City man pleads guilty in $5M Ponzi scheme
An Edmonton man admitted Thursday to running a multimillion dollar Ponzi scheme over a span of eight years that defrauded investors of more than $5 million.
Timothy Ray Carruthers, 59, entered guilty pleas on 22 counts of fraud over $5,000 in Edmonton Court of Queen’s Bench Thursday.
Court heard Carruthers was behind a nearly $5.3-million scheme involving fake bridge mortgage loans, to which he recruited relatives, neighbours, acquaintances and work contacts.
He used the funds to pay for more than a dozen lavish vacations for he and his wife, as well as a $40,000 diamond ring and a Porsche.
Court heard he also used the money to pay his daughters’ credit card bills, and issued his wife paycheques totalling $486,000 despite the fact she held no job with the company.
Some of the people who invested with Carruthers are out hundreds of thousands of dollars, court heard. Only about $1.7 million of the roughly $5.3 million invested with Carruthers has been repaid.
Carruthers sat wearing a plaid shirt in the prisoner’s dock. Around half a dozen people defrauded in the scheme sat in the court gallery.
Kim Krahn, one of the investors, said Carruthers’ fraud had robbed him and his wife of their retirement funds. They had also planned to use the money to give their kids a leg up in life. After 30 years of frugal living, his family was back to counting every penny, he said.
According to an agreed statement of facts read into the record, Carruthers originally registered Wakina Consulting Inc. in 2001.
In 2009, he began to find investors for what he claimed was an “investment arrangement” to provide bridge mortgage financing.
Court heard he never intended to invest the money taken in the fraudulent joint ventures, but was “obtaining those funds for his own personal gain.”
Carruthers would approach potential investors claiming borrowers in need of bridge financing had been referred to him by bank managers.
The “investment” was framed as a joint venture since Carruthers would allegedly be investing alongside the investor. He variously claimed that his company would invest between 50 and 75 per cent of the mortgage loan.
The investment would be secured by caveats or liens placed on the titles of the home the borrower was selling and the new home they were buying.
The borrowers would allegedly pay Wakina an initial setup fee followed by monthly interest payments, court heard. Investors would then receive monthly interest payments, which they would split with Carruthers, as well as a chunk of the setup fees.
The documents he provided to the investors were designed to look legitimate, although “all representations within the documentation were false,” the agreed facts state.
One investor put $837,500 into the scheme but has received just more than $264,000 in payouts, court heard.
In 2014 another couple consulted Carruthers, who informed them their current investment strategy was not enough to fund their retirement. On his advice, they invested in six joint-venture agreements totalling $600,000. They only received $45,500 in return.
When the couple stopped receiving interest payments, they contacted Carruthers, who told them the borrowers had not paid back their loan and that the issue was tied up in court. Eventually, they filed a claim against Carruthers, and their lawyer filed liens on all the properties that were supposedly part of the joint ventures, naming the registered owners as defendants.
Carruthers, however, had used those people’s names and properties without their knowledge.
“This resulted in innocent owners of homes whose names had been fraudulently used by Carruthers in the joint venture agreements to face the problem of being sued and having liens on their ... properties due to no fault of their own,” the agreed facts read.
The scheme began to fall apart when investors started to press Carruthers for their money.
Police announced charges against Carruthers in July 2018, saying an investor who had not received the agreed-upon funds tipped police off two years prior.
Carruthers is due back in court March 8 for a sentencing hearing. The court received around 20 victim impact statements in total.