Callidus Capital denies it is subject to whistle-blower complaints

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Alternative lender Callidus Capital Corp. on Wednesday denied media reports that said the company is the subject of whistle-blower complaints with Canadian market regulators.

Callidus shares fell 21 per cent after The Wall Street Journal published an article that stated at least four individuals have filed statements with the Ontario Securities Commission alleging fraud at the firm and its private equity parent Catalyst Capital Group Inc. Callidus and Catalyst, both of which lend money to financially distressed companies, are accused by whistle-blowers of inflating the value of assets and deceiving borrowers on the terms of loans, according to The Journal.

In a statement Wednesday evening, Callidus said it "knows of no legitimate basis for any whistle-blower complaint," and called the story "completely false." The OSC has not made any allegation of wrongdoing against Callidus or Catalyst. In a statement, the Wall Street Journal said it stood behind its reporting.

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Ontario's whistle-blower program was launched in 2016 and allows any individual to submit information on alleged violation of securities law to market watchdogs. If the allegations are proven to be true, whistle-blowers can receive up to $5-million.

Callidus reports quarterly financial results late on Thursday. The company has a market capitalization of $600-million and did an initial public offering in 2014 at $14 a share.

Over the past year, Catalyst has been working on a plan to take Callidus private. In late June, Callidus said in a press release that while there is no certainty a transaction will take place, the parent private equity fund "remains committed to completing a transaction on terms consistent with the previously published valuation range of $18 to $22 per share."

Catalyst was founded in 2002 by Toronto-based fund manager Newton Glassman and has approximately $6-billion of assets under management.

Separately, Callidus is in the midst of a lawsuit with the company's former chief underwriter Craig Boyer, who left the company in 2016 and subsequently sued for vacation pay, health benefits and stock options he claims he is owed.

In response, Callidus counter-sued for $150-million and alleged Mr. Boyer misled the company, in part by signing off on forged letters and artificially inflating financial results at companies that borrowed from Callidus.

Mr. Boyer filed documents in court that stated the company's $150-million claim "is raised for ulterior purposes. Callidus is subject to multiple complaints and regulatory investigations with respect to its material non-disclosure to fund members and the public."