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Gary Ng at the Fairmont, in Winnipeg, on Nov. 28, 2018.Mikaela MacKenzie/Handout

Gary Ng, the Winnipeg-based entrepreneur who was briefly a force in Canada’s wealth-management sector, had less than $500,000 in his personal accounts when he borrowed more than $240-million to fund a series of investment dealer acquisitions, new court documents allege.

Between 2018 and 2020, Mr. Ng borrowed nearly a quarter of a billion dollars from some of North America’s most sophisticated lenders – loans he secured with falsified account statements showing he was worth closer to $90-million, the RCMP have alleged in court filings.

The allegations about the true state of Mr. Ng’s modest net worth highlight the disconnect between the reality of his personal holdings, and the proclamations he made a few years ago about his ambitions to consolidate the Canadian wealth-management sector. The documents, which were filed in support of several judicial orders for the production of records, had been barred from public view until they were unsealed in June, but only recently obtained by The Globe and Mail.

They shed light on several aspects of the scandal, which led the RCMP to charge Mr. Ng with fraud and money laundering earlier this year. The documents included a detailed account of how Richard Thomas, the chief compliance officer at Vancouver-based PI Financial Corp., detected the alleged fraud. At the time of that discovery in January, 2020, Mr. Thomas was an employee of Mr. Ng, who had purchased PI for $100-million in late 2018.

The records also show that when the alleged falsified accounts came to light, David and Natasha Sharpe, then the husband-and-wife executive team at Bridging Finance Inc., confronted Mr. Ng. At the time, Bridging was co-owned by Mr. Ng and the company was also one of Mr. Ng’s largest financial backers, having lent him $90-million.

How one of Gary Ng’s lenders tried to keep quiet that it had been allegedly defrauded

The Sharpes, who have since been accused of fraud by the Ontario Securities Commission, in part because of their dealings with Mr. Ng, recorded the confrontation. The RCMP have obtained a copy of the audio recording, in which, they allege, Mr. Ng admits to falsifying records.

Mr. Ng declined to comment for this story. His lawyer, Christi Hunter, said in an e-mail that he is “pro-actively defending himself through the proper channels of the criminal process.”

None of the allegations against him have been proven in court.

Until 2020, Mr. Ng presented himself as an upstart in Canada’s independent investment-adviser sector and a major acquirer of wealth-management companies. In media interviews, he referred to himself as an “admiral” who was amassing a “fleet” of companies.

His first foray into the business was with Chippingham Financial Group Ltd., which he founded in 2012 along with another Winnipeg-based investor. But between 2018 and 2020, his imprint expanded significantly and rapidly. Over that two-year period, he paid $20-million for Montreal-based Rothenberg Capital Management, $100-million for PI, which at the time managed $4.5-billion in assets, and $50-million for a noncontrolling 50-per-cent stake in Bridging.

In addition to his $90-million loan from Bridging, his acquisition spree was funded by three other lenders, according to the records:

  • H.I.G. Capital Management, which is based in Miami and has US$52-billion under management, lent Mr. Ng US$80-million;
  • R.C. Morris Capital Management Ltd., a Vancouver-based asset manager, lent him $60-million, $20-million of which he paid back;
  • BlackRock Financial Management Inc., the New York-based private equity giant, lent him US$12-million.

The unsealed records contain a 10-page report written by Mr. Thomas, PI’s general counsel, about how he uncovered the alleged fraud.

On Jan. 29, 2020, a little more than a year after Mr. Ng bought PI, Mr. Thomas was reviewing a number of internal corporate e-mails. A former Chippingham employee who had a long-standing lawsuit against Mr. Ng had added PI as a defendant, and it was Mr. Thomas’s job to vet documents before producing them for the plaintiff.

During that process, Mr. Thomas happened upon e-mail exchanges between PI director Donald Metcalfe – one of the loyalists Mr. Ng brought over to PI from Chippingham – and staff at R.C. Morris, one of Mr. Ng’s lenders. The exchanges stuck out, Mr. Thomas recalled, because they contained information that he believed was not true: Mr. Metcalfe wrote that one of Mr. Ng’s PI investment accounts was worth at least $21-million, and said that R.C. Morris had a control agreement in place restricting what Mr. Ng could do with the assets.

A long-time veteran executive at PI, Mr. Thomas wrote that he was “personally aware that Mr. Ng had never held assets in such amounts in accounts of PI.” Mr. Thomas was also “unaware of any account control agreement on any account Mr. Ng held with PI.”

He dug deeper, and determined that the account Mr. Metcalfe referred to was owned, not by Mr. Ng, but by an entirely different client of PI, the document states. Mr. Thomas and PI’s chief executive officer Jean-Paul Bachellerie reported their findings to the Investment Industry Regulatory Organization of Canada, or IIROC.

The regulator, which ultimately determined that Mr. Ng falsified and fabricated other account statements, has since fined Mr. Ng $5-million and banned him for life from the industry.

IIROC has also launched an enforcement proceeding against Mr. Metcalfe, which is unresolved. Mr. Metcalfe has denied all of the IIROC’s allegations and has not been charged with any criminal wrongdoing. He could not be reached for comment.

Mr. Thomas’s internal investigation also uncovered evidence that R.C. Morris had concerns about the proof Mr. Ng had been providing to the lender about his collateral, and that Mr. Ng took steps to keep outsiders from snooping around the true state of his wealth.

E-mails from 2019 showed that R.C. Morris was frustrated Mr. Ng hadn’t provided sufficient evidence that his investment accounts were blocked, a mechanism to ensure that he couldn’t deplete the lender’s security. When R.C. Morris demanded more proof that the accounts were blocked, Mr. Ng “reacted aggressively,” and suggested their relationship should be wound up, Mr. Thomas’s report states. Mr. Ng’s threat appeared to cause R.C. Morris “to back off from its request,” Mr. Thomas wrote.

The documents also make it clear that there was one person Mr. Ng did not want involved in his regularly scheduled collateral updates to R.C. Morris: Mr. Thomas, the compliance officer.

In 2019, when R.C. Morris requested that Mr. Thomas act as a signatory on the control agreement over the accounts, Mr. Ng pushed back, writing in one e-mail, “due to the sensitive nature of my loan, I do not want PI Staff involved.”

R.C. Morris declined to answer questions that The Globe e-mailed to its managing partner, Christopher Morris, for this story. Instead, the company convened an emergency court hearing where it sought to reseal the documents, a request that was turned down on Wednesday by Justice Vincenzo Rondinelli.

When allegations filtered out in early 2020 among Mr. Ng’s lenders about the non-existent investments backing their loans, they scrambled to get a handle on the extent of their exposure, the court documents show.

On Feb. 27, the Sharpes confronted Mr. Ng in a phone call, which the couple recorded. When David Sharpe asked Mr. Ng about a family trust that he had pledged to Bridging, and which was purportedly valued at $150-million, Mr. Ng allegedly replied: “That … was not correct. That was falsified as well.”

When Ms. Sharpe asked him why he would do such a thing, Mr. Ng gave a rambling reply. “The reason why I did that Natasha was in order to get the leverage I required to … put my plan into action,” he allegedly said.

“Like I said, I’m going to spend the rest of my life apologizing to you and David … and all my other stakeholders. But I did it because that was the only way I could get to achieving the plan that I put out. And the plan was sound. Like I said, it was working.”

He allegedly added: “I guess … there was a whistle-blower somewhere.”

All of the lenders interviewed by the RCMP said they were reluctant to put an exact dollar value on any losses they may have incurred, citing both the complexity of unravelling the loans as well as their continuing recovery efforts.

Some spoke about the due diligence they performed on Mr. Ng prior to lending. Representatives from H.I.G. said that, in addition to reviewing records about Mr. Ng’s purported net worth, they retained a corporate intelligence firm to perform a background check on him. It found nothing to dissuade them from believing him “to be a sound financial partner,” they said.

H.I.G., which did not respond to requests for comment from The Globe, also had safeguards in place to ensure PI met performance targets. When those targets were missed in 2019, Mr. Ng was required to pay down more of his loan, which he did. However, the company has since come to suspect Mr. Ng was using loans from R.C. Morris or BlackRock to make the payments, H.I.G. representatives told the RCMP.

BlackRock is suing Mr. Ng in Ontario. Bridging is now under the control of a court-appointed receiver, but it’s not clear what assets the receiver, PricewaterhouseCoopers Inc., could possibly recover from Mr. Ng through litigation. Two luxury condos that Mr. Ng purchased in Toronto in 2019, as well as his $9-million Ontario cottage with a helipad, have all been sold, but it’s not clear which of his lenders was entitled to the proceeds.

The RCMP documents state that Mr. Ng reached a partial settlement with R.C. Morris that involved him paying $5-million and handing over a Lamborghini, which has been sold.

As for Rothenberg Capital Management, the Montreal-based asset manager that Mr. Ng acquired in 2018, he now has zero interest in the company. Rothenberg is 100-per-cent employee owned, its chief executive officer, Robert Rothenberg, said in a statement.

The largest asset available to offset losses was PI, which is now majority owned by H.I.G. and R.C. Morris. In an e-mailed statement, PI’s Mr. Bachellerie described the ownership transfer as “seamless,” and said that since that transition, some PI employees have taken small stakes in the company.

“The firm continues to grow and recorded two of its strongest financial years in its history during and after the ownership change,” he said.

As for Mr. Ng, a date has yet to be set for his trial.

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