DICO placed Pace Credit Union under Administration due to governance issues | Page 4 | General financial discussion | Discussion forum

Thanks very much, Doug, for taking the time to summarize the article. Sounds like a tangled web indeed, but BMO and DICO were on the job!
The Smith boys must be in shock. Summer's coming, and no watercraft. What WILL they do? Stay tuned...

There was a connection with Frank Klees in what we unearthed about PACE earlier, but I can't remember the details now.

PS. I did try the slow download in previous version, but it seemed rather like the "slow food" movement and never finished cooking/downloading.

DICO is understandably concerned.

According to the mentioned Globe & Mail article, PACE wrote off $2.9-million in 2016 as the result of defaulted loans to 2340938 Ontario Ltd. for its venture into the "poultry processing" business.

I guess PACE didn't lose enough money on those loans. PACE subsequently gave insolvent 2340938 Ontario Ltd. a new "$14.5-million interest-only loan and a $500,000 line of credit" so that the numbered company could participate in the purchase of the Continental Currency Exchange which closed in, would you believe it, January 2017.

Loonie said
Thanks very much, Doug, for taking the time to summarize the article. Sounds like a tangled web indeed, but BMO and DICO were on the job!
The Smith boys must be in shock. Summer's coming, and no watercraft. What WILL they do? Stay tuned...

There was a connection with Frank Klees in what we unearthed about PACE earlier, but I can't remember the details now.

PS. I did try the slow download in previous version, but it seemed rather like the "slow food" movement and never finished cooking/downloading.  

No problem, Loonie. I've removed the PDF file anyway. That's interesting that you guys had unearthed something about Frank Klees' (perhaps it was just that he was on the board and/or removed by DICO?) involvement.

Cheers,
Doug

savemoresaveoften said
so conclusion is Pace is in fine financial shape as what the DICO suggested back in Dec last year ?
And any rogue dealing the father son duo has done are all uncovered and no more bad roaches in the mix I hope...  

Yep, that's what it sounds like. It's still nonetheless interesting and was a great read.

The Globe article does rightly question the lack of timely regulation by DICO/FSCO, though, and this was ultimately only uncovered when it was thanks to (a) a whistleblower, presumably at PACE and (b) a BMO commercial account manager.

Cheers,
Doug

Thanks, Oscar, for for highlighting the slide presentation from PACE Credit Union's 2019 AGM. I'd been meaning to update the forum members on those highlights and several other developments.

So I'll do that now.

From page 4 of their 2018 audited financial statements, which Oscar linked to and which have finally been posted (link: https://www.pacecu.ca/SharedContent/documents/AnnualReports/PACESavingsandCreditUnionLimitedDec2018Clientcopy.pdf), one thing that was interesting to see was that Guy Hubert, in his capacity as EVP Credit Union and Prudential Regulation for the newly-established Financial Services Regulatory Authority of Ontario, co-signed the financial statements along with Rubina Havlin, the newly-installed Interim President & CEO of PACE (who previously headed up Wealth One Bank of Canada). This is because FSRA (then known as DICO) fired the entire Board of Directors of PACE following financial irregularities relating to the former senior executive officers of PACE.

From the slides (link: https://www.pacecu.ca/SharedContent/documents/2019/FSRASlidesPACEAGM.pdf), on slide 4, FSRA notes that PACE Credit Union continues to surpass the required regulatory capital ratios. From the financial statements Oscar shared at post # 69, PACE enjoys very good profitability and growth in its loan book. It grew its loan book by between 7-10% in 2018, from $810 to approximately $860 million. Deposits grew an impressive $110 million. So, that shows that, even if they've had some deposit leakage, net of any redemptions, they actually grew their deposit book by 10-12%. Profit-wise, they turned in a $4 million profit, versus a $77,000 net loss in 2017.

As well, in a notice posted on its website (link: https://www.pacecu.ca/SharedContent/documents/Mediacentre/2019/PACE_Print_8.5x11Edit.pdf), the FSRA administrator, acting in place of a board of directors, approved a 3.5% dividend to all classes of member equity and investment shares, the highest in PACE Credit Union's history. As well, the CEO noted that the net income earned in 2018 was one of PACE's most profitable years.

So, bottom line: the former president and CEO, who are now subject of legal action by FSRA on behalf of PACE Credit Union, seemed to put together a number of very profitable credit union mergers. It's just too bad of the unfortunate alleged malfeasance. Nonetheless, it's worth noting that FSRA has been working with PACE to improve its internal controls and audit framework, and, from the slides, they're now focused on improving its governance framework so that they can appoint a new board of directors. So, while Oscar notes that PACE is not expected to emerge from administration till next year, it doesn't say "at the earliest." On the contrary, I wouldn't be at all surprised to see FSRA targeting the 2020 AGM to announce PACE's emergence from administration and a new board of directors.

I like what PACE Credit Union is doing and how they're consolidating credit unions much like Alterna Savings. If they'd open up their bond of association, they are one of three or four Ontario credit unions I'd join. Still, it may be prudent to stay within one's FSRA deposit insurance limits ($250,000 in non-registered accounts, unlimited in registered accounts - hat tip to @Loonie for pointing that out to me).

Cheers,
Doug

Loonie said
Thanks to both of you.
Am I right, then, in assuming the exact nature of the problem was never revealed?  

No problem.

Officially, FSRA (previously DICO) and PACE are being tight-lipped because of the concurrent court action against the former PACE executives. However, as we know from the Globe story, the allegations of attempts to mask an ill-fated buyout of Continental Currency Exchange, Ltd., which owns the Continental Bank of Canada that is undergoing its own discontinuance application and itself is owned or co-owned by Eric Sprott, to avoid having to obtain FSCO and DICO (now FSRA) approval and to some alleged self-dealing and questionable lending activities.

Basically, the reason FSRA is concerned is the problems with internal controls, audit, and board governance. It sounds like they've now rectified, or nearly rectified, the first two of those and are working on the third.

Nothing to do with capital adequacy, a bank run, or profitability (or lack thereof). Hope that helps put minds at ease.

Cheers,
Doug