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Pace Securities
August 5, 2021
10:00 pm
Norman1
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According to Paliare Roland's page, Justice Koehnen, Ontario Superior Court of Justice, approved the proposed settlement on July 30:

This is a motion to approve a settlement of two related proceedings involving 700 investors of PACE Financial Limited and First Hamilton Holdings Inc. There is no opposition to the proposed settlement.

I [Justice Koehnen] am satisfied that the settlement should be approved.

The settlement reflects a gross recovery of $40 million on an investment of $48 million. Even after deducting anticipated fees and disbursements, the settlement is anticipated to reflect recovery to investors of approximately 70% of the funds invested. That recovery comes at a relatively early stage compared to the time that any litigation would take. Given that a large portion of the investors are retired individuals who depend on investments to fund their daily living expenses, speedy resolution has significant value.

The settlement process had objection periods and opt out periods built into it. No one objected or opted out.

August 6, 2021
8:27 am
Bud
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a lot of these settlements are poorly structured imo they allow for those who lost an insignificant amount to recover leavin out big chunks for those who really got hit. There should be more common sense

August 7, 2021
7:39 am
AltaRed
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Could you explain that better? ISTM all investors will get the same percentage recovery. That is the basis of fairness. How else could it be done fairly?

September 4, 2021
10:25 am
Dave_1
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Holy cow. Just got my letter from PRRR. What a piece of work..... the lawyers really are masters of deception. About one/half of the 600-700 investors get kicked in the groin again...... let the discrimination begin !

Let's peel back the onion & have a closer look at what PRRR really said.

With fees around $6m, settlement at $40m, and total damages around $48m, the simplistic math is -->

investor claimant B C D E
$ invested Pro rata gross $ recovered Pro rata lawyer fees deducted net $ recovered
me $500,000 $416,667 $62,500 $354,167
claimant "A" $250,000 $208,333 $31,250 $177,083
claimant "B" $100,000 $ 83,333 $12,500 $ 70,833
claimant "C" $ 75,000 $ 62,500 $ 9,375 $ 53,125
Ian Goodfellow - PACE Chairman of the Board $ 33,000 $ 27,500 $ 4,125 $ 23,375
Steve Farrant - stepfather of John Thomson $ 1,000 $ 833 $ 125 $ 708
Naomi Hamersley - Partner of Chris Barnes - VP of Sales and Training at PACE Securities $ 1,000 $ 833 $ 125 $ 708

If the lawyer fees of $6m were divided equally among all investors, that equates to about $8,500-10,000 each. ($6m/700 or $6m/600. PRRR has been vague so my numbers are vague)

If you haven't figured it out, PRRR wants you concentrated on column "E" alone. While the pro rata allocation on Column "D" is where people get screwed. Every party to this action drank from the same trough, consumed exactly the same amount, ate up PRRR resources at exactly the same rate. Yet some pay more in lawyer fees. A lot more, depending were you are on the scale. Discrimination at its finest. WTF happened to fair and just ?

And the pro rata crowd will scream -> that's the way it should be. Well then, where are the facts to justify WHY Ian Goodfellow, the guy at the helm of PACE when this went down, pays only $4,125 in lawyer fees, while Investor "A" pays $31,250 ?
(queue all the fact free replies now)

You can bet, I'll be submitting an objection to this. Pro rata of the lawyer fees ? BS !!! Every one should pay the same fee. You want to participate in this poker game ? It's the entry fee to play. Anti up. EQUALLY !!!

September 4, 2021
11:15 am
Elaine
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Where did you get all that info?

September 4, 2021
12:49 pm
Kidd
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Dave 1.

Property tax works the exact same way. If your house is worth 1 million dollars and mine 100 thousand. You pay 10 times more property tax than i do, even though the service is the exact same. My street is as well plowed as yours. Our garbage pick up is the same, my pizza box and your pizza box equals a pizza box, yet you pay 10 times more to have your pizza box picked up.

September 4, 2021
12:50 pm
Dave_1
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Elaine, everything is in the public domain. Since you asked, the primary sources are:

I didn't make this up. It's all from public data and a little algebra.

September 4, 2021
1:05 pm
Dave_1
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Kidd, yup I get that. Property taxes work that way. The pro rata crowd want us to look at it that way.

Yet when you & I walk into the same pizza joint and buy the identical pizza, I'd expect to pay the same price as you.

The lawyer fees aren't a tax yet the gods in charge want to treat it like a tax. I feel the fees are more akin to the purchase of a pizza. Everyone pays the same. That's all.

September 4, 2021
1:35 pm
Elaine
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Dave -I did not think you were making anything up.I am just sickened that people who were on the in crowd got anything.
And I could see why you are p***ed.
But no way can I agree with you.As that would leave me with almost nothing when I was not even in on the game!
How I look at it-if I get 70 grand-add it to the 14 grand I got in interest it is 84grand.
For me that 16 grand would be the price of a a new (used) car.Not happy-but that is life.
I can see why you would not be happy but you got 70 grand in interest .So basically -if you do ithe math like I do, you got 420 grand.And lost 80 grand-the price of a Tesla.if you only knew what house prices would do you would be a millionaire now-It all sucks

September 4, 2021
1:53 pm
savemoresaveoften
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Dave_1 said
Holy cow. Just got my letter from PRRR. What a piece of work..... the lawyers really are masters of deception. About one/half of the 600-700 investors get kicked in the groin again...... let the discrimination begin !

Let's peel back the onion & have a closer look at what PRRR really said.

With fees around $6m, settlement at $40m, and total damages around $48m, the simplistic math is -->

investor claimant B C D E
$ invested Pro rata gross $ recovered Pro rata lawyer fees deducted net $ recovered
me $500,000 $416,667 $62,500 $354,167
claimant "A" $250,000 $208,333 $31,250 $177,083
claimant "B" $100,000 $ 83,333 $12,500 $ 70,833
claimant "C" $ 75,000 $ 62,500 $ 9,375 $ 53,125
Ian Goodfellow - PACE Chairman of the Board $ 33,000 $ 27,500 $ 4,125 $ 23,375
Steve Farrant - stepfather of John Thomson $ 1,000 $ 833 $ 125 $ 708
Naomi Hamersley - Partner of Chris Barnes - VP of Sales and Training at PACE Securities $ 1,000 $ 833 $ 125 $ 708

If the lawyer fees of $6m were divided equally among all investors, that equates to about $8,500-10,000 each. ($6m/700 or $6m/600. PRRR has been vague so my numbers are vague)

If you haven't figured it out, PRRR wants you concentrated on column "E" alone. While the pro rata allocation on Column "D" is where people get screwed. Every party to this action drank from the same trough, consumed exactly the same amount, ate up PRRR resources at exactly the same rate. Yet some pay more in lawyer fees. A lot more, depending were you are on the scale. Discrimination at its finest. WTF happened to fair and just ?

And the pro rata crowd will scream -> that's the way it should be. Well then, where are the facts to justify WHY Ian Goodfellow, the guy at the helm of PACE when this went down, pays only $4,125 in lawyer fees, while Investor "A" pays $31,250 ?
(queue all the fact free replies now)

You can bet, I'll be submitting an objection to this. Pro rata of the lawyer fees ? BS !!! Every one should pay the same fee. You want to participate in this poker game ? It's the entry fee to play. Anti up. EQUALLY !!!  

Think the problem is for a equal split on lawyer's fee, anyone that puts in $10k or less basically got wiped out completely ? And they will cry foul as well, as in why would they fund your lawyer's fee.... So I think at the end allocate the lawyer's fee based on the size of the pot is prob the best and fair practice after all. This is the same as when company goes bankrupct, bond holders end up getting 10-20cents back on the dollar, so a 10-20% recovery based on investment, not based on equal split of fee either.

I am not a victim, just looking at whats fair or not from an outsider's point of view.

September 4, 2021
2:13 pm
AltaRed
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Pro rata percentage is almost always the way it is done. There is no point having a coronary over it. This sorry mess has come to a conclusion. It is time to lick and heal one's wounds and move on. It could be worse, i.e. minimal to zero recovery.

September 4, 2021
2:14 pm
Norman1
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Elaine said
… I am just sickened that people who were on the in crowd got anything.
And I could see why you are p***ed.
But no way can I agree with you.As that would leave me with almost nothing when I was not even in on the game!

They weren't in on the game either.

If the PACE chairman knew, then he wouldn't have sank $33,000 of his money into the shares. Same with another PACE staff whose family had over $40,000 in the shares.

September 4, 2021
5:37 pm
Bill
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If someone is in for only $5k they would receive zero (not fair) plus who would have to pay their additional $3.5k - $5k portion of legal fees? Has to be pro rata, only fair way.

September 4, 2021
6:05 pm
Elaine
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They weren't in on the game either.

If the PACE chairman knew, then he wouldn't have sank $33,000 of his money into the shares. Same with another PACE staff whose family had over $40,000 in the shares.

I can't prove anything.But I doubt that anyone thought it would fold as quick as it did.Plus that is a pretty measly amount for the Pace chairman to put in.

September 4, 2021
7:44 pm
Bud
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Norman1 said

Elaine said
… I am just sickened that people who were on the in crowd got anything.
And I could see why you are p***ed.
But no way can I agree with you.As that would leave me with almost nothing when I was not even in on the game!

They weren't in on the game either.

If the PACE chairman knew, then he wouldn't have sank $33,000 of his money into the shares. Same with another PACE staff whose family had over $40,000 in the shares.  

Sure they could to give appearance deal was on the up n up. 33k for most chairman is peanuts.

September 4, 2021
9:03 pm
Norman1
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Bud said

Sure they could to give appearance deal was on the up n up. 33k for most chairman is peanuts.

No, not at all. If it had not blown up, everything would have remained private and no-one would have known if the chairman had invested at all.

Also $33,000 is $33,000. There are better things in Toronto to do to get rid of $33,000 of "unwanted" money.

September 4, 2021
9:11 pm
Norman1
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Elaine said

I can't prove anything.But I doubt that anyone thought it would fold as quick as it did. Plus that is a pretty measly amount for the Pace chairman to put in.

No one expected it to fold period. If it hadn't been for the COVID pandemic, it wouldn't have.

All the shares are identical, including the maturity/redemption date. It's not like the earlier investors could get their money out before the later ones.

It was likely an appropriate amount for the chairman. Not supposed to put more than 10% of a portfolio in shares of a single publicly traded company. Even less in shares of a private company.

Ditto for the family of another PACE employee. Don't remember the exact figure. It was between $40,000 and $100,000 that the employee and family invested.

September 4, 2021
9:27 pm
AltaRed
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This thing folded because it was a financially engineered product dependent on leverage (margin) to fund interest payments. The math was correct as long as the holdings of the underlying portfolio maintained their market value. When those holdings started to get shaky and lose value, the brokerage issued a margin call and the house of cards folded.

Ultimately, this engineered product was built on some shaky assumptions and no one, apparently including the chairman, had looked enough under the hood to fully understand underlying risks. It is no consolation but there are many financially engineered products sold on the TSX (and other exchanges) or privately, and most of them will have some underlying risk associated with them. It is always a question of degree.

September 4, 2021
10:06 pm
Kidd
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AltaRed said
This thing folded because it was a financially engineered product dependent on leverage (margin) to fund interest payments. The math was correct as long as the holdings of the underlying portfolio maintained their market value. When those holdings started to get shaky and lose value, the brokerage issued a margin call and the house of cards folded.

Ultimately, this engineered product was built on some shaky assumptions and no one, apparently including the chairman, had looked enough under the hood to fully understand underlying risks. It is no consolation but there are many financially engineered products sold on the TSX (and other exchanges) or privately, and most of them will have some underlying risk associated with them. It is always a question of degree.  

AltraRed. You're describing the Canadian economy and housing market. Canada used match sticks, not cards, it will burn brighter when it collapses.

September 5, 2021
3:35 am
savemoresaveoften
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AltaRed said
This thing folded because it was a financially engineered product dependent on leverage (margin) to fund interest payments. The math was correct as long as the holdings of the underlying portfolio maintained their market value. When those holdings started to get shaky and lose value, the brokerage issued a margin call and the house of cards folded.

Ultimately, this engineered product was built on some shaky assumptions and no one, apparently including the chairman, had looked enough under the hood to fully understand underlying risks. It is no consolation but there are many financially engineered products sold on the TSX (and other exchanges) or privately, and most of them will have some underlying risk associated with them. It is always a question of degree.  

AltaRed said
This thing folded because it was a financially engineered product dependent on leverage (margin) to fund interest payments. The math was correct as long as the holdings of the underlying portfolio maintained their market value. When those holdings started to get shaky and lose value, the brokerage issued a margin call and the house of cards folded.

Ultimately, this engineered product was built on some shaky assumptions and no one, apparently including the chairman, had looked enough under the hood to fully understand underlying risks. It is no consolation but there are many financially engineered products sold on the TSX (and other exchanges) or privately, and most of them will have some underlying risk associated with them. It is always a question of degree.  

It’s a leverage long on high yield bonds, and it is pretty clear that is the only way to fund the outsize expected interest. Certainly not for someone with principal protection being the forefront of their investment decision. However some choose to turn a blind eye to the risk. Who knew COVID would hit. Big losses are always triggered by some event that no one ‘expected’….

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