Security commission bans developer for fraud
James Schouw says panel wanted to ‘make an example’ of him, vows to continue current projects
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.