Vancouver Sun Article on Sidoo & EW
David Sidoo's B.C.-based company in default with Securities Commission East West Petroleum ran into trouble about filings related to a proposed merger. DAN FUMANO Updated: March 30, 2019 Here is Weekend's Edition on EW & Sidoo While Vancouver businessman David Sidoo faces a felony charge in the U.S. after being implicated in what American authorities allege was a massive college admissions scam, closer to home, his Vancouver-based company has been put on notice by B.C.s securities regulator. Sidoo stepped down earlier this month as CEO of East West Petroleum, after his arrest in the U.S., but he remains a director of the publicly traded oil and gas company. Coincidentally, just days before news of Sidoos arrest, the B.C. Securities Commission placed East West in default for problems with a filing. East West Petroleum Corp. was placed in default because the information circular it had filed was materially deficient, securities commission spokesman Brian Kladko said in an emailed statement. The circular didnt contain financial statements of the company that East West was proposing to merge with, and didnt contain details of the merger agreement. Placing a company in default, Kladko said, means the company could be subject to a cease trade order at any time without further notice. But that proposed merger agreement appears to be in question anyway, and East West management doubts the transaction will proceed as originally announced. STORY CONTINUES BELOW TRENDING IN CANADA Animals in distress: 5 things to know | Vancouver Sun This advertisement has not loaded yet, but your article continues below. Sidoo, a prominent Vancouver businessman, philanthropist and former CFL player, is listed in East Wests regulatory filings as one of four members of its board of directors, along with Nick DeMare, a chartered professional accountant and the companys chief financial officer; Ross McElroy, a professional geologist with nearly 30 years of experience in the mining industry and an officer of several publicly traded companies; and Sidoos son Dylan, described in company documents as a graduate of the University of Southern California and founder of a film company. Sidoo was arrested earlier this month in California in connection with what the U.S. Department of Justice alleged to be a nationwide college admissions scam, and faces a felony charge of conspiracy to commit mail and wire fraud. If convicted, he could potentially face jail time. Dozens of other defendants were named in the case, including CEOs and Hollywood stars. Sidoo is accused of paying a total of $200,000 to have someone take the U.S. SAT college entrance exams on behalf of his sons, Dylan and Jordan, in 2011 and 2012, the indictment says, as well as paying an undisclosed amount to have someone write a high school exam for Dylan. The charge against David Sidoo has not yet been tested in court and no allegation of wrongdoing has been made against either son. Some of East Wests shareholders told Postmedia they had been unhappy with the management of the company and had questions about Dylan Sidoos appointment to East Wests board of directors long before news broke this month of the college admissions investigation. DeMare, the East West CFO, described Dylan Sidoo as a good, hard-working kid, but said hed anticipated blowback about his appointment to the companys board before it was announced in 2016. People were upset and not too happy that there was nepotism in the appointment of Davids son to the board. I spoke frankly about that to David before it came out, DeMare said. I said: David, Im supportive of the decision, but just so youre aware, youre going to put your son under some scrutiny, and hes going to get some negative comments. Are you sure you want him to be exposed to that scene? Dylan Sidoo has been paid a monthly stipend of $2,500 for his work as a director at East West, DeMare said. David and Dylan Sidoo declined, through a representative, to talk to Postmedia News about East West. Dylans appointment to the East West board of directors was announced in December 2016, the same month he graduated from the University of Southern Californias cinematic arts program. The university confirmed this week that Sidoo graduated from that program in 2016, but declined to answer further questions about his degree. The university announced earlier this month they had initiated a case-by-case review of current students and graduates who may be connected to the alleged scheme. Jeff Emans, who described himself as an East West shareholder for about five years, said he had concerns about Dylans appointment as a director. What other board would have Dylan on the board of directors, if it wasnt for nepotism? Emans said. He comes out of college, and my understanding is hes a web page designer or something along those lines. Wheres all the oil and gas background? For heavens sakes, Ive been an oil and gas investor for 15 years, I have 40 years of large company managerial experience, and I dont think Im qualified to be on the board of directors. How in the heck could this kid be qualified to be there? East West had announced in July 2018 it had signed a letter of intent to acquire all of the issued and outstanding common shares in the capital of Juva Life Inc., a California-based cannabis company, and in February 2019, East West announced it had executed a definitive agreement to complete, subject to approval, the acquisition of Juva. A meeting of East Wests shareholders had been scheduled for March 15 in downtown Vancouver to vote on the proposed merger, but that meeting never happened. On March 12 four days after Sidoo was arrested in California East West announced it was cancelling the meeting. DeMare said the meeting was cancelled because the Securities Commission found East Wests disclosure deficient, and not because of anything to do with Sidoos criminal charge. They were unfortunate coincidental timings, but Davids issue with the college thing had absolutely nothing to do with the cancellation of the meeting, DeMare said. The Securities Commission, DeMare said, had issues with the disclosure, and certain things werent done, which was a surprise to me, I thought it had been dealt with but it got missed. (The commission) said: We want to know tomorrow that you are cancelling the meeting, and if youre not, we will cancel it for you, DeMare said. That was essentially what they said, so it was an easy decision. Earlier this week, East West issued a statement saying that, While the meeting was cancelled, the Company did receive final tally of votes by shareholders for the cancelled meeting and if the meeting had taken place the Juva transaction would not have received approval by shareholders. The issue of the deficient disclosure of merger details is almost a moot point now, DeMare said, because the Juva merger is not likely to proceed. He said he is in touch with the Securities Commission and is working to resolve the matter so East West can be removed from the default list. East West is listed on the TSX Venture exchange, and trading of its stock has been halted since last year at the companys request, DeMare said, because of the planned Juva deal. East West is also in communication with Juva, DeMare said, about how to deal with the contractual obligations we have in place, and decide how to move forward, in the best way for each shareholder group.