A whold bunch of Canadians about to get hit with $98,000 Tax Liabilities.

 If the deal looks too good to be ture, it is likely so.

I spoke out about this finanical investment plan in the past and now the manure has hit the fan.

CRA is going to create a ton of tax problems requiring solutions. This is going to require some very serious tax planning for the victims of this alleged ponzi scheme.

Dan White

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Taxmen search 50 homes, businesses linked to Ponzi scheme

By Kelly Cryderman, Gwendolyn Richards and Kristen Odland, Calgary HeraldSeptember 16, 2009 7:01 AM Be the first to post a comment

CALGARY - Dozens of investigators in the Canada Revenue Agency’s Calgary office are hunkered down probing one of the largest alleged Ponzi schemes in Canadian history — which was highlighted by RCMP fraud charges laid earlier this week.

The tax examination of an alleged Calgary-based investment plot is part of a two-year investigation and follows an intense, two-day search of 50 locations across Western Canada by agency investigators and auditors in March 2008.

At that time, 300 tax officials swept the locations–which included usually quiet accountants’ offices–for evidence related to alleged fictitious registered retirement savings plans, investment scams and tax evasion.

“It does speak to the fact we are taking this very seriously, and it is a very complicated and involved case,” said agency spokeswoman Joanne Gorsalitz, who confirmed the investigation is related to the alleged Ponzi scheme.

Court documents filed last year to execute the search warrants say the agency has reassessed 295 related investors in at least $29 million in RRSP withdrawals, “creating a significant tax consequence” for those people.

The RCMP took action in the case this week. On Monday, the RCMP charged Milowe Allen Brost, 55, of Chestermere, and Gary Allen Sorenson, 66, of Calgary with fraud. RCMP allege the pair have been involved in a nine-year scheme that defrauded upwards of 3,000 investors — primarily from Canada and the U. S.–of hundreds of millions of dollars.

A Ponzi scam typically includes promises of high investment returns, and sees early investors paid off with cash from newer investors until the pyramid collapses. Investors are discouraged from withdrawing any funds for as long as possible.

In the allegations relating to Brost and Sorenson, a North American-wide army of investment advisers called “structurists” did much of the work recruiting investors through entities such as the Institute for Financial Learning.

It appears that few if any investors had received returns in the last two years, or have been able to withdraw their money. Canadian law firm Bennett Jones is heading up two yet-to-be-certified class action lawsuits on behalf on investors who dealt with Brost or his related companies.

“This is the largest (alleged) Ponzi in Canada that I have seen, and I’ve had experience with many of these cases,” said Jim Patterson, the partner in charge of the firm’s fraud law group.

“The returns being promised are remarkable,” Patterson said. “The common theme in these schemes is if it’s too good to be true, it is.”

But it is now clear that besides being pursued by the RCMP, Brost, Sorenson and others associated with the scheme are also under investigation by the Canada Revenue Agency. They could face charges under the Income Tax Act and the Criminal Code.

Court documents filed to execute the search warrants state that investors attended seminars where they were promised stellar returns on their investments–reportedly as high as 40 per cent — and would also still have access to their money. The investors were also told that this was all eligible for an RRSP tax shelter.

Calgarian Cindy Schug, 49, believes she is one of the victims of the scheme.

In 1999, on the advice of a friend, she attended a downtown hotel meeting. The promise of her money growing by three per cent each month tax free was definitely intriguing.

“Sure you have a house but you never seem to get out of the hole,” Schug said.

“So I went, and thought, ‘well that sounds pretty cool,’ ” she said. “I can make lots of money and then retire when I’m 50.”

Over time, she invested a total of about $155,000 into Syndicated Gold Depository SA and various other companies.

She received professional looking documents and certificates to sign. She said she was also supposed to get a debit-like card to access her money through bank machines but never did.

Schug said she has now been trying to get her money back for the past seven years.

To add insult to injury, Schug said she received a shocking letter from Revenue Canada this spring which states she owes Ottawa approximately $77,000 in back taxes.

“I’m at a point where I don’t know who to believe,” she said. “I have no RRSPs for my future.”

The Canada Revenue Agency documents also allege Brost–who also went under the names Mylo Brost, Milo Brost and MB Gonne–understated his income to avoid paying taxes between 2000 and 2005. The same documents state that most of the money from the “RRSP strip scheme” were funnelled to Sorenson, who hasn’t paid taxes in Canada since 2000.

All the while, say the agency documents, Brost and his now-estranged wife owned at least six vehicles between them, including a Mercedes Benz and two Lexus.

While some questions have been raised about the length of the investigation, the RCMP said Tuesday they could not act until there was enough evidence.

“During that time we didn’t want to be seen as market-breakers,” said Supt. Eric Mattson of the Integrated Market Enforcement Team.

“We don’t want to discuss a group of committing crimes and say’Don’t do this,’because at the end of the investigation perhapswedon’thavesufficient information to lay charges and we’d be open(to civil litigation) as well,” he said.

“We may end up interfering with what could have been legitimate business.”

At the height of the investigation, about a dozen people were on the case, including six RCMP officers, forensic accountants and civil analysts.

Sending officers to numerous foreign countries — including Peru, Honduras and Costa Rica–also added to the lengthy investigation because they had to follow the rules of those countries to obtain evidence, Mattson said. International agreements had to be followed to get banking information for offshore accounts, he added.

As news of the charges spread Tuesday, a further 35 investors contacted RCMP.

Steven Skurka, a Torontobased criminal lawyer who is representing Brost, said he has spoken with his client, but not in person.

“I’ll be meeting with him as soon as is feasible to review the charges. They are serious charges but they are only allegations at this stage. I may have more to say in the near future,” Skurka said.

Brost and Sorenson both have histories dating back to 1998 with the Alberta Securities Commission for a number of violations.

In 2007, Brost was ordered to pay$650,000 in 2007 for fraud, the largest amount levied in the commission’s history, and has been barred for life from trading on the Alberta market. The ASC has been unable to collect the debt.

While the 3 1/2-year RCMP investigation has led to charges in this jurisdiction, police and other agencies elsewhere are also pursuing Sorenson and Brost. According to the court documents, Brost is also facing charges in Ontario for uttering a forged document and fraud over $5,000.

In February 2008, the U. S. Justice Department filed two lawsuits against two accountants– one in Texas and the other in Washington, D. C. –for a fraudulent gold-mining scheme sold to a number of wealthy investors, including seven current or former NFL players. The suits allege the investments were connected to one of Sorenson and Brost’s companies in Calgary.

kcryderman@ theherald. canwest.comwith files from stephane massinon,
© Copyright (c) The Calgary Herald

This entry was posted on September 16, 2009 at 10:16 am and is filed under Tax Topics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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