A Calgary company raised millions from investors for real estate deals with companies which didn’t actually own the properties, and funneled $7 million from one specified project to others, an Alberta Securities Commission hearing heard Monday.
“This is a case about deceit,” ASC lawyer Tom McCartney told the panel.
Shire International Real Estate Investments Ltd. and its president and sole director Jeanette Cleone Couch, as well as related entities, made false and misleading statements in an offering memorandum related to property in Hawaii and “perpetrated a fraud” on investors relating to a Calgary site, the ASC alleges.
Couch, who is representing herself and the companies at the hearing, said she will make an opening statement after the ASC finishes with its evidence and will call one witness.
The charges against Shire and Couch relate to two offering memorandums.
One was called the Hawaii Fund, which the ASC alleges raised about $1.3 million from 107 investors between January and June 2009, and the other was Bearspaw at 144th Avenue Ltd., which the ASC believes raised between $16 million and $20 million from 844 investors between August 2007 and June 2008.
“All these projects failed and it appears most investor money has been lost,” McCartney told the hearing.
In the case of the Bearspaw development, the ASC alleges that while more than enough money had been raised for the $13.8 million purchase price, two mortgages were taken out on the property.
As well, the ASC says more than $15 million was transferred from the Bearspaw account to Shire and of that, according to investigators, at least $7 million was used for transactions not related to Bearspaw, including other real estate deals connected to Couch and her daughter,
and a $100,000 payment to Couch.
The Bearspaw property is in foreclosure, the ASC said.
The Hawaii Fund involved two deals on Maui which the offering memorandum stated were to be purchased from companies which in fact didn’t own them, the ASC alleges.
Investigator Viola Pickering, who testified Monday, said Shire first came to the ASC’s attention when the owner of one of the Hawaii properties contacted them, because the two luxury homes had not been purchased as stated.
As well, the numbered company Shire said it had a deal with for the other purchase (although that company didn’t actually own the property, which contained 32 condo units) had as its sole director Shire’s vice-president of special projects, a fact that wasn’t disclosed, the ASC said.
Couch’s husband had previously been listed as a director of that company.
Pickering told the panel that when they launched the investigation, they were “primarily concerned with misrepresentation and fraud.”
She also said Shire’s promotional material stated they were expecting returns of 43.6 per cent over two years on the two Hawaii deals.
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