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Half-billion dollar lawsuit launched by investors

Former Lethbridge pastor faces legal action

BY JASON VAN RASSEL, CALGARY HERALD APRIL 4, 2013

“Most of these people are in the nature of mom-and-pop retail investors,” lawyer Blair Yorke-Slader of Bennett Jones LLP in Calgary said in an interview.

Investors have launched a class-action lawsuit seeking to recover $500 million they put into a series of beleaguered real estate companies and related ventures promoted by a former Lethbridge pastor.

A statement of claim filed in Court of Queen’s Bench on Wednesday alleges hundreds of people invested their savings in a scheme that improperly siphoned millions of dollars to Ronald James Aitkens and seven other people named in the suit.

“Most of these people are in the nature of mom-and-pop retail investors,” lawyer Blair Yorke-Slader of Bennett Jones LLP in Calgary said in an interview.

The suit alleges Aitkens created a series of entities called the Harvest Group of Companies, which raised $500 million for 16 ventures in real estate development, resource development and financial investment since 2001.

However, the suit claims none of the projects were viable; it alleges they were bait used to solicit money from investors that wound up in the pockets of Aitken and other Harvest Group principals.

“Each (project) was merely a shell, sham or captive company formed and/or incorporated with the purpose of obscuring this common purpose and organization,” reads the statement of claim.

“Although ostensibly in the business of providing legitimate real estate investments and developments, the Harvest Group of Companies was really in the business of improperly enriching the personal defendants.”

Aitken’s lawyer couldn’t be reached for comment on the lawsuit’s claims, which haven’t been proven in court.

The statement of claim names 11 plaintiffs who have stepped forward on behalf of hundreds of investors allegedly victimized by the defendants.

The precise number of investors eligible to join the suit isn’t yet known.

The suit said Harvest raised its money with a network of agents who sold shares and bonds in its ventures, often through word-of-mouth and free seminars.

The agents themselves were misled into providing false information to investors by the defendants, the suit alleges.

Although the plaintiffs don’t claim to know the exact role each of the seven defendants allegedly played, the suit describes Aitkens as the “directing or controlling mind” of the companies involved.

“Aitkens personally moved the scheme forward, made misrepresentations as described above to the investors and received benefit from investors’ funds. Aitkens was the ‘face’ of the Harvest Group of Companies and of the investment scheme,” the statement of claim said.

The suit claims the defendants enriched themselves mainly through “nonsensical management fees” and by transferring investors’ money out of the projects and into separate, but related, companies they also controlled.

In the case of a proposed industrial park in the town of Millet, south of Edmonton, the defendants raised $35 million from investors.

The suit alleges $22.7 million was used to buy the land “at an inflated and improvident value” from another Harvest Group company.

The defendants “improperly paid themselves” $9.1 million in management fees and made $2 million in payments to “affiliated entities and unknown parties,” according to the statement of claim.

Yet despite raising $35 million in capital, “few if any development activities have taken place with respect to the Railside Industrial Park project,” the claim said.

Some of the other projects Harvest raised money for include an office complex in downtown Calgary, as well as residential developments in southwest Calgary, Airdrie and Rocky View County.

The suit alleges not only have the projects never been built, investors’ bonds were never redeemed either.

Investors also put money into a Harvest Group company, Foundation Mortgage, that claimed to offer financing to other real estate development companies.

The suit alleges the money was used instead to make improper loans to other Harvest Group ventures.

“By either fraudulent design or extraordinary incompetence, the defendants, or certain of them, thereby ensured that bondholders would never be repaid,” the claim says.

Initially, some Foundation bondholders did receive a return on their investment — but the suit claims they were paid with money improperly taken from elsewhere.

“In truth, (Foundation) paid investors with money from other investors, sometimes even from other projects, in a Ponzi-like fashion,” the suit says.

The suit must be certified by a judge before it can proceed.

In addition to $500 million restitution, the suit also seeks unspecified damages for breach of contract, misrepresentation, breach of trust, breach of fiduciary duty, unjust enrichment and other alleged torts.

The suit also seeks a freeze on the defendants’ assets, as well as the appointment of a receiver or supervisor to oversee the sale of the real estate held by the Harvest companies with any proceeds going to the plaintiffs.

The case is scheduled to be heard in Calgary.

http://www.calgaryherald.com/news/alber … story.html

Statistics: Posted by yoda — Fri Apr 05, 2013 10:14 am