TORONTO, June 22 /CNW Telbec/ - On May 18, 2007, the Ontario Securities
Commission (the "OSC") issued an Order approving a settlement agreement
between Mr. Eugene Melnyk and Staff of the OSC (the "Settlement Agreement").
The Settlement Agreement settled allegations involving Mr. Melnyk made in a
Notice of Hearing and Statement of Allegations dated July 28, 2006.
Mr. Melnyk is filing this press release solely for the purposes of the
OSC proceedings and his compliance with the Settlement Agreement. Mr. Melnyk
expressly denies that this press release is intended to be an admission of
liability, misconduct or wrongdoing by him in any other context to any person
or company or other entity. The following facts are as set out in the
Mr. Melnyk is the Chairman of the Board of Directors of Biovail
Corporation ("Biovail"). On May 16, 2007, Mr. Melnyk announced his retirement
from Biovail effective June 30, 2007, the twentieth anniversary of the listing
of the company on the Toronto Stock Exchange.
The allegations involved trusts settled by Mr. Melnyk under the laws of
the Cayman Islands. In 1991, he settled a trust in the Cayman Islands named
the Evergreen Trust. RHB Trust Co. Ltd., an institutional trustee in the
Cayman Islands, was the trustee of the Evergreen Trust. The beneficiaries of
the Evergreen Trust included certain members of Mr. Melnyk's family, but did
not include Mr. Melnyk. Shares of Trimel Corporation owned by Mr. Melnyk were
transferred to the Evergreen Trust between 1991 and 1995. Mr. Melnyk filed
insider reports disclosing dispositions of the shares that were transferred to
the Evergreen Trust. Trimel Corporation is a predecessor to Biovail, and the
shares of Trimel ultimately became shares of Biovail.
In 1996, Mr. Melnyk settled the following trusts under the laws of the
Cayman Islands: Conset Trust, Congor Trust, The Southridge Trust, and The
Archer Trust (collectively referred to as the "Trusts"). Mr. Melnyk was the
settlor of the Trusts, and Mr. Melnyk was also listed as a beneficiary in the
Deeds of Settlement for the Trusts. Other beneficiaries of the Trusts included
certain of Mr. Melnyk's family members (including his wife and children) and
certain of his friends. The trustees for each of the Trusts are institutional
trust administrators located in the Cayman Islands (the "Trustees"). The
Trustees include Barclays Private Bank & Trust, Coutts & Co. and the R & H
Trust Co. Ltd.
The assets of the Trusts were held by investment companies and consisted
primarily of shares of Biovail, as well as nominal amounts of shares of other
publicly traded companies. The investment companies owned by the Trusts are:
Conset Investments Limited ("Conset"), Congor Investments Limited ("Congor"),
Southridge Management Limited ("Southridge") and Archer Investments Limited
("Archer") (collectively, the "Investment Companies"). The Investment
Companies were incorporated under the laws of the Cayman Islands.
In 1996, Mr. Melnyk requested that the trustees of the Evergreen Trust
transfer approximately 4,900,000 shares of Biovail from the Evergreen Trust to
the Investment Companies. The trustees complied with this request and
transferred the Biovail shares. These shares represented approximately 19% of
the outstanding shares of Biovail at that time. From the time that the Trusts
were established in 1996, Mr. Melnyk maintained certain relationships with the
Trusts and engaged in certain activities involving the Trusts, as described in
paragraph 26 of the Settlement Agreement.
During 2004 and 2005, Mr. Melnyk settled four new trusts, known as STAR
trusts, in the Cayman Islands. These STAR trusts are known as The Breakwater
STAR Trust, The Edgewater STAR Trust, The South Point STAR Trust and The
Highwater STAR Trust (collectively, the "New Trusts"). The trustees of the New
Trusts (the "New Trustees") are institutional trust administrators located in
the Cayman Islands: Barclay's Private Bank & Trust (Cayman) Limited, Coutts
(Cayman) Limited and Caledonian Bank & Trust Limited.
After the New Trusts were established, at Mr. Melnyk's request, the
Trustees transferred the shares of the Investment Companies to holding
companies owned by the New Trusts.
The beneficiaries of the New Trusts include Mr. Melnyk's wife and
children. Mr. Melnyk is not now and has never been a beneficiary of the New
Trusts, and holds no interest, contingent or otherwise, in the assets of the
New Trusts. Mr. Melnyk cannot be a beneficiary of the New Trusts as long as
they hold shares of Biovail.
As at February 2006, the Canadian and U.S. trading accounts of the
Investment Companies held 9,408,232 Biovail common shares. To Mr. Melnyk's
knowledge, the accounts do not hold any derivatives in respect of Biovail
As at February 28, 2004, Conset held 4,975 call options, which permitted
Conset to purchase 497,500 Biovail common shares, at exercise prices ranging
from US$30.00 to US$35.00. 2,700 of such call options expired during April
2004 and 2,275 expired during January 2005. None of these options were
exercised by Conset. None of the other Investment Companies held call options
as at February 28, 2004.
As a term of the Settlement Agreement, Mr. Melnyk has obtained the
cooperation of the New Trusts to report future trades by the New Trusts on
SEDI and has also agreed to file insider reports under Multilateral Instrument
55-103 on SEDI under his name disclosing the existence and material terms of
the Trusts and the New Trusts as of February 28, 2004 and each Material
Amendment (as defined by the Settlement Agreement) that occurred after
February 28, 2004 to the present and in the future, subject to the terms of
the Settlement Agreement. Mr. Melnyk also agreed to take steps to ensure that
future Biovail disclosure documents will describe the material terms of the
New Trusts. Mr. Melnyk has also agreed under the Settlement Agreement to,
among other things, pay an administrative penalty of $750,000 to the OSC and
make a payment to the OSC of $250,000 representing a portion of the costs of
the OSC's investigation. As a term of the Settlement Agreement, Mr. Melnyk is
prohibited from acting as a director of Biovail for a period of one year
beginning June 30, 2007. Mr. Melnyk has been reprimanded by the OSC and is
also required to send a letter of apology to the Investment Dealers
Association apologizing for conduct summarized in the Settlement Agreement.
Mr. Melnyk has also agreed to continue to cooperate with the OSC in this
matter. The additional obligations of Mr. Melnyk can be found in the
Settlement Agreement, which is available on the OSC website at
For further information:
For further information: Duncan Fulton, (613) 238-2090,