Len Barrie took money improperly from the Bear Mountain resort and its investors in order to pay for his share of the Tampa Bay Lightning, according to a member of the real-estate development's executive committee.
Scott Bye, a financial adviser to a group of NHL players who was appointed to Bear Mountain's executive committee after the players became concerned about its finances, said yesterday that Barrie, the chief executive officer of Bear Mountain, owes the company "between $16-million and $20-million dollars."
Barrie told The Globe and Mail on Monday that all of the money in question was either paid back or accounted for, following a damning report by the company's auditor, but Bye said yesterday this was not true.
"To my knowledge, zero," Bye said in a telephone interview from his office in Fargo, N.D., when he was asked how much of the disputed money was paid back by Barrie.
Barrie insisted again yesterday that he did nothing improper and that he gave a full accounting of the funds to the executive committee.
"That's wrong," Barrie said of Bye's statement. He also said his debt to Bear Mountain, a golf, resort and real-estate development near Victoria, was $5-million, not as much as $20-million. "I don't agree," Barrie said. "Me and Scott [Bye]have never agreed on that number. And the number was five and it's been paid back."
But both Bye and an auditor's report say the money has not been repaid. Bye also said Barrie's accounting for the money was simply an admission to the executive committee in a meeting on Jan. 21 that the auditor's report was accurate and he used a lot of the money to pay for his 35-per-cent share of the Lightning last year.
Earlier this year, the company's then-auditor, Victoria accounting firm Norgaard Neale Camden Ltd., made a report to the executive committee that accused Barrie of using his authority "to misappropriate [Bear Mountain] funds for personal purposes." The report raised questions about more than $25.8-million in company funds that went to Barrie or companies he controls.
Almost three months later, on April 15, Norgaard resigned as Bear Mountain's auditors because the executive committee had not acted quickly enough on its report. In a letter of resignation signed by Norgaard partner Allan Neale, the auditor said senior members of Bear Mountain's management had "engaged in a number of activities that, in our view, were improper and, in some cases, illegal."
On Jan. 21, the day after the parent company, Bear Mountain Master Partnership, received the auditor's report, the executive committee met with Barrie. Bye said Barrie admitted to taking the funds and said the recession, which crippled the Bear Mountain project last fall, also ruined his plans to replace the money.
Months earlier at Bear Mountain's annual meeting, Bye said, one of the investors "stood up and asked Len [Barrie]if any money from Bear Mountain was being used to fund your Lighting purchase. Len said, 'No, it's not.'"
But on Jan. 21, Bye said, the executive committee met with Barrie to discuss more than 20 financial transactions in which he used company funds.
"We sat there on the 21st and went down the list," Bye said. "Many times [Barrie]said, 'Yeah, that was used to buy the Lightning.' He basically admitted to every one of the items. His idea was the credit market dried up and things didn't go as planned."
Barrie insisted yesterday, as he did on Monday, that proper explanations were made. He also denied that, aside from one transaction, that any money was used to pay for the Lightning.
Barrie said once more that KPMG was hired as Bear Mountain's new auditor and that a new report was being prepared that would clear him of any misappropriation of company money.
However, Gordon Braun-Woodbury, KPMG's national director of communications, sent an e-mail message yesterday to The Globe and Mail in response to Barrie's claims that appeared in the newspaper on Monday. Braun-Woodbury said "KPMG are not the auditors of Bear Mountain Resort nor have we agreed to accept appointment as the auditor." He also wrote that "KPMG have not been engaged to provide any form of assurance on the financial affairs of Bear Mountain Resort."
When this was relayed to Barrie, he insisted that he hired KPMG as an auditor through its Vancouver office. When asked who he dealt with from KPMG, Barrie said, "John something," and then refused to provide any further details.
Among the transactions questioned by the auditor's report was millions of dollars used by Barrie to build his house in addition to paying for the Lightning. There were also two cheques paid to a numbered company owned by Barrie for a total of $3.695-million in January and February of 2008, five months before he funnelled $2.5-million of Bear Mountain money to the Lightning through a construction company owned by his brother-in-law, Scansa Construction.
Bye said Barrie never told anyone from Bear Mountain about his numbered company and the auditor only discovered the $3.695-million in payments by accident. "Nobody knew about it," Bye said.
This was disputed by Barrie, who said that money plus the $2.5-million from Scansa Construction was part of a share distribution he was entitled to as a Bear Mountain owner, although he admitted he "got ahead of myself by owing two and a half. And I said we'll fix it."
The problem for the investors now is that Bear Mountain, once projected to have a potential worth of $3.5-billion, has plummeted in value because of the effects of a drop in real-estate prices and the drying up of bank credit because of the recession. More than 17 investors, most of them current and former NHL players, put up amounts ranging from $150,000 to $3-million.
Sources say another problem is that the project is carrying a large amount of bank loans, mostly from HSBC Bank Canada, which may soon oust Barrie as CEO. Prowis, a Toronto company that specializes in corporate rescues, has been brought in and one of its principals, Rob Holmes, may become interim CEO of Bear Mountain if Barrie is pushed out.
Barrie claims it was his idea to bring in Prowis.
At this point, sources say the player-investors are hoping to work out something with HSBC to keep the project going so they may eventually get some of their money back. They engaged a Victoria law firm in May to work on their behalf.
Barrie claims he is working on a deal to buy out the investors so he can take over Bear Mountain. He also says a deal with a Dubai-based investment firm, Siraj Capital, will inject as much as $350-million into the project.
Sources close to the executive committee say both plans are long shots.