Lawsuit pits investors against prominent Saskatoon businessman Darrell Remai

A member of one of Saskatchewan's most prominent business families, and his associate, are facing allegations in a lawsuit including self-dealing, mismanagement, and a scheme to wilfully devalue investments in several retirement communities so they could be bought at a fraction of their real value.

The allegations against Darrell Remai and his business associate, Sirous Tosh, are contained in a $7-million lawsuit filed in Saskatoon in April by investors in several limited partnerships that built, and now operate, three large retirement communities in Winnipeg, Man. and Chatham, Ont.

The group of investors, led by Saskatoon businessmen Brad Summach and Tim Krivoshen, includes former Calgary Flames defenceman Robyn Regehr and several small investment advisers from Calgary, Edmonton and Saskatoon.

The lawsuit foreshadows what is expected to be a bruising court fight with serious allegations against several corporations including failure to: act in good faith; report conflict of interest; produce accurate financial statements; and improper use of property and funds. It also alleges failure to avoid or report fraudulent activity.

None of the allegations contained in the statement of claim has been proven in court and no statement of defence has been filed.

The investors have wrested managing control of the limited partnership from Remai and Tosh through a court-ordered vote.

The Remai family have been prominent developers in Saskatoon for decades. Darrell Remai's aunt, Ellen, has donated a total of $50 million to the Remai Modern Art Gallery of Saskatchewan, which is scheduled to open in Saskatoon next year.

The two sides are scheduled to appear in court in Saskatoon today to argue a motion brought by Remai and Tosh to move jurisdiction of the lawsuit to Winnipeg.

'Lowball' offer sparks legal dispute

Court documents show the legal dispute began in February 2015 after Remai forwarded an offer from Tosh Consulting to each of the limited partners to buy all units of Cathedrale Retirement LP (limited partnership) for $1 million. That offer represented about 16 cents for each dollar invested by the limited partners.

Remai recommended the partners accept the offer and told them he had already sold his units in Cathedrale for less than two cents a share. He also provided a preliminary financial statement for 2014 that showed the partnership had suffered a net loss.

The lawsuit says several of the partners thought it was a "lowball" offer and suspected Remai was not acting in their best interest, particularly because Remai "represented that he was unaware whether the offer was from an arm's-length purchaser and he did not know who owns Tosh Consulting, which the (investors) subsequently learned was owned by Tosh, who shares office space with Remai."

In April 2015, the investors learned from Tosh that the retirement facilities were over-financed and owed more than $1 million in unpaid property taxes.

Remai and Tosh, the lawsuit states, "failed to make payments of taxes in relation to the retirement facilities owned by the limited partnerships and failed to disclose, and, indeed, materially misrepresented the extent of the arrears."

The investors allege the failure to pay taxes could cost them at least $575,00 in interest, fees and penalties.

The lawsuit says Remai told the investors he had lost interest in the retirement community investments and intended to proceed with the sale. In response, the investors took legal action and removed Remai as manager of the partnership in October 2015.

Some of the investors also sought access to the partnership's financial records. After months of delay, the investors gained access to some, but not all, of the records in February 2016.

"The plaintiffs have discovered the self-dealing conduct, mismanagement and other wrongs," the lawsuit states, including that Remai and Tosh had "various undisclosed financial interests in transactions concerning the limited partnership" and "misused the positions they each occupied for personal gain."

Securities flip not disclosed

The lawsuit details a complex series of transactions in 2014 that involved the purchase of assets, which included debentures, from a Baptist foundation. Debentures are unsecured loans issued by a company and backed with the company's assets.

The web of transactions, which involved the sale of the debentures between companies controlled by Remai and Tosh, eventually netted a $1.5-million profit for a company owned by Remai, the lawsuit alleges.

None of these transactions was disclosed to the limited partnerships, the lawsuit states. It claims Remai's company, Caleb Management, profited from the security flip "to the detriment of the limited partnerships," even though Remai's company owed a fiduciary duty to the partnerships.

The lawsuit also details hundreds of thousands of dollars of allegedly unapproved and unreported management and consulting fees, and commissions, paid to companies owned or controlled by Remai and Tosh.

The lawsuit references money paid to an executive associated with a financial institution, from which the partnership had obtained multi-million dollar loans.

"In or about November 2010, Caleb Management also charged and was paid by Cathedrale Retirement LP (limited partnership) a 'consulting fee' of $20,000 for Mr. Brad Douglas, who was at the time or had previously been a branch manager at Synergy Credit Union," the lawsuit states. Synergy has its headquarters in Lloydminster, Sask.

"This payment was in addition to a $2,000 'retainer fee' for 'financial consulting' that Tosh directed Cathedrale Retirement LP to pay Mr. Douglas in September 2010, says the statement of claim.

"Particulars of the payment to Mr. Douglas were not disclosed in the financial statements of Cathedrale Retirement LP," the lawsuit states.

In an emailed statement, Synergy said Douglas worked for the credit union until April 2010.

The investors also allege Remai and Tosh misused their positions by chartering aircraft instead of flying with commercial airlines.

The lawsuit shows Tosh and Remai invoiced nearly $110,000 for flights to Winnipeg and Chatham, but also to Tisdale, Sask., northeast of Saskatoon, and Calgary, even though the partnership conducted no business there.

@charlesrusnell

​charles.rusnell@cbc.ca