PACE is a credit union with 17 branches throughout southern Ontario and over $1 billion in assets under management. An Administration Order was issued against PACE by Financial Services Regulatory Authority (“FSRA”), the regulator of credit unions in Ontario.
Prior to the Administration Order, FSRA engaged KSV to perform a special audit of PACE. The purpose of the special audit was to identify evidence to support allegations made by a whistleblower regarding secret commissions, self-dealing and other inappropriate practices at PACE.
As Special Auditor, KSV reported to FSRA regarding the evidence identified to suggest that PACE’s senior management and/or its board of directors were not complying with their fiduciary and other obligations to the members.
Immediately following the Administration Order, KSV was appointed as agent of FSRA. KSV’s mandate included:
- interim management, encompassing all aspects of PACE’s business and operations, such as liquidity monitoring, branch performance, budgeting, investments in third-party ventures and all day-to-day operating matters;
- investigations and account tracings, including a forensic review of account statements, sub-ledger accounts and thousands of email records;
- review of the commercial loan portfolio and loan commitments for the purpose of determining risk of impairment; loan documentation deficiency; quality of reporting by borrowers; whether borrowers qualified for additional advances; remedial and workout strategies for defaulting loans; and whether appraisals were required; and,
- assisting in all aspects of the litigation against the former President, CEO and board of directors, including preparing and acting as the affiant in proceedings for a Mareva Order and detailing components of the losses suffered by PACE.