CRIMINAL CAPITALI$M IS THERE ANY OTHER KIND?
'Give me a break': Bridging Finance, Sean McCoshen sued over Alberta-Alaska rail plan
A Canadian company with a decade-old $27-billion plan to build a railway that would ship energy products from Alberta to the Pacific Northwest has filed a lawsuit against a group of defendants, including Bridging Finance Inc., alleging that a rival project at the centre of the private lender’s high-profile scandal stole proprietary information.
B.C.-based G Seven Generations Ltd. (G7G Railway) filed a lawsuit in a Manitoba court last month seeking unspecified damages from Bridging Finance; the firm's former CEO, David Sharpe; entrepreneur Sean McCoshen; as well as infrastructure consulting firm Aecom Canada Ltd., which was retained in 2011 to help develop the project; Aecom Canada Vice-President John Falcetta; former Aecom executive Bill Hjelholt; and the Alaska-Alberta Railway Development Corp. None of the allegations have been tested or proven in court.
The lawsuit is another chapter in the scandal at Bridging Finance, a Toronto-based private lender that was sent into receivership earlier this year amid an Ontario Securities Commission (OSC) investigation into alleged mismanagement and self-dealing. The OSC probe led an Ontario judge to put PricewaterhouseCoopers in control of Bridging, which managed approximately $2 billion in assets as of December 2020, according to a court filing.
OSC staff alleged that Sharpe received undisclosed payments into his personal chequing account from a company controlled by McCoshen at the same time that Bridging Finance loaned more than $100 million to companies operated by McCoshen, including the Alaska-Alberta Railway. The allegations haven’t been proven or tested.
Matt Vickers, chief executive officer of the G7G Railway project, said in a phone interview that he decided to file the lawsuit now because potential investors began to confuse his rail project with the competing Alaska-Alberta project. He also said he hopes for a friendly resolution because both projects included provisions that mandated significant First Nations owners
"I was always praying and trusting that the First Nations would put an end to the dispute between the two rail groups," he said.
‘Do you trust me?’
The G7G Railway project was first envisioned in 2008 as a major infrastructure initiative that would link Alberta's oil patch to several ports in British Columbia, Alaska, and the Arctic to get some of the province's energy products to foreign markets. Under the plan, First Nations groups would own half of the project, and the total cost was estimated to be about $27 billion, Vickers said. The Alberta government provided G7G Railway with $1.8 million in April 2013 to develop a feasibility study.
The lawsuit alleges that executives from G7G Railway met with McCoshen to seek financing support in May 2015 and subsequently signed a non-disclosure agreement to keep details of the rail project confidential. Two months later, McCoshen and Falcetta are said to have introduced G7G Railway to Sharpe and the Bridging Finance team to provide financing for the project.
Vickers said he first met McCoshen after one of G7G Railway's directors met with Blaine Knott -- a former employee of The Usand Group, a Manitoba-based company that McCoshen founded that aimed to create partnerships with First Nation, Inuit, and Métis organizations and communities -- when seeking financing for the rail project. Knott wasn't immediately available for comment.
B.C.-based G Seven Generations Ltd. (G7G Railway) filed a lawsuit in a Manitoba court last month seeking unspecified damages from Bridging Finance; the firm's former CEO, David Sharpe; entrepreneur Sean McCoshen; as well as infrastructure consulting firm Aecom Canada Ltd., which was retained in 2011 to help develop the project; Aecom Canada Vice-President John Falcetta; former Aecom executive Bill Hjelholt; and the Alaska-Alberta Railway Development Corp. None of the allegations have been tested or proven in court.
The lawsuit is another chapter in the scandal at Bridging Finance, a Toronto-based private lender that was sent into receivership earlier this year amid an Ontario Securities Commission (OSC) investigation into alleged mismanagement and self-dealing. The OSC probe led an Ontario judge to put PricewaterhouseCoopers in control of Bridging, which managed approximately $2 billion in assets as of December 2020, according to a court filing.
OSC staff alleged that Sharpe received undisclosed payments into his personal chequing account from a company controlled by McCoshen at the same time that Bridging Finance loaned more than $100 million to companies operated by McCoshen, including the Alaska-Alberta Railway. The allegations haven’t been proven or tested.
Matt Vickers, chief executive officer of the G7G Railway project, said in a phone interview that he decided to file the lawsuit now because potential investors began to confuse his rail project with the competing Alaska-Alberta project. He also said he hopes for a friendly resolution because both projects included provisions that mandated significant First Nations owners
"I was always praying and trusting that the First Nations would put an end to the dispute between the two rail groups," he said.
‘Do you trust me?’
The G7G Railway project was first envisioned in 2008 as a major infrastructure initiative that would link Alberta's oil patch to several ports in British Columbia, Alaska, and the Arctic to get some of the province's energy products to foreign markets. Under the plan, First Nations groups would own half of the project, and the total cost was estimated to be about $27 billion, Vickers said. The Alberta government provided G7G Railway with $1.8 million in April 2013 to develop a feasibility study.
The lawsuit alleges that executives from G7G Railway met with McCoshen to seek financing support in May 2015 and subsequently signed a non-disclosure agreement to keep details of the rail project confidential. Two months later, McCoshen and Falcetta are said to have introduced G7G Railway to Sharpe and the Bridging Finance team to provide financing for the project.
Vickers said he first met McCoshen after one of G7G Railway's directors met with Blaine Knott -- a former employee of The Usand Group, a Manitoba-based company that McCoshen founded that aimed to create partnerships with First Nation, Inuit, and Métis organizations and communities -- when seeking financing for the rail project. Knott wasn't immediately available for comment.
Matt Vickers, chief executive officer of G Seven Generations, is pictured at the Industrial Works Railyard in North Vancouver, B.C. on Jan. 10, 2018. Photo by Chung Chow.
"I believe [Knott and the G7G director] were meeting for one of our wind projects at the time and it was mentioned that we're working on this massive rail project. Blaine [told the director], 'Well listen, I known this guy Sean McCoshen. He's an investment banker and he raised funding for First Nations for participating in equity positions and major projects,'" Vickers said.
"We go Googling to see who Sean McCoshen is and we certainly never found anything negative or positive about the guy so we thought, what the heck, if someone can raise the 50 per cent for First Nations investment, it's not going to hurt to go meet with them."
Vickers said that shortly afterward, he had dinner with McCoshen after a meeting earlier in the day with the G7G Railway board failed to secure a financing deal. Vickers said that McCoshen told him, "I know the First Nations are going to have to trust me. Do you trust me?"
"My answer to him was that I just met you. I later told the board, 'Wasn't that a ridiculous statement for him to make?’," Vickers said.
‘Give me a break’
Between July and December 2015, Bridging Finance agreed in principle to provide a $28.9-million loan to G7G Railway, signed a non-disclosure agreement, and was privy to confidential information regarding the rail project, the filing states.
According to the filing, Vickers spoke with Sharpe in July 2015 regarding the financing arrangement as well as a $1.4-million payment that McCoshen would receive for connecting G7G and Bridging Finance. The lawsuit alleges that Sharpe told Vickers that Bridging Finance would "push on" from discussing the lending plans with G7G Railway and cut off communication with the company.
"If that was the finder’s fee for a $27-billion project, you know, it probably would be understandable," Vickers said. "But for a $20-million loan? I mean, give me a break. Who would even think of paying that kind of money."
Around that same time, G7G Railway alleges that the defendants "combined or conspired with each other with the intent to injure the plaintiff by entering into an agreement to steal the plaintiff's idea for the G7G Railway, misappropriate the plaintiff's proprietary information and pursue an identical or nearly identical railway project along the route."
That idea is alleged to have led to the creation of Alaska-Alberta Railway Development Corp., which was founded by McCoshen. The competing rail project also hired Aecom to lead engineering development while Bridging Finance provided $180 million in loans to the company, the lawsuit alleges. Despite being granted a presidential permit from former U.S. President Donald Trump last September to develop the project, Alaska-Alberta Railway Development Corp. filed for bankruptcy protection in June shortly after Bridging Finance was put into receivership. Vickers said that G7G Railway is exploring legal advice on whether it would acquire its rival's assets during bankruptcy proceedings.
Lawyers representing the court-appointed receiver for Bridging Finance and Sharpe declined to comment. Representatives from Aecom Canada, Alaska-Alberta Railway Development Corp., as well as Falcetta were not immediately available for comment. McCoshen didn't respond to messages left on his personal cell phone and a phone number linked to a company he controls.
When reached, Hjelholt told BNN Bloomberg in an email that he was unaware of the lawsuit filed by G7G Railway and had not seen the statement of claim, so he could not comment on the details.
“I can categorically deny that I, nor to my knowledge AECOM (when I was employed there, ending in June of 2016) even HAD a contract with G7G. I am not a lawyer, but I am pretty sure you cannot breach a contract if you don't have a contract,” Hjelholt wrote in the email.
According to Vickers, G7G Railway has a signed agreement with Aecom from Nov. 14, 2011, but was not able to share it with BNN Bloomberg because the document is deemed confidential.
Vickers added that G7G Railway is still looking to develop the project and has secured a draft term sheet from an unnamed financier based out of Australia that would still preserve the First Nations equity position. He is also looking to secure Alberta Premier Jason Kenney's backing to go forward with the rail project.
A representative from the Alberta Premier's office said in an email that while the current government hasn’t provided any financial support for the project, discussions continue with counterparts in Alaska “on opportunities that are in the best economic interests of our two jurisdictions, which includes rail.”
"We feel it's economically viable," Vickers said. "The mining industry alone could generate a billion dollars in revenue. You've got frieght, you've got grain, the list goes on and on. Even if we ship no oil, the plan always was that we would be shipping raw bitumen in one form or another."
Jun 15, 2021
25,000 'vulnerable' Bridging Finance investors fight for voice in probe
Lawyers for tens of thousands of retail investors with money in Bridging Finance Inc.’s investment funds are asking an Ontario court to allow them to represent those unitholders amid an investigation into the troubled Toronto-based private lender by Canada’s top capital markets regulator.
An Ontario court appointed PricewaterhouseCoopers Inc. (PwC) to take control of Bridging Finance on Apr. 30 at the request of the Ontario Securities Commission. That decision was made pending the outcome of an investigation into allegations the lender and its then-senior executives, including Chief Executive Officer David Sharpe and his wife Natasha, who was chief investment officer at the firm, mismanaged funds and failed to disclose conflicts of interest. The Sharpes were subsequently fired from their roles after PwC stepped in. The allegations have not been proven.
According to a court document filed Monday, a team of lawyers at Toronto-based Weisz Fell Kour LLP submitted a motion to the Ontario Superior Court asking to be assigned as representative counsel for approximately 25,000 retail investors who invested in Bridging Finance's funds and may either be unfamiliar with the court proceedings or financially unable to retain their own lawyer to recover their investments.
"The retail investors are the most vulnerable unitholders in this proceeding and it would be unjust to deny funded legal counsel to the very people who bear the greatest burden of any liquidation losses but have the least means to mitigate them," according to the filing.
The motion will be heard by an Ontario Superior Court judge Wednesday morning, according to the filing.
As receiver, PwC proposed to create limited partnership advisory committees that would solicit feedback from two groups of Bridging Finance fund unitholders to relay feedback on decisions made by the court monitor.
While the committees would include several brokers and institutional investors, retail investors would only account for two members of one group. However, the filing from the Weisz Fell Kour legal team described the committees as "toothless tigers" with limited capacity to represent the interests of any relevant parties.
"The retail investors are a vast and disconnected group, comprised of many persons unsophisticated in financial or legal matters, and who cannot individually afford to incur legal fees in what will undoubtedly be a long receivership," the filing states.
Tracey Fellowes, a 63-year-old retiree who invested almost $120,000 with her husband in Bridging Finance funds, is one retail investor who would like to be represented by a separate group of lawyers, rather than be part of a committee.
Courtesy: Tracey Fellowes
"We need to have someone speaking for us directly, not the people that got us into Bridging in the first place," she said in a phone interview. BNN Bloomberg reviewed documents confirming Fellowes’ investments.
Fellowes, who used her existing financial advisor, Richardson Wealth Ltd., to invest in the funds on her and her husband's behalf roughly two years ago, said that there's a potential conflict of interest by having brokers and money managers take part in the same committee where their interests may not be aligned with retail investors.
"I feel that [Bridging Finance] should probably be liquidated and all the assets they can get from David Sharpe, or Natasha Sharpe and whoever else was involved, [should] pay the investors back," Fellowes said. "There's a lot of people involved that will get paid. How much is going to be left for us?"
A Richardson Wealth spokesperson told BNN Bloomberg in an email that the firm is, "monitoring the situation carefully, engaging with PwC which is overseeing Bridging, and keeping our clients up to date every step of the way.”
Lawyers representing PwC and Bridging Finance were not immediately available for comment.
Bridging Finance mystery deepens amid 34,200 deleted emails
The receiver in control of embattled Bay Street lender Bridging Finance Inc. has raised red flags over transactions involving the lender’s top client and said tens of thousands of company emails have been deleted, according to the latest report on its work.
The June 9 filing by PricewaterhouseCoopers paints the picture of an arduous task in getting to the bottom of what transpired at the lender and what the future holds for unitholders in its investment funds.
Here are some of the key takeaways from PwC’s report. None of the allegations or claims have been tested or proven in a court.
According to PwC, an I.T. firm provided a service ticket dated Oct. 6, 2020 from an unidentified employee who requested that “all records of emails” be deleted based on certain search terms. That resulted in 34,200 emails being scrapped, according to logs reviewed by PwC.
The employee was interviewed by PwC on June 7 and claimed that “on more than one occasion”, starting last year, they were asked by then-Chief Executive Officer David Sharpe and another senior executive to perform searches for emails to be deleted.
PwC identified what it called “a number of issues of concern” relating to Bridging Finance’s relationship with Alaska-Alberta Railway Development Corp. (AARDC), which is the lender’s top client with $316.6 million in exposure as of March 31. A central figure in the relationship is a financier named Sean McCoshen, who co-founded the rail project.
PwC said its legal counsel attempted to arrange a conversation with McCoshen about the role of some numbered companies he controls, but was informed by McCoshen’s counsel that he’s unable to respond “due to medical circumstances.”
PwC said it has demanded repayment of $207.8 million outstanding under Bridging’s loan to AARDC.
It also said it was informed late last month that AARDC’s legal counsel and some of its management team had resigned. As of Thursday morning, the only individual listed on AARDC’s online executive management profile is President Jean Paul (JP) Gladu.
PwC said in its report that it’s planning to launch a “rigorous sales and investor solicitation process” in which some or all of Bridging’s loans and assets could be scooped up. The process is subject to court approval.
PwC is also seeking court approval for funding to hang on to key talent. In the report, PwC said it has identified up 20 non-executive employees to whom it wants to offer retention bonuses that would amount to a maximum of $366,000. As of the time of the filing, PwC said it has thus far allocated $266,000 of that amount.
"I believe [Knott and the G7G director] were meeting for one of our wind projects at the time and it was mentioned that we're working on this massive rail project. Blaine [told the director], 'Well listen, I known this guy Sean McCoshen. He's an investment banker and he raised funding for First Nations for participating in equity positions and major projects,'" Vickers said.
"We go Googling to see who Sean McCoshen is and we certainly never found anything negative or positive about the guy so we thought, what the heck, if someone can raise the 50 per cent for First Nations investment, it's not going to hurt to go meet with them."
Vickers said that shortly afterward, he had dinner with McCoshen after a meeting earlier in the day with the G7G Railway board failed to secure a financing deal. Vickers said that McCoshen told him, "I know the First Nations are going to have to trust me. Do you trust me?"
"My answer to him was that I just met you. I later told the board, 'Wasn't that a ridiculous statement for him to make?’," Vickers said.
‘Give me a break’
Between July and December 2015, Bridging Finance agreed in principle to provide a $28.9-million loan to G7G Railway, signed a non-disclosure agreement, and was privy to confidential information regarding the rail project, the filing states.
According to the filing, Vickers spoke with Sharpe in July 2015 regarding the financing arrangement as well as a $1.4-million payment that McCoshen would receive for connecting G7G and Bridging Finance. The lawsuit alleges that Sharpe told Vickers that Bridging Finance would "push on" from discussing the lending plans with G7G Railway and cut off communication with the company.
"If that was the finder’s fee for a $27-billion project, you know, it probably would be understandable," Vickers said. "But for a $20-million loan? I mean, give me a break. Who would even think of paying that kind of money."
Around that same time, G7G Railway alleges that the defendants "combined or conspired with each other with the intent to injure the plaintiff by entering into an agreement to steal the plaintiff's idea for the G7G Railway, misappropriate the plaintiff's proprietary information and pursue an identical or nearly identical railway project along the route."
That idea is alleged to have led to the creation of Alaska-Alberta Railway Development Corp., which was founded by McCoshen. The competing rail project also hired Aecom to lead engineering development while Bridging Finance provided $180 million in loans to the company, the lawsuit alleges. Despite being granted a presidential permit from former U.S. President Donald Trump last September to develop the project, Alaska-Alberta Railway Development Corp. filed for bankruptcy protection in June shortly after Bridging Finance was put into receivership. Vickers said that G7G Railway is exploring legal advice on whether it would acquire its rival's assets during bankruptcy proceedings.
Lawyers representing the court-appointed receiver for Bridging Finance and Sharpe declined to comment. Representatives from Aecom Canada, Alaska-Alberta Railway Development Corp., as well as Falcetta were not immediately available for comment. McCoshen didn't respond to messages left on his personal cell phone and a phone number linked to a company he controls.
When reached, Hjelholt told BNN Bloomberg in an email that he was unaware of the lawsuit filed by G7G Railway and had not seen the statement of claim, so he could not comment on the details.
“I can categorically deny that I, nor to my knowledge AECOM (when I was employed there, ending in June of 2016) even HAD a contract with G7G. I am not a lawyer, but I am pretty sure you cannot breach a contract if you don't have a contract,” Hjelholt wrote in the email.
According to Vickers, G7G Railway has a signed agreement with Aecom from Nov. 14, 2011, but was not able to share it with BNN Bloomberg because the document is deemed confidential.
Vickers added that G7G Railway is still looking to develop the project and has secured a draft term sheet from an unnamed financier based out of Australia that would still preserve the First Nations equity position. He is also looking to secure Alberta Premier Jason Kenney's backing to go forward with the rail project.
A representative from the Alberta Premier's office said in an email that while the current government hasn’t provided any financial support for the project, discussions continue with counterparts in Alaska “on opportunities that are in the best economic interests of our two jurisdictions, which includes rail.”
"We feel it's economically viable," Vickers said. "The mining industry alone could generate a billion dollars in revenue. You've got frieght, you've got grain, the list goes on and on. Even if we ship no oil, the plan always was that we would be shipping raw bitumen in one form or another."
Jun 15, 2021
25,000 'vulnerable' Bridging Finance investors fight for voice in probe
Lawyers for tens of thousands of retail investors with money in Bridging Finance Inc.’s investment funds are asking an Ontario court to allow them to represent those unitholders amid an investigation into the troubled Toronto-based private lender by Canada’s top capital markets regulator.
An Ontario court appointed PricewaterhouseCoopers Inc. (PwC) to take control of Bridging Finance on Apr. 30 at the request of the Ontario Securities Commission. That decision was made pending the outcome of an investigation into allegations the lender and its then-senior executives, including Chief Executive Officer David Sharpe and his wife Natasha, who was chief investment officer at the firm, mismanaged funds and failed to disclose conflicts of interest. The Sharpes were subsequently fired from their roles after PwC stepped in. The allegations have not been proven.
According to a court document filed Monday, a team of lawyers at Toronto-based Weisz Fell Kour LLP submitted a motion to the Ontario Superior Court asking to be assigned as representative counsel for approximately 25,000 retail investors who invested in Bridging Finance's funds and may either be unfamiliar with the court proceedings or financially unable to retain their own lawyer to recover their investments.
"The retail investors are the most vulnerable unitholders in this proceeding and it would be unjust to deny funded legal counsel to the very people who bear the greatest burden of any liquidation losses but have the least means to mitigate them," according to the filing.
The motion will be heard by an Ontario Superior Court judge Wednesday morning, according to the filing.
As receiver, PwC proposed to create limited partnership advisory committees that would solicit feedback from two groups of Bridging Finance fund unitholders to relay feedback on decisions made by the court monitor.
While the committees would include several brokers and institutional investors, retail investors would only account for two members of one group. However, the filing from the Weisz Fell Kour legal team described the committees as "toothless tigers" with limited capacity to represent the interests of any relevant parties.
"The retail investors are a vast and disconnected group, comprised of many persons unsophisticated in financial or legal matters, and who cannot individually afford to incur legal fees in what will undoubtedly be a long receivership," the filing states.
Tracey Fellowes, a 63-year-old retiree who invested almost $120,000 with her husband in Bridging Finance funds, is one retail investor who would like to be represented by a separate group of lawyers, rather than be part of a committee.
Courtesy: Tracey Fellowes
"We need to have someone speaking for us directly, not the people that got us into Bridging in the first place," she said in a phone interview. BNN Bloomberg reviewed documents confirming Fellowes’ investments.
Fellowes, who used her existing financial advisor, Richardson Wealth Ltd., to invest in the funds on her and her husband's behalf roughly two years ago, said that there's a potential conflict of interest by having brokers and money managers take part in the same committee where their interests may not be aligned with retail investors.
"I feel that [Bridging Finance] should probably be liquidated and all the assets they can get from David Sharpe, or Natasha Sharpe and whoever else was involved, [should] pay the investors back," Fellowes said. "There's a lot of people involved that will get paid. How much is going to be left for us?"
A Richardson Wealth spokesperson told BNN Bloomberg in an email that the firm is, "monitoring the situation carefully, engaging with PwC which is overseeing Bridging, and keeping our clients up to date every step of the way.”
Lawyers representing PwC and Bridging Finance were not immediately available for comment.
Bridging Finance mystery deepens amid 34,200 deleted emails
The receiver in control of embattled Bay Street lender Bridging Finance Inc. has raised red flags over transactions involving the lender’s top client and said tens of thousands of company emails have been deleted, according to the latest report on its work.
The June 9 filing by PricewaterhouseCoopers paints the picture of an arduous task in getting to the bottom of what transpired at the lender and what the future holds for unitholders in its investment funds.
Here are some of the key takeaways from PwC’s report. None of the allegations or claims have been tested or proven in a court.
According to PwC, an I.T. firm provided a service ticket dated Oct. 6, 2020 from an unidentified employee who requested that “all records of emails” be deleted based on certain search terms. That resulted in 34,200 emails being scrapped, according to logs reviewed by PwC.
The employee was interviewed by PwC on June 7 and claimed that “on more than one occasion”, starting last year, they were asked by then-Chief Executive Officer David Sharpe and another senior executive to perform searches for emails to be deleted.
PwC identified what it called “a number of issues of concern” relating to Bridging Finance’s relationship with Alaska-Alberta Railway Development Corp. (AARDC), which is the lender’s top client with $316.6 million in exposure as of March 31. A central figure in the relationship is a financier named Sean McCoshen, who co-founded the rail project.
PwC said its legal counsel attempted to arrange a conversation with McCoshen about the role of some numbered companies he controls, but was informed by McCoshen’s counsel that he’s unable to respond “due to medical circumstances.”
PwC said it has demanded repayment of $207.8 million outstanding under Bridging’s loan to AARDC.
It also said it was informed late last month that AARDC’s legal counsel and some of its management team had resigned. As of Thursday morning, the only individual listed on AARDC’s online executive management profile is President Jean Paul (JP) Gladu.
PwC said in its report that it’s planning to launch a “rigorous sales and investor solicitation process” in which some or all of Bridging’s loans and assets could be scooped up. The process is subject to court approval.
PwC is also seeking court approval for funding to hang on to key talent. In the report, PwC said it has identified up 20 non-executive employees to whom it wants to offer retention bonuses that would amount to a maximum of $366,000. As of the time of the filing, PwC said it has thus far allocated $266,000 of that amount.
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