Shortly after I posted the Fauth ASC decision, “guest” on the CEF Investors Forum posted the following summary of the decision and compared it with a statement Bill Nye’s made in his published reason for LCC’s restructuring.
You can read the CEF post here.
Quote follows – all emphasis is mine.
Skimming through the ASC decision:
In the unsworn Fauth Submissions, Fauth apologized for causing harm to Espoir’s investors, and echoed the evidence he gave during his investigative interview to the effect that he had not intended to lose any investor funds – including his own – and wished that he had the ability to “somehow make it right”. He suggested that he had relied on professional advice in “making operational and investment decisions” for Espoir, and said that “[t]his outcome was not what [he] envisioned“.
The fraud – based on the deceit of misrepresentations made to numerous investors over an extended period – was more serious, and deprived the investors of the ability to make fully informed investment decisions. Fauth also made unauthorized use of investment funds, including by paying earlier investors with funds from later investors, in the manner of a Ponzi scheme. He deliberately misled those he knew were in search of a secure way to generate a return on their money, exposing them to unanticipated risk despite the fact that he knew some investors were using the life savings they had set aside for their retirement.
Even if Fauth were truthful initially and intended to follow the investment plan he described to early Espoir investors, it was not long before he became deliberately deceptive. He then continued to deceive people over the ensuing months and years. As we noted in the Merits Decision, he relied on the enticement of a low-risk investment secured by assets that could be liquidated if necessary, and never corrected or updated the promotional information he gave to investors. He also distributed materials which were not accurate at any point, and sent correspondence with claims about Espoir’s mortgage holdings when he knew full well Espoir was no longer investing in mortgages.
The Fauth Submissions also reiterated that Fauth did not deliberately set out to create a fraudulent enterprise and lose everyone’s money. At the Merits Hearing, he pointed out that before Espoir’s collapse, he tried to return some money to the investors most in need. However, any mitigating effect this might have had (see Homerun at para. 40) is offset by the fact that Fauth engaged in active deceit to obtain money from those investors in the first place. He deliberately chose not to disclose the actual use of Espoir investment funds when he knew that use was not what investors expected and involved risk they were not prepared to take. If he had been as confident as he said he was with his plan to make money for everyone through FairWest and the oil and gas limited partnerships, he could have disclosed the plan to those he solicited for investment.
Sound familiar? Remember this letter? FACTORS THAT LED TO A CALL FOR A MAJOR OVERHAUL OF THE LCC STRUCTURE
“I would like to note that, in my personal view, it was a series of decisions made over many years regarding the building of the complex at Prince of Peace Lutheran Church and School in Calgary that contributed in a major way to the collapse of the CEF which provided the bulk of the funding for that project. Those decisions were made by good, dedicated Christian people, fellow members of the body of Christ and of congregations of the ABC District, all of whom were committed to spreading the Word of God, with no intent whatsoever to have the project fail. “ Rev. William R.A. Ney
ANO: One has to wonder how Bill could align “no intent … to have the project fail” with CEF handing over $3M to the Prince of Peace Church and School even though it had been running an operating deficits for years and never demonstrated an ability to service any of the loans it was given. And let’s not forget how CEF considered declaring bankrupty multiple times over the years and decided to continue operations in spite of their ongoing losses.