ERON MORTGAGE INFORMATION WEBSITE
THE ERON LENDER COMMITTEE

MINUTES OF MEETING - APRIL 8, 1998

Joint Eron Lenders Committee - Project Leaders Meeting
Royal Canadian Legion Hall - North Burnaby, B.C.
Recorded by D'Ann Madsen

The meeting was called to order by David Craig at 7:00 pm .

The first order of business was a review of the ELC Income and Expense Statement for the period December 15, 1997, to February 28, 1998. The Balance Sheet shows an Account Payable of $35,668 for legal work by Ladner Downs. The volunteer committee for challenging the bills of Ladner Downs and the law firms retained by Price Waterhouse (Russell & DuMoulin, Campney & Murphy, Perkins & Coie) is comprised of Jack Rockendal, Mike Buchanan, Konrad Tittler, and Darlene Godard. They have begun the process of taxation of legal bills.

The volunteer committee for taxation of Price Waterhouse bills is comprised of Verne Cinnamon, Ted Butterfield, and Brian Robson. To January 31, 1998, the Price Waterhouse bill amounts to over $3.5 million. Direct costs to specific projects amounts to $2.3 million. Legal expenses amount to $750,000. The remainder consists of indirect expenses (general administration). David Craig stated that although our PW expenses since January 31st are decreasing, this significant cost to lenders needs diligent challenge. At the project level, committees must decide on any issues regarding PW billing and respond in writing by April 10th to Neil Narfason at Price Waterhouse. For example, hourly rates can be questioned.

Unfortunately, to challenge bills at the judicial level, the normal practice is for the client (ourselves) to pay the legal expenses for both sides, i.e. Price Waterhouse and our own. A second option is to negotiate a discount of Price Waterhouse billing. The ELC has already been successful in discounting $100,000 for PW travel costs.

Gordon Johnson of Ladner Downs presented a report and hand-out, which had been commissioned in the Fall of 1997 by the ELC. The 31-page hand-out is meant to be "a set of tools in determining who shares the responsibility for the closing of Eron Mortgage Corporation." It reviews factors to consider before commencing a legal action and defines the types of claims. He said it was never the intention for Ladner Downs to advise specific individuals or projects. Gordon Johnson recommends saving legal fees by grouping cases together. He lists four goals:

1. Determine what are the types of claims lenders may have.

2. Note factors which determine whether or not lenders would pursue an action. For example, does the target of the case have funds to pay, or is there a probability of settling outside of court?

3. Undertake class actions whenever possible. The difficulty is to coordinate a group around the same claim.

4. Find lawyers to represent your claim. Will they take the case on a contingent-fee basis?


The depletion of ELC funds necessitates finding a law firm to take the case on a contingency basis. To date only four class actions have been identified in British Columbia, and the potential to negotiate a settlement is desirable. The ELC could give consent to Ladner Downs to take on a class action. Price Waterhouse has undertaken some actions against Slobogian and Biller. Ladner Downs has not been pursuing those. Jamie Engen of Price Waterhouse stated that challenging the government regulators is a certainty. Gordon Johnson stated that notwithstanding that Ladner Downs does some work for the government of B.C, his firm has historically sued on behalf of clients the government approximately once a year. He fully supports the use of evidence against the government, such as Hobart's letter of November 1997, which states that the government would pay PW fees.

As a member of the volunteer legal committee, Jack Rockendal stated that in addition to looking into legal bills, his committee would help organize various groups for class action and that a definition of common interests will be provided by the ELC. He stated that any recovery is likely from only a few sources: FICOM, Doug Jackie, Michael Schultz, the Laurentian Bank, and the Superintendent of Mortgage Brokers for allowing Eron to sell securities. This information will be posted on the website.

Regarding Frank Biller's bankruptcy, creditors are able to appear in a hearing on April 16, 1998, at Robson Square. Biller's trustee requires each individual lender to file a claim. There is not much in Biller's estate, and thousands could be wasted in the process. Form 33 "Proof of Claim" is available from MacKay & Co, trustees in Biller's bankruptcy. Tel: 689-3928 or fax: 687-5617.

Regarding the lender bonuses which Price Waterhouse included as interest when issuing T5 slips, Jamie Engen stated that he was told by the tax department of PW that this was the correct interpretation of the Revenue Canada Tax Act. Several lenders spoke out saying that upon telephoning Revenue Canada, they had been told that they should not have to pay tax on the lender bonus if it was not received. Furthermore, if Price Waterhouse will write to say that a lender did not receive a bonus, it does not need inclusion. Jamie Engen did not agree to doing this. David Craig stated that he will be seeing the Minister of Finance regarding lender bonuses appearing on T5 slips.

Steve Ripley expressed appreciation to the many volunteers who have stepped forward to participate in committees. In particular he thanked the volunteers for communication (Wendy Menghi, Erika Inacio, Martje Hartman) and the creator of a lender database (John Hall). Project leaders were asked to submit names of lenders who could assist in a telephone tree.

Our "geocities" webmaster Mark Hoffmann is unable to continue on a volunteer basis. Steve Ripley expressed appreciation for Mark's valuable and time-consuming work,and repied to questions about website expenses. We will now be attaching ourselves to the Price Waterhouse website www.eron-pwl.com.

David Craig reinitiated a request for funds. The telephone tree may assist in this task.

A volunteer committee consisting of Peter Kwok, Penny Cooper, James Tindle, Barbara Mayer, Jack Rockendal, and Konrad Tittler was previously set up for settling the issue of an honorarium for the past and current elected members of the ELC. In an attempt to reach a final resolution, a preference form with a wide range of options was distributed for selections by each project leader in attendance. The results will be reported at the May 5th ELC - Project Leaders meeting.

The meeting concluded at 9 pm. Thirty eight projects were represented at the March 3, 1998, ELC - Project Leaders meeting. Forty three projects were represented at the April 7, 1998, meeting. The next meeting is scheduled for May 5, 1998, Tuesday at 7:00 pm at the North Burnaby Legion Hall on East Hastings Street.




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