Alberta authorities eye oilsands firm as Ponzi probe deepens

By Kelly Cryderman, Calgary HeraldSeptember 26, 2009

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.

© Copyright (c) The Calgary Herald

What market watchers are saying this week

David Parkinson tracks down the insightful, the outspoken, the colourful and, occasionally, the just plain weird words coming out of the investing community


David Parkinson- Globe and Mail

A Capital Condemnation

"The Dow Jones goes up whenever the unemployment rate goes up, because Wall Street likes it when people lose their jobs. It's better for the bottom line of companies when they don’t have to pay people and they can get the remaining people to work twice as hard.” – Filmmaker Michael Moore, talking with long-time sparring partner Wolf Blitzer of CNN about his new Wall-Street-bashing documentary Capitalism: A Love Story, argues that the stock market’s recovery has come on the backs of the unemployed, as companies pump up their bottom lines by slashing payrolls.

Filmmaker Michael Moore declares the New York Stock Exchange a crime scene in Moores new film, Capitalism: A Love Story, an Alliance Films' release.

So what else would we expect?

“His latest film isn’t really a documentary … but a freewheeling denunciation of the capitalist system that is often mordantly funny and, by lurching turns, scornful, rambling, repetitive, impassioned, mock-lofty, pseudo-lowbrow, faux-naïve, persuasive, tabloid-shameless and agit-prop-powerful.” – Wall Street Journal film critic Joe Morgenstern opines on Michael Moore’s Capitalism: A Love Story, which he gave a generally positive review despite its unabashed attacks on the newspaper’s core audience.

Much atwitter about nothing

“Twitter is rewriting that old saying about a penny for your thoughts. It turns out that our most mundane and irrelevant musings are worth $1-billion.” – TheStreet.com’s Glenn Hall comments on a new $100-million (U.S.) private financing at Twitter, which, by implication, puts the value of the popular (and profitless) social-networking website into the 10-figure range.

I guess owning the Coyotes won't help, either

“Three things could help RIM: A takeout by a larger company with smart phone ambitions; RIM’s own acquisition of Palm; or new employment for millions of stock brokers, which would boost RIM’s enterprise sales. Take a bet on all that if you will. The fundamentals speak for themselves, and they only suggest that business will get tougher from here on out.” – Tiernan Ray, columnist with influential investment magazine Barron’s, suggests some Hail-Mary solutions that would be necessary to alter the bleak prospects for Research in Motion and its stock. The Blackberry maker’s shares plunged Friday after the company issued disappointing financial results and an even worse sales outlook.

Hey, goldbugs, maybe you should put down those muskets, too

“Gold could be investors’ version of World War II France’s failed Maginot Line – an expensive defensive hedge, yet unfortunately built to fight yesterday’s battles.” – Vincent Fernando of website The Business Insider argues that the defensive play in gold no longer makes any sense. He believes deflation is a more serious risk than inflation, and that the speculators who have been driving gold’s surge are risk-takers, not the risk-averse who began the rally.

Oil price may be down in 2009 but pace of discovery is gushing

Oil price may be down in 2009 but pace of discovery is gushing TheStar.com - Business - Oil price may be down in 2009 but pace of discovery is gushing

More than 200 sites reported in what could be the most impressive number of new finds in a year since 2000

September 26, 2009

JAD MOUAWAD
The New York Times

The oil industry has been on a hot streak this year, thanks to a series of major discoveries that have rekindled a sense of excitement across the petroleum sector, despite falling prices and a tough economy.

These discoveries, spanning five continents, are the result of hefty investments that began earlier in the decade when oil prices rose and of new technologies that allow explorers to drill at greater depths and break tougher rocks.

More than 200 discoveries have been reported so far this year in dozens of countries, including northern Iraq's Kurdish region, Australia, Israel, Iran, Brazil, Norway, Ghana and Russia.

They have been made by international giants, like Exxon Mobil, but also by industry minnows, like Tullow Oil.

Just this month, BP said it found a giant deep-water field that might turn out to be the biggest oil discovery ever in the Gulf of Mexico, while Anadarko Petroleum announced a large find in an "exciting and highly prospective" region off Sierra Leone.

It is normal for companies to discover billions of barrels of new oil every year, but this year's pace is unusually brisk. New oil discoveries have totalled about 10 billion barrels in the first half of the year, according to IHS Cambridge Energy Research Associates.

If discoveries continue at that pace through year-end, they are likely to reach the highest level since 2000.

Although recent years have seen speculation about a coming peak and subsequent decline in oil production, people in the industry say there is still plenty of oil in the ground, especially beneath the ocean floor, even if finding and extracting it is becoming harder.

They say prices and the pace of technological improvement remain the principal factors governing oil production capacity.

While the industry is celebrating the recent discoveries, many executives are anxious about the immediate future, fearing that lower prices might jeopardize their exploration drive.

The world economy is weak, oil prices have tumbled from last year's records, corporate profits have shrunk and global demand for oil remains low. After falling to $34 (U.S.) in December, oil prices have doubled, stabilizing near $70 a barrel. But if the world economy does not pick up, some analysts believe the price could fall again.

Oil companies contend that is not a prospect they can afford. Despite reaping record profits in recent years, many executives have warned that they need prices above $60 a barrel to develop the world's more challenging reserves.

In fact, some exploration activity has already slowed this year as producers seek better terms from service companies and contractors.

Exploration spending swelled in recent years, partly to offset a doubling of costs throughout the industry – from steel prices to the cost of renting deep-water drilling rigs.

A big issue confronting the industry now is how to drive down costs while maintaining a high level of exploration.

On average, costs have fallen by 15 to 20 per cent from their peak, according to petroleum executives.

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