ERON MORTGAGE INFORMATION WEBSITE
THE ERON LENDER COMMITTEE

MINUTES OF MEETING - JULY 7, 1998

Joint Eron Lenders Committee - Project Leaders
Royal Canadian Legion Hall - North Burnaby, B.C.
Recorded and written by James Tindle, edited by Steve Ripley


1. The meeting was called to order by David Craig at 7:15 PM at which time he presented a DRAFT copy of a Nomination Ballot that will be used to elect a 2nd term slate of ELC members. If you are interested in serving on the ELC for the term November 1998 to 1999, please complete a form and return to David Craig via fax (604) 713-6696 before September 1, 1998.


David also asked if there were any errors or omissions regarding the June 2, 1998 minutes? Further, that if there were any errors or omissions noted in the Newsletter, to advise Steve Ripley of same.

David Craig introduced Jamie Engen who had been scheduled to give an update on the projects, legal action being considered or undertaken, and distribution issue (Agenda item # 9).

Jamie Engen proceeded his comments on Eron updates by informing the group that he was leaving PWC and taking a new position at a company in Europe. That his successor on the Eron file would be announced shortly and that he would be available if and when required to assist in wrapping up the Eron file.

The major issue at this time was that of the taxation of PWC's billing. Jamie stated that he was not prepared to talk about this issue but knew that David Craig would be talking at length on this issue later in the meeting. Other than this issue, everything was "fair game" as far as Engen was concerned.

Legal Action: Engen advised that a 100 page report has been issued on Doug Jackie and that PWC would be proceeding on this shortly. That the next report they were working on was that of Michael Scholz of Alexander Holburn which, when completed, would be turned over to Russell DuMoulin for action. He further advised that the Slobogians were being asked for "all" of their assets, that PWC wanted to bankrupt them, although they were trying to commence negotiations for a settlement. When their West Van home was sold, Slobogian realized $450,000 which PWC placed in Trust. Later, Slobogians were allowed to use $350,000 of that amount to buy another home that went into a Certificate of Trust in favour of the Lenders so they cannot sell the place or obtain any of the asset therein.

Engen advised that, while Frank Biller has declared bankruptcy, Michelle Biller had approx. $1.2mm in assets protected by a family trust. He requested ideas from the meeting as to whether or not PWC should negotiate with Billers to try and get as much as possible on a voluntary basis or would the Lenders prefer that legal action.

be instituted. Considerable discussion prevailed and it was not clear which action the committees preferred. PWC will continue to work on this issue and it will be brought up again at a forthcoming meeting.

B.C. Securities Commission have a list of some 30 projects which they are investigating actively and are requesting Lenders to return the information questionnaires mailed to them. It appears that they are targeting Slobogian, Biller and some of the brokers.


Distribution Issue: The first step to clarify or set the framework for distribution was the EIC hearing before Justice Tysoe regarding pooling. Tysoe's ruling is now being awaited, the hearings have been completed. It is expected that there will still be some controversy after his ruling because it will not be possible to please all Lenders. Engen felt that there was a good chance that a 'hybrid' pooling may be ordered by Tysoe and if so, some of those not wishing to be pooled will have to make their own argument not to be included in the EIC pooling. Engen did clarify that RRSP funds were never co-mingled, that they couldn't be, so they were a clear issue on their own.

The question was asked whether or not any Lenders had been paid out, to which Engen replied, "yes" a few have, but not many. Some projects that were paid out by the borrowers have not been totally distributed, these are being held in Trust pending certain clarifications.


Taxation Issue: Engen was asked if any response had been received from Revenue Canada regarding the request to consider the monthly interest payments Lenders had received could be classed as a return of capital rather than interest earned. He replied that an answer was expected by July 15th and it was hoped that the ruling would be in favour of the Lenders. If this were true, Lenders could re-file their annual tax reports eliminating their interest payments as income which may result in lower taxes for each year affected, possibly even a tax return.

Jamie Engen thanked all the Lenders and Project Committees and the ELC for the assistance he had received while on the Eron file. He wished all of the Lenders well and trusted that things would work out. The group gave Engen a very warm round of applause.


Agenda Item 2 - PWC Billing - David Craig: Craig advised that he felt that a 7.5% reduction in the PWC billing could be achieved without much further effort at this time. Or, the Lenders could decide to take the matter to Court and risk the possibility of getting less than the 7.5% which seems to be attainable at this time. Should we proceed to Court for a resolution of the billing issue, PWC could withdraw their offer of 7.5% at any time.

Craig put the question to the floor; "Do you want to push further or do we want to take the 7.5% being offered now and not push further?" Needless to say, considerable discussion and suggestion came from the members present, some in favour of accepting the 7.5% and others wanting to push further. Craig further explained that the billing being negotiated was for PWC's time costs only and did not include their out-of-pocket expenses nor those of legal counsel for Russell & Dumoulin, the latter of whom had dug their heels in against any reduction in their fees.

The question of what effect Jamie Engen's leaving and a new person being put in charge of the Eron file may have on the billing issue, was asked. Good point but one that nobody could really answer. However, Craig did feel there was a good chance to resolve the billing issue by the end of July, the date of Engen's official leaving of the Eron file.

After much discussion a vote was held and all but two (2) of the attendees agreed to allow David Craig to continue the negotiations with a view to completion by the end of July.


Agenda Item 3 - Negotiation with Government - David Craig: Craig advised that we needed to "build up a head of steam" by commencing a letter writing campaign. All Lenders are urged to get on with writing a letter each and every month to one or more of the people listed on the handout provided at the meeting. It was suggested that a single page, hand written letter would probably be most effective. The idea was to write just enough to make the point and write often. The more letters that are received the better the chance that we have of getting a sympathetic and helping ear.

Select a theme for your letters, i.e. "the regulators took too long to step in a take over Eron" - "this is not the only mortgage broker company that has failed in B.C. in the past few years, there have been many. Is it because the regulators cannot, or will not, regulate?" Also, tell your own story of the hardship you have experienced because of the failure of Eron, i.e. what this has meant to you personally.

If every Lender wrote one letter each month for three months, that would be approximately 12,000 letters which would be very hard to keep under wraps and not have some influence on our situation. Do your share.. Write some letters each month. The handout at the meeting gave not only the names and addresses of where to write, but included a chronological list of the historical facts of Eron.


Agenda Item 5 - Michelle Biller - David Craig: Craig put the question to the meeting; "Spend some money on legal fees to pursue Michelle's assets or to negotiate with her to get as much as possible without expending funds for legal action"?

After much debate and discussion a vote was taken with the result that 36 Lenders present voted to negotiate while 10 members preferred to push through a lawsuit. Craig was to advise PWC that the majority of the Lenders want to negotiate a settlement and to go as high as can be achieved.


Agenda Items 7 & 8- Steve Ripley: Ripley advised that PWC would be doing a general mailing to all Lenders later in July and that each Lender would receive a list of the names and addresses to write regarding our situation. That, when received, it was the Lender's responsibility to motivate themselves to begin their personal letter writing campaign to help with negotiations with the government later this year.

Chairman Craig thanked Steve Ripley and his committee of volunteers who had been doing an excellent job of keeping the communications alive with the Eron Lenders group.


The meeting was adjourned at 9:00 PM.


Next meeting is scheduled for Wednesday, September 9, 1998, at 7:00 PM at the Legion Hall at 4356 E. Hastings Street, Burnaby.




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