Regulators descend on an unusual credit institution, imperilling the money of 'half a town'
by Colby Cosh
THE town of Burns Lake, situated nearly in
the dead centre of British Columbia, is beautiful, suffering and angry.
Things shouldn't be this way for its 8,000 residents, who live in the
heart of the Lake District amidst nine Indian bands (with which they enjoy
notable amity). Like any other B.C. community ultimately reliant on
forestry, however, Burns Lake has suffered shock after shock over the last
10 years. They did not see the latest one coming.
On May 3, the B.C. Financial Institutions Commission (FICOM) hit a
company incorporated as 439288 B.C. Ltd. with a cease-and-desist order.
The company is owned and run by Glenn Anderson, a 59-year-old man who was
born in Burns Lake, and his partner Doug Montaldi. Its business is simple:
it accepts money from residents, paying 12% annual interest, and lends it
out to local businesses at 18%. The total invested is believed to be about
$36 million, so a great many people in Burns Lake have a stake. But FICOM
decided that the company was not merely accepting loans--it was taking
deposits, like a bank or a credit union. And doing that without the
government's permission is not cricket.
According to Alan Clark, the province's Superintendent of Financial
Institutions, FICOM learned of the company after someone at a rival
lending institution reported seeing an investor document that looked like
a bank statement. Within days, FICOM investigators swooped into Burns Lake
to check things out. "Our interest is focused on the deposit-taking aspect
of the operation, not the lending," says Mr. Clark. "If you want to start
a credit union or trust company, you must obtain deposit insurance, come
to the commission with your business proposal, prove you are well
capitalized...and you'll get what can basically be called a licence. This
company was totally unknown to us and they did not have clearance to take
Which raises a question: what is the difference between a "bank
deposit" and a "loan"? In both cases you are giving someone money on the
expectation that they will invest it and return interest. Under the
Financial Institutions Act, companies not registered with FICOM (or
Ottawa) are forbidden to carry on "deposit business," defined rather
unhelpfully as "the business of receiving on deposit money that is
repayable on demand, after notice, on the expiry of a specified term, or
at specified intervals for a specified term." Mr. Clark says the
distinction requires a regulator to "look at the facts in total." "If
you're loaning me money on a promissory note, I may have a term in which I
have to pay it back, but it's a one-off transaction," he says. "The
problem arises when taking in money on deposit is your whole
The law is meant to protect creditors, but when FICOM halted 439288's
"deposit-taking," the company declared insolvency and was placed in
receivership May 9. This was necessary while the FICOM order is appealed,
says 439288's lawyer, Colin Emslie of Fraser Milner Casgrain. "The
company's position is that it is not carrying on deposit business," he
says. "These are investments, and the investors understood their nature. I
don't think that's a FICOM concern, and we don't believe it should be
subject to the Financial Institutions Act." The town agrees. On May
10--even after insolvency proceedings began--500 people attended a rally
to support the company, carrying signs (according to the Vancouver
Sun) with slogans like "God sent Uncle Glenn Anderson to help people"
and "Glenn rocks, government sucks."
"There is great animosity in town toward the provincial government for
being so nitpicky," says Lake District News editor Frank Peebles. "FICOM
may be in an excellent legal position, but that doesn't change how people
felt about the way it was handled. They think they ought to be able to do
what they want with their money, and how dare FICOM step in and freeze
what amounts to the assets of half a town?"
With small businesses already struggling in B.C.'s newly "have-not"
economy, some may have to close shop without access to 439288's ready
cash. FICOM describes many of the company's investments as "slow" or
"non-performing," but making unorthodox investments was the outfit's
entire modus operandi. Some of its most important customers, for example,
are Indians who cannot raise capital by traditional means because of their
"I can't find one person who is dissatisfied with the service they've
received," says Mr. Peebles. "I cannot find anybody to badmouth [Messrs.
Anderson and Montaldi]." A local business owner, not involved with 439288,
agrees. "Everything I've heard is positive--people say that without Glenn
the community would be nothing," she says. "People are asking, 'Will we
get our money back? Will we be asked to liquidate our business?' There's a
lot of uncertainty."