won three Gey Cups, Smith was a co-founder with business partner Michelle Dunk of Ground Wealth Inc.
The company’ only business was the marketing of partnership agreement to investors in Armadillor Energy, the OSC said.
In the agreement, Smith admitted to selling securities without proper registration and without an approved prospectus, although he had been registered at times. Dunk was never registered.
Ground Wealth sold $5.3-million worth of Armadillo partnership agreements to more than 130 Canadian investors in 2010 and 2011, including 68 in Ontario valued at some $2.8 million, the regulator said.
Ground Wealth kept 24 per cent of the funds it raised from investors or about $1.3-million as its marketing fee for organizing the sales.
During the period, Armadillo made production payment to the purchases of about $1 million, the OSC said. But in December 2012, investors were told the oil extraction rate had declined more quickly that predicted.
Armadillo would have to be restructured and future production payments would “initially be at a reduced rate,” they were told.
In December 2013, a U.K. company called Fortis Admin Ltd. sent correspondence to purchasers advising that it had acquired the “oilfield interests of Armadillo and was holding them in trust for those who had invested in Armadillo.”
Fortis advised investors that it had already received funds from the company contracted to extract and sell the oil owned by the Purchasers, and was holding the funds in trust pending determination of the exact amounts owing to the individual Purchasers.
The OSC said it was not able to determine when or if further payments would be forthcoming, but noted that as of Dec. 10, 2014, some purchasers had not received payments since September 2012.