Philip Services Corp. was a Canadian recycler based in Hamilton, Ontario. It was accused of accounting fraud in its 1997 financial statements and filed for bankruptcy under Chapter 11 in 1999.[1]

Philip Services Corp.
IndustryIndustrials
FateBankruptcy in 1999 and 2003
Headquarters
Hamilton, Ontario
,
Key people
Robert Karey Waxman, Allen Fracassi

History and Ownership

edit

Carl Icahn led the restructuring negotiations during Philip's first bankruptcy in 1999. Icahn and partners owned 14% of the company's common equity and were the largest holders of Philips debt at the time, with approximately $200 million of debt.[2]

Accounting fraud and settlement

edit

A class action launched on behalf of US investors against Philip's Canadian auditor Deloitte & Touche LLP was settled in 2007 with Deloitte agreeing to pay US$50.5 million.[3] As part of the settlement, the insurance company for directors and officers agreed to pay $18.25 million. The underwriters of Philip's 1997 stock offering, Merrill Lynch and Salomon Brothers, agreed to pay a total of $11 million as part of the same settlement.[4]

Criminal prosecution and regulatory actions

edit
  • In 2014, Robert K. Waxman, former president of Philips' metals trading division, was convicted of four counts of fraud over $5,000 and sentenced to a total of 26 years in prison.[5] The sentences were 8 years, 8 years, 5 years and 5 years respectively, with the sentences to be served concurrently. Waxman was charged by the RCMP in 2007 of "elaborate frauds and thefts" totalling over US$17 million in 1996 and 1997.[6]
  • David Graham Hoey and John Alexander Woodcroft, both former executives of Philip Services were sanctioned in 2012 by the self-regulatory body for chartered accountants in Ontario, the Institute for Chartered Accountants of Ontario.[7] Both were fined CAD$10,000 and suspended for two years. Hoey was senior vice president finance for Philip in 1997 and Woodcroft was executive vice president of operations at the same time.
  • The Ontario Securities Commission agreed to fines and bans for five of Philip's senior executives in March 2006:[8]
    • Allen Fracassi, former chief executive officer, was banned from serving as a director or officer of a company for 12 years, and fined $100,000.
    • Phillip Fracassi, former chief operating officer, was banned from serving as a director or officer of a company for 10 years, and fined $100,000. Allen and Phillip Fracassi are brothers.
    • Marvin Boughton, former chief financial officer, was banned from serving as a director or officer of a company for 10 years, and fined $100,000.
    • John Woodcroft was banned from serving as a director or officer of a company for 10 years, and fined $100,000.
    • Graham Hoey was banned from serving as a director or officer of a company for 5 years, and fined $100,000.

References

edit
  1. ^ "Philip Services Gets Bankruptcy Protection". New York Times. 5 November 1999. Archived from the original on 27 May 2015. Retrieved 20 February 2023.
  2. ^ De Santis, Solange (23 November 1998). "Philip Services Makes Deal With Icahn, A Major Creditor, to Avoid Bankruptcy". Wall Street Journal. Archived from the original on 5 October 2017. Retrieved 20 February 2023.
  3. ^ "Deloitte to pay $50.5 mln in Philip Services suit". Reuters. 23 March 2007. Retrieved 20 February 2023.
  4. ^ McFarland, Janet. "Deloitte to pay $50.5-million in Philip Services suit". Globe and Mail. Archived from the original on 20 February 2023. Retrieved 20 February 2023.
  5. ^ Arnold, Steve (April 3, 2014). "Hamilton businessman's exotic lifestyle ends as he goes to jail". The Hamilton Spectator.
  6. ^ Tedesco, Theresa (25 October 2011). "OSC opts for immunity as courts get tougher". Financial Post. Retrieved 20 February 2023.
  7. ^ "Discipline Committee: Hoey and Woodcroft" (PDF). ICAO. Archived from the original (PDF) on 1 April 2022. Retrieved 20 February 2023.
  8. ^ McFarland, Janet (3 March 2006). "Philip heads punished". The Globe and Mail. Archived from the original on 20 February 2023. Retrieved 20 February 2023.