JUNE 2005 ISSUE
Discipline
APEGGA DISCIPLINE COMMITTEE DECISION
DISCIPLINE COMMITTEE PANEL
Bruce Alexander, P.Eng., Chair
Marty Klaassen, P.Eng.
Bob Swift, P.Geol.
Panel Counsel
Dwayne Chomyn
Neuman Thompson
PARTIES
APEGGA
Investigative Committee represented by Barry Massing, Hendrickson
Gower Massing Olivieri
Member
Paul Salvian, P.Eng.
Member’s Counsel
J. Todd Van Vliet
BACKGROUND
On December 22, 2003 , the Discipline Committee received, from the Investigative Committee, the referral for a discipline hearing concerning Paul Salvian, P.Eng. (the “Member"). After obtaining the availability of all necessary parties, the Discipline Committee set a hearing date of June 18, 2004 and issued the formal notice of hearing on January 15, 2004 , serving copies on the Member’s counsel and on the Investigative Committee (the “parties"). At the same time, the Discipline Committee, according to its standard process for disclosure of documents, requested that the parties provide, to the Panel and to each other, copies of documents on which they intended to rely at the hearing. All submissions were provided to the Panel on June 11, 2004 .
THE HEARING
The hearing was held before the Panel at the Association’s offices in Edmonton on June 18, 2004 and adjourned on that day. The hearing resumed on September 29, 2004 and was adjourned the same day. The hearing resumed again and concluded on November 2, 2004 . The Investigative Committee was represented by Mr. Massing. The Member was represented by Mr. Van Vliet.
The Panel initially included a fourth member of the Discipline Committee, Reg Pridham, for the first two days of the hearing. Mr. Pridham was unable to continue in his role as a Panel member on November 2nd, however, and the hearing proceeded with three professional members on the Panel, in accordance with the provisions in the Engineering, Geological and Geophysical Professions Act. Mr. Pridham had no further involvement in the proceedings or the decision.
CHARGES (ALLEGATIONS)
The matters to be decided, as brought forward by the Investigative Committee, were:
1. “That on or about August 31, 1999 , Paul D. Salvian, P.Eng., swore a Statement of Affairs pursuant to the Bankruptcy Act which Statement of Affairs was false in that it did not disclose his shareholdings in F & Y Engineering Concepts, nor 767295 Alberta Ltd.”
2. “That on or about September 15, 1999, Paul D. Salvian, P.Eng., swore a statement that his answers given on the Examination of Bankrupt pursuant to the Bankruptcy Act were true in every respect, when in fact the answers given by Paul D. Salvian, P.Eng., were false in that they failed to disclose shareholdings in the aforesaid companies to the official Receiver as required by the Bankruptcy Act.”
3. “That Paul D. Salvian, P.Eng., continued to hold office as a Director in F & Y Engineering Concepts Ltd. and 767295 Alberta Ltd. following his Assignment in Bankruptcy, dated August 31, 1999 .”
4. “That the conduct of Paul D. Salvian, P.Eng., constitutes unprofessional conduct in the foregoing respects and as defined in the Engineering, Geological and Geophysical Professions Act in that his conduct is:
a. Detrimental to the best interests of the public;
b. Contravenes the APEGGA Code of Ethics, in particular Rule of Conduct #10;
c. Tends to harm the standing of the profession generally.”
FINDINGS AND REASONS
F & Y Engineering Concepts Ltd. (FYEC) was incorporated on April 23, 1997 to provide mechanical and electrical consulting services. Fred Yakimchuk became president and held 40% of the shares. Paul Salvian became vice president and secretary and held 25% of the shares. Two other directors held the balance of shares at that time. Paul Salvian was employed by Western Engineering who provided structural and mechanical engineering services to outside clients as well as FYEC.
In February 1998, an inactive corporation, 767295 Alberta Ltd. was acquired and immediately activated as a holding company for a building which would serve as offices for FYEC, Western Engineering and a few other tenants. The building was financed with $60,000 cash plus a $158,000 mortgage. Paul Salvian paid 20% of the down payment, or $12,000 by relinquishing fees which were owed to him by Fred Yakimchuk. Paul became a 20% shareholder in the numbered company.
Western Engineering had difficulties in collecting fees and on or about September 1, 1999 , Paul Salvian declared personal bankruptcy. The reporting of assets in that bankruptcy is the focus of this hearing. His relationship with Fred Yakimchuk had been gradually deteriorating and on October 3, 2001 , approximately two years after the bankruptcy, Paul wrote a letter to Fred asking for a substantial pay increase and listing ten areas which he considered “contentious issues". He closed by offering to sell his shares in both FYEC and the numbered company.
A letter dated November 20, 2001 from Mr. Salvian to FYEC refers to a document requesting his resignation from FYEC. He then sets down four conditions under which he will sign that document. One condition is a demand for a cash separation or retroactive salary increase. Another is a demand to be bought out of the building ownership for $20,000.
By letter of December 17, 2001, Mr. Salvian resigns as Vice-President of FYEC and offers his shares in FYEC to Fred Yakimchuk for one dollar. By separate letter of the same date, Mr. Salvian resigns as Vice-President of 767295 Alberta Ltd. and signs over his shares in same for one dollar. He closes with:
There has been mention that these shares were relinquished at the time of my bankruptcy, it is true that they should have been. Because of the fact that these shares are being relinquished for the value of one dollar, it seems like unnecessary paperwork to reopen my bankruptcy estate for only a loonie.
Charge 1: That on or about August 31, 1999 , Paul D. Salvian, P.Eng., swore a Statement of Affairs pursuant to the Bankruptcy Act which Statement of Affairs was false in that it did not disclose his shareholdings in F & Y Engineering Concepts Ltd., nor 767295 Alberta Ltd.
Charge 2: That on or about September 15, 1999, Paul D. Salvian, P.Eng., swore a statement that his answers given on the Examination of Bankrupt pursuant to the Bankruptcy Act were true in every respect, when in fact the answers given by Paul D. Salvian, P.Eng., were false in that they failed to disclose shareholdings in the aforesaid companies to the official Receiver as required by the Bankruptcy Act.
The Panel is satisfied that the Investigative Committee has proven Charges 1 and 2. Clearly, there is no mention of any shares in the Statement of Affairs and the value shown for ‘Securities' on the ‘Assets' page is nil. During the Examination of Bankrupt by the Official Receiver, Mr. Salvian responded to Question #14. “Do you have any other assets that you have not disclosed on your Statement of Affairs? If yes, give details." with the word “No" which he testified was in his own handwriting.
The evidence presented is most contradictory on the question as to whether Mr. Salvian was advised by the trustee's office to omit information relating to his holdings in the two companies. The Panel believes that personnel of the Trustee's office would likely have advised the bankrupt to disclose all of his shares. We find that it is highly unlikely that a Bankruptcy Trustee would advise a client not to disclose an asset. The Trustee's office would have nothing to gain by giving such advice to a bankrupt. The evidence is quite clear that if the shares had been disclosed, a rather perfunctory exercise would have been undertaken by the Trustee to determine their value. It is not a lot of work and does not have any impact on the Trustee. In fact, advising a bankrupt not to disclose an asset would put the Trustee at the risk of losing a great deal in terms of reputation and the possible legal ramifications of providing such advice. The Trustee must balance the interests of the creditors against the interest of the bankrupt and such advice runs contrary to the primary purpose of the undertaking.
What is more, it appears obvious to us that Mr. Salvian understood that he had a duty to disclose all of his assets, even those with little value. One merely has to look at the sheet and note that he disclosed the value of a term life insurance policy and a fifty dollar set of golf clubs to see that he understood his obligations. That the Trustee would then turn around and give advice running counter to what is presented on the form seems to be a questionable proposition. Consequently, we accept the evidence of Ms. Kelli Stewart and reject the evidence of Mr. Salvian and Ms. Brown insofar as it suggests that the omission of the shares in the two companies was approved or encouraged by either the Trustee or the Receiver.
Charge 3: That Paul D. Salvian, P.Eng., continued to hold office as a Director in
F & Y Engineering Concepts Ltd. and 767295 Alberta Ltd. following his Assignment in Bankruptcy, dated August 31, 1999.
The Panel accepts that Mr. Salvian did not attempt to act in the capacity of director following his bankruptcy. The Business Corporations Act operates automatically to delete Mr. Salvian as a director upon assigning himself into bankruptcy. Accordingly, this charge is dismissed.
Charge 4: That the conduct of Paul D. Salvian, P.Eng., constitutes unprofessional conduct in the foregoing respects and as defined in the Engineering, Geological and Geophysical Professions Act in that his conduct is:
a. Detrimental to the best interests of the public;
b. Contravenes the APEGGA Code of Ethics, in particular Rule of Conduct #10;
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Tends to harm the standing of the profession generally.
Failure to report assets on the bankruptcy documents denies creditors the opportunity to have those assets accurately evaluated. As a matter of common sense, Mr. Salvian would have understood that there likely was some value in the building, no matter what he may have been told by Mr. Yakimchuk to the contrary. When Paul Salvian swore an oath that the documents revealed all of his assets, he was being untruthful and unfair to his creditors.
When Mr. Salvian attempted to sell the 767295 Alberta Ltd. shares for $20,000, he was aware that the shares had been acquired prior to his bankruptcy. If he sincerely believed that they had no value, why would he ask that they be purchased for the sum of $20,000? Clearly, Mr. Salvian believed that the shares had value. He knew or ought to have known that they rightfully belonged to his creditors and not to himself.
After the bankruptcy was discovered by Fred Yakimchuk, Paul Salvian signed over the shares in each company to Mr. Yakimchuk for the token sum of one dollar, knowing that the shares were not his to sell or to give away. Clearly, Mr. Yakimchuk knew that too, but his conduct is outside the jurisdiction of this Panel and does not excuse the conduct of Paul Salvian.
The Panel deems the above actions of Paul Salvian, P. Eng. to be contrary to the APEGGA Code of Ethics, detrimental to the best interests of the public and tending to harm the standing of the profession generally. Accordingly, we find Mr. Salvian's conduct to be unprofessional conduct. Charge 4 is sustained.
Summary
The Panel finds that Mr. Salvian breached the APEGGA Code of Ethics with respect to charges 1, 2 and 4. It dismisses charge 3.
ORDERS
On December 14, 2004 , the Discipline Committee Panel’s written findings and reasons were issued to the Member and to the Investigative Committee. In its covering letter, the Panel asked that the parties provide their submissions in writing on the matter of the orders to be made.
The Panel received two submissions dated January 7, and January 12, 2005 from Mr. Massing on behalf of the Investigative Committee and one submission dated January 12, 2005 from Mr. Van Vliet on behalf of the Member.
On or about January 31, 2005 , the Panel prepared the Orders, taking into account recommendations from Mr. Massing and Mr. Van Vliet. Those orders included a reprimand plus an assessment of the lesser of 50% of the cost of the hearing or $5,000, with twelve months in which to pay. Fifty percent of the cost of the hearing was deemed to be consistent with Discipline Committee practice in similar situations. An upper limit of $5,000 was specified in appreciation of Mr. Salvian’s financial situation following a bankruptcy.
The Panel requested that the Director of Professional Practice (the Director) provide information on the costs associated with the hearing. The Director wrote to the parties on February 7, 2005 indicating the costs that his office had determined and noting that he would provide a copy of that letter to the Panel along with any comments either party wished to make.
Both parties responded, and on March 23, 2005 , the Panel received additional material as follows:
• The Director's letter of February 7, 2005
• Letter dated February 28, 2005 from Mr. Van Vliet
• Letter dated March 1, 2005 form Mr. Massing
• Letter dated March 21, 2005 from Mr. Van Vliet.
The panel is inclined to accept the argument put forward by Mr. Van Vliet in his letter of March 21, 2005 . Absenting the two issues mentioned therein, Mr. Salvian may well have accepted a stipulated order and avoided a hearing. On the other hand, the Panel feels that the hearing process was unnecessarily extended by failure to produce an appropriate witness on the second day of the hearing.
Taking into account all of the above, the Panel orders as follows:
1. That Paul D. Salvian, P.Eng. be reprimanded for unprofessional conduct.
2. That Paul D. Salvian, P.Eng. pay to APEGGA within 12 months of the date this decision is served on him, $2,500.00, being less than 25% of the cost of the hearing.
3. If Paul Salvian, P.Eng., fails to comply with Order #2, his registration with APEGGA is to be suspended until he complies with Order #2.
DATED this 13th day of April, 2005 at Sherwood Park , Alberta.
Bruce Alexander, P.Eng.
Chair, Discipline Hearing Panel