Skip to main content

The Globe and Mail

Alleged Ponzi scheme targeted CFL players

The home of Milo Brost in Chestermere, Alta.

Chris Bolin/© 2009

Jamie Taras shook his head when he heard this week that police arrested Calgary businessman Milowe Brost over allegations he orchestrated a $100-million fraud.

"I can't believe it took this long," Mr. Taras said yesterday from Vancouver where he works for the Canadian Football League's B.C. Lions. "I was surprised when I heard that he was still [in operation]"

Mr. Taras knew all about Mr. Brost and his various companies, including the Institute for Financial Learning and Capital Alternatives Inc. He'd been approached to invest with Mr. Brost back in 2003, while he was vice-president of the CFL Players Association. Mr. Taras not only rejected the pitch but conducted a mini-sting to help steer other former players clear of the companies.

Story continues below advertisement

On Sunday, Calgary RCMP arrested Mr. Brost and filed fraud charges against him and business partner Gary Sorenson, alleging they conducted an elaborate "Ponzi-like scheme" that roped in thousands of investors in Canada and the U.S. Mr. Brost was released on bail and his lawyer, Steven Skurka of Toronto, said he is reviewing the charges.

Mr. Sorenson, who is believed to be in Honduras, denied the allegation on a website.

A former securities regulator who investigated Mr. Brost's company, along with many investors, say the case raises questions about Canada's provincially splintered securities-enforcement regime, and lack of a national securities regulator. They note that Mr. Brost and Mr. Sorenson faced regulatory scrutiny, sanctions and a multitude of investigations for nearly 10 years but continued to raise money from investors.

"The fact that it's interjurisdictional certainly makes it more difficult in our regulatory system," said Victor Pankratz, former deputy director of enforcement for the securities regulator in Saskatchewan who investigated Mr. Brost's company in 2001.

Mr. Taras, a former football lineman, said it didn't take him long to have suspicions about the enterprise. He was first approached in the fall of 2003 by a man named Graham Dorn who worked for Capital Alternatives, which Mr. Brost founded in 1999. According to regulatory filings, Mr. Dorn had been approaching former CFL players at the time and encouraging them to turn over their pension money to Capital Alternatives.

"He said this will give you freedom and flexibility," Mr. Taras recalled. "They were phoning up players individually saying 'here's what we can do for you.'"

Mr. Taras was leery and asked Mark Schiefner, a Vancouver bank manager, to do some checking. He called Mr. Dorn, who described a strategy that involved players transferring their money out of the CFL pension plan and into an offshore gold trust. He guaranteed returns of up to 20 per cent. "They were hoping to get the CFL Players Association to endorse this to the players," Mr. Schiefner said. "I thought this was too good to be true."

Story continues below advertisement

He made some calls and found out that Mr. Dorn and Mr. Brost were under investigation by securities regulators in two provinces. He warned the players to stay away. But several had already signed up. At least one had invested $1,200. "So we decided to set up a little sting," Mr. Taras said.

Mr. Taras told Mr. Dorn that he would be at the upcoming Grey Cup game in Regina and suggested they get together to talk about the investments. Mr. Dorn jumped at the chance and they agreed to meet two days before the game in a hotel coffee shop. Mr. Taras didn't come alone. He brought the president of the CFLPA, Stu Laird, and the association's lawyer, Ed Molstad.

They told him to stay clear of football players. "The guy got quiet and disappeared pretty quickly," Mr. Taras said.

The fact that Mr. Brost kept going for many more years - nine in total, according to RCMP - "doesn't reflect well on the regulations, I guess, or regulators," Mr. Pankratz said.

A former police officer, Mr. Pankratz was tasked with looking into the Capital Alternatives investments when a finance worker reported something suspicious. He posed as an investor, going undercover to a meeting at a restaurant with Mr. Dorn, who promised offshore returns as high as 160 per cent, in exchange for a pledge of secrecy. The investigation helped trigger a 2002 cease-trade order against Mr. Dorn in Saskatchewan. Yet that work did little for the thousands of other investors who in subsequent years poured money into what RCMP now allege was an elaborate Ponzi scheme.

Mr. Pankratz believes Saskatchewan did all it could at the time. Still, he says the case has brought to light problems in the way border-hopping scams are managed in Canada, where each province has its own independent securities regulator.

Story continues below advertisement

Mr. Pankratz declined to speculate on whether a national securities regulator, promised by the Ottawa but opposed by some provinces, could have more effectively intervened. "But certainly, there's got to be very close co-operation interjurisdictionally to be effective in this type of situation," he said.

Report an error
About the Authors
European Correspondent

Paul Waldie has been an award-winning journalist with The Globe and Mail for more than 10 years. He has won three National Newspaper Awards for business coverage and been nominated for a Michener Award for meritorious public service journalism. He has also won a Sports Media Canada award for sports writing and authored a best-selling biography of the McCain family. More

Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

Comments are closed

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.