A prominent Vancouver developer known for projects such as Grace and Iliad allegedly committed fraud, according to the British Columbia Securities Commission (BCSC).
The regulator claims that Brendan James Schouw, who is a B.C. resident and the sole director of Hornby Residences Ltd., solicited a $1 million investment and promised the investor that the investment would generate an 18% annual return.
Schouw told Business in Vancouver in an email that he emphatically denies all claims.
Nonetheless, the BCSC alleges that Schouw provided the investor with an investment certificate, signed by Schouw as president and a director of Hornby Residences Ltd.
Schouw also promised that Hornby Residences Ltd. would guarantee repayment of both the principal investment and the interest, the BCSC claims.
Schouw allegedly told the investor that his funds would be used for building permits, demolition and construction costs of the Artemisia, which is a project on Hornby Street in Vancouver for which Schouw had incorporated Hornby Residences Ltd.
Schouw allegedly told the investor that once the project was complete, the investor could have his investment and interest paid out, or he could choose to use it as a credit towards the purchase of a suite in the Artemisia, or another of Schouw's developments.
Additionally, BCSC alleges that, upon receiving the investor's funds, Schouw transferred approximately 75% of the money to other accounts under his control.
Within a month and a half of receiving the investor's funds, Schouw spent approximately $453,155 of the investor's funds on expenses unrelated to the development of the Artemisia, according to the BCSC.
That spending allegedly included a payment towards a personal legal judgment, payments to previous investors, and to service personal mortgage and rental obligations.
“Unprecedented challenges arose in the business world during the aftermath of the 2008-09 credit crisis, and the new real estate development market in Vancouver came to a near standstill,” Schouw told BIV.
“Rather than closing up shop and walking away from investors, I have since been working hard and focused on their returns, including agreements with the Boffo Development Group to construct planned projects.”
Indeed, Schouw did not develop the Artemisia. Instead, Boffo Developments Ltd. stepped in to develop the luxury condo development, which has 21 homes at the corner of Hornby and Helmcken streets.
A bankruptcy order was made against Hornby Residences Ltd. in April 2015.
The investor has not received any interest or principle repayments from Schouw or Hornby Residences Ltd. and the investor's funds are gone, according to the BCSC.
None of the allegations has been proven. Counsel for the BCSC's executive director will apply to set dates for a hearing into the allegations before a panel of commissioners on December 8.
