Se­cu­rity com­mis­sion bans de­vel­oper for fraud

James Schouw says panel wanted to ‘make an ex­am­ple’ of him, vows to con­tinue cur­rent projects

The Province - - NEWS - SAM COOPER scooper@post­media.com

A B.C. Se­cu­ri­ties Com­mis­sion panel has per­ma­nently banned a Van­cou­ver de­vel­oper for fraud. How­ever, the de­vel­oper, James Schouw, says he doesn’t be­lieve the panel’s de­ci­sion will im­pact five Metro Van­cou­ver de­vel­op­ments he is cur­rently in­volved in.

In a no­tice of hear­ing that was is­sued in 2015, the com­mis­sion al­leged Schouw so­licited $1 mil­lion from an in­vestor for the Artemisia project at Hornby and Helm­cken streets, promis­ing to use the money to ad­vance the de­vel­op­ment, but us­ing lit­tle of it for that pur­pose.

The fraud al­le­ga­tions against Schouw, who has de­vel­oped high-pro­file projects in Van­cou­ver, came af­ter his down­town project hit rocky times dur­ing the post-re­ces­sion com­mer­cial real es­tate bust in 2009.

In Jan­uary 2017 a se­cu­ri­ties com­mis­sion panel found that af­ter Schouw de­posited the in­vestor’s money into his com­pany Hornby Res­i­dences Ltd.’s bank ac­count, “Schouw redi­rected cer­tain of the funds to his own ac­count.”

“Schouw spent ap­prox­i­mately $75,000 of the in­vestor’s money on his per­sonal mort­gage pay­ments and on his sep­a­rate prop­erty man­age­ment busi­ness, de­spite rep­re­sent­ing to the in­vestor that all of his in­vest­ment would be used for the de­vel­op­ment of a Van­cou­ver real es­tate project,” a state­ment is­sued Thurs­day from the se­cu­ri­ties com­mis­sion said.

In an in­ter­view Thurs­day, Schouw said he has pre­pared a le­gal ap­pli­ca­tion seek­ing to dis­miss the panel’s judg­ment and sanc­tions. Schouw pointed to an on­line state­ment, in which he claims he did not de­fraud the in­vestor, and that “it seemed ap­par­ent to me that BCSC was de­ter­mined to make an ex­am­ple of a ‘high-pro­file’ de­vel­oper, and pos­si­bly to max­i­mize col­lec­tion of fines.”

“I’m not so con­fi­dent in the prin­ci­ples of one or more BCSC in­ves­ti­ga­tors,” Schouw’s on­line state­ment claims.

In its de­ci­sion on penal­ties for the fraud, the panel stated “Schouw know­ingly di­verted the funds for his own pur­poses and did so with the knowl­edge that by so do­ing, he was putting the in­vestor’s funds at risk.”

Schouw has been or­dered to pay an ad­min­is­tra­tive penalty of $125,000, and to pay a dis­gorge­ment or­der of $74,612.

Schouw and Hornby Res­i­dences have been or­dered to cease trad­ing any se­cu­ri­ties or ex­change con­tracts.

“They are both also banned from be­com­ing or act­ing as a reg­is­trant or pro­moter, act­ing in a man­age­ment or con­sul­ta­tive ca­pac­ity in con­nec­tion with ac­tiv­i­ties in the se­cu­ri­ties mar­ket, and en­gag­ing in in­vestor re­la­tions ac­tiv­i­ties,” a state­ment says.

In a sep­a­rate dis­ci­plinary ac­tion, Post­media re­ported in April, Schouw was fined $300,000 by the Canada Rev­enue Agency for evad­ing GST on hous­ing units sold.

The CRA said Schouw didn’t re­mit $203,082 in GST in per­sonal-unit sales by Grace Res­i­dences Ltd. in 2008-2009.

JAMES SCHOUW

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