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David Sharpe of Bridging Finance in Toronto on Feb. 9, 2017.JENNIFER ROBERTS/The Globe and Mail

Of all the questions surrounding Bridging Finance Inc. – the $2-billion private debt manager placed under the control of a receiver last week – few compared to the one asked at 2:22 p.m. last Thursday.

At the time, David Sharpe, Bridging’s chief executive officer, was in his home and under examination over video conference by a forensic accountant and lawyer from the Ontario Securities Commission. Under oath, he was repeatedly asked whether he had ever accepted any money from one of Bridging’s largest borrowers, a Winnipeg-based businessman named Sean McCoshen whose companies had borrowed more than $180-million from Bridging.

Mr. Sharpe was nearly unequivocal: To the best of his knowledge, no, he hadn’t.

Why then, they asked, did a company controlled by Mr. McCoshen deposit a total of $19.5-million in Mr. Sharpe’s personal chequing account?

Mr. Sharpe asked for a moment to confer with his lawyer, then, after a 10-minute break, he changed his tune: “So I’ve had some personal financial dealings with Sean McCoshen and in the way of loans from him,” he told them.

Asked to explain why he didn’t disclose this earlier, Mr. Sharpe replied: “I honestly didn’t think it was applicable.” A little later, when pressed to explain why the payments seemed to come within days of Bridging advancing loans to Mr. McCoshen’s companies, Mr. Sharpe conceded: “It certainly does not look good. That’s for sure.”

The OSC agreed, and a little more than 24 hours after that interview, a transcript of which has been filed in court, the regulator turned to Ontario Superior Court Justice Glenn Hainey to place Bridging under the control of receiver PricewaterhouseCoopers LLP.

In the aftermath, Bridging’s investment clients, the majority of whom are accredited retail investors, are left wondering what will become of their money. Documents filed in court depict a complex web of loans and payments between Bridging funds, clients, owners and executives that will take time to work through while the money manager is under the control of PwC.

The transactions include the $19.5-million payment from Mr. McCoshen, as well as Bridging’s decision to assign to Mr. McCoshen a large loan it made to troubled construction company Bondfield Construction at cost and for no payment.

Bridging’s relationship with former co-owner Gary Ng is also under the microscope. Two days before Mr. Sharpe was interviewed, the OSC asked Bridging co-owner Jenny Coco about a $10-million dividend the company paid to Mr. Ng weeks before they bought back his $50-million stake for $5 because of fraud allegations against him. Through her lawyer, Ms. Coco said the money was advanced to help Mr. Ng service some troubled loans.

In its request for receivership, the OSC has alleged a number of improprieties around disclosure and conflicts of interest at Bridging: that Bridging improperly used investors’ money to buy out a fund-management contract from another firm, Ninepoint Partners LP, with which it had been co-managing the Bridging Income Fund; that Mr. Sharpe asked a client to take part in a questionable transaction that was designed to “give the appearance” that the Ninepoint payment had been financed through a loan; and that Bridging lent $32-million in investors’ money to Mr. Ng just two weeks before he bought a 50-per-cent stake in Bridging.

But central to the OSC’s case, and the predominant topic its staff returned to again and again when they probed Mr. Sharpe last week, is his relationship with Mr. McCoshen, the visionary behind a proposed railway line connecting northern Alberta and the ports of Alaska.

The Alaska-Alberta Railway Development Corp., or AARDC, which was founded by Mr. McCoshen, is Bridging’s biggest borrower, with debts exceeding $180-million.

Mr. McCoshen did not respond to requests for comment. AARDC, where Mr. McCoshen also serves as CEO, issued a statement saying it “was disappointed to learn of the allegations against Bridging Finance and its principals.”

The OSC’s analysis of Mr. Sharpe’s Bank of Montreal chequing account, which was filed in court, shows that between 2017 and 2019 a company controlled by Mr. McCoshen made six payments to Mr. Sharpe – each of them made within days of Bridging advancing loans to Mr. McCoshen’s companies.

In his interview on Thursday, the OSC pushed Mr. Sharpe on these transactions – which he had declined to mention in a previous interview in 2020. Asked whether there was an actual loan agreement explaining the payments, Mr. Sharpe replied: “There’s probably one,” before making a more definitive statement that, yes, there was an agreement. It was a hard copy at the Bridging office, he said.

The investigators demanded that he produce the loan documents by 5 p.m. that day, citing concerns that Mr. Sharpe had been “intentionally misleading” them – a characterization disputed by Mr. Sharpe’s lawyer. At 8:13 p.m. that night his lawyer e-mailed OSC lawyer Carlo Rossi to say Mr. Sharpe went to Bridging’s office but could not find the agreement.

In his interview, which was compelled under Ontario’s securities law, Mr. Sharpe was vague about the purpose of the loan from Mr. McCoshen, saying it was “for investments.”

Mr. Rossi asked Mr. Sharpe a blunt question: “So, Mr. Sharpe, I just want to put it squarely to you. Are these kickbacks that Mr. McCoshen is paying you in connection with extending loans to his companies?”

Mr. Sharpe replied: “No, they’re not.”

The investigators also questioned Mr. Sharpe about what became of the millions Mr. McCoshen advanced him. Mr. Sharpe’s chequing account showed that, in addition to payments for renovations and car leases, Mr. Sharpe made payments to two Bridging employees: $260,000 to the company’s vice-president of sales, Ian Baele, and payments totalling $180,000 to Bridging’s chief compliance officer, Andrew Mushore. Mr. Sharpe said these were “gifts.”

The investigators asked him how normal it was for him to give employees such large gifts.

Mr. Sharpe replied: “I’m a very generous person.”

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