WHY DID THE BCSC ORIGINALLY ALLEGE YOU TOOK $5.45 MILLION DOLLARS FROM INVESTORS BY NOT ADVANCING FUNDS TO THE DEVELOPER IF YOU SAY THIS IS NOT TRUE?
This literally is the million dollar question – during the lead up to the hearing I was given certain documents by the BCSC and was told they would be making their case out of these documents. I was told they had to make the case that was brought forward in the Notice of Hearing (“NOH”) that was issued on June 14, 2013 and they could not vary from those allegations. Among the allegations was that in both FCC and DCF, I did not advance the majority of the funds to the Developer – something that is stated in the Offering Memorandum(s) that would happen.
Reading through Staff’s NOH, the Press Release (or the subsequent newspaper articles written directly by the reporters after reading the BCSC Press Release) they clearly imply that I absconded with over $5.45 million dollars. The front page of the Vancouver Province newspaper on April 8, 2014 featured a close up picture of the Respondents face with the headline “Investor’s Millions Evaporate” splashed across the bottom. The problem with all this is that I knew I had NOT absconded with millions of dollars – it was physically impossible. And the problem that Staff at the BCSC soon discovered, is that relying on a Grade 2 summary calculation was not enough to prove their case. Again, Liz Chan (the lead investigator responsible for all the math brought into the Hearing) took the total money raised and subtracted the commissions and cheques that were written to the Developer and came up with this great big number that she took to her boss – the Executive Director. This is WHERE the number of $5.45 million came from and it was wrong to rely on this number.
The problem they soon ran into is they DID NOT take into consideration other expenses (that were allowed as per the OM), including BC and AB Securities Commission fees, accounting fees, bond interest, etc. Other things that they would (or could) have uncovered, if they completed a thorough investigation, included payments made directly to tradespeople (that no longer wanted payment from the Developer), and high E & 0 insurance premiums that were paid on behalf of the corporations.
That being said, it did not take long during the cross examination of the Lead Investigator during the hearing to determine they in fact did not do a complete, thorough investigation and that they cherry-picked certain items to make their case seem stronger. When I read the Offering memorandum and the definition of the majority of the funds, it was clear to me their case against me was factually inaccurate – the majority of the eligible funds were in fact advanced to the developer. For the most part, the Panel agreed with me in their Findings, and the allegations against me were not proven by the Executive Director of the BCSC.
And for the record, I do not sit here and claim my books were perfect – they were not but I certainly did not make “Millions Evaporate”. A great deal of the money went directly into the project or paid bills directly associated with the project. Funds that I took out of the project (that I did not consider repayment of the $300,000 shareholder loan I place into the company in 2006) were either paid back in full or were in the process of being paid back in full. I maintain to this day that all funds (with the exception of $112,500) was paid back into the Respondents bank accounts. The difference between the $517,500 that the Panel ended up ordering against me is explained very easily:
- Repayment from the Grocery Store Loan -$240,000
- Repayment from personal funds to FCC -$ 45,000,
- Repayment from personal funds to DCF -$ 20,000
- Mortgage Proceeds from my house to WKL -$ 75,000
- Repayment of funds used to create OM* -$ 25,000
(*) Funds paid to have the OM created totaled $30,000 (as per the OM) and I argued these are the funds I took back out and bought the ring with. The ring purchase was $24,000 – we have no idea where the number $25,000 came from.
$112,500 is a far cry from the $5.45 million the Executive Director tried to pin on me!