Questions still being asked about ACE/Security assets

The founder of protective laminates firm World ACE is facing accusations by the Ontario Securities Commission (OSC) of unregistered trading and unlawful distribution of securities relating to a separate venture.

Dan White founded World ACE earlier this year and hired the founder and former chief executive of ACE/Security Laminates, Peter Fabian, as an "independent contractor" after Mr. Fabian declared personal bankruptcy in April with more than $5.7 million in debts.

Mr. Fabian informed company creditors on Feb. 29 that ACE/Security Laminates was immediately ceasing operations due to an inability to secure additional financing. Mr. White said he saw an opportunity to fill the void left by ACE/Security Laminates.

The securities allegations involve Mind Management Consulting and the Toronto-based World Network Business Club (WNBC), both of which were led by Mr. White.

The WNBC purported to be a business club offering investment seminars, access to onshore and offshore investments, private and offshore banking, tax reduction strategies and other educational services, according to the OSC allegations.

OSC documents also name Naveed Ahmad Qureshi and his asset management companies Capital Reserve Financial Group and Capital Investments of America.

The OSC alleges that between May 2002 and March 2005, WNBC, Mr. White and Mr. Qureshi sold investments totalling approximately $1 million to investors in Ontario.

Among the investment opportunities offered to WNBC members was a program called Eggsvestments, which, by 2003, had a "planned" minimum rate of return of 18 per cent over one year, 19 per cent over two years and 20 per cent over three years, according to the OSC documents.

Although the contract stipulated that WNBC made no explicit guarantees, the investment contracts stated Mr. Qureshi had provided a guarantee of the rate of return to WNBC members, the OSC alleges.

While the OSC said some investors received repayment of their principal investments, approximately two-thirds of the funds had allegedly not been repaid to investors when the allegations were filed in February.

The OSC argues the investments fall under the legal definition of securities. It says Mr. White and Mr. Qureshi traded and advised in securities without registering with the commission and unlawfully distributed securities.

A hearing on the merits of the case is scheduled for January 2009.

In an interview, Mr. White said he will argue that the investments did not qualify as securities and said there is a "very real chance" the allegations will be settled before the January hearing.

"It is going to be a question (of), 'Were we really trading in securities or not?'" he said, adding it was a "very bad decision" to go along with the idea to invest. Mr. White later described the business club as the equivalent of a private mutual fund.

In addition to running World ACE, Mr. White is assisting Mr. Fabian in his personal bankruptcy proceedings, where questions continue to be asked about the whereabouts of assets belonging to the company, which is named in several lawsuits and is being pursued by credit agencies.

Former ACE/Security Laminates board member McKenley Esnard has requested that Mr. Fabian explain what happened to $1.5 million in company assets before being discharged from bankruptcy.

Mr. Esnard, who said he served on ACE/Security Laminates's board for roughly three years, also said he represents several investors and other individuals owed $2.5 million in Mr. Fabian's personal bankruptcy proceedings.

Mr. Esnard, who runs a local informatics consulting firm, said he attended the first creditors meeting in May and provided OBJ with an e-mail sent earlier this month to bankruptcy trustee Sylvie Lyons of Ginsberg, Gingras and Associates.

The e-mail contained more than three pages of questions for Mr. Fabian, including the whereabouts of company assets such as computer equipment and servers, machinery and processing equipment, plasma televisions and other demonstration equipment.

"I have no idea where they are, but ... I would like to know, (as would) a lot of other shareholders and a lot of other people who are owed money by ACE," said Mr. Esnard in an interview.

As of late last month, the Ministry of Labour was trying to collect unpaid wages, vacation pay and/or termination pay from the company on behalf of nine employees. Additionally, a former board member is suing ACE/Security Laminates for close to $19,000 in unpaid board fees.

Mr. Fabian responded in an interview that questions about ACE/Security Laminates's assets have been answered to the satisfaction of the trustee.

"I'm not allowed to say any more unless the trustee has given me permission to speak ... My expectation is that I will be discharged (from bankruptcy)," he said.

The trustee, Ms. Lyons, could not be reached last week to verify whether Mr. Fabian's creditors, who are collectively owed more than $5.7 million, will object to him being discharged from bankruptcy.

Questions about what happened to the formerly publicly traded company's assets have intensified since Mr. Fabian became involved in the new venture, which has adopted the now-defunct company's online image.

Mr. Fabian and his former vice-president of investor relations, David Hayes, are now independent contractors for World ACE, according to Mr. White. World ACE has signed exclusive distribution rights with new vendors from Venezuela and Kenya, according to one such dealer.

Mr. White previously downplayed any connection between ACE/Security Laminates and World ACE, telling OBJ, "I'm not accountable to anything ACE/(Security) Laminates did because it is none of my business."

However, most of World ACE's online presence has been adopted from Mr. Fabian's previous company. Not only is the new website nearly identical to the still-online ACE/Security Laminates website, but the first frame of the promotional video on World ACE's homepage still features the ACE/Security logo.

The rights to the trademark are owned by Placements Contemporains Inc., according to Canadian Intellectual Property Office records. That company is owned by Mr. Fabian, said former ACE/Security Laminates board member Marie-Andree Mallette, who has filed a suit against the company for $18,986.89 in unpaid board fees and is listed as being owed an additional $15,000 by Mr. Fabian in his personal bankruptcy filings.

In an interview last week, Mr. White said it is his intention to remove the logos soon and eventually build a new website.

Elsewhere on World ACE's website, several newspaper stories, including one published by the National Post in 1999, have been edited to replace references to ACE/Security Laminates and its predecessor, ACE/Clear Defense Inc., with 'World ACE,' which was only registered as a business provincially earlier this year.