League’s Deception, Lies and Conspiracies

July 3rd, 2014 · 16 Comments · League REIT Updates

World's Biggest Liar

People I have to say I’ve been silent about League not because I don’t have anything to say but because I just want to rent and manage new condos and not be bothered with the fucking cesspit of League. Every single time I think the latest update is the worst I end up discovering another layer of filthy psychopathy.

Screwing Over Past Employees

I now know of three higher up past employees that were constructively dismissed after asking questions. But there ended up being allegations of sexual harassment. So basically the CEO or Sales Manager would ask why they were using investor money to fund payroll or bills and the next day there would be allegations. This happened.

Then after that in one case at least Manny “Ethics” Arruda went online smearing the reputations of said persons under pseudonyms (fake names).

Cease Trade Orders

Back in 2007 there was 4 total cease trade orders I know about (there may be more) and during the time that there was cease trade orders, League collected checks and money and it was selling as usual, except those check got stockpiled and cashed once the CTO was lifted.

Investors may or may not have been told about the Cease Trade Orders.

This was revealed during court room testimony by Adam Gant and a copy of his testimony was given to the BCSC.  It’s positively shocking.

7  776     Q   And did the CTOs have any impact on the business of

         8              League? 

         9          A   Yes.  Yeah. 

        10  777     Q   What impact? 

        11          A   Well, not so much in Citizen or IGW Property’s

        12              case, but in the REIT’s case, you know, we were in

        13              the process of raising capital for some

        14              transactions, and so we had to delay the

        15              transactions until the cease trade was lifted. 

This information was given to the BCSC and they did nothing.

 

Using Investor Funds For Payroll and Payables

This is Adam Gant’s own testimony verbatim as per court transcripts.

4  891     Q   And my understanding is — obviously from my

5              client — that there were intense discussions on

6              how on earth the payroll would be met, for example,

7              given the small amount of cash and the state of the

8              payables.  Have you been informed that there were

9              such discussions?

 

10          A   Yes.  Yeah, I remember there being some.

 

11  892     Q   And at the time — do you understand now at the

12              time, that is, January and the first days of

13              February, there was not sufficient cash to meet the

14              payroll or deal with those payables?

 

15          A   Sorry.  What are you asking me?  Was there cash?

 

16  893     Q   Yes.

 

17          A   I think we needed to — to get outside funding that

18              month.  We had to inject more shareholders’ loans

19              into the company that month.  So, no, there wasn’t

20              enough that month.

 

21  894     Q   And did you tell my client that there was or was

22              not money to fund the payables and the payroll in

23              January?

 

24          A   I believe I told him that — I think I told him not

25              to worry about it.  I w

1              I remember at the time hoping that they would find

2              a solution while I was away.  I knew that if they

3              didn’t, when I got back, we would take care of it.

4  895    Q   How did you?

5          A   We put more capital into the company for the

6              payroll.

 

7  896     Q   Who is “we”?

 

8          A   Myself and Emanuel.

 

9  897     Q   Did you tell my client before the two of you did

10              that that there was 5 million in Mr. Reed’s trust

11              account to cover the payables and payroll and other

12              ongoing needs for money?

 

13          A   January 2008 . . .  I’d have to look at the trust

14              report to find out exactly how much cash was

15              sitting in the account at the time.  But up to that

16              point, we were carrying usually a million or two in

17              trust funds.

 

18  898     Q   I didn’t ask you that.  Whatever was there, did you

19              tell my client, Hans, there is $5 million — or

20              words to the effect — Hans, there’s 5 million with

21              Keith Reed; don’t worry?

 

22          A   I could have, yeah.

 

23  899     Q   Is that true?

 

24          A   Well, I’m sure I told him that there was money in

25              the trust fund because there was for payables for

1              the — the real estate entities.

 

2  900     Q   Well, did — did you tell him the truth?

 

3          A   Yes.  Yeah.

 

4  901     Q   So if you said 5 million, there was 5 million?

 

5          A   Whatever number I told him there was at the time.

 

6              Like, the number that there was, I can get that for

7              you.

 

8  902     Q   I’m instructed that you, very shortly after telling

9             him there was 5 million, said there was 3 million.

 

10          A   Okay.  I —

 

11  903     Q   Do you recall that?

 

12          A   Again, I can’t recall the specific numbers, but it

13              was another one of the times where I said, Please

14              call Keith directly if you’d like to confirm the

15              number from — for yourself.

 

16  904     Q   Do you recall giving him different numbers, like

17              significantly different numbers?

 

18          A   If it was a — well, if it was — if it was while I

19              was away, I could have then checked and just

20              updated myself as to exactly how much there was, so

21              possibly.

 

22  905     Q   Did you tell him around the time of these

23              discussions that you wanted to teach Manny a

24              lesson?

 

25          A   Yes.

1  906     Q   And what was that about?

2          A   Well, like I said, I had hoped that they could find

3              a solution without me that week while I was away.

 

4  907     Q   So what was the lesson that you wanted Manny to be

5              taught?

 

6          A   Well, I just was hoping they’d come up with a

7              solution without me.

 

8  908     Q   So in other words, did you mean by that that you

9              wanted Manny to figure out how to do it without

10              bothering you?

 

11          A   Yeah, exactly.  I just hoped that they could either

12              find a financing source that, you know, didn’t

13              involve me going out and — and doing it myself or

14              find a solution to it in the short term to, you

15              know, fulfill themselves.

 

16  909     Q   And did you say words to the following effect to my

17              client around this time frame and about these

18              discussions about finances that, The accounting

19              girls are idiots; they don’t know how to move money

20              from A to B?

 

21          A   I hope I didn’t use that term.

22  910     Q   I’m not suggesting you’d be indicted for that if

23              you did so, sir.  Did you use words to that effect

24              and say basically that?

 

25          A   Possibly.

 

 

1  911     Q   And what would you have meant by that?  That there

2              was money available for them if they just moved it?

 

3          A   Well, the funds — any funds in trust for the

4              entity can be moved up into our account for the

5              entity, and if they hadn’t done that, typically,

6              when I get back, I typically — you know, I’ll do

7              the cash flow projection and — and move the

8              capital from trust as we need it.

 

9  912     Q   Sorry.  “For the entity,” you mean the assets?

 

10          A   The REIT or the — the LP for the specific project.

 

11  913     Q   So do you mean monies invested for those could be

12              used to deal with payables and payroll of League?

 

13          A   Yeah.  I mean, if we’re — if we’re investing in a

14              project, subscription funds prior to that time had

15              typically flowed into Keith Reed’s bank account.

16              He would hold them until after the decision period,

17              and then once they were effectively released, we

18              could then use them to go and buy an asset or

19              invest into upgrading an asset or for whatever

20              particular — you know, it was just a whole — it

21              was one place or another where the cash was held.

22              So if we needed capital for, you know, some

23              invoices that we required, we transferred from

24              Keith’s account to our account.  If we were going

25              to close a property and we’d raised some money but

1              had some in our account, we’d transfer from our

2              account to Keith’s account, so . . .

 

3  914     Q   I’m not sure I follow, so let’s — let me ask you a

4              question or two on this.  So if people sent money

5              in for subscriptions —

 

6          A   Yeah.

 

7  915     Q   — and were held for the period properly by

8              Mr. Reed —

 

9          A   Yeah.

 

10  916     Q   — after that period expired, did you understand

11              you could use those monies for payables of League

12              including payroll of League?

 

13          A   We’re not talking —

 

14       MS. McNEIL:  Just before you —

 

15          A   — about the defendant.

 

16       MS. McNEIL:  — before you answer —

 

17          A   We’re talking about the entities.

 

18       THE WITNESS:  Sorry.  Yeah.

 

19       MS. McNEIL:  — the question — sorry.  Again, I just want

20              to ask you, Mr. Main, because you seem to be fairly

21              far-reaching here, how this relates to matters

22              raised in the pleadings.

 

23       MR. MAIN:  I think it’s raised in the pleadings or at

24              least by allusion, and let me think aloud further.

25              My client, as I’m asking yours about, was disturbed

1              about or expressed concerns about some of the

2              aspects of operation of the business, and that

3              might be related to what led to his alleged

4              constructive dismissal.

 

And that is Adam Gant under oath testifying in a court of law about playing fast and loose with investor money. This court proceeding occurred in 2009 but the events occurred in 2007.

 

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16 Comments so far ↓

  • JD

    Topics for discussion at the next Royal Roads University “Ethics and Leadership Conference” perhaps? Will League be represented this year?

    • Jimmy

      Good point. I believe that Royal Roads also ran a charity event with Ian Thow. Makes you wonder how a ‘business school’ chooses its partners.

  • JD

    Maybe another lecture at the Barrett Values Centre “International Conference” as well this year?

  • Jimmy

    Sorry to break it to you but the CTOs were posted on the BCSC website the day they were issued so that isn’t news to anyone.

    Using investors funds for payroll and payables is how 99.9% of startups operate. Do you think that companies that raise money only use it for purchasing hard assets?

  • Rachelle

    Actually Jimmy you happen to be incorrect. There are a number of seperate companies involved. The company that would later be known as LISI earned fees for finding investors. Typically this would be 5% of the amount raised. That company pays for its staff using that income. The rest of the money is earmarked for investment.

    This is not a Silicone Valley startup where investors can and do use their funds to pay for all kinds of things that are company related.

    This was an investment company where investors were told their money would be used to buy hard assets / buildings.

  • Jimmy

    All of the OMs state that a portion of funds may be used for working capital. Working capital includes payroll and payables.

    • Allison Barber

      The problem with your post is that no bills ever got paid. The only people who got paid were Gant and Arruda. The tiny amount that was actually ‘spent’ on hard assets doesn’t even begin to cover $400M. They borrowed more than that against the properties! I cannot fathom what you are thinking. There never were ANY ASSETS, only debt. But, they kept raising new money because they CLAIMED there were $2B in assets!

      • pat

        Clearly there were assets, namely numerous shopping centers, and a construction site called Colwood. Of course they were never worth billions, as Gant stated in his disillusion state – another gross misrepresentation. Of course, if I buy some Google shares I could also claim I own assets worth billions.

        Gant also conveniently swept the debt under the carpet, resulting in zero equity for teh investors, i.e. a NAV of zero.

        Any lawsuit shoudl focus on the repeated misreps where the main intention was to raise more money and collect more fees into his trusts. he and Manny will file for bankruptcy, but the trust cannot be touched.

        Many says “hi” from his native Brazil shouting “Go, Brazil, go. Pass me another bottle of champagne, please.”

        Movie material really ! The biggest fraud in BC. Bre-X – Part II.

        • Allison Barber

          Pat, you cannot call something an assets if there is more owed on it than it is worth. Period. NOT ONE of their properties can be considered an asset.

  • Pat

    The issue is not so much that money was used for payables or employees, i.e. working capital. Clearly the OMs stated as such.

    The core issue is that the net asset value (NAV) was grossly inflated, mainly in the IGW REIT but also ther other ventures too numerous to mention.

    The NAV started to drop in IGW REIT immediately after they opened the fund, and continued to drop due to investor payments, high interest rate mortgage, negative cash-flow and investments into Colwood. The NAV was never adjusted, except upwards.

    Even teh auditor KPMG did not flag that, as teh loan to Colwood never was collectable; in the end over $100M in “assets”.

    That is where the primary misrepresentation is. Not just a minor 2-8% difference in NAV .. perhaps a few million on $100M+ raised, but 50-95% difference and in the end 100% difference as the NAV was zero.

    It was obvious to the various CFOs that came and left as soon as they deciphered the complicated books.

    In addition to the gross misrepresentation about the NAV in IGW REIT they also never stated the true asset value of the various other assets acquired in other LPs due to the state of repair or high vacancies.

    Any lawsuit should focus on the repeated misrepresentation of various NAVs or asset values, not just one or 2 assets here and there, but a systemic series of lies to take in more money and thus, more fees.

  • JD

    Jimmy, you must be the only person who carries a laptop to the World Cup? Vamos Brasil!

  • Jimmy

    Pat,

    League was careful never to use the term NAV in their materials or valuations. They used the term “Pricing NAV” which they defined in their OMs to be a nebulous figure that they created. No doubt people confused the two but this is another of many examples of ‘fine print’ that was easy to overlook.

    I agree with you that the debt owed from Colwood and some of the other League controlled entities was highly suspect and you would think that it would have been called out on at least one of the several auditor reports.

    From what I know Arruda and his wife split several years ago so I doubt he has a “family trust”. Gant has a family trust but I haven’t seen any info on what funds were transferred into it.

  • JT

    LEAGUE ANNOUNCES THIRD-PARTY NAV CERTIFICATION
    Links to more information:
    Altus Helyar: http://www.altushelyar.com/AltusHelyarCost.aspx
    The Valuation Agreement: http://www.league.ca/pdf/altusvaluationagreement.pdf

    April 7, 2008

    Greetings fellow Member-Partners!

    League is proud to announce yet another strategic alliance designed to further assure transparency, accountability and disclosure to current and potential League Member-Partners.

    Trusted name
    Beginning immediately, Altus Helyar-Canada’s largest and oldest cost consulting and development cost management practice, and the leading provider of independent real estate consulting and advisory services, will provide quarterly and annual valuation services for all of the assets in the IGW REIT. In addition, on an annual basis, Altus will certify the Net Asset Value (NAV) and, in conjunction with the audit supplied by KPMG, determine the Unit Value of the IGW REIT.

    This new strategic partnership brings significant industry expertise and valuation experience to bear for the Member-Partners of League’s IGW REIT.

    I thought I saw your name at the bottom of this Jimmy?