ASC panel rules Focused Group pair misled investors

Two men who used the Focused Life Group of Companies to raise $47 million from investors have been found to have broken Alberta securities laws.

Victor George DeLaet and Stanley Kenneth Gitzel of Calgary made or permitted misleading or untrue statements to be made to investors during the sale of securities, an Alberta Securities Commission panel has ruled.

DeLaet was also found to have committed fraud against the investors, many of whom were pensioners spending their life’s savings, according to a decision on the ASC website.

The two were charged in December 2011, two years after the commission issued a cease trade order on DeLaet and Focused Money Solutions Inc.

ASC staff originally alleged they employed a Ponzi scheme, where funds from new investors are used to provide returns to original investors, but that part of the charge was withdrawn, said ASC spokesman Mark Dickey.

In its decision, the panel notes that some Focused Group investors received periodic payments on their securities totalling $3.7 million, although it acknowledged that DeLaet said the Focused investments provided no return.

The investment group sold $25,000 stakes in the “life settlement” industry in the United States, the ASC said in its decision.

Under a life settlement, future death benefits payable under a life insurance policy are sold to a buyer in exchange for an immediate payment to the person whose life is insured.

“To summarize, Focused Group investors were sold something purportedly safe. The reassurance of safety turned largely on the promise of reinsurance bonding, and also on the involvement of an escrow agent with a premium reserve fund,” the panel wrote.

“Investor money was instead applied in an operation lacking these features. The risks that the Focused Group business model claimed to address were very real, and some materialized.”

Testimony from three unnamed investors was cited, with each noting they were told they would earn 10 or 12 per cent annual returns.

An 85-year-old retiree attended a Focused Group sales meeting in 2007 and wound up investing some $700,000. He recommended the scheme to an 87-year-old relative who invested $45,000.

Another retiree, 68, said he and his wife invested $240,000 in 2008 and 2009 and have lost a net $231,000 after taking into account limited payments they received.

ASC staff, DeLaet and Gitzel have been asked to provide submissions on orders for sanctions and costs. At least 187 investors in Alberta alone bought into Focused, the ASC has previously said.