A Victoria lawyer has come under the spotlight of the British Columbia Securities Commission for allegedly harming the reputation of B.C. capital markets.
Robert Scott Morrice, who goes by Scott Morrice, faces allegations that he, along with Donald Gordon Byrne, a resident of Lumby, B.C., created and sold shell companies. The BCSC says Morrice and Byrne created three companies — Edgemont Mining Inc., Interfac Mining Inc., and Jupiter Resources Ltd. — that had few assets and didn’t conduct any business.
Morrice received a law degree from the University of Saskatchewan and practised at Brodie Morrice, a small Richmond-based law firm for 21 years, according to his LinkedIn profile. The firm is now defunct.
He is listed as a practising lawyer on the Law Society of British Columbia’s web site. But according to a personal web site about Victoria tourism that he maintains, Morrice is retired.
The allegations against Morrice and Byrne harken back to an era when the B.C. markets were a haven for penny-stock fraud. Many shell companies would be incorporated in B.C. and would then be listed on over-the-counter markets in the United States, which are minimally regulated. These companies would often have phony directors and officers that did not participate in the business and even dummy shareholders.
The stocks were often used as fodder for “pump-and-dump” schemes, where stock brokers dupe their clients to buy shares in shell companies, raising the price of the stock, before the initial shareholders would sell off their shares for a profit, leaving the shares worthless.
But in 2008, the BCSC instituted rule changes that strengthened the regulation of companies on over-the-counter markets. But just days before the new rules would have gone into effect, Morrice filed documentation with the SEC, which stated that Edgemont Mining, Interfac Mining, and Jupiter Resources had moved their head offices to Saskatchewan, and thus would not be subject to the new rules.
The BCSC is alleging that Morrice lied to the SEC. Also, the BCSC alleges that Morrice asked Byrne, who had family in Saskatchewan, to find new directors for the companies in that province. Three new directors were found, and, according to the BCSC’s allegations, they had nothing to do with the company and had no knowledge of mining. The three directors were a farmer, a welder, and a freight broker, and the BCSC alleges none of them even knew where the company offices or bank accounts were located.
In 2009, Jupiter Resources changed its name to Rineon Group Inc., and its business was changed to insurance instead of mining exploration. The company was sold to a company in the British Virgin Islands. In 2010, Rineon stock was used in an alleged penny stock manipulation scheme, according to the BCSC. At one point in 2009, Rineon had a market capitalization of $72 million.
The BCSC will hold a hearing Sept. 30, 2014. Morrice did not return calls for comment.