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THE ERON LENDER COMMITTEE

MINUTES OF MEETING - SEPTEMBER 9, 1998

Joint Eron Lenders Committee - Project Leaders Meeting
Royal Canadian Legion Hall - North Burnaby, B.C.
Minutes recorded and written by D'Ann Madsen, edited by Steve Ripley


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


2. Inspector E. Malone from the RCMP Office of Commercial Crime was introduced as the head of the Eron Mortgage Corporation Investigation. He has a team of seven investigators now working full time on the Eron file. This is almost half of his staff of researchers. The mandate established by the Federal Government is to investigate bankruptcies, fraud, and breach of trust, but the #1 focus is organized crime. Regarding the Eron file, budget restraint is an issue, especially regarding the time necessary for forensic accounting. It is likely that the RCMP will thoroughly investigate at least three projects, and this will have the same outcome in court as if they were to investigate 30 or 40 projects. This information is then presented to Crown Counsel and it is up to them to lay charges. Currently in the Canadian court system white collar crime is not as high a priority as organized crime, and it typically takes years to reach a criminal conviction. Additionally, the pendulum has swung away from sentences of jail time to sentences of community service if the crime is judged less publicly offensive .


3. David Craig introduced Craig Bushell as the new head of Eron matters for Price Waterhouse Coopers. He shares this responsibility with Darryl Eddy. Mr. Bushell stated that he has over 20 years experience with bankruptcies and receiverships. He agreed with Inspector Malone that white collar crime rarely results in jail time, but has other penalties, such as restriction in travel to the United States, rejection for any future licensing, etc. Bushell stated that on September 11, 1998, Judge Tysoe will be hearing information from Price Waterhouse Coopers regarding distribution issues. This matter appears to be divided into three viewpoints: full pooling of Eron funds, partial pooling of Eron funds, or tracing of Eron funds into individual projects. Judge Tysoe is likely to appoint counsel to present the legal aspects of these viewpoints. According to Bushell, there were a wide variety of ways that money went into projects, and co-mingling of funds was widespread. Price Waterhouse Coopers is taking legal action on many projects, especially foreclosure. They cannot take civil action against Frank Biller because of the Bankruptcy Act, and Brian Slobogian is protected because he signed a Mareva Injunction last October, and thereby assigned all of his assets to PWC. Bushell would not discuss legal actions planned against other individuals, as he did not wish to divulge the PWC strategy.

Bushell stated that a total of $222 million was credited into Eron projects by lenders, and the current estimate of the amount recoverable is between $40 and $60 million. Regarding lenders reporting losses to Revenue Canada, the best scenario would be the use of ABIL ( Allowable Business Investment Loss) which can be applied against one's income versus reporting a capital loss which is applied only against one's capital gains. To defend one's position of using ABIL, a lender might argue that interest payments were a return of capital as they were being made by new investor's money. This is known as a Ponzi scheme. Bushell stated that PWC will continue to work with Revenue Canada.


4. and 5. Regarding negotiation with the Government, David Craig stated that we need to raise the profile for the Eron situation. He encouraged letter writing to government officials. When the group of project leaders was asked, approximately 10 acknowledged having written to their MLA. Craig stated that there appears to be apathy, and we must build momentum towards the November meeting.


6. Regarding billing from Price Waterhouse, fees to November 30, 1997, totaled $3.5 million. Additional fees to July 30, 1998, are between $2 and $2.5 million.


7. On August 21, 1998, a packet of information was mailed out by the Eron Lenders Committee to all Eron lenders. Craig stated that he is getting a good response to the mail-out.


8. David Craig announced that a class action law suite - F. M. Cooper vs. R. Hobart and B.C. Government - has been filed for certification. It is a difficult process to obtain this class action certification within the British Columbia Supreme Court. Penny Cooper, along with a small group, which includes Ian Wragge and Peter Kwok, has started this action; eventually, it will seek to represent all B.C. lenders in mortgage projects that were under the supervision of the B.C. Mortgage Brokers Superintendent. They have retained the law firm of Camp Church and Associates. Peter Kwok stated that in regards to the class action, an important aspect of certification is that lenders must show a commonality of interest. Therefore, he would recommend that when lenders complete the Class Action Registration Form, they indicate their claim to be mainly against the regulatory authorities rather than their investment advisor or sub-broker.Database Manager John Hall confirmed the confidentiality of all class action- form replies other than for their specifiic use to further lawsuits agreed to by the ELC. The lawyers from Camp Church and Associates will likely be speaking at the October 6 ELC - Project Leaders Meeting.

[Camp Church have established a toll-free information line:1-877-571-2288].


9. David Craig stated that the Annual General Meeting for all Eron lenders has been set for Sunday, November 15, 1998, location yet to be determined. The election of individuals wishing to serve on the Eron Lenders Committee will occur at that time. Craig stated that the ELC has made application to court for covering ELC costs out of Eron assets. Craig explained the absence of Steve Ripley at the meeting was due to illness.


The meeting was concluded by David Craig at 9 pm. The next ELC - Project Leaders Meeting is scheduled for October 6, 1998.




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