KPMG Inc. (Nova Scotia) —

Professional Conduct Decision

What is a professional conduct decision?

An investigation into a Licensed Insolvency Trustees (LIT)'s professional conduct is initiated when there is information to suggest that the LIT has not properly performed the duties of a trustee or there has been improper administration of an estate or lack of compliance with the Bankruptcy and Insolvency Act (BIA).

In some cases, the findings are sufficiently serious to support a recommendation for sanctions against the LIT's licence (cancel or suspend a LIT's licence (subsection 13.2(5) of the BIA) or impose conditions or limitations (subsection 14.01(1) of the BIA)).

The professional conduct decision is deemed to be a decision of a federal board, commission or tribunal and may be judicially reviewed by the federal court.

Canada
Province of Nova Scotia
County of Halifax

In the Matter of:
Professional Disciplinary Proceedings under the Bankruptcy and Insolvency Act respecting KPMG Inc.

Whereas KPMG Inc. (the "Corporate Trustee"), a licensed trustee, operates an office in the city of Sydney, in the Province of Nova Scotia;

And whereas in April 1998, the Corporate Trustee discovered certain irregularities in the estate files of its Sydney, Nova Scotia office specifically relating to counselling certificates;

And whereas the Corporate Trustee investigated this matter, promptly notified the Office of the Superintendent of Bankruptcy (the "OSB") of its initial findings and cooperated fully in the subsequent Audit and the investigation of the Senior Analyst;

And whereas during 1998 and 1999 the Corporate Trustee undertook an extensive review of estate files of its Sydney, Nova Scotia office to identify and rectify numerous administrative deficiencies, including contacting debtors to ensure necessary counselling was provided where possible, and realizing assets;

And whereas the Senior Analyst, Professional Conduct (the "Senior Analyst") of the OSB has submitted a Report (the "Report") on the administration of the Corporate Trustee pursuant to the general delegation under section 14.01(1) of the Bankruptcy and Insolvency Act (the "BIA" );

And whereas the Report of the Senior Analyst alleges a number of deficiencies where, in the opinion of the Senior Analyst, the Corporate Trustee has failed to fulfill its statutory duties in the administration of estates to which it was appointed, including:

  1. In six estates where it cannot be demonstrated that counselling was performed as required, the Corporate Trustee failed to reimburse, on a timely basis, draws of counselling fees which were drawn contrary to Directive IR2, Counselling in Insolvency Matters, subsections 7(4) and 8(4), and Rule 48 of the Code of Ethics for Trustees;
  2. In eight estates where, prior to March 1998, Notices of Bankruptcy were not published as required by section 102(4) of the BIA, the Corporate Trustee did not remedy this omission until , contrary to Rule 36 of the Code of Ethics for Trustees;
  3. In other estates, prior to March 1998, the Corporate Trustee failed to adequately supervise its employees, and in particular the individual licensed trustee in its employ, contrary to Directive 13, Trustee Licensing, Section 34 and Rule 52 of the Code of Ethics for Trustees, and therefore is responsible for the following deficiencies:
    1. In one estate, failure to assess the bankrupt, contrary to Directive 6R, Assessment of an Individual Debtor, Section 10;
    2. In four estates, failure to adequately assist the bankrupt in the preparation of the Statement of Affairs, contrary to Directive 16R, Preparation of the Statement of Affairs, Section 5;
    3. In fifteen estates, failure to verify the bankrupt's Statement of Affairs, contrary to subsection 19(1) of the BIA;
    4. In fourteen estates, failure to take possession of the property of the bankrupt, contrary to subsection 16(3) of the BIA;
    5. In three estates, failure to seek or obtain the approval of the estate Inspectors for actions of the Trustee, contrary to subsection 30(1) of the BIA;
    6. In eleven estates, failure to realize on estate property;
    7. In two estates, failure to obtain a resolution of the estate Inspector for the approval or disapproval of the Section 170 Report, contrary to subsection 170(1) of the BIA;
    8. In two estates, failure to provide complete and accurate information to the OSB and the Court in Section 170 Reports, resulting in material omissions or misrepresentations, contrary to Rules 39 and 45 of the Code of Ethics for Trustees;
    9. In fifteen estates, failure to carry out the duties of a trustee in a timely manner and carry out their functions with competence, honesty, integrity and due care, contrary to Rule 36 of the Code of Ethics for Trustees;
    10. In one estate, failure to provide accurate information to the Halifax Division Office of the OSB, contrary to Rule 37 of the Code of Ethics for Trustees;
    11. In three estates, failure to avoid any influence, interest or relationship that impairs, or in the opinion of an informed person, appears to impair professional judgment, contrary to Rule 44 of the Code of Ethics for Trustees.

And whereas, although the Corporate Trustee does not accept all of the findings of the Report, it acknowledges that its conduct, specifically with respect to its responsibility to supervise the administration of the individual trustee in its employ at its Sydney, Nova Scotia office, fell below the standard expected of a licensed corporate trustee;

And whereas the most significant alleged administrative deficiencies occurred prior to , and the Corporate Trustee's Sydney, Nova Scotia office has been re-staffed by a new individual trustee and group of estate administrators;

And whereas the individual trustee formerly in the employ of the Corporate Trustee has subsequently pleaded guilty in a criminal proceeding to a charge of forging a counselling certificate for which offence the Corporate Trustee is not considered responsible;

And whereas the above facts do not have the effect of lessening the responsibility of the Corporate Trustee but are mitigating circumstances in the terms and sanctions to be imposed;

And whereas the parties have jointly submitted to me the draft of this decision which in my opinion is fair and reasonable in the specific circumstances of this case and consistent with public policy, and there is no reason to derogate from it;

By These Reasons:

I, the undersigned, The Honourable Benjamin J. Greenberg, Q.C., Delegate of the Superintendent of Bankruptcy by virtue of the powers delegated to me under Section 14.01 of the Bankruptcy and Insolvency Act,

  1. Order with respect to the Corporate Trustee's Sydney, Nova Scotia office only, that the trustee license of the Corporate Trustee shall be limited for a period of four (4) weeks from the date this Order comes into force, during which time the Corporate Trustee shall not be appointed in any new bankruptcies, proposals or receiverships or act as an interim receiver, and shall be limited to administering files to which the Corporate Trustee has been appointed prior to the coming into force of this Order, and the Corporate Trustee shall not file any new bankruptcies, proposals or receiverships or act as an interim receiver with respect to any file originating in Cape Breton, Nova Scotia, by filing same through some other office of the Corporate Trustee during this period of limitation;
  2. Order that the Corporate Trustee shall remit to the OSB as undistributed assets the amounts set out in the schedule attached hereto as Schedule "A";
  3. Order that the Corporate Trustee shall reimburse the estate of Perry Kent Cadegan the sum of $8,892.41 and distribute that amount as a supplementary dividend to proven creditors within 90 days of the date of this Order;
  4. Order that the Corporate Trustee shall reimburse to the OSB the sum of $10,000 towards the cost of the OSB investigation;
  5. Order that, in the event the Corporate Trustee fails to comply with the Order herein, the Corporate Trustee shall be in default pursuant to section 13.2(5)(b) of the BIA;
  6. Order that this Order will come into force three business days after it is signed.

Signed at Montreal, Quebec, this .

The Honourable Benjamin J. Greenberg, Q.C. DELEGATE OF THE SUPERINTENDENT

Schedule "A"
Name Estate File Amount
Hugh Myatt 51–053070 $90.95
Nicholas Vallas 51–061592 $35.17
Deborah Walker 51–060295 $73.87
Margaret Hiscock 51–061887 $43.06
Shawn and Ray Smith 51–062741 & 51–062742 $16.19
Bruce Burke 51–063184 $90.95

This document has been reproduced as submitted by the delegate of the Superintendent of Bankruptcy.

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