By Shurtz, Delon on July 22, 2020.
A southern Alberta man has been found guilty of fraud and making false or misleading statements, contrary to the Alberta Securities Act.
On Monday a Calgary provincial court judge released his decision finding Ronald James Aitkens, who has business ties to Lethbridge, guilty of the two charges, which stem from the distribution and sale of securities in a real estate investment opportunity west of Calgary known as Legacy Communities Inc.
The securities were distributed to investors under the Offering Memorandum exemption available under the ASA, which relieves an issuer from the requirement of the prospectus and registration system. However, it still requires accurate and plain disclosure so investors can assess the opportunity and weigh its risks.
“It is a fundamental principle that representations contained in offering memoranda must be fair and accurate,” Judge L.W. Robertson said in his written decision.
“There must be no misrepresentation, either by deliberate statement or omission of critical facts. It is not the obligation of the investor to sift through the materials, carefully inspecting and weighing what might be truthful and accurate and cautioning themselves about might not be. Instead, it is the obligation of the party seeking the investment capital, the issuer, to provide only accurate and truthful facts about the opportunity.”
Three separate Offering Memoranda were issued between July 2005 and October 2007, with final investments received in 2008. More than $35 million was raised from about 1,400 investors, some of whom used their RRSP savings.
The project failed, however, and by December 2011 Legacy had less than $10,000 in its account, Judge Robertson noted in his decision.
“It is alleged that the funds were not used for their stated purpose, that highly relevant ‘investment agreements’ Legacy had with companies controlled by the accused were not disclosed, and that the accused engaged in general fraud in the course of the project.”
During trial the Crown argued the accused failed to meet his obligations under the Act by knowingly misleading investors by, among other things, misusing money specifically dedicated to the Legacy project for unrelated and riskier projects. Defence, on the other hand, said the Crown failed to prove the elements of the charges and claimed there was no misappropriation of money from the objectives detailed in the Offering Memorandum.
The offences carry a maximum fine under the ASA of $5 million or imprisonment of up to five years less a day, or both. Sentencing submissions are scheduled to be heard Sept. 4 in Calgary provincial court.
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