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THE ERON LENDER COMMITTEE

MINUTES OF MEETING - OCTOBER 6, 1998

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


1. The meeting was called to order at 7:00 pm by David Craig. He noted that in response to the class action of F. M. Cooper vs. R. Hobart and the Government of British Columbia, Robert Hobart has issued a statement of defense.


2. Pricewaterhouse Coopers was represented by Darryl Eddy and Craig Bushell. Craig Bushell first spoke about the distribution issue, stating that Counsel has appointed D. Hobbs to present legal issues in favor of general pooling of all Eron assets. David Fredricksen has been appointed to present legal issues opposing the concept of general pooling. These two sides may be presenting their legal opinions to Judge Tysoe at the end of October.

Craig Bushell stated that several projects will be realized in the near future. These include Castlegar, Raven, Riva Point, Gateway, and three or four Alberta projects. Capitalization is being affected by declining real estate and equity values. Therefore, he now projects total recovery at $40 million net of costs. Bushell noted that PWC fees to date are approximately $7 million. He also noted that the RCMP will soon be coming to the PWC offices to investigate Eron records. This is occurring one year after the closing of Eron.

Bushell has met with the Minister of Finance who has not agreed to any concessions on tax issues, but Bushell is waiting for a response from the Federal Government.

When questioned about Brian Slobogian, Bushell stated that the Mareva injunction, by which Slobogian turned over all of his assets to Price Waterhouse in exchange for exemption from civil prosecution, was allowed one year ago because it appeared to be the least costly, most efficient solution. Bushell stated that he will look into whether any lien was attached to the Slobogian condo on Folkestone Way in West Vancouver, his current residence. Lender Anthony Jasich asked if there are any roadblocks to formally questioning Brian Slobogian.

Bushell was asked about attaching the assets of Michelle Biller, and responded by saying that PWC believed they had made a deal with Mrs. Biller, but her lawyers did not agree to it, and PWC will now end up having to sue her. PWC is currently working through the Biller bankruptcy trustee. One lender stated that if Biller Holdings is owned solely by Michelle Biller, where would the company's assets come from other than Frank Biller, since Michelle had no outside source of income. Bushell was asked to investigate how Biller Holdings received its assets, including the Hestor Creek Winery.

Bushell was questioned as to his knowledge of Jamie Engen's involvement with the Grandview property deal. Ian Wragge stated that Jamie Engen declined to provide him with documents regarding this project, which Engen had proposed to Eron Mortgage Corporation.

Anthony Jasich questioned Bushell on the company structure of Cedar Ridge Development and whether David Nairn could be pursued? Bushell responded in the negative.

Regarding RIF's, Bushell stated that no resolution has been reached yet with Revenue Canada.

Bushell was asked to differentiate the duties of PWC. As the Judicial Trustee for Eron, the Judge creates the rules and PWC is instructed to first gather any assets and secondly, to distribute these assets as set out by the Judge. PWC does no forensic accounting nor pursue any criminal matters. As Receiver for the Eron Mortgage Corporation, PWC is instructed to realize on any assets of that company only. PWC currently has seven employees working part-time on Eron business, five in Vancouver and two in Calgary.

There was considerable discussion around the issue of global pooling. David Craig stated that Judge Tysoe had consulted the ELC regarding the appointment of Hobbs and Fredricksen, and he felt that their prior knowledge of the circumstances was a benefit. Some lenders expressed concern that Fredricksen has lender David Patriquin as a private client and that this presented a conflict of interest. David Craig asked for a vote on the appointment of Fredricksen and Hobbs. The project leaders in attendance expressed favor with the appointments. Bushell stated that PWC has arrived at 32 different ways that money went into Eron projects and noted that the security listed on any term sheet was not necessarily there. Overfunding prevails for most projects. Bushell stated that if Judge Tysoe rules in favor of general pooling, there can be interim distributions to lenders.


3. Andrew Pearson of the law firm of Camp Church & Associates spoke regarding the action taken against R. Hobart and the British Columbia Government. This action was started in August, 1998, in the name of lender Penny Cooper. The application to Court to certify this as a class action is likely to receive a response by the end of the year. The application makes allegations against the Mortgage Brokers Commission, specifically, that they did not fulfill their duty by failing to sufficiently investigate Eron and then warn lenders. Part of the defense written by Robert Hobart on July 14, 1998, is that regulators did not owe a duty to protect lenders.

Class action litigation is quite new in British Columbia, first receiving approval in 1995. The Court looks at several criteria: 1) Are there common issues amonst the petitioners, and 2) Is this a fair way to settle this issue. The definition of those eligible for this class is that one is a resident of British Columbia and a lender with Eron on October 3, 1997. Certification would decide that the "class" is appropriate; then litigation moves ahead to a trial. If certification is approved, any individual lender can opt out of the class action. Also, lenders from outside of British Columbia can opt in as a separate sub-class. The fees paid to the lawyers are decided by the Court. If we were to loose this action at the trial stage, the individual lenders are not liable for the defense's costs.

The firm of Camp Church & Associates has previously taken large projects, such as asbestos litigation, and the senior partner, J. J. Camp is involved in the Hepatitis C litigation, which has been certified as a class action. David Church has agreed to argue the Eron case along with Andrew Pearson. Camp Church has set up a telephone line #1-877-571-2288 for Eron lenders to hear updated messages once the action has been certified.


4. David Craig stated that he will coordinate with Camp Church with respect to his independent negotiations with the government for a possible settlement.


5. David Craig stated that the letter-writing campaign has made an impact. It is important that in these letters criticism be directed against FICOM, as appropriate.


6. Regarding Pricewaterhouse Coopers bills, David Craig is still negotiating a few issues with respect to the reduction of the first bill of $3.5 million. Of that bill, $2.8 million are fees for Price Waterhouse time and $750,000 are for legal expenses. The current PWC tab has risen to $7 million.


7. Hundreds of responses have been received from the August ELC mail-out. About 50% have said `yes', they would attend the Annual General Meeting scheduled for Sunday, November 15, 1998, at 12:00 noon at Kitsilano High School, 2250 West 10th Avenue, Vancouver. Lender concern was expressed at the cost of another mail-out ie. sending the election ballots and announcing the AGM.

On the issue of remuneration, approximately 80% of the respondents are in favor of paying $1800/month to the two individuals on the ELC for work of the past 9 months.


8. Regarding the election of the second term ELC, James Tindle suggest electing 7 individuals to the ELC and allowing them to choose leadership. Barbara Mayer stated that the election process at last November AGM was supervised by Ladner Downs and was very costly. The question was raised as to the extent of scrutiny required to retain the legitimacy of the election process.

To a question put by Ian Wragge, of those individuals seeking election to the second term ELC, Tindle, Rockandel, and Jasich are desiring no remuneration. Ripley wishes to be remunerated considering the number of hours required as communications coordinator if he were to continue with the same amount of work. Inacio and Menghi did not respond.

The ELC has an outstanding bill of $50,000 with Ladner Downs. Recent donations from lenders plus the prior balance have resulted in a current balance of$15,000 for the ELC accounts. The volunteer legal committee is attempting to settle the Ladner Downs account with this amount.

David Craig expressed his appreciation to all the volunteers for their efforts.


The next Joint ELC - Project Leaders Meeting is scheduled for Tuesday, November 3, 1998, at 7pm.




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