The British Columbia Securities Commission (BCSC) has determined that two Vancouver residents committed $21.7 million fraud but has yet to mete out any punishment.
One of the BCSC’s panels found that Michael Patrick Lathigee and Earle Douglas Pasquill both committed fraud in 2008, the BCSC announced July 14.
Lathigee and Pasquill jointly directed and controlled a group of companies called the Freedom Investment Club (FIC), according to the BCSC.
FIC included FIC Real Estate Projects Ltd., FIC Foreclosure Fund Ltd., and WBIC Canada Ltd.
By early 2008, FIC had taken on significant debt related to several Alberta real estate properties that it had acquired and was attempting to develop.
All of the loans included guarantees from other FIC companies. Also at this time, Lathigee and Pasquill were aware that FIC was, in their own words, “in a very bad situation” and “close to insolvency,” according to the BCSC.
Instead of being open about that knowledge, Lathigee and Pasquill chose to keep the information confidential as they focused on raising money in an effort to “save” FIC, according to the BCSC.
The BCSC’s panel found that between February 1 and November 15, 2008, Lathigee and Pasquill fraudulently raised $21.7 million through the sale of securities to 698 investors without telling the investors important facts about the financial condition of the corporate respondents.
The panel found that Lathigee and Pasquill knew when they were distributing the securities that FIC had severe cash flow problems, including an unfunded $8 million cost overrun on the company’s biggest project.
The panel found that the Lathigee and Pasquill also committed fraud by using $8.5 million of $9.9 million raised from 331 investors in the company’s FIC Foreclosure division to make loans to related companies instead of investing the funds in foreclosures of residential properties in the U.S., which was the purpose for which the funds were raised.
“As a consequence of the respondents’ dishonesty, the pecuniary interests of the investors in the corporate respondents were clearly put at risk,” the panel noted. “The 698 investors invested, and have lost, $21.7 million.”
Both BCSC staff and council for Lathigee and Pasquill will now make submissions on what they believe an appropriate penalty will be.
A determination of what that penalty will be is likely to be in the next year.
