FSCO lays charges against two former Pilot execs

The Financial Services Commission of Ontario (FSCO) confirms that charges have been laid against two former executives of Pilot Insurance Co. for allegedly providing the regulator with false information.
Former Pilot CEO Stuart Kistruck and CFO Colin Simpson face two charges each, says FSCO spokesperson Rowena MacDougall. The first, under section 447.2 of the Ontario Insurance Act, relates to allegations of “directly or indirectly furnishing false, misleading or incomplete information to the Commission”. The second, under section 447.4, concerns the responsibility of every director, officer and chief agent of a corporation who causes, authorizes, permits, participates in, or fails to take reasonable steps to stop, the furnishing of such information. Each charge carries a maximum $100,000 fine.
Both men were let go from Pilot by parent Aviva Canada following an audit investigation which revealed a $195 million shortfall in Pilot’s reserves at 2002 yearend. Last spring, Aviva Canada confirmed FSCO was looking into the accounting issues.
Kistruck and Simpson both now work for Kingsway Financial’s York Fire and Casualty, and their employer, Kingsway CEO Bill Star, stands by both men. “They are both capable people and both honest people,” he says. Of Kistruck in particular, he comments, “I’ve known Stu for a long time. He has a great reputation in the industry.”
Star says he was aware of the reason both men were let go from Pilot, and that there was a potential for charges to be filed, but says he was not concerned and continues to believe both men are being unfairly targeted. “Considering the number of companies under-reserving in the last few years, I’m surprised the charges were laid.”
In fact, this is the first time such charges have been laid by FSCO, and notably, the regulator has not laid any charges against Pilot itself, or any other staff members. At the time Kistruck and Simpson were fired, Pilot’s assistant vice president of claims George Hamilton was also axed, but no charges have been laid against him. Neither the company’s actuary nor its auditor face charges, although FSCO would not comment on the potential for future charges to be laid relative to the matter.
There is also some question about the relationship Kistruck and Simpson now have with Aviva. The Toronto Star reports Kistruck being paid by and driving a company car supplied by Aviva. “Usually if a company lets you go, and it’s a serious matter, that they’re firing you for cause, you’re not still on the payroll,” comments Star.
Star says he was in discussions with ultimate parent, U.K.-based Aviva, to buy Pilot at one point, but he understands Aviva Canada did not want to sell the operation.
While calls to Kistruck were not returned by press time, Star says Kistruck is eager to have the matter resolved. “The good thing about the charges is now the truth is going to come out and questions will be answered,” says Star.
No court date has been set at this time.