# League files for CCAA today



## Berubeland

http://landlordrescue.ca/league-files-ccaa-ponzi-mortem/


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## james4beach

*wow*


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## james4beach

Quoting parts:

"A number of factors have led to the League Group’s current financial difficulties . . . The second factor, resulting from the recovery of the credit markets, has been an increase in the demand for redemptions by investors . . . [lack of demand for League investments] has resulted in a larger than anticipated number of redemption requests by Investors, further straining the League Group’s cash flow. . . . *The result of the above is that the League Group no longer has sufficient cash, and has ceased meeting its obligations as they become due*"

Well, well well well well.

This further stokes my anger about how League pursued you with a SLAPP harassment, as you tried -- purely out of altruism and concern for average investors -- to warn others about the situation.

This means that at the time League sued you to shut you up, they already had significant cashflow difficulties and were already on the brink of insolvency.

I'm not a lawyer or anything, but could it perhaps be possible to sue League, for defaming YOUR character, hurting your reputation and hurting your business? Did League claim in court that in fact their financial situation was sound? If they made that claim then I think they were lying, as they must have known they had serious cashflow problems, at the same moment they were harassing you with legal action. In such a case perhaps it would be feasible to sue them for defamation of your character, perhaps demonstrating an intent to mislead the court, and mislead the public, with false claims about their own solvency, soundness of business, ability to meet their obligations, etc. Again I don't know what claims they made in court, I'm just thinking aloud.


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## james4beach

Also - if the moderator will excuse my language in this case - what _balls_ to sue you, while at the same time they could barely pay their bills and make redemptions.

As a naive layperson I can't help but think there must be something illegal (or at least immoral) about launching a SLAPP action against someone who is voicing valid concerns, especially concerns about a situation that is actually happening.

Please check the court records and find out whether League lied in court. Did they misrepresent themselves or their situation somehow?

It just seems to me like they may have lied in BC Superior Court.

- you made statements to the effect of, I think League is insolvent
- League sued you
- League said in court that you were wrong, and thus harming them
- doesn't this mean they were telling the court that they were solvent?
- yet they knew they were insolvent, at the same moment they were in court

Then again I don't recall solvency was the primary issue, it was the use of the word 'ponzi'. Anyway, just thinking aloud.


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## sags

Berubeland uncovered but one of many, many white collar ripoffs in real estate, tax reduction schemes, and other schemes designed purposely to defraud investors.

The Provincial regulators............sometimes get around to investigating. It takes years..........and they are thorough and almost always successful.

But what is the end result?

The investors lose all their money, the perpetrators are given a fine...........and they start a new company and do it all again.

The OSC and other regulators have lists on their websites of scammers convicted who don't even bother to pay their fines.

Scam 15 million from people........get a lifetime ban on selling securities......and a fine of 1 million dollars. (maximum fine)

Big deal.........don't pay the fine, ignore the ban, start a new company and off they go again. 

I think our governments are so enamored with "business" in general, that they don't want to ruffle any feathers with stiff penalties.

If a person stole that much money from the bank..............there is no doubt where they would be..........in prison for a long, long time.


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## james4beach

sags said it... white collar crime does pay. Very little consequences, and certainly no serious consequences.

Some of you may have noticed that I seem ridiculously (almost obsessively) critical of any "investment" I encounter. There's a reason. These are shark infested waters out there -- and nobody's looking out for us. Regulators are a joke! The crooks out there are just feeding on us, and it's a feeding frenzy.

Think of for example, MF Global. A major brokerage in the states. They lost a billion $ of client money, which was supposed to be segregated (but it wasn't)... and the CEO walked away, no prosecution. Last I heard he was starting a new hedge fund.

Just think of that, whenever someone tries to get you into a hedge fund ... or REIT ... or investment partnership ... or whatever.


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## andrewf

Steal a few million, get a slap on the wrist. Steal an iPhone, 5 years in jail.... If you're going to steal, steal *A LOT.*


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## Berubeland

Actually I think their defamation suit was a last ditch attempt to sanitize the internet so that their google ads would work. In fact I believe that they have done this type of legal bullying before and are still doing it. One of their employees has now come forward with the "gag order" he was given. So this is just part of business as usual for them and a sign of further lack of fiduciary responsibility. They are using investor funds to sue me and deal with the 27 other lawsuits I discovered (Some open some closed) 

I conversely am not at all interested in suing them, I think I could sue them for abuse of process, but they have no money and so I would get nothing even if I won. Second if I did win and I got money, it would be blood money, I would be unjustly enriching myself at the expense of the investors, most of whom are seniors who desperately need their money to retire.


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## kcowan

The web of companies is so complex that a forensic accountant would be needed to discover where they bled all the money out of the organizations for their own gains.


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## james4beach

It just strikes me as wrong to see someone abuse the law... they've harmed Canadian society by harassing you, and the idealist in me says there should be some consequence for that.

If there are no penalties for harassing people with SLAPP suits, then this just encourages others to do it too. Shouldn't there be a penalty mechanism?


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## Jaberwock

Apparently the investors who asked for their money back were more interested in putting that money into higher risk investments

Quote from G&M article (taken from CCAA filing)

"_More recently, a number of investors asked to redeem their units, something League attributed to these individuals being “more interested in higher-risk investments with higher returns.”_ - Very funny

It is not illegal to have marketing materials which are so sleazy that they make you puke. Nor is it illegal to be an incompetent businessman - if it were our jails would be overflowing with suits. The two sleazebags, Gant and Arruda will likely never be brought to justice.
They have now filed for protection from creditors so that they can "re-organize" - a futile exercise during which the legal vultures will pick over the bones of the company, leaving nothing


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## Berubeland

You know Jaberwock, I don't know about that because there are rules against deceptive marketing. I spoke to an investor that told me he asked them for a very low risk investment "Like a GIC" for his 85 year old mom. 

Over and over I have heard that investors did not get Offering Memorandums. 

You are not allowed to write "back massager" on a chainsaw and then have a disclaimer in the instructions and claim that this is just fine and what was wrong with the seniors and gullible people who used the product as advertised in some of the marketing got injured. That's just blaming the victim and I think it's really disingenuous. 

We live in a world where hammers are required to have instructions on it to wear safety goggles.

This loop hole must be closed. Not that it is legal to plunder seniors RRSP and TFSA accounts there must also be greater regulation. When exempt market products were for institutional investors and accredited/sophisticated investors this might fly, but if you want to market your exempt market security to the great unwashed masses different rules apply. It's a slaughter out there and it's not acceptable to me. 

Frankly, for every Adam Gant and Emanuel Arruda, there's an army of complicit, inured, enablers who stood by and did nothing or even supported these con men in behaviour that is ethically deficient. These people should be shamed and exposed as the collaborators they are as well. I have a guy with 9 degrees that wrote a glowing review of League in 2011. In 2008 League's auditor KPMG had received a report that League was not profitable and had essentially no funds from operations. They continued to provide audits for them. 

Is there no duty to disclose?


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## Mall Guy

Well nothing like court documents to bring out a bit of dirt! Anyone else notice the "old boys" network in the list of creditors ? I may be wrong but wasn't Trez Capital (associated with TCC Mortgage who put them in default) pushing IGW REIT as an investment on their website until very recently. . . (not there any more so may be just a vague memory). And the "Joyce Posluns Special Trust" and "Wilfeur Inc" would point me in the direct of the Posluns family (anyone remember Dylex ? Canada's one time largest retailer).

Our boys seemed to have signed a few personal guarantees, but I am sure they were already creditor proof . . . CCAA is a crap process . . . I am sure a few of the creditor will eventually push them into bankruptcy . . . but not till PWC rakes out some big fees . . . that's the problem with CCAA, the lunatics are still in charge of the asylum !!!


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## james4beach

> I have a guy with 9 degrees that wrote a glowing review of League in 2011. In 2008 League's auditor KPMG had received a report that League was not profitable and had essentially no funds from operations. They continued to provide audits for them.


No offense to you financial people out there, but this is why I don't trust what financial "experts" or certified professionals say. I keep remembering Fannie Mae, who refused to release financial statements for years, yet nobody batted an eye... they remained listed on the NYSE, and advisors kept recommending the stock & bonds. Then it collapsed and everyone acted surprised.

Even big institutions (like regional banks) lost tons of money as a result. They all employed certified, accredited experts too. Are all of these people useless? Does anybody in finance ever look at basic financial statements any more? I just couldn't believe the incompetence and dishonesty out there.


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## sags

Dialogue from the movie Office Space.............

_Peter Gibbons: [Explaining the plan] Alright so when the sub routine compounds the interest it uses all these extra decimal places that just get rounded off. So we simplified the whole thing, we rounded them all down, drop the remainder into an account we opened.

Joanna: [Confused] So you're stealing?

Peter Gibbons: Ah no, you don't understand. It's very complicated. It's uh it's aggregate, so I'm talking about fractions of a penny here. And over time they add up to a lot.

Joanna: Oh okay. So you're gonna be making a lot of money, right?

Peter Gibbons: Yeah.

Joanna: Right. It's not yours?

Peter Gibbons: Well it becomes ours.

Joanna: How is that not stealing?

Peter Gibbons: [pauses] I don't think I'm explaining this very well.

Joanna: Okay.

Peter Gibbons: Um... the 7-11. You take a penny from the tray, right?

Joanna: From the cripple children?

Peter Gibbons: No that's the jar. I'm talking about the tray. You know the pennies that are for everybody?

Joanna: Oh for everybody. Okay.

Peter Gibbons: Well those are whole pennies, right? I'm just talking about fractions of a penny here. But we do it from a much bigger tray and we do it a couple a million times._

And a link to what happens to an auditor when he tells the big accounting firm he works for..........that their paying client has problems with their books.

http://www.youtube.com/watch?v=qfSAcVq6s9c


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## Berubeland

All my offices looked like that one. Is there something wrong with that? And in my business you know all the best sources for pest control. Thank you for the explanation and the laugh. Self employment is good for me.


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## martinv

Here is the Times Colonist article from this morning; http://www.timescolonist.com/group-...roject-files-for-creditor-protection-1.664541

This section really caught my eye; "The League group of companies, which lists 105 entities under its banner in a complex corporate structure"

Complex, yeah right! 105 entities. Truth really is stranger than fiction.


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## Berubeland

The Financial Post article http://business.financialpost.com/2...r-at-partners-reit-files-for-ccaa-protection/

and for those who have Globe Investor subscription (not me) Tim Kiladze did a great article as well.

Also the League Reviewed blog without whom hundreds or perhaps thousands more investors might have fallen prey to their dodgy marketing

http://leaguereviewed.wordpress.com...-file-for-bankruptcy-protection/#comment-2097


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## fraser

There is a huge problem with the Exempt Securities Market in most provinces. To start with they are being sold to exactly the people that they should not be sold to simply because of the risk. Then comes the rest....false presentations, misleading documents, etc. 

Combine this with affinity investors and extremely lax provincial securities regulation/oversight and you have a recipe for disaster. Unfortunately there are some financial advisors who will do anything for a higher commission....including recommending very high risk investments (while at the same time presenting them as risk free) to clients who should never be considering anything in the exempt marketplace.


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## Berubeland

I am inordinately pleased by this...http://www.greaterfool.ca/2013/10/20/carrion/


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## james4beach

Berubeland said:


> I am inordinately pleased by this...http://www.greaterfool.ca/2013/10/20/carrion/


That one is very nice! I'm so happy for your Berube

By the way as I observed before about League, this whole situation is a bearish statement on real estate in Canada. You generally don't get these kinds of blowups when things are still strong and people are still being stupid with money. This is one of those failures "at the margins" as money gets tighter.


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## Ihatetaxes

Berubeland said:


> I am inordinately pleased by this...http://www.greaterfool.ca/2013/10/20/carrion/


You should be!!

Nice going!


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## kcowan

It is always nice to get recognized by Garth Turner. Did you know that they even had an infamous Opportunity Fund among the 105 entities? It seems they left no stone unturned in their quest for uninformed or gullible investors.


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## fraser

Congrats, well done.

If you want to take a look at another mess, about $500M as I understand it, then look at the Harvest/Foundation group of companies. Real estate investment and development. Lots of heartache over this one in terms of life savings, retirement monies, etc. Such a shame. 

They just go on, and on, and on. I just wish that some of the investment advisors who sell junk (at high commission rates) to their unsuspecting clients could be held to account in terms of criminal charges


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## sags

Garth Turner has branched out from just real estate, to discuss other finances on his website.

It is a welcome change, and an interesting insight from someone who has been at the highest level of government, and knows how the real world works.


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## dBII

Having spent the last 25 years on the Island dealing with developers, this was of particular interest to me...http://www.cowichannewsleader.com/news/215711661.html

Is this just something that occurs here on the island? I can think of at least a dozen projects that have cropped up during those 25 years that came flying in with trumpets blaring and ended up in disaster. I was involved in a lot of them as a consultant (geotechnical). I suggest that the success rate of these large development is around 50% and development costs are so high that any tangible assets that come out of a failure are eaten up. As much as I would like to have sympathy for the investing widows and orphans, I really wonder how anyone can be so naive.


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## marina628

dBII said:


> Having spent the last 25 years on the Island dealing with developers, this was of particular interest to me...http://www.cowichannewsleader.com/news/215711661.html
> 
> Is this just something that occurs here on the island? I can think of at least a dozen projects that have cropped up during those 25 years that came flying in with trumpets blaring and ended up in disaster. I was involved in a lot of them as a consultant (geotechnical). I suggest that the success rate of these large development is around 50% and development costs are so high that any tangible assets that come out of a failure are eaten up. As much as I would like to have sympathy for the investing widows and orphans, I really wonder how anyone can be so naive.


I don't own any REIT in my investments but this year seeing so much positive energy about them I started doing my research.I have to say peeling the layers away on this one makes me secure with my own decision to buy physical real estate.


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## james4beach

If I was ever going to invest in REITs (which I never have to date) I would stick to the major ones via an index ETF -- either XRE or ZRE. This of course doesn't guarantee you won't have fraud either, but at least it's diversified.


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## Berubeland

Any League investors dropping by....

Status of file as of October 21, 2013

Further to the status update of October 18, 2013, should you wish to partake in the conference call slated for 1:00 pm PST, please register to take part in the call, so that the company can address any technical issues prior to the call. The deadline to register for the call, will be at 10:00 am PST, Wednesday October 23, 2013. Register through this link:

https://docs.google.com/forms/d/1_i9gMEc9gvZ_3HfEOj1MYtBFB2TQDjOZdCaNcMsf94M/viewform


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## Jaberwock

You didn't say what day the call is, I assume it is Wednesday Oct 23rd.

The form does not indicate that you have to be an investor to join the conference. It will make for interesting listening. Investors might want to record the call, you could gather some evidence for a future lawsuit


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## Berubeland

Hmm I thought I had to be an investor to join the call, in any case, I have court tomorrow at 1:30 so I can't. 

But more information...http://landlordrescue.ca/whats-next-league-investors/ so basically Ernst and Young want to represent investors and there is a letter you have to sign and send back 
http://documentcentre.eycan.com/Pages/Main.aspx?SID=283.


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## heyjude

Berubeland, I think you should get some sort of award for exposing these charlatans. I did look at their Blue Book a few years ago but concluded that the whole thing smelled of rotting fish.


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## Berubeland

They already gave me an award. It's a lawsuit at the BC Supreme court for defamation. This is not over, I have no idea what happens after this. CCAA stays all legal proceedings but they may well continue the lawsuit. :frown:


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## Jaberwock

Summing up the conference call:

The CCAA proceedings were precipitated by the two foreclosures. There will be a hearing Nov 18th, at which a decision will be made to pursue one of two alternatives, either a re-organization or a liquidation. Stakeholders will be given an opportunity to participate. The law firm of Fasken-Martineau is being proposed to represent investors (though individual investors can appoint their own counsel).

There are 3300 investors who have put in about $350 million. League reckons their assets are $200 million, it was not clear whether that figure is total assets or net assets after deducting the $180 million in secured liabilities.

The guy from PWC stated that he thought there would not be much left for equity holders after the debts had been paid.

November 18th is the date at which the direction will be decided, it will take 2 months after that to formulate a plan and hold a vote, then 3 months to execute the plan (estimates by PWC)

PWC will be posting some more details on their website today


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## Berubeland

Hi Jaberwock,

It must be total assets because in their last video call with the CFO Adam Gant said that they had 40 million in equity only. Everything seems leveraged to the hilt and the companies that have not were not put into CCAA. They have basically cherry picked the bankrupt ones. 

One we found was Wesbrooke Retirement residences, there is 4-5 million in equity in that one. Ironically it was developed by a subcontractor not League.


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## Berubeland

Tim Kiladze of the Globe explains... http://www.theglobeandmail.com/glob...s-it-prepares-for-court-date/article15032719/


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## FAR67

*Calling League IGW REIT Investors*



Berubeland said:


> http://landlordrescue.ca/league-files-ccaa-ponzi-mortem/


The PwC hosted League Investors conference call yesterday was helpful as far as it went. However, the format is limited. I would like to participate in an on-line discussion forum where League Investors can share perspectives and questions as the situation evolves. If there is an existing bulletin board, please let me know. If not, are others interested?

far67-at-sasktel.net


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## Mall Guy

Berubeland said:


> Tim Kiladze of the Globe explains... http://www.theglobeandmail.com/glob...s-it-prepares-for-court-date/article15032719/


. . . _League stressed that it doesn’t yet have answers for investors who wonder whether they will get all of their money back_ . . . love the use of the word "all" as apposed to the more appropriate "any". The equity investors are at the back of the bus . . . behind the monitor, lawyers for the monitor, layers of consultants, appraisers, brokers, lawyers, lenders, penalty clauses, probably a few more lawyers, then we get to the investors, who, if the company actually restructures, we be diluted further to some kind of new senior ranking debt/convertible debenture or the eventual receivership/liquidation process . . . 

Not a pretty picture at all . . .


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## SpendLessEarnMore

pretty picture for Partners Reit I think. Getting rid of League's 15% dead weight.


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## Berubeland

Actually, CCAA stays any actions on the part of Partners. In June of this year Partner's fired LALP (League management company) and their termination was for 6 months later. Partner's has applied to the court to continue the firing process. 

I'm really proud of the old trustees of Partners for having integrity and speaking out about the malfeasance going on at League. Then League bought more shares of Partners at a premium to be able to fire them and put their own trustees in there.


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## Jaberwock

There is a very good report from PWC on their website

http://www.pwc.com/en_CA/CA/car/leagueassets/assets/leagueassets-024_10232013.pdf

Apparently the asset value is $210million, net of mortgages. However, that includes $146 million of book value in the development properties (mostly Colwood). Those book values are the amounts spent to date, not the amount which could be realized in a sale, the real value will be much less.

The $23million worth of shares in Partners is encumbered by an $18 million mortgage.


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## Berubeland

CTV Coverage of Colwood being broken down. http://vancouverisland.ctvnews.ca/video?clipId=1038133&binId=1.1180928&playlistPageNum=1


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## andrewf

Rachelle, I suspect you are going to be okay going forward. Their action against you is not likely to have a high ROI (their potential damages to recover * probability of being awarded those damages/cost of further action).


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## CanadianCapitalist

Not to mention, the plaintiffs in Rachelle's lawsuit are not in control anymore. Chances are, pretty soon, lenders with deep pockets will be in control and their main interest would be getting their principal back, not lawsuits.


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## andrewf

^ Yes, that's what I was getting at. Because this action was an alleged (being careful here...) SLAPP, with that motivation gone, I doubt there is a financial case for them to proceed.


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## james4beach

If Canadian real estate is so hot, why did this thing fall apart?

In super-hot times you're supposed to be able to get away with anything.


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## fraser

A hot market will not protect anyone from a sub standard management practices or management team.


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## james4beach

True, but a hot market is way more forgiving and usually lets them get away with more, for longer.


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## HaroldCrump

James4 is right - a hot market can cover up a lot of incompetence, fraud, and other irregularities for a long time.
Isn't there a famous Warren Buffet saying about swimming naked when the tide is up.


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## Berubeland

A hot market has nothing to do with it. Everyone, lenders, auditors, lawyers and investors were deceived. League did not make money from their stated principal operation of managing and selling buildings for a profit from the outset. Londondale mall was one of their very first projects and when they sold it years later they lost $606. In fact all of their activities as managers fail to make sense from a property management perspective. The only thing that makes sense is if their real business was the earning of money from investor's fees. After distributions stopped on their common shares in June of 2011, they should have been able to regroup. Instead there was a marked increase in their google advertising to lure in new investors and sell them another product. This is something many of our members remarked on. 

Their outfit looked like a successful real estate operation but it was far from it because of the lack of fiduciary responsibility.


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## Berubeland

http://www.nationalpost.com/markets...eague+Assets+Corp+Interest/9166524/story.html


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## Berubeland

*OSC deregistered League*

Finally there will be no more sales of League Investments http://www.osc.gov.on.ca/en/SecuritiesLaw_ord-oth_20131111_league-investment-services.htm


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## Jaberwock

It appears that Gant and Arruda will be removed from any executive positions, though Gant stays on as Chairman of the board.

The latest proposal seems to be a compromise between a full liquidation and a restructuring. Most of the secured creditors had petitioned for receivership.

The Partners Reit units are being sold for $7/unit but the proceeds will not be available to league or its investors as the secured claims against those units exceed the value of the proceeds.

http://www.pwc.com/en_CA/CA/car/leagueassets/assets/leagueassets-154_112113.pdf


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## martinv

The latest on this in today's Times Colonist;
http://www.timescolonist.com/news/local/colwood-s-capital-city-centre-project-key-to-league-s-fall-report-1.1158696

Wonder where the principals are now and what they are up to? starting a new investment "product" perhaps?


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## kcowan

kcowan said:


> The web of companies is so complex that a _forensic _accountant would be needed to discover where they bled all the money out of the organizations for their own gains.


It would appear they never used any forensic accountants. So it ends up being a whitewash and the culprits go free!:stupid:


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## Berubeland

Oh here is the founder that created the Blue Book of Real Estate Syndication and all the marketing spiel feeling sorry for himself. This begs the question where was he? The League in the monitor's report was nothing like the company he knew. That's because it appears he was completely oblivious as he has said before "He's not a numbers guy" He should be ashamed. He was responsible and he will be brought to justice, his only hope at this point is to stop dissembling and work with the BCSC to help them stop Adam Gant from continuing to rip off investors into his half baked, poorly devised, erratic and dangerous schemes. Members of the League Investors Victim Group have seen Adam continuing to raise funds. 

http://www.timescolonist.com/busine...-he-has-integrity-is-also-suffering-1.1185565 

If you remember those of us that got to listen to the recording of both of them originally halting distributions on common shares in 2012 were very disturbed by their lack of connection to the impact their poor fidiciary responsibility had on investors.


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## Karlhungus

Berube, did you have money invested with league?


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## Berubeland

Nope, thankfully. I just wrote a blog post about REIT's and in the comments on that blog post another blogger brought to my attention an article he had written about Red Flags with REIT one of those red flags was appraisal shopping and that brought to mind another press release I had read from League stating that they had hired with great fanfare Altus Heyer to do their appraisals and then fired them about 2 months after. And then League who probably had a google alert for their name came over and started commenting on the blog post. Then Adam Gant called me at home to discuss that I had called League a Ponzi. They also offered to pay for advertising on my blog. 

Years before I had ordered the Blue Book of Real Estate Syndication and I had found that IGW REIT had a number of cease trade orders. After reading the book I decided that they were a scam, because of the misleading and deceptive information I found in it. 

Then several years later I posted a thread here when League ceased distributions on their investors. They had a recording on their site. I linked to it. People here who listened to it were also offended by the founder's laissez faire attitude towards investors. Also the humongous number of fundraising ads that were all over the internet. 

Anyways, for both of these postings Adam Gant and Emmanuel Arruda decided to sue me and 11 other people from the internet for defamation. Their goal was to sanitize the internet so they could raise more funds. I and Allison Barber defended that lawsuit. Then Adam Gant and Emmanuel Arruda decided to get an emergency injuction to shut down the websites and remove the speech, luckily Alison and I were able to defend the injunction against a lawyer at the Supreme Court of BC. 

After they sued me, I started investigating them, I went to their building on 50-52 Arrow Road here in Toronto, which was virtually abandoned with grass three feet tall. I called the city to verify the status of the plan and was told nothing had been heard from them since their plans for the building were rejected. That was about the year before, also the city also had a number of citations on them so I lovingly gave the city their Toronto office information for contact. 

Even at that time, it was clear that something was horribly wrong. Their last financial statements stated that they had $46? million in assets in 2011 and yet they had taken in over $300 million from investors. 

That's when I decided to go all out and expose them. I used material from their own financial statements to make people aware that they were an awful investment a Ponzi in fact. 

Less than a month after I won the right to keep calling them a Ponzi, they filed for CCAA (bankruptcy) and all my worse forebodings were confirmed and what was found was even worse than anyone could have imagined. There was 170 companies, none of the appraisals were accurate. Almost all their buildings were derelict. The investors in this case are not at all sophisticated. There are a lot of irregularities with the know your client forms. 

There is a League Investors Victim group and contact can be made at [email protected]


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## kcowan

This is forensic accounting at its best. The fact that you were not an investor is amazing. This deserves an award:
View attachment 1162


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## martinv

More today in the Times Colonist. Don't understand why no charges have been laid.

http://www.timescolonist.com/business/league-group-likened-to-ponzi-scheme-1.1193369


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## fraser

White collar criminals, this is not to imply that these folks are, have a distinct advantage in Canada over and above the leniency that our courts display.

The RCMP do not have the manpower that it takes to investigate these crimes. They have stated this publically. They also do not have the 'right' manpower in terms of the skill set needed to unravel these crimes in a TIMELY manner. Forensic accounting is a specific skill. The RCMP needs to employ people with the right skill sets, pay them a competitive rate, and offer them a good carreer. Even a job placement term with some of the large CPA firms would help. The people with the requisite skills are not attracted the force because of compensation, management style of the senior executives, and the RCMP's poor reputation.

Hopefully this will change. White collar crime is not just here to stay, it is growing at an alarming rate. And it appears to remain relatively unchecked. Just take a look at Earl Jones. About $50M stolen. Spent his jail time in a minimum security 'townhouse' environment, and out after three years. This a major problem in western Canada. The RCMP will even look at or touch most cases.


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## Berubeland

Ever since the government changed the rules and allowed exempt market dealers into registered investments it's been open season on those juicy retirement funds. It's also too easy for the unscathed masses to look shake their head and say that the victims of the latest scam should have "done their due diligence" 

It's complete bullshit. These people and* those who stand by them* need to be prosecuted to the fullest extent of the law. There's a whole industry of panderers who get paid to prop up these companies. False and misleading press releases, coats of arms, donations to charity, fancy offices, analyst reports, the credo, bond ranking agencies, these guys went all out to completely deceive. 

http://www.profitguide.com/microsite/profit500/2013/ranking/103-league-financial-partners-inc

I also can't tell you how many seniors who wanted something like a GIC that paid a few percent more were roped into thinking an IPU was similar in risk to a GIC. Know your client form compliance was thrown completely out the window. 

Not to mention how many people feel bad because if I spotted it they feel like they should have too. Except I have industry experience and I'm a real estate nerd and I love spreadsheets and I know how to read financial statements, and my reading comprehension is well above average. I feel like they took advantage of information asymmetry. The facts are that 90% of the people investing do not know how to read and understand an Offering Memorandum. Does that mean that these people should be ripped off and lose all their retirement money?

No it doesn't and until Canada and Canadians stop blaming the victims of these scams and start making Canada a really awful place to perpetrate this kind of crime, they will continue to happen. In fact today I could easily start up a League Part Deux and there's not a single thing to stop me or make it harder. Other investors can look at the penniless victims and feel superior because they spotted the scam until maybe one day there's a new angle and they don't and they end up having to look for a job to keep their house at the age of 85 or committing suicide so their spouse can inherit some money because they feel guilty about their bad decision. Because that's what it's like to be the victim of a white collar crime. 

Anyways don't get me started...


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## fraser

Where I live, in Alberta, it has been estimated that well over $2 Billion, that's right, $2 Billion has been lost in these schemes. Not that hard to get to a number that size when you look at the Foundation mess, or Concrete, Merendon Mining/Financial Learning Group, Platinum...the list goes on and on and on. Lots of RSP accounts emptied, paid for housed mortgaged, etc, etc. Heck, they are even flogging Iraqi dinars out here on the promise that they will increase dramatically in value.


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## Mechanic

It's so sad that schemes like this are able to take investors money. I came very close to losing money in this myself. I had read the Blue book and they were phoning and emailing me. I just felt uncomfortable with the whole deal and decided to stay out. I feel very lucky. It's a minefield out there as investors try to generate income. On another note, I bought shares in a company that traded on the TSX. The financials looked good, with good revenue. The company then decides they mis-stated their income and get hit with a cease trade order, share price plummets and all the investors lose their money, millions!!! How do they get away with this ? Smells like fraud to me ?


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## kcowan

I was lucky. As a rookie investor in Ontario, I was called up by a boiler room. They were hawking a mining firm called Ossington Explorations. I decided "What the hell!" and invested $100. Got a share certificate and I had it mounted on the wall to remind me not to trust anyone. Since that time I have had good friends want to let me in on sure things. I have always thanked them for thinking of me and said I was fully invested at the moment but would welcome an opportunity in the future.

Funny, they never call back because they loose they ***-ets and are embarrassed. Lots of money can be made on pink sheet companies. You just have to get in early and get out early. But you need to recognize that you are supporting the boiler room industry.

If you want a good dose of cold water, post any "opportunities" that you encounter over on the Financial Wisdom Forum. Just try to ensure that you do not come across as a troll or spammer.

The thing is this. Berubeland did the right thing for the right reasons. What did she get? Satisfaction perhaps. I gave her an award. But where is BNN, or the CBC shouting from the rooftops about how these scam artists are still walking free? Well they are bought and paid for! By advertisers. And then she had to deal with a lawsuit for her efforts.

Maybe Ponzi scheme is a bit harsh, after all, those schemes have nothing to show for their efforts. Whereas these guys have holes in the ground while they walk away with pockets full of gold.

Have you people heard the term Howe Street Boys? They were in the centre of many get-rich-quick schemes with company stocks. They are still at it, although much harder to detect. You used to be able to go to Trader Vics at the Bayshore after work and meet them all. Now they are spread out too much.

I have my investments in growth and dividend-paying stocks listed on the major exchanges. But even then, I got burned with a convertible debenture in Yellow Pages. They bribed the banks to take their offer and us little guys got screwed. I had invested because I thought I was safe because the banks were buying them too. Wrong!

So the moral of my story is to be very careful with your money. It is very hard to earn and even harder to keep.


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## gt_23

Berubeland said:


> Ever since the government changed the rules and allowed exempt market dealers into registered investments it's been open season on those juicy retirement funds. It's also too easy for the unscathed masses to look shake their head and say that the victims of the latest scam should have "done their due diligence"
> 
> I also can't tell you how many seniors who wanted something like a GIC that paid a few percent more were roped into thinking an IPU was similar in risk to a GIC. Know your client form compliance was thrown completely out the window.
> 
> The facts are that 90% of the people investing do not know how to read and understand an Offering Memorandum. Does that mean that these people should be ripped off and lose all their retirement money?


While I generally respect your persistence in the whole League affair, I don't agree with your portrayal of League investors as "innocent victims."

The fact is, many of these people are happy to claim "accredited investor" status while fortunes are looking good, but the moment they turn bad, they claim to have been misled and all of a sudden appear to be much less sophisticated than their accredited investor status would imply. To suggest that any investor should be entitled to a riskless profit (GIC safety at GIC+ X% rates) is ridiculous and even the most unsophisticated investor generally has a good understanding of the "if it's too good to be true..." rule. 

It is a sad fact, yet happens repeatedly, that the investors' greed leads him to chase a marginal improvement in yield or potential gain, while unknowingly accepting a disproportionately much higher amount of risk.



Berubeland said:


> No it doesn't and until Canada and Canadians stop blaming the victims of these scams and start making Canada a really awful place to perpetrate this kind of crime, they will continue to happen. In fact today I could easily start up a League Part Deux and there's not a single thing to stop me or make it harder. Other investors can look at the penniless victims and feel superior because they spotted the scam until maybe one day there's a new angle and they don't and they end up having to look for a job to keep their house at the age of 85 or committing suicide so their spouse can inherit some money because they feel guilty about their bad decision. Because that's what it's like to be the victim of a white collar crime.


The exempt market channel provides alternative (and higher risk) investment opportunities. While there may well be more frauds that occur in the space, there are still many more successful ventures that would have not succeed otherwise, and have provided proportionate gains to their investors. There is no reason to punish firms and investors (through more regulation) who actually behave responsibly and perform their due diligence, respectively, because of situations like League's. League investors are understandably angry and want to see some movement somewhere. Now that they know they will never get their money back and may not see those responsible held to account, they think that increasing regulatory oversight will make them feel better, when in reality it will just serve to punish those unrelated to this situation. It's akin to suggesting that we should ban McDonald's from selling Big Macs or tobacco companies from selling cigarettes, because adults choose to consume them and some die of heart disease and cancer, respectively.

Furthermore, it is unlikely that any amount of regulatory change will have the consequences League investors think it will. If you are not convinced, I would direct to check out Michael Lewis' Flash Boys. I think a better use of League investors' energy would be a public education campaign that disseminates the very simply message: investing is inherently risky, scams can and do exist in all types of investments, and no amount of regulation or perceived safeness is likely to ever change this. If we all accept these as generally true, then no investor, regardless of his status, is truly burden-free when it comes to due diligence.

Finally, the League investors made another bad choice in not doing more to force a liquidation last fall where they might have received $0.10-$0.20 on the dollar. Since then, the monitor, all the various legal counsels, consultants, the DIP lenders, and League employees have destroyed ever last dollar of equity. They allowed the secured lenders and the monitor to control the process in their own best interests the same way that League's original management did.

League investors' best chance of any restitution at this stage would be civil claims against KPMG, the founders, and the other directors.


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## fraser

I think that many people get into these schemes, not necessarily League, on the basis is trust, greed, and perhaps either laziness or ignorance. Many of the schemes in our area have been sold through affinity groups. You trust that person at church, or wherever. I remember reading an article on US Ponzies...the author asked the FBI Deputy Director overseeing these scams what his advice was. It was 'never buy an investment from someone at church or at the Rotary club"
This is because many of these schemes based on affinity fraud. Trust seems to override every day common sense and investment prudence.

It does not take a mental giant to figure out that a 25 percent return is NOT guaranteed, nor is the principal. There is a distinct relationship between risk and reward. Yet some people get lulled into believing that a high return, safe investment is theirs for the taking. Greed or plain stupidity? I am not certain which.

Sometimes all it takes is a Google or two to find out about the scam or the principals. Too late after you have invested. My sister and BIL attended a very persuasive presentation in London, UK for a bank investment pitch. Beautiful office, huge boardroom, lots of fine talk and the promise of untold investment gains. When they got home they did a simple google.....and the page was suddenly filled with flashing red lights.


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## Eder

This entire thread should be required reading for anyone with more than a nickel to invest....well done Berubeland, unfortunately big pain for little gain.


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## Beaver101

^ ... but her work was done not in vain. Hope more RE investors seek out her services or better yet wannabe RE landlords / investors check with her first! :victorious:


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## Berubeland

I tend to disagree with you of course gt_23 :biggrin: and here is my reasoning as faulty as it may be. Not so long ago, these exempt traded instruments would be funded by institutional money and there really was relatively no exempt market for consumers with the exception of accredited investors and perhaps a minor amount of suckers. There was no real attempt made on the part of exempt market dealers to target the unwashed masses. It wasn't until the laws changed and people were allowed to use their registered accounts and billions of $$ came into play that these companies got serious about targeting the general public. 

The problem as I see it is that in Canada in general we have a consumer friendly society and consumer protections. Except that these financial products and the way they are marketed to Canadians has virtually no regulation. It's all buyer beware. That's where information asymmetry starts to really show because as teams of lawyers and accountants fabricate these Offering Memorandums that the average consumer just cannot interpret or understand, followed by disclaimers and disclaimers of the disclaimers. 

For instance and just to use League as an example, the initial document used to inform the public about their investments was the Blue Book of Real Estate Syndication and the materials posted on their website. On their webpage, there was then a link you had to click that said "For More Information" and that is where the disclaimer was. The Blue Book was written at an 8th grade reading level. The people who would read and like that publication, would be unable to read the Offering Memorandums. There was also a lot of religious type of phrasing, such as the Credo and numerous calls to authority and expertise. The golden rule etc essentially an affinity fraud. 

Then once you were involved and on their list, they did not stop. That is in fact why there were so many different companies. Every month or every few days your "member service manager" would contact you and tell you about the latest and greatest investment available. People were asked to tell their friends and families to invest and were actively encouraged to remortgage their houses to invest in League. So contrary to the usual bad investment where you lose your money, no one is calling you and getting you to invest more and refer your family and friends. In that way it borrowed heavily from MLM scams. 

The misleading marketing went on and on. For instance people were asked to invest in the "going public" scheme that contained a merger with Orion Resources? in a transaction that involved Orion issuing $161 million in an IPO. Current investors were led to believe that their shares which were apparently worth $10 would go up in value on the open market. 17% increase in value was suggested in the marketing for the vote to go public. People were called and urged to withdraw their retraction requests. 

Nowhere in Canada is it allowed for consumers to be marketed this way. For instance when you go to the grocery store and there is a can with a picture of corn on it and CORN written on the label, it is not allowed to put carrots in the can and in 9pt type behind the label state that the can may contain other vegetables. Further consumer protection is getting even stronger as time goes by, for example, cell phone contracts in 9 pt type written by lawyers have been deemed invalid because they again take advantage of this information asymmetry. There is a basis in law that is getting stronger and stronger that these complicated long unreadable and difficult to understand contracts are being thrown out. Fundamentally, to agree to a contract you must be able to understand what you are signing. Mark my words that there will come a day when "click if your agree" will come to mean nothing. 

In other areas other than financial products, you are allowed to sell much more dangerous products than to the general public. For instance any plumbing supply store will have bottles of muriatic acid used to unclog drain that can peel your skin off and cause death if misused. Those products are not sold to the public as cleaning products from the local grocery store. The same for many other cleaning products used in buildings for instance. 

Other countries have also found it necessary to regulate the way these financial products are marketed and sold. In Australia and UK you must even if you are an accredited investor, get your accountant or lawyer to review and sign off on your know your client form (rather than the salesperson) and look over the OM and sign off that you have been advised on the suitability of the investment. That financial advisor or lawyer cannot have a financial stake in the transaction. (So no payments or commissions) 

Currently in Canada the same person who signs off on the know your client form and fills it out is the same person that is employed by the company and gets commissions if you buy their financial product. That is a direct conflict of interest. Obviously the compliance officer is also employed by the company who will benefit financially by the investment. No one checks that these forms are filled out properly or completely. In at least one case I know of, people were told to just fax in blank forms with signature and the salespeople would take care of it. 

While I understand that the argument is that more regulation = bad because it costs more money to comply etc. I would argue in this case that more regulation that prevented scams would increase the public's comfort with investing. In countries where there is no regulation such as Somalia, it is not a good environment for business. This is good for all legitimate business. 

So while yes the investors for the most could have been much more informed and active, there was a large undercurrent of deception. Your argument that there will always be scams does not mean that regulators should not act to prevent this type of fraud, we are currently in the billions with this same type of fraud. Yes the fraudsters will find new scams, let them work for their money. This gaping hole in our regulatory environment needs to be stopped before more seniors lose their money. That is how it works the scammers scam and we stop them and they have to find a new scam and we stop them again. We don't just throw up our hands and say scammers gonna scam nothing we can do about it. 

Furthermore as you mentioned, let any legitimate business found to be standing arm in arm with the scammers feel the burn of enabling the theft and misuse of people's money. There will always be criminals around but our professional service companies, KPMG, Colliers, Property Managers, Media and different lawyers should be made to pay. KPMG actually was giving free consultations to discuss League and a KPMG employee was selling League and then to top it off, one of the senior partners got an advisory from an analyst that the company had never made any profit. Colliers provided all pre and post CCAA property valuations and there was millions in difference between the two. 

A two hundred page transcript of Adam Gant's testimony admitting to very suspicious transferring of monies and other major issues with behaviour during a cease trade order was provided to the BCSC in 2009 by Hans McFarlane. 

We need to provide greater whistleblower protection for employees that will come forward. Exemployees of League are scared to come forward, there are three I know of who asked questions and were later "constructively dismissed" because of supposed sexual harassment. Non disclosure agreements should not be binding in cases of illegal activities. 

Finally SLAPP legislation pertaining to government and business should be implemented to provide real penalty for people who sue for defamation. Currently the media is terrified to publish anything at all about this case. League had actually breached a barrier by suing me and the other 11 internet commenters. This is a new low for Ponzi schemers. As far as I can tell they sued anything that moved and had 37 lawsuits in the companies I researched, now there are more.


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## heyjude

Excellent post, Berubeland. I nominate you for securities regulator.


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## kcowan

The issue of apparently reputable firms selling such schemes is real. Even in the pure Ponzi schemes, many of the selling agents were sufficiently removed to have an air of respectability.

These suckers will continue to be fleeced. The KYC forms are a joke. What might work is to legislate that some 3rd party with fiduciary obligations to the client would be paid to create the KYC once. This same completed form would be used for all such investment schemes. It would become part of the price of entry into such private equity schemes. Believe me, in the long run it would be cheaper for all investors. There would be hefty fines for any false statements.


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## gt_23

kcowan said:


> These suckers will continue to be fleeced. The KYC forms are a joke. What might work is to legislate that some 3rd party with fiduciary obligations to the client would be paid to create the KYC once. This same completed form would be used for all such investment schemes. It would become part of the price of entry into such private equity schemes. Believe me, in the long run it would be cheaper for all investors. There would be hefty fines for any false statements.


Or the investor could take the proposed investment idea to his accountant or lawyer...at the end of the day, the investor will always receive an "opinon" and is ultimately responsible for his or her own decision to act or not. No 3rd party with the fiduciary obligations that you suggest will ever accept liability in the event of investor loss.


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## Berubeland

This is the new legislation in the UK and Australia, you must get the know your client form signed by an independent third party. The protection is two fold, first it stops the sales process and introduces an outside opinion into the process, it is assumed that this outside advisor would have the knowledge to look at and interpret financial statements. 

While it is true that the investor is ultimately responsible, at least they would have the benefit of an outside opinion. In our current system there is a direct conflict of interest in the system that is supposed to protect the investor. That conflict and the lack of any checking currently is making the know your client forms useless. 

In Ontario the OSC did check compliance on the KYC forms and there were many problems. If I remember off the top of my head, they check 18 companies and two got fined and had to take more courses and half had problems.


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## kcowan

Ideally the KYC form would produce an indicator that say Approved for the type of investment or not. And that is all that would be communicated to the salespeople, not all the details. I don't want to supply the sales force with a cherry-picking list. That is why I lie on them today. I only divulge what I must. So no one really know about me but me (and DW).


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## kcowan

Berubeland said:


> This is the new legislation in the UK and Australia, you must get the know your client form signed by an independent third party. The protection is two fold, first it stops the sales process and introduces an outside opinion into the process, it is assumed that this outside adviser would have the knowledge to look at and interpret financial statements...


Do you know if these legislations have had any desirable effects?


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## Berubeland

kcowan said:


> Do you know if these legislations have had any desirable effects?


I'm not sure it's really measurable. How do you measure if a few scams never start or become larger? Or a senior stops the sale process and keeps her money in GICs? 

All I know is that Canada is not alone because other countries are having to try to block similar gaps to prevent similar occurrences and these is the measures they have taken. 

Considering that Canada and Australia both inherited their legal system from the UK it's not surprising we would need to move in the same direction with legislation.


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## kcowan

I found a couple of current examples from OZ:
Commonwealth Bank Financial Advisers commit fraud
WealthSure adviser commits $500k fraud


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## kcowan

Here is a depressing article about the future of scams:

http://www.cnbc.com/id/101552775


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## kcowan

Here is another article that emphasizes the futility of regulation for such "Ponzi" schemes:
Even the SEC cannot protect "qualified" investors.


> “When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50% of the time,” said Andrew Bowden, the SEC’s director of compliance inspections and examinations, during a recent speech. In a follow-up interview with the New York Times, he added, “In some instances, investors’ pockets are being picked.”


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## gt_23

kcowan said:


> Here is another article that emphasizes the futility of regulation for such "Ponzi" schemes:
> Even the SEC cannot protect "qualified" investors.


Exactly...as I stated previously on this thread, the knee-jerk reaction to add regulations beyond a certain point (in an attempt to appease the investors who lost $ and make them feel "less bad" because even though they won't get their $ back, they are protecting future investors so selflessly) will not solve the problem of financial con-men taking advantage of the greedy, ignorant investor. This is has been proven over and over in financial history, so perhaps its time to consider that a lack of oversight is not the true cause(s), find the real cause(s), and target it.

All more regulation will do is just increase transaction costs for all investors.


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## Berubeland

gt_23 said:


> Exactly...as I stated previously on this thread, the knee-jerk reaction to add regulations beyond a certain point (in an attempt to appease the investors who lost $ and make them feel "less bad" because even though they won't get their $ back, they are protecting future investors so selflessly) will not solve the problem of financial con-men taking advantage of the greedy, ignorant investor. This is has been proven over and over in financial history, so perhaps its time to consider that a lack of oversight is not the true cause(s), find the real cause(s), and target it.
> 
> All more regulation will do is just increase transaction costs for all investors.


I take exception to your characterization of my plan as a knee jerk reaction. I'm not at all interested in appeasement but rather some kind of plan to improve the currently unacceptable situation. 

Using your do nothing logic, we'd still wouldn't have seat belts and child proof locks on medicine bottles because "foolish drivers" and "parents are supposed to supervise" 

Just think of this, one day we will all be old and vulnerable and have reduced faculties and possibly mental impairment and not be up with the times. This does not mean it should be open season for people to steal all your money.


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## gt_23

Berubeland said:


> I take exception to your characterization of my plan as a knee jerk reaction. I'm not at all interested in appeasement but rather some kind of plan to improve the currently unacceptable situation.


I wasn't referring specifically to "your plan" at all, but rather to the general pattern of knee-jerk reactions to financial crimes in the past, usually ending with investors calling for increased regulation. It's an entirely emotional response that once the investor comes to grips with the fact that he will never get his money back, he needs to see some change in order to get closure. The problem is that decisions made hastily due to emotion are usually not in the best interest of anybody.



Berubeland said:


> Using your do nothing logic, we'd still wouldn't have seat belts and child proof locks on medicine bottles because "foolish drivers" and "parents are supposed to supervise"


On the contrary actually, I suggested that you try to understand the root cause(s) before solutioning. Simple logical reasoning would suggest that if a lack of regulation were in fact the "cause(s)" of financial frauds, including this one, then past attempts at filling regulatory gaps should have at least decreased their likelihood of recurring. However, it is quite evident from the historical record that financial frauds have actually increased during a period of ever-increasing regulation. Many new regulations have actually opened the doors for enitrely new kinds of financial fraud, such as the SEC's Reg-NMS.

Without knowning the true causes myself, I suggested above that "a better use of League investors' energy would be a public education campaign" to make people aware of these scams and how to defend themselves. However, even with the high-visibility of all the ponzis that have come crashing down in the last 20 years (and the popularity of CNBC's American Greed) and the greatest-ever level of industry regulation and scrutiny, retail investors still seem to get themselves into these situations. This leads me to believe that one of the major cause(s) may in fact be basic human greed, in which case the actions that both of us have suggested, are likely to have little impact.

Finally, your comparison of my suggestion to seat belts etc. is not a good one at all. I very clearly referred to "regulations beyond a certain point" to indicate that a basic level of universal protection is needed, which is pretty much what the seat-belt is doing in the case of automobile safety. Beyond that critical point of regulation (whereever IT is), you will see dimishing or even negative benefit.



Berubeland said:


> Just think of this, one day we will all be old and vulnerable and have reduced faculties and possibly mental impairment and not be up with the times. This does not mean it should be open season for people to steal all your money.


I hope that by the time I am old and vulnerable, I have built up a small group of trustworthy advisors (POA, banker, accountant, lawyer, etc) that would steer me away from something such as League. This has certainly been the case for my grandparents - their advisors don't chase the type of "too-good-to-be-true" returns peddled by financial con-men, this late in their lives (both 80).

At the end of the day, you still need to place your trust in somebody. I think where we differ is that I would much prefer to trust those stated above with my financial affairs than any sort of Government, Governtment Agency, or self-regulatory body (such as the securities commissions who regulate the financial industry).


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## kcowan

My Dad lived to 95. When he was 92, his banker told him that his will was no good because it was 25 years old. So he took it out of his Safe Deposit Box and tore it up.

It just divided his assets equally among his heirs. We had him sit down with a 75 year old retired lawyer to compose a new one. But we were all glad that he could ignore any future advice from his banker. She was trying to get his estate business.

My problem is that, by the time I need someone else, they will all be too old. Our GP died of a heart attack 2 years ago. My investment adviser retired 4 years ago.


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## martinv

More in the Times Colonist today;

http://www.timescolonist.com/business/investors-to-seek-answers-on-league-group-s-future-1.1265418

Interesting about the real estate "handbacks". Obviously, there is no real estate "bubble" as far as these properties are concerned.


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## Jaberwock

If there were justice in these matters, Gant and Arruda would be in jail for the next 20 years. Unfortunately, there are no laws that require company management to possess even the slightest degree of competence.


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## Berubeland

Jaberwock said:


> If there were justice in these matters, Gant and Arruda would be in jail for the next 20 years. Unfortunately, there are no laws that require company management to possess even the slightest degree of competence.


To be honest, I don't think competence at issue. What really clinches the prior intent in my mind is the "family trusts" According to their own lore, Gant and Arruda started League out of a travel trailer. They had no money just what they raised from investors. Yet in the first edition of the Blue Book I read, they discussed at length family trusts and how they put their money in there. 

Now there are several popular reasons to have family trusts, the most popular being that you are very wealthy and want to keep money for future generations. However it is generally understood that family trusts are expensive to create and maintain and so a certain amount of assets are required to make such an endeavor worthwhile. http://www.incorporate.ca/family-trusts-canada 

The second is to shield your assets from creditors. So why would two guys with no money and no prior intent establish a family trust from their travel trailer when setting up their company? 

That's the million dollar question for me.


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## Jaberwock

It would be nice to see Gant and Arruda given some sort of penalty for the suffering and losses they caused to so many people, but I don't hold any expectations of any kind of prosecution.

As for the family trusts, it does look suspicious, but is there any evidence that they illegally siphoned money from League into those trusts? I noticed that Gant's parents were big investors and have lost their money along with everyone else. 

In my 40 years in business, I have come across lots of people who could talk the talk, but couldn't walk the walk. That's what we have here - two people with big fat egos and nothing to back it up.


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## Berubeland

Just during the monitoring process, Gant sold a company he had ownership of that had received loans from IGW REIT. IGW REIT was not paid back according to the monitor. One of the REIT trustees also was 50% of owner of that company (Green Tree). 

This is again a documented example of what is a complete lack of fiduciary responsibility. Did Gant vote himself the authority to do that? Yes he did. Is that illegal? It certainly should be. Between all the disclaimers and allowances to do whatever they wanted it's all legal, even when it's not legal, no one cares to prosecute. 

I went to a lawyer, because in my court case for defamation, he filed a false affidavit in my opinion. KPMG had given him the "going concern" letter as of end of July and he wrote his affidavit that League was in great financial health August 8th 2013. I wanted to get him charged but as it turns out, no one ever gets prosecuted for filing a false affidavit. 

Personally I look at it like this the median family income in Canada is $74,000 for 2012 League Lost/stole/misspent $370,000,000 and that represents. 5000 years of work for the average person. One guy I spoke to freaked out when he lost his money because he'd been a frugal guy his whole life, no vacations, no new cars, very modest house. He may have stopped short of splitting double ply into two rolls of toilet paper to save money, but he sacrificed a lot to provide for his retirement and kids colleges etc. He even got his family to invest and he was one of the guys who ended up taking out an investment mortgage as well. It's all gone. Every. Single. Cent. 

Even the one thing he did invest in that had some money left in it ended up loaning money to IGW REIT and now that's going under. 

People genuinely thought they were diversifying by buying into different funds within the company. if you buy BMO mutual funds, you think you might do crappy on one fund but good on the other. You don't exactly foresee the end of the whole company. Investors were fed success stories.


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## carverman

sags said:


> Berubeland uncovered but one of many, many white collar ripoffs in real estate, tax reduction schemes, and other schemes designed purposely to defraud investors.
> The investors lose all their money, the perpetrators are given a fine...........and t*hey start a new company and do it all again.*
> The OSC and other regulators have lists on their websites of scammers convicted who don't even bother to pay their fines.
> Scam 15 million from people........get a lifetime ban on selling securities......and a fine of 1 million dollars. (maximum fine)
> Big deal.........don't pay the fine, ignore the ban, start a new company and off they go again.
> I think our governments are so enamored with "business" in general, that they don't want to ruffle any feathers with stiff penalties.
> *If a person stole that much money from the bank.*.............there is no doubt where they would be..........in prison for a long, long time.


The difference is of course the way the law sees it. 

If you rob a bank, and are caught and convicted of bank robbery, you get the punishment that the law states for that crime.
First time offender, you may get off with less than half the time served, second time you will be incarcerated a lot longer.

However if a company that owes MILLIONS files under the CCAA for bankruptcy protection, (because they are in different locations across Canada) , even if they still go bankrupt shortly after) ,it is a lot different. 



> The Companies' Creditors Arrangement Act (commonly referred to as the "CCAA" or the "CC, double A") is a Federal Act *that allows financially troubled corporations the opportunity to restructure their affairs*. By allowing the company to restructure its financial affairs, through a formal Plan of Arrangement, the CCAA presents an opportunity for the company to avoid bankruptcy and allows the creditors to receive some form of payment for amounts owing to them by the company.





> The Plan of Arrangement is the proposal that the company is presenting to its creditors on how it intends to deal with debt it owes at the time of the initial filing with the Court.





> If a class of creditors or the Court does not approve the Plan, the company does not automatically go into bankruptcy, but the Stay is lifted. However, once the Stay has been lifted, the pressures that caused the company to initially file for CCAA protection from its creditors will likely return and, accordingly, it is quite likely that the company will be placed into receivership or bankruptcy.


Nortel is dead and gone, and the creditors and courts are still fighting over the sale of it's assets....but suppose, just
suppose that the SAME group of management, managed to convince some other investors that they could start a "THE NEWNORTEL 2014" LTD. and that they would be just as successful in growth to attract a huge investment...there is nothing to stop them..as they personally are not responsible for the former company's debt.

That is why we hear of these investors that defraud the public, they spend the money invested on a good time, and usualy very little left to show for the money "invested" in them. They operate a pyramid scheme..."rob Peter (later investors)... to pay Paul (first investors) "dividends" that are too good to be true....and continue that way as long as they can until...someone demands their initial investment plus the additional interest earned.

They declare bankruptcy, move to another city..and start all over again under a new assumed limited partnership name .


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## carverman

Berubeland said:


> J
> 
> Personally I look at it like this the median family income in Canada is $74,000 for 2012 League Lost/stole/misspent $370,000,000 and that represents. 5000 years of work for the average person.


Even in Harper's devaluing "plastic" money..370 million is a lot!


> One guy I spoke to freaked out when he lost his money because he'd been a frugal guy his whole life, no vacations, no new cars, very modest house. He may have* stopped short of splitting double ply into two rolls of toilet paper to save money*, but he sacrificed a lot to provide for his retirement and kids colleges etc. He even got his family to invest and he was one of the guys who ended up taking out an investment mortgage as well. It's all gone. Every. Single. Cent.


What??? There are other people that think that frugally too? 


> Even the one thing he did invest in that had some money left in it ended up loaning money to IGW REIT and now that's going under.
> 
> People genuinely thought they were diversifying by buying into different funds within the company. if you buy BMO mutual funds, you think you might do crappy on one fund but good on the other. You don't exactly foresee the end of the whole company. Investors were fed success stories.


That's the problem these days with these investment schemes..it "looks" good on the surface (on paper) and the public tend to trust what is handed to them..but nobody other than the guys running the "scheme" really know what goes underneath, until they go under. Look for some fancy yachts and villas in foreign countries where the money ended up eventually.


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## martinv

An update in the Times Colonist (Victoria) today.

http://www.timescolonist.com/busine...es-over-colwood-corners-development-1.1421595

It will be interesting to see what might eventually be built at Colwood corners.


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