ERON MORTGAGE INFORMATION WEBSITE
THE ERON LENDER COMMITTEE

Eron Lenders Committee Newsletter: June 1, 1999

Judicial Trustee & Receiver: Capital Recovery -- Realization, Distibution, Litigation

1. Realization
* The projects that are now confirmed by PWC as realized or near realization are: ABC Boat Charters, Balak, Capital Place, Castlegar, Crampton, Davie, Desert Springs, Fairways at Arrowhead, Gaetz Crossing, Gallie, Homer Street, Leewood Village, Morewood, Proctor, Ravenswood, Rusin, Wallace. The fact that a project has been realized does not mean that the project will result in a net positive return to lenders in that project. Please see item #2, below.


2. Distribution Issues
* On May 20 PWC filed at Court for Justice Tysoe's review the proposed Distribution Plan. On June 9 Tysoe will respond to PWC regarding the procedural aspects of the plan, setting out the schedule of events that are to occur for the plan's implementation in June and thereafter, including the resolution of any outstanding contentious legal issues. The implementation requires that PWC obtain all lenders' data needed to meet the Revenue Canada refiling criteria, because the distribution will be coordinated with the refiling election. The distribution will proceed on a project by project basis, with the zero-value projects being administered first, beginning possibly as early as late June or early July, depending upon the Court's summer schedule and how complex the legal challenges are to the details of the plan's non-procedural aspects, including allocation. A gain in allocation by any Eron lender/project must be at the expense of some other lender/project because of the fixed amount of the total realized Eron estate.

* Distribution payments to lenders will be net of over-subscription amounts, inter-company advances, and trusteeship costs.

* The currently estimated zero-return or near-zero return projects are Columbia Street, Commonwealth, Enterprise Park, Everbrite, Maxim, Gail Taylor, Rusin, Ucluelet, USCAN, Vocal Point. There are other projects that may eventually be determined to be zero return, or of near-zero return.


3. PWC Civil Litigation
* On Feb.2 / 99 a Statement of Claim was filed by PWC/R&D against the Slobogians jointly and severally for funds owing to EFS, in the amount of $1.2M. Neither of the Slobogians have filed a Statement of Defense in response. PWC/R&D has subsequently, on May11, served on Brian Slobogian - through substitution on his lawyer - a Petition for Receiving Order and an Affidavit of Truth in Bankruptcy Petitition. On June 2 / 99 the Court will hear PWC's B.Slobogian Bankruptcy Petition. See the Apr.6/99 ELC-Projects `Minutes', #5.

* On May 17 / 99 J. Tindle served on O.Slobogian - through her lawyer at the BCSC hearing - PWC's Feb.2 Statement of Claim.

* PWC continues to investigate the possibility of civil lawsuits against other individuals related to the Eron failure.


4. PWC Administration
* Project leaders and lenders with concerns about specific matters relating to PWC and R&D's Trusteeship costs [ project direct costs, indirect costs, allocation of costs] are requested to send them in writing to any member of the ELC or to David Craig. Complaints about a project's direct costs, in particular, should be addressed to D. Craig.

* The ELC has requested of PWC that PWC keep in closer communication with the ELC respecting the ongoing billing of the Trusteeship costs, to which PWC has agreed. How to provide for PWC & R&D's fees (as we approach the terminal stages of the trusteeship) is a subject of the Distribution Plan that Justice Tysoe will be reviewing.


5. RCMP / FBI Criminal Investigations / lawsuits
* The RCMP continues its review of information held in PWC files pertinent to their criminal investigations, as well as closely following the evidence presented at the BCSC hearings. Once cases are suitably defined, the information will be presented to the B.C.Crown Counsel, and it will be the B.C. Attorney General's decision as to how to proceed.

* According to information Tindle has received, the RCMP now has 16 individuals working on the Eron case

* Fabian Dawson reports in the May 31 " Province" that the FBI (USA) are now investigating Eron's Bellingham, Washington bank accounts with respect to the Maxim project. The article also states that the RCMP is concerned for the safety of F.Biller because of reported death threats against him.


6. Brian Slobogian
* See # 3 above, Slobogian is presently working in Las Vegas as a "public relations" consultant, as discovered by Fabian Dawson and reported in his "Province" articles of May19 & 20.


7. Onalee Slobogian
* See # 3 above.and #13, below.


8. Frank Biller
* See # 13 below. On May 31 and for one or two weeks thereafter Biller and other witnesses sympathetic to allegations of his innocence will be testifying before the BCSC panel.

* On May 10 PWC filed an Amended Statement of Claim against F.Biller, M. Biller, Biller Holdings Ltd., and A. & H.Biller Enterprises Ltd., which alleges breach of fiduciary duty, breach of trust, misrepresentation, and the charging of criminal or usurious interest rates. The result of these alleged acts was wrongful profits in the amount of $6.5M. PWC claims, on behalf of Eron lenders, a judgment against the Defendants for the amount and interest found due upon the accounting, a charge against their lands or other assets, and an interim injunction prohibiting the transferal, assignment, conveyance, encumbrance or other dealing with any of the assets pending a trial of the matters.


9. Frank Biller Bankruptcy
* McKay and Co. reports that Biller in his latest bankruptcy accounting states he is earning no income. Payment of his legal fees is being made from Mrs. Biller's assets. See #7, above.


10. Michelle Biller
* See # 7 & 8, above.


11. Other Investigations--James Tindle is working to investigate other information that may prove useful to all Eron lenders in the attempts to recover our $capital. *Important*: contact James with any information you think might further these efforts-tel #438-0915 or fax #438-2795.


12. Revenue Canada
* See the Jan.5 / 99 newsletter and the January all-lenders mailing for introductory comments on the discretionary rulings being provided by Revenue Canada to Eron lenders. At the Feb.2 /99 leaders' and lenders' meeting at the Legion Hall Craig Bushell provided further detailed information to lenders (see the Minutes of the meeting). A series of additional instructions will be communicated to lenders in the coming months to prepare them to take advantage of this administrative provision.

* See the April 6/99 Minutes of the ELC-Projects/ Lenders Meeting for further comments of C. Bushell.

* Revenue Canada form T1135: Eron lenders participating in U.S.A. / Foreign loans that total over $100,000. are required to complete this form as part of their 1998 Income Tax Return. Obtain the form from your local RevCan office.

* ABIL-PWC now advises all lenders that it is highly unlikely Revenue Canada will permit an ABIL (allowable business investment loss) treatment of Eron lenders' losses, except for those individuals who otherwise in their normal previous filings have had the tax circumstances that justified such claims.


* Do not refile your prior years' returns yourself ; await PWC's instructions ! DO NOT CONTACT REVENUE CANADA! File your 1998 Income Tax Return normally, as your accountant advises. You will receive no T-5's from PWC in 1999 for the tax year 1998 because no payments were made to you from PWC in 1998 [nor did any `crystallizations' (payouts) occur in 1998 (as distinguished from `realizations')]. Please telephone Steve Ripley (222-1646) or David Craig (713-6680) if you have further questions.


13. Laurentian Bank & Canadian Western Trust: RRSP & RIF accounts
* Laurentian has sent a letter to all its Eron RRSP and RIF accounts re. PWC's arrangements with Revenue Canada. CWT will not send such a letter, because it states it is not satisfied with the legalities of the documentation provided to it by PWC. PWC has no authority / persuasion over CWT's legal interpretation of RevCan's provisions, and therefore lenders should discuss their individual situations directly with George Mihalopulos at CWT(tel:685 -2081, fax: 669-6069, email: george@cwt.ca).

* Locked-in RSP account holders who wish to consider a class-action lawsuit against Laurentian Bank were invited at the last Leaders'and lenders' meeting to contact Jack Rockandel (tel:533-5207, fax:533-4190). To date no one has expressed an interest to him.

* There are about-_____ individual RRSP / RIF Eron accounts, totaling about $ ____ in original value.


14 .BC Securities Commission
* See # 7 above.

* An investigative hearing into the conduct of Slobogian and Biller began April 12 at the Century Plaza Hotel, 1015 Burrard St., Vancouver. The Commission Hearing Panel consists of Ms. Joyce Maykut, Q.C., Mr. Brent Aikten, and Mr. John Graf. Following a schedule that will conclude in mid-June the panel has been hearing the testimony of important witnesses to the Eron disaster. F Biller is attending, represented by his counsel, M. Skwarok; B. Slobogian has refused to appear, nor do any lawyers appear for him. Mr.James A. Angus is the lead lawyer for the BCSC. The ELC Chair, Dr. James Tindle, testified at length on behalf of all lenders, and has assiduously attended the hearings and taken notes for future reference. The RCMP is in attendance, and the media is covering the events, which have been reported by David Baines for "The Vancouver Sun"'. Radio (CKNW) and is also present. Depending upon the findings of the Panel, Slobogian and Biller are potentially liable for various sanctions &/ fines. Were there to be fines, the monies-if realizable- would go to the B.C.Government.

* For a regularly updated schedule, please contact Ms. Paula Couper, legal secretary to Mr. Angus (899-6626), or Steve Ripley (222-1646).

* On May 17-18 Jamie Engen testified in considerable detail and at great length. The questions of the BCSC counsel, Sasha Angus elicited testimony suggestive of Biller's knowledge of, and complicity in, the Eron problems that contributed to its disaster. M. Skwarok asked Engen questions intended to show that the responsibility for Eron's problems lay with Price Waterhouse's negligence in 1997 because, as periodic advisers to Eron, it allegedly did not warn Biller of the depth &/ legal complexity &/ seriousness of the problems of which PWC was supposedly aware. Engen's response was that initially Slobogian stated to PWC that of Eron's 80 plus projects only 8 or so were in need of PWC's occasional reorganizing assistance, and that behind the entire set of projects was EMC's net equity of over $170M.

* Attending the Engen session in order to take notes were the Defense lawyers for the B.C.Government in the Cooper vs. Hobart class-action lawsuit.

* On May 17 Mrs.O.Slobogian testified before the Panel that, despite her being the wife of the President of Eron and working regularly at the Eron office as the bookkeeper of Eron Financial Services, she nonetheless saw nothing, heard nothing, nor read anything indicating Eron was experiencing any compliance illegalities or unusual financial problems.

15. Chartered Accountants' Institute of British Columbia
* No news to report



E.L.C

Communications, Projects, Volunteers, Class Action Litigation

16. Litigation:Class Action
* The second and final part of the class action certification process -Class Suitability-- was heard on May12 &13.Justice Tysoe has reserved a period to prepare his judgment. W. K. Branch, counsel for the B.C.Government, argued that the complexity of causation, and the attribution and allocation of responsibility, was going to require " 3000 separate lender trials in any event…". His conclusion was, therefore, that a separate, class trial was both unnecessary and inefficient. This and many other arguments were countered by D. Church, emphasizing that R. Hobart and the B.C.Government were the focus of this class action attribution of responsibility, not the actions of those individuals and companies named as 3rd parties by the B.C.Government. The same line of reasoning was offered by the lawyers attending for the 3rd parties, led by the remarks of Dan Pangman, counsel for D. Nairne. He also remarked that cases of this nature often are pursued to the level of the Supreme Court of Canada because of the fundamental nature of the issues being contested, ie. in this case, governmental accountability.

* If the Application for certification is successful, the action will be certified as a class action. Class members will be notified of the certification and of the alternatives available to them as a result of the certification order, in the manner directed by the Court.

* General updates on the litigation process are available at the websites: www.eron-pwl.com and www.geocities.com/WallStreet/6380


17. Project Leaders-* Important * Please remember to distribute to your project members as completely as your committee can the essential information in the newsletter. This is one of your commitments and responsibilities as a leader! Recall: this saves all Eron lenders significant $ money by informing individuals of a wide range of information that otherwise they may believe they can only obtain by phoning PWC directly--at considerable hourly rate cost to the estate assets.

* The following information was provided to Project Leaders and lenders at the June 1 / 99 ELC-Projects & Lenders Meeting:

June 1 Agenda, June 1 Newsletter, May 4 / 99 Project Leaders Meeting Minutes, BCSC Investor's Kit, BCSC Schedule of Slobogian & Biller Hearings, B. Mudry "Stockwatch" article on B.Slobogian, S. Ripley `Letter to the Editor' ("Province" May 28 / 99), PWC Distribution Plan

* For project leaders who wish to use the website for postings, please telephone / fax / email your information to Catherine Palmer. Preparation of your material will be assisted by our volunteer webmaster, David Jackson, Tel #986-3718 or fax #986-6215 or email address www.vanlang.com Catherine Palmer's email address is: contact@eron-pwl.com, to be distinguished from PWC's Eron website, www.eron-pwl.com


18. Letter-Writing Campaign
* Eron lenders are continuing to send letters to assorted newspapers, institutional officials and politicians. See no. 17, below: use these newspaper articles as the basis of further letters! For copies, contact S. Ripley at tel.222-1646 / fax 222-1641 Thank you!


19. Media
* James Tindle coordinates media relations for the ELC.

* The Feb. 13 & 16 "Vancouver Sun" carried important articles, the first by David Baines, the second written by the editors, both of which suggested the B.C. Government & / the Superintendent of Mortgage Brokers had been negligent in not warning Eron lenders of the risks in dealing with Eron Mortgage Corp., given FICOM's knowledge of Eron's non-compliance record.

* A variety of media staff has been reporting the events at the BCSC hearings.

* See # 5, above. Fabian Dawson of the " Province " tracked down B. Slobogian in Las Vegas. He reported his interview in the May 19 & 20 editions.

* David Baines reporting in the "Vancouver Sun " continues detailed investigative reviews of the ongoing Eron saga

* The May 28/99 "Province " carried a "Letter to the Editor" from S. Ripley.


20. ELC Legal Counsel-No news to report.


21. ELC Funding
* The ELC, on behalf of all lenders, especially thanks those individuals who have contributed various amounts up to $100. For those lenders who are able to contribute, and who have not yet done so, may we ask your participation? Please recall it has been through the sacrifices of other lenders who have already contributed that the work of your committee is enabled. Please send your cheque to the ELC Treasurer:

Eron Lenders Committee
c/o Anthony Jasich, "in trust",
4725 Glenwood Ave.
North Vancouver, B.C.V7R 4G6


22. ELC Treasurer's Report
* The ERC-ELC Consolidated Income Statement for Oct.3/97-Nov./98 has been issued. For a copy, please phone S. Ripley (222-1646) / fax (222-1641).


23. Website
* The Eron website www.eron-pwl.com also functions as our archives. Project leaders; please encourage your members who are unfamiliar with visiting a website to try it at a friend's home, at a public library, or at a cybercafe.

* A `link' has been made from the PWC/ELC website to the geocities website for updates on the class action lawsuit. See item # 15, above.

* For those lenders using the internet please recall that you can access written decisions via the B.C. Supreme Court documents website at: www.gov.bc.ca


24. Database
* John Hall is Manager of the database, Tel #876-9081 or fax #876-9082.Please send John your changes re. address, telephone, fax, email, name, Eron beneficiaries, or deceased Eron lenders.


25. Volunteers
* Wendy Menghi is Head of Volunteers (Tel: 929-6003, fax 924-0629). Contact Wendy with your questions about how you can help with the small, specific, manageable volunteer tasks that will contribute to your fellow lenders, your ELC committee, and yourself! THANK YOU!


26. ELC Administration
* The ELC invites any lender who may contemplate applying for the open position on the ELC to contact an ELC member for further information.


27. Postal Communication
* The last all-lenders mailing occurred in March from PWC regarding distribution matters. Others mailings will be sent in June regarding Revenue Canada options, and further distribution matters.


28. Calendar / Schedule
* An updated calendar to June / 99 is posted on the website. Please contact Steve Ripley with suggestions for items to be included: tel. #222-1646, fax #222-1641, email: sripley@imag.net.


29. Newsletter
* This newsletter is the production of the ELC. It will be posted on the website without editing by PWC or R&D, who take no responsibility for its contents. Any Eron lender who wishes to suggest ideas or contribute to the preparation of the newsletter is invited to contact Steve Ripley (tel. 222-1646, fax 222-1641).


30. Minutes
* Minutes of the monthly ELC-Project Leaders & Lenders meetings are available to all Eron lenders. For a copy by fax please contact Steve Ripley, Tel: 222-1646, fax: 222-1641, or else find them posted on the website.


31. Next Meeting
* September7,1999, Tuesday, at 7pm -- ELC-Project Leaders and all lenders meeting, Royal Canadian Legion Hall # 148, 4356 East Hastings St., Burnaby.For further information regarding meetings, contact Meetings Coordinator Martje Hartman, Tel #538-6601; also, see the ELC calendar on the website.

* The ELC has decided not to hold meeting in July and August. During the interim period please contact Steve Ripley or other members of the ELC for general updates, or see the website for new postings. Also, contact David Craig if you have questions about PWC-Revenue Canada developments, or about project specific costs complaints.


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