Atlantic Acceptance Corporation

Atlantic Acceptance Corporation, Ltd. was an Oakville, Ontario-based finance company. It collapsed in 1965 in one of the biggest financial scandals in Canada at that time, with an estimated $65 million loss to investors.

Background

Atlantic Acceptance was a finance company specializing in commercial, real estate and auto loans. It began business in 1953 and eventually became headed by Campbell Powell Morgan. Control of the company came to be held by Lambert International, headed by financier Jean Lambert. The company experienced fast growth in the early 1960s, with sales increasing from $25 million in 1960 to $176 million in 1964. It became the sixth largest sales finance company in Canada in 1965, with assets of $150 million. Through Lambert's connections on Wall Street, the company attracted loans from major banks, pension funds, universities and other investors such as United States Steel and Carnegie Pension Fund, Ford Foundation, Princeton University, University of Pennsylvania, National Lead Company, First National City Bank of New York and Morgan Guaranty Trust Company.[1] Atlantic Acceptance also held a large stake in Commodore Business Machines, and had three directors on the board of Commodore.

Downfall

The company made a number of high-risk and poorly documented loans.[2] This included a $10 million loan to the mob-connected Lucayan Beach Hotel and Casino in the Bahamas, controlled by Louis Chesler and Wallace Groves, and secured only by stock in the resort.[3] Atlantic Acceptance also issued misleading financial statements, and there were conflicts of interest by Morgan and by the outside auditors (Wagman, Fruitman & Lando). The company began having liquidity problems. A $5 million check issued by the company to redeem some borrowings bounced on June 14, 1965, and the company was placed in receivership three days later.

Aftermath

A Royal Commission of Ontario investigated the collapse, starting in 1966, chaired by Samuel Hughes QC, with a four-volume report issued in 1969.[4] Campbell Powell Morgan died of leukemia in October 1966. The investment house Lambert & Company, owned by Jean Lambert, closed its doors.[1] William Pike, the mortgage manager of British Mortgage and Trust Company, was found guilty of accepting bribes and sentenced to two months in jail. Accountants William Walton and Harry Wagman were convicted of theft and conspiracy to defraud in 1967 and sentenced to two years in prison. Attorney Donald Reid was convicted of bribery and sentenced to one year in prison.[5] British Mortgage and Trust Company, which was a creditor of and an investor in Atlantic Acceptance, was rescued by the Ontario government. That intervention was considered the impetus for the creation of the Canada Deposit Insurance Corporation in 1967.[6]

References

  1. 1 2 M. J. Rossant (November 14, 1965). "Atlantic Acceptance: Even the Big Ones Got Stung; U.S. Investors Lose Heavily Following Collapse of Canada's Atlantic Acceptance". New York Times.
  2. ↑ Moose Pastures and Mergers: The Ontario Securities Commission and the Regulation of Share Markets in Canada, 1940-1980 by Christopher Armstrong
  3. ↑ Masters of Paradise: Organized Crime and the Internal Revenue Service in the Bahamas by Alan A. Block
  4. ↑ Report of The Royal Commission Appointed to Inquire Into the Failure of Atlantic Acceptance Corporation Limited. September 12, 1969
  5. ↑ No Additional Charges Urged The Ottawa Journal December 12, 1969
  6. ↑ Why deposit insurance matters The National Post February 20, 2014

Further reading

  • Weekes, Irvine Duncan. "The Collapse of Atlantic Acceptance Corporation and the Effect on the Structure of Liabilities and Quality of Reporting of Canadian Finance Companies." University of British Columbia. 1968.
  • Croft, Roger. "Swindle: A Decade of Canadian Stock Frauds." Gage Pub. 1975. ISBN 978-0771599347
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