Alberta authorities eye oilsands firm as Ponzi probe deepens
Milowe Brost, charged with operating an alleged Ponzi scheme, enters his home in Chestermere, Alta. on Sept. 17.
Photograph by: Leah Hennel, Calgary Herald
CALGARY — The Alberta Securities Commission has levelled its largest fine ever against Milowe Brost, one of two alleged Ponzi scheme architects, but the watchdog agency isn't done with the Calgary men.
A hearing in the new year will focus on a purported energy and oilsands company that the securities commission alleges Brost, 55, Gary Sorenson, 66, and another man were responsible for developing, Arbour Energy Inc.
The commission says Calgary-based Arbour collected more than $46 million from investors — mostly Albertans — over 16 months.
According to Arbour's website, the firm was engaged in oil and gas exploration, and environmentally friendly oilsands recovery. But at the time it sought money from investors, "Arbour had effectively no business or operations," the ASC alleges in its hearing notices.
"They were trying get the people — they wanted to invest their money in something that was environmentally friendly. And that was the shtick that they used with Arbour Energy, that they were actually trying to clean up the tarsands," said Graham McMillan, a chartered accountant who has studied the business dealings of Brost and Sorenson since his elderly parents invested $50,000 in a Brost-related company.
Lawyers representing Arbour officials contacted for comment declined to be interviewed. A news release from Arbour's president Dennis Morice in 2008 said "the company intends to aggressively defend its position both before the commission and through the courts."
Last week, the RCMP slapped Brost and Sorenson with theft and fraud charges related to an alleged Ponzi-like scheme that could, through a throng of companies, involve as much as $400 million, according to court documents.
At the same time, the Alberta Securities Commission continues to look into Arbour Energy, which was a publicly traded company.
The commission alleges the controllers of Arbour Energy, including Brost, Sorenson and their associates, "perpetrated a fraud on Alberta investors" and illegally distributed Arbour securities.
Brost in particular is singled out. In 2007, he was handed a $650,000 fine — the largest in Alberta securities history — and banned for life from operating in Alberta's capital markets for his role in a fraud against investors through the company Strategic Metals Corp.
None of the new allegations have yet been ruled on by an ASC panel.
In all, Arbour managed to raise $46 million through the sale of shares, ASC documents allege. Most of those shares were sold through the Institute for Financial Learning (IFFL), an entity the ASC alleges provided unregistered advice to investors.
The IFFL was one of the companies listed by RCMP when they charged Brost and Sorenson.
"The majority of the purchasers were IFFL members, and more than half the sales — $25,144,689 — occurred in Alberta," says a ruling from the commission.
About $43 million was loaned to Merendon Mining, a company controlled by Sorenson, according to the ASC. Sorenson is now believed to be living in Honduras, a country which does not have an extradition agreement with Canada.
After numerous delays caused by fillings from the respondents — who include Brost, Sorenson and other controllers of the company — the hearing for Arbour will begin on Jan. 18.
Commission spokeswoman Tamera Van Brunt said if the ASC panel finds the allegations to be true, Arbour officials could face a fine of $1 million per contravention of the Securities Act. The players could also be banned for life from participating in Alberta's capital markets.
Meanwhile, more information came to light Tuesday about an anonymous group calling itself The Agency, which is taking credit for distributing wanted posters around Sorenson's palatial home in Honduras.
The posters appeared last week when RCMP charges against Brost and Sorenson were announced. They depict Sorenson and his wife Thelma, along with the promise of a $100,000 reward for their arrest and the return of investors' money.
In an e-mail to the Herald, the group said it will co-operate with authorities and does not want to jeopardize any cases against Sorenson and Brost.
The group claims it has been contracted to recover lost money, but will not say specifically who it is working for.
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