He was the perennial outsider. The boy who toiled on his father's impoverished farm outside Tignish, P.E.I., believed
that hard work and wealth would earn him a place among Canada’s moneyed elite. And in 1986, 28 years after he hitchhiked to Toronto from Tignish
with $19 in his pocket,
Venard J. (Len) Gaudet became chairman of the venerable brokerage firm Osler Inc. But despite his successes, the 44-year-old millionaire’s meteoric rise halted seven weeks ago when he was forced to resign amid an investigation into questionable trading practices at Osier.
Said the vice-president of a major Torontobased investment firm:
“Gaudet was still considered the nouveau riche young man from who knows where in the poverty-stricken Maritimes.”
Gaudet’s troubles on Bay Street began on Dec. 14 when the Toronto Stock Exchange was notified by Osier officials and a disgruntled client about a looming crisis at the brokerage firm. On the previous Friday the Canadian
Co-operative Credit Society, a central lending institution for the country’s credit unions, had been informed by senior Osier officials that the brokerage firm would fall $25 million short on two agreements to buy back a total of $335 million in securities from the credit society. The TSE immediately appointed the Toronto accounting firm Clarkson Gordon to conduct an internal investigation that is focusing on why Osier lost $40 million in eight months. On Jan. 8 Osier was placed into receivership by the Supreme Court of Ontario. But throughout the crisis, the firm has continued to conduct business, and last week, after lengthy negotiations, Osier’s retail branches and most of its assets were sold to Midland Doherty Ltd., another Toronto-based securities firm, for an undisclosed sum. Although Osier’s cor-
porate fate has been decided, the investigation is continuing and Gaudet’s role in the company’s demise remains unclear.
Last week the Supreme Court of Ontario placed the assets of Gaudet, his wife, Noreen, and a numbered company controlled by Gaudet and two other
former Osier executives into receivership. According to an affidavit filed with the court by Clarkson Gordon, $3.9 million may have been “improperly diverted” from Osier to client accounts controlled by or related to Gaudet, Osier’s former president Paul Cohen and Patrick Anthony (Tony) Chesnutt, an executive vice-president.
According to the court documents, $2.09 million passed from Osier to accounts controlled by Gaudet and his wife between April, 1986, and December, 1987. An additional $1.57 million was deposited in 711817 Ontario Ltd., the numbered company controlled by Gaudet, Cohen and Chesnutt. The affidavit cited two types of irregularities: a number of bonds were purchased from Osier’s inventory and were resold to the company the same day at “an improper reduction” of the purchase
price or “an improper inflation of the resale price to inventory.” Other transactions involved Osier’s buying bonds from a third party for the company’s inventory, after which the Gaudets would buy them from Osier and resell them to Osier at an increased price.
Already, the Ontario Securities
Commission—the provincial body that regulates much of Canada’s securities industry—has frozen the assets of Chesnutt. As well, the commission suspended the trading rights of the former Osier executive and scheduled a public hearing into his activities on Feb. 24. At the same time, the TSE and the securities commission are investigating the close relationship between Osier and the credit society. The brokerage firm and CCCS engaged in three deals last November and December that required Osier to buy back treasury bills for a total of $475 million. Since then OSC investigators and Clarkson Gordon have been trying to piece together events that may reveal how the small brokerage firm could enlist such a large institutional client. According to a CCCS official, the business relationship between Osier
and the credit society began eight years ago. Last October Gaudet, Cohen and two other Osier officials addressed an informal meeting of a half dozen national credit union members at a downtown Toronto hotel. The topic discussed, according to the credit society official, was the deregulation of the country’s securities industry.
Flamboyant and friendly, Gaudet flattered his clients with his generosity. A former associate described how Gaudet sent two bottles of Dom Perignon champagne to acquaintances who were eating lunch at Butterfield’s, an exclusive Bay Street restaurant, on Dec. 4. That same evening Gaudet, Osier’s shareholders and their guests—a group of 36 people—gathered at the rural Elora Mill Inn for a black-tie Christmas party. The tab: more than $9,000 for drinks, food, decorations and entertainment, which included a choir, a bagpiper and a belly dancer.
Gaudet also maintained a generous soft spot for his home province. Every year, Gaudet, his wife and two sons spend two weeks at their cottage in Nail Pond, a seaside village near his home town. And he arranged financing for several companies in Prince Edward Island. But the allegations surrounding Osier and Gaudet have shocked Prince Edward Island’s tiny business community. In the past year Osier arranged $3.5 million in financing for four fledgling firms that are expected to provide 171 new jobs for the Islanders. Three of those ventures, Cytrigen International Inc., Marine Harvesting Ltd. and Chimney Guard Ltd., were started up before Osier’s financial woes became evident.
But Sonatel Telecommunications Corp., a telephone systems company, had only received $900,000 of the $1.5 million Gaudet promised to raise for the company. Said Donald Baker, executive director of the Prince Edward Island Development Agency, which has a mandate to attract business to the province: “A year ago, who on earth would have ever guessed that Osier would be put into receivership?”
As well, Gaudet’s commitment to raise funds for the installation of a mural of bronze sculptures in Charlottetown has also been jeopardized. Last summer Gaudet donated $25,000 to Prince Edward Island’s Confederation Centre of the Arts—and promised to raise an additional $175,000—for the creation of a mural of life-size bronze reliefs depicting the Fathers of Confederation. But for now Gaudet’s dreams of wealth and acceptance appear to be all but shattered.
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