A Saskatoon lawyer says it’s hard to say a local real estate company acted in good faith when it raised $211.9 million from investors before collapsing earlier this year.
Mike Russell represents 121 investors who pumped millions into Epic Alliance Real Estate Inc. and are now seeking answers about their missing money.
He successfully had a court-ordered inspector examine Epic Alliance in February. Last month, Ernst and Young, appointed by a Court of Queen’s Bench judge to review the company’s books, released its report, concluding there remained “no more than face value cash and other assets”.
“The most notable thing that struck me immediately was the absence of any significant financial records prior to 2019, leaving a gap of more than six years in the financial history of a group of companies that had over $200 million flowing through it. . A major problem,” Russell said of the report.
The report also said that many of the files available to the investigator were “very disorganized” and that computer servers containing the company’s financial data were found missing from the company’s offices.
The investigation also confirmed what Russell originally thought when he first heard that Epic Alliance co-owners Rochelle Laflamme and Alisa Thompson blamed the company’s demise on a temporary order of cease trade order issued in October by the Financial and Consumer Affairs Authority of Saskatchewan.
“The business model is pretty clear. And it’s not operations-based like a steady stream of income,” he said.
“Unfortunately, at this point, I think it’s pretty clear that it’s hard to say these entities were acting in good faith.”
The Ernst and Young report showed investor funds accounted for around 82% of revenue between 2019 and 2022 when accurate financial records were kept. About 18% came from operations.
“We find that investors are getting their returns largely through investor input,” Russel said.
Epic Alliance controlled over 500 properties in Saskatoon and North Battleford, mostly in central neighborhoods.
Russel also pointed to other concerns in the report regarding “questionable” disbursements.
In the report there are lines labeled “professional fees” amounting to $1.4 million, “miscellaneous operating expenses” listed at $1.2 million, “unknown” disbursements at $1.2 million dollars and “credit card payments” listed at $2.9 million.
“So these line items obviously require further explanation. By themselves, you know, they are quite concerning,” Russell said.
In addition to the ongoing FCAA investigation, the Saskatoon Police Department’s Economic Crimes Unit is investigating a complaint against Epic Alliance filed by an Ontario investor.
CTV News was unable to reach Laflamme and Thompson for comment.