Milowe Brost, shown near his Chestermere home Thursday, has said the Institute for Financial Learning (IFFL), which has been linked to an alleged Ponzi scheme, taught strategies to “accomplish financial freedom,” according to documents.
MONTREAL — Members of a Canadian family that runs an offshore foundation under police investigation have taken over an Ecuadorean gold mining firm in a purported attempt to prove their organization is not a Ponzi scheme and to reimburse millions of dollars in missing investments, the Montreal Gazette has learned.
About 1,000 Canadians, the majority from Quebec and Alberta, are unable to retrieve an estimated $65 million they invested on the advice of the Costa Rica-based Voyageur Foundation.
The organization — and many of the investment funds it flogged to Quebecers — are controlled by the Jarmans, a Canadian family originally from Port Alberni, B.C.
Some of the missing funds were shifted into a clutch of firms once controlled by Gary Sorenson, an Alberta businessman who has been found guilty in the U.S. of orchestrating a $300-million U.S. gold mining Ponzi scheme.
One of those companies was Merendon de Ecuador — the same Ecuadorean gold mining firm the Jarmans have taken over.
Family members say that by seizing the company’s assets and putting its mine into production, they will be able to generate more than enough money to reimburse the missing funds — and prove that their organization is not an investment scam.
But a group of U.S. investors, victims of the $300-million scheme masterminded by Sorenson and his partner, Milowe Brost, already has a prior claim on the company’s assets, a U.S. lawyer who represents the group’s interests says.
In an interview, Ivan Reich, a Florida trustee lawyer charged with securing — and eventually selling — the worldwide assets of the individuals and companies involved in running the Merendon gold mining Ponzi scheme, was skeptical of the Jarmans’ plans for Merendon de Ecuador.
“Just because they have taken it over doesn’t mean it has any assets,” he said, noting that they could very well run into difficulties securing Ecuadorean mining rights and permits. “I know that it sounds like they are making progress but I’m not so sure that they are.”
Another group of investors also has a claim to the assets of Merendon de Ecuador.
These are the Canadians who invested in Sorenson’s investment scheme. Although Sorenson was found guilty of running a Ponzi scheme in the U.S. this year, he has yet to face charges related to same investment scheme in Canada. Sorenson and Brost, are scheduled to go on trial in an Alberta courtroom next year.
In the meantime, a Calgary judge has appointed Dallas-based Michael Quilling as the receivership lawyer for Canadian investors involved in the case. He is working in tandem with Reich to preserve the assets of Sorenson and his companies. Repeated attempts to reach Quilling by telephone and email were unsuccessful.
It’s not clear how the matter will play out legally, or whether the company’s mining concessions — which have never been properly evaluated — contain enough gold to merit setting up a mining operation.
Moreover, a 2008 report by Quilling, which is referred to in an April 2010 Alberta court filing, states that despite Sorenson’s claims of unexploited riches, the mining property in Ecuador has “no value.”
But even if the concessions do turn out to contain “a billion dollars” worth of gold, as the company’s former manager has claimed, it’s not clear if the family members — who include a former helicopter pilot, a helicopter mechanic, a former tour guide, and a former journalist — have the financial means and skills needed to set up and to run a successful gold mining operation.
Over the last few months, the Jarmans have made progress in their attempts to seize the assets of Merendon de Ecuador.
Belize court records reveal that in July, Angela Jarman and her husband Christian White Hernandez executed a “share pledge agreement” that effectively gave them control of Merendon de Ecuador. And a source in the Ecuadorean corporate registry office has confirmed that the Jarman-controlled Quito-based Compania Minera Terramining Resources S.A. company is the new majority shareholder of Merendon de Ecuador. Philip Jarman, the founder of Voyageur, is the vice-president of this firm. In a phone interview, Angela Jarman told the Montreal Gazette she is the president of Merendon de Ecuador.
In February, Philip Jarman, his daughter Angela, the foundation and its Quebec associates were ordered by Quebec’s Autorite des marches financiers to stop selling investments in the province after concerned investors reported they were unable to retrieve funds they had invested in companies recommended by the foundation.
On Dec. 12, the Alberta Securities Commission reciprocated the AMF ban. (The AMF found that Voyageur and its representatives had contravened securities laws by “pursuing activities as dealers or advisers without being registered as such with the AMF.”)
Securities officials and police are currently investigating Voyageur to determine whether it is a Ponzi scheme.
Despite the controversy in Canada, family members are active in high-profile Ecuadorean and Costa Rican social circles. In October, the Jarmans’ new Ecuadorean company helped sponsor the Canadian Ecuadorean Chamber of Commerce’s annual Thanksgiving dinner. In November, Philip Jarman played the bugle at a Remembrance Day ceremony in Costa Rica that was attended by the Canadian and British ambassadors and other dignitaries.
In the summer of 2009, the Jarmans travelled across Canada promoting investments in Sorenson’s unproven and high-risk Merendon de Ecuador mining venture, internal foundation documents show. The tour raised more than $6 million in investments from Voyageur members in Quebec and Alberta, according to a source with knowledge of the foundation.
The source said that even after January 2010, when the Jarmans acknowledged that they were unable to meet investor obligations, family members continued to raise money from investors for this project. The AMF reported that Philip Jarman had asked Voyageur members to provide an additional $1.5 million in funding to buy the mining concessions from Sorenson. Family members told investors that if they were able to buy the mines, they would be able to recover their missing money — and much more, an AMF report said.
A February 2011 order from the AMF forbade the Jarmans from soliciting further investments from Quebecers.
Yet Voyageur appears to have continued raising money for the mining venture. A November posting on Angela Jarman’s blog thanks Voyageur members “who have pledged their Security for Cost Deposits.”
In an email response to a reporter’s question about the meaning of the posting, Jarman wrote that members had contributed funds to Voyageur “to pay the security deposit required by the Belize Court. Some of them have now allowed Voyageur Foundation to direct these deposits to cover further legal expenditures as we have gone on to take legal actions in Ecuador, for example.”
In another email, Jarman said that raising those funds from members did not violate the AMF ban because “Voyageur does not sell investments.”
“Members contributed funds for the Security for Costs deposit, which were for the court case, not for an investment,” she said.
As for questions raised about the true value of Merendon de Ecuador’s assets, Jarman said in a telephone interview from Costa Rica this month that the company is currently conducting a proper geological survey of the company’s six mining concessions. The sites in question are not hard rock concessions, but rather loose gravel “placer” concessions, which exploration geologists say are more difficult to assess than other sites.
Even if the study estimates that the sites contain enough gold to merit a mining operation, the Jarmans still would face formidable hurdles before they could realize their plans.
In an interview, University of British Columbia exploration geologist Craig Hart said a large-scale placer gold mine typically would have startup capital costs of $5 million to $10 million. It is unclear how the Jarmans, a family whose foundation and investments funds are unable to meet their obligations to investors, would come up with this kind of money.
And actually running a placer mine, where the gold is not distributed evenly over the terrain, would be another enormous challenge, Hart said.
“The real trick in placer mining is about efficiencies,” he said. “Efficiencies and processing and in making sure that your operation is well tuned up and that your processing materials as best as possible without any down time. Most placer operations suffer from the fact that they have poor equipment that is not working most of the time and needs to be repaired.
“The other big factor is knowing your ground and where the sweet spots are,” he added. “Otherwise, you are going to spend a lot of money processing material that has very little gold in it.”
Other issues include ongoing indigenous land claims on property included in the Merendon concessions. These disputes have been widely reported in the Ecuadorean media.
And then there is the issue of security. Hart said one of the biggest risks in operating a mine is being robbed of the gold when transporting it to market. In the jungle area where the Merendon mining concessions are located it would best to build a private runway to fly the gold out in a private plane or helicopter, adding significantly to the upstart costs.
“If you are going along a rickety mountain road the opportunities for that vehicle to be hijacked are very big,” he said.
Despite the difficulties of working in Ecuador’s mining sector, Jarman said she and her family are attempting to take over a second Ecuadorean mining firm that was also once owned by Sorenson and that the hope is to have it under control of Voyageur members by the end of the year.
“Our bottom line is to recover enough assets for the members to get their funds back,” she said, adding that it would be “wonderful” if another party would buy the two mining companies.
“Our goal here as a financial club — an investors club — is not to own mines,” she said.
Jarman disputed the amount of money members are owed. She says members are only owned $25 million. (In an interview earlier this year, she did not dispute a reporter’s statement that members were owed $65 million.)
She was unable to provide independent verification of the $25 million figure. But she did provide a Belize court document from June that states members are owed a principal amount of $36.8 million, a figure that rises to $67.5 million with interest. Jarman said she couldn’t explain the discrepancies in the figures she provided to a reporter “because of legal claims currently under process in other countries.” Furthermore, the head of another one of Voyageur’s endorsed investment funds has acknowledged that currently, he is unable to reimburse an additional $8 million worth of members’ investments.
Jarman acknowledged the additional money owed to members by the other fund but claimed that “all outstanding investments made by members will be paid.”
Asked whether she worried that taking over Merendon de Ecuador may violate a worldwide freeze on Sorenson’s assets obtained in a Canadian court by (receivership lawyer) Quilling, Jarman said: “For sure,” she said.
“Anytime you are told that you are doing something illegal you are very concerned.”
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