The Royal Canadian Mounted Police have charged an Alberta man in connection with what they say is a "significant" Ponzi scheme that bilked thousands of investors around the world out of up to $400 million.
Authorities say a second suspect believed to be involved in the scheme -- identified as 66-year-old Gary Allen Sorenson -- is currently at large, possibly in Honduras.
Milowe Allen Brost, 55, was arrested Sunday after an investigation that lasted more than three years.
Both men are facing charges of fraud over $5,000 and theft over $5,000.
A Ponzi scheme is designed as a pyramid plan where new investors pay off earlier investors. Such pyramid schemes are illegal and can collapse quickly.
RCMP officials say about 3,000 people were affected by the scheme and investigators believe more than $100 million was squandered -- and maybe even as high as $400 million.
"That's a minimum," said Supt. Eric Mattson, with the RCMP's Integrated Market Enforcement Team in Calgary.
"That's probably very much on the low side of what we believe this is. It's a very large one. It's very significant."
'No refunds'
Police allege the men took money from investors between 1999 and December, 2008.
Investors were enticed to buy into offshore shell companies in exchange for a high rate of return and tax advantages.
"Funds were sent offshore but they did not end up with their returns and they did not get what they thought they were going to get," Mattson said.
Police say the men set up Syndicated Gold Depository S.A., an entity that was supposed to lend money to Merendon Mining Corp. Ltd.
The shell companies were managed by Brost's firms Capital Alternatives Inc. and The Institute for Financial Learning Group of Companies Inc., said police. The companies listed include Asset Trax Inc., Quatro Communications Corp., Rapid Express Corp. Strategic Metals Corp., and Merendon Mining Nevada Inc.
Sorenson is listed as the CEO of Merendon Mining Corp. on the company's website. The website says Merendon is no longer based in Canada as it has headquarters in Honduras and operates out of Belize.
On a note posted on the company's website, Sorenson says the company is not involved in any illegal activity nor has it ever used the Merendon name in the U.S.
The note says that while "the U.S. Merendon companies may have been victims of fraud" the Merendon Mining Corporation is not involved.
"Any person who has received such a false representation should contact their local authorities and report the matter," the note says.
It also adds that people who invested in U.S. Merendon companies will not be refunded.
Extradition
Though police believe Sorenson is living in Honduras, Mattson said arresting the suspect is a "complicated" matter.
"Canada doesn't have an extradition treaty with Honduras so that certainly complicates the situation," Mattson said.
The Alberta Securities Commission reprimanded Brost in 2007 after a panel found the entrepreneur was involved in a fraudulent scheme to help finance Sorenson's offshore mining ventures.
The Commission placed Brost under a lifetime market ban and fined him $650,000.
"Brost not only does not recognize the seriousness of his misconduct, but is also prepared shamelessly to overlook it," the panel said when it released its decision.
Mattson said investors should always be wary of where they are placing their money and urged them to do their homework before entering into an agreement that will cost them thousands of dollars.
"People take so much more time actually buying a car than they do putting a couple thousand dollars into something like this," he said. "People should really look at what's available before they make those rash judgements."
The federal government is also getting involved by introducing legislation Tuesday afternoon which targets white collar criminals. The proposed legislation would impose tougher sentences among other measures.
The victims
Seniors Genie and Helmut Vollmer of Calgary said they poured about $400,000 over seven years into the scheme after their accountant told them of an investment opportunity.
They were promised returns of 30 per cent when they met with Brost, they say.
"I've never met a person like him that spoke that well and explained things to you and it sounded all good," Genie Vollmer told CTV Calgary. "I was just fascinated by him."
The Vollmers have joined a class action lawsuit, but are not expecting to get any money back.
Gloria Lozinski told CTV Canada AM Tuesday that her sister committed suicide when she realized she lost her life savings -- about $300,000 -- in the scheme.
Lozinski said her sister Edna Coulic called her to tell her what had happened.
"She said she lost everything," Lozinski explained. "I asked her to elaborate and she said she got conned."
Lozinski said Coulic was convinced that she was set to get a big return and that the people involved did everything to convince her that was the case.
"They had her believe she had to get a safety deposit box," she said.
When she realized there wasn't going to be a return, Coulic contacted the people involved several times, pleading with them to return her money, said her sister.
"Edna became Edna no more," her sister said. "Her demeanor had changed. She became anti-social and depressed. Shortly after, she took her life."
Police say they are interested in speaking to anyone who may have been affected by the investment plan. The public is being asked to call 403-292-8827 with information.
With files from The Canadian Press
