CITATION: R. v. Reeve, 2017 ONSC 5376

COURT FILE NO.: CR-13-8029

DATE: 20171013

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Her Majesty the Queen

F. McCracken, for the Provincial Crown

• and -

Daniel Reeve

M. Cremer, H. Gladstone for the accused Daniel Reeve

HEARD: June 8, 2015 - June 6, 2017

Reasons for Judgment commence following the Table of Contents.

R. v. Daniel Reeve

TABLE OF CONTENTS

TABLE OF CONTENTS.. 2

REASONS FOR JUDGMENT.. 9

A. OVERVIEW... 9

B. ISSUES.. 9

C. STRUCTURE OF THE FACTS.. 10

CROWN EVIDENCE.. 10

A. THE INVESTORS.. 10

1A. JOSEPHINE DESALVO.. 10

FIRST INVESTMENT – JAKOBSTETTEL INN.. 11

SECOND INVESTMENT – BREADALBANE INN.. 13

SUBSEQUENT EVENTS. 14

1B. ANGELA DESALVO.. 17

1C. CONCLUSION.. 18

2. NANCY HERLICK. 19

3. ANDREA MORGAN.. 21

4A. RONALD DEKONING.. 25

4B. BRENT DEKONING.. 30

5. WARREN BOLDT. 32

6. BARRY CUNNINGHAM... 36

FIRST INVESTMENT – JAKOBSTETTEL INN.. 37

SECOND INVESTMENT – BREADALBANE INN.. 39

SUBSEQUENT EVENTS. 41

7. BRIAN CROZIER. 43

8. DOUG THIEL. 47

9. DR. IRA BERNSTEIN.. 51

FIRST INVESTMENT – BREADALBANE INN.. 52

SECOND INVESTMENT – BREADALBANE INN, AGAIN.. 54

SUBSEQUENT EVENTS. 56

10. MICHELLE KEDDIE. 60

FIRST INVESTMENT – MILLIONAIRE MORTGAGE. 61

SECOND INVESTMENT – BREADALBANE INN.. 63

SUBSEQUENT EVENTS. 66

11. LORNA EADIE. 67

12. MARK MCGUIRE. 73

FIRST INVESTMENT – BREADALBANE INN.. 75

SECOND INVESTMENT – JAKOBSTETTEL INN.. 77

THIRD INVESTMENT – MILLIONAIRE MORTGAGE. 79

SUBSEQUENT EVENTS. 80

13. HEATHER GARDNER. 81

FIRST INVESTMENT – JAKOBSTETTEL INN.. 82

SECOND INVESTMENT – N.Y. PARK PLAZA. 83

THIRD INVESTMENT – BREADALBANE INN.. 84

SUBSEQUENT EVENTS. 85

14. PATRICIA WESTERHOUT. 88

FIRST INVESTMENT – LOAN TO DPR. 89

SECOND INVESTMENT – BREADALBANE INN.. 89

THIRD INVESTMENT – MILLIONAIRE MORTGAGE. 91

FOURTH INVESTMENT – JAKOBSTETTEL INN.. 92

15. LAURA KERR. 95

16. AMOS LICHTY. 99

17. ANNE COLQUHOUN.. 102

FIRST INVESTMENT – JAKOBSTETTEL INN.. 103

SECOND INVESTMENT – N.Y. PARK PLAZA. 104

THIRD INVESTMENT – BAYFIELD PROPERTY. 106

SUBSEQUENT EVENTS. 108

18. GLEN BRUBACHER. 110

FIRST INVESTMENT – JAKOBSTETTEL INN.. 110

SECOND INVESTMENT – N.Y. PARK PLAZA. 111

SUBSEQUENT EVENTS. 114

19. CLAUDETTE TAYLOR. 116

FIRST INVESTMENT – JAKOBSTETTEL INN.. 118

SECOND INVESTMENT – N.Y. PARK PLAZA. 119

SUBSEQUENT EVENTS. 120

20. PETER STEENBERGEN.. 124

FIRST INVESTMENT – MILLIONAIRE MORTGAGE. 126

SECOND INVESTMENT – MILLIONAIRE MORTGAGE. 127

THIRD INVESTMENT – N.Y. PARK PLAZA. 128

SUBSEQUENT EVENTS. 129

21. MARINA OGNJANOVSKI 131

22. WILMA JORDAN.. 134

23. CHIN TAN.. 136

24. THERESA KAUP. 141

25. RENE BROSSARD.. 146

FIRST INVESTMENT – EMERALD MET. 147

SECOND INVESTMENT – N.Y. PARK PLAZA. 149

SUBSEQUENT EVENTS. 150

THIRD INVESTMENT – ISABELLA BROSSARD ESTATE. 153

SUBSEQUENT EVENTS. 154

26. CRAIG MASON.. 154

27. CARIN SMITH.. 159

28. SHERRILL MARTIN (STEVENSON) 163

29. BRAD ASHMAN.. 169

30. EVA BERNACHI 173

FIRST INVESTMENT – JAKOBSTETTEL PROPERTIES INC. 174

SECOND INVESTMENT – MILLIONAIRE MORTGAGE INC. 177

SUBSEQUENT EVENTS. 180

31. JEANNETTE HARROP. 183

32. KEVIN HILLMAN.. 190

FIRST INVESTMENT – MILLIONAIRE MORTGAGE INC. 190

SECOND INVESTMENT – JAKOBSTETTEL PROPERTIES INC. 192

SUBSEQUENT EVENTS. 194

33. GARY RAYCROFT. 196

FIRST INVESTMENT – CELEBRITY MANAGEMENT INTERNATIONAL INC. 197

SECOND INVESTMENT – JAKOBSTETTEL PROPERTIES INC. 199

THIRD INVESTMENT – MILLIONAIRE MORTGAGE INC. 202

34. WAYNE SCHROEDER. 206

35. ANDREW EPLEN.. 210

36A. LYNETTE CARNEGIE (CAIGER) 214

36B. ROBERT CAIGER. 219

36C. DAN BALCH.. 223

37A. PILITA GALANO.. 226

37B. JOHN CAVAN.. 229

38. LINDA CHAFFE. 232

39. PAUL MELEG.. 235

FIRST INVESTMENT – REEVE HOTELS AND RESORTS INC. C.O.B. AS BREADALBANE PROPERTIES INC. 237

SECOND INVESTMENT – MILLIONAIRE MORTGAGE INC. 238

SUBSEQUENT EVENTS. 239

40A. LISA SCHNARR. 241

40B. PAUL SCHNARR. 243

41. CHERRIN MELEG.. 245

42. STEVE MANUEL. 248

43. ISAAC THIESSEN.. 251

44. JAMES REINHARDT. 256

45. KEITH AUSTIN.. 260

FIRST INVESTMENT – MILLIONAIRE MORTGAGE. 260

SECOND INVESTMENT – BREADALBANE INN.. 261

SUBSEQUENT EVENTS. 262

46. LLOYD HOFFMAN.. 263

FIRST INVESTMENT – MILLIONAIRE MORTGAGE. 264

SECOND INVESTMENT – MILLIONAIRE MORTGAGE. 266

SUBSEQUENT EVENTS. 267

B. THE PROPOSED REAL ESTATE VENDORS.. 268

1. BREADALBANE INN.. 268

PETER EGGER. 268

2. N.Y. PARK PLAZA HOTEL. 272

ALICIA GANZ. 272

MERYL GOLDBERG.. 275

3. BAYFIELD PROPERTY. 276

HENRY ISRAEL. 276

C. DPR FINANCIAL – THE INSIDERS.. 277

1. JEFFREY MAY. 277

2. KAREN GINGRICH.. 279

3. CYNTHIA TAYLOR. 292

4. KIMBERLY KROEKER. 299

5. DIANE INTINI 301

6. SARAH SNOW... 304

7. LINZIE BROWN.. 311

8. STEVE HANEY. 318

9. LEE-ANNE RUGGLE. 325

10. LEN BRUNEN.. 327

11. HOWARD SOUTHWOOD.. 329

D. THE ATTEMPTED COMEBACK.. 332

1. MARK JACKSON.. 332

2. NEIL BOYD.. 334

E. FAMILY MEMBERS.. 337

1. CHERYL REEVE. 337

2. DAVID REEVE. 340

F. CROWN FORENSIC ACCOUNTING EVIDENCE (CAROLINE HILLYARD) 364

A. DEFENCE FORENSIC ACCOUNTING EVIDENCE (EDWARD NAGEL) 374

1. APPENDIX C ISSUE #1. 377

2. APPENDIX C ISSUE #2. 378

3. APPENDIX C ISSUE #3. 379

4. APPENDIX C ISSUE #4. 380

5. APPENDIX C ISSUE #5. 381

6. APPENDIX C ISSUE #6. 381

7. APPENDIX G ISSUE #1. 383

8. APPENDIX G ISSUE #2. 384

9. APPENDIX G ISSUE #3. 384

10. APPENDIX G ISSUE #4. 385

11. APPENDIX G ISSUE #5. 386

B. DANIEL REEVE.. 444

1. GENERAL. 444

2. SPECIFIC INVESTORS. 486

BREADALBANE INN.. 486

i. Josephine DeSalvo. 486

ii. Andrea Morgan. 487

iii. Ronald DeKoning. 488

iv. Warren Boldt 490

v. Brian Crozier. 491

vi. Dr. Ira Bernstein. 492

vii. Michelle Keddie. 495

viii. Isaac Thiel 497

ix. Lorna Eadie. 497

x. Mark McGuire. 498

xi. Patricia Westerhout 499

xii. Heather Gardner. 499

N.Y. PARK PLAZA. 500

i. Background. 500

ii. Heather Gardner. 501

iii. Laura Kerr. 502

iv. Anne Colquhoun. 503

v. Amos and Dorothy Lichty. 504

vi. Glen Brubacher. 506

vii. Claudette Taylor. 507

viii. Peter Steenbergen. 508

ix. Chin Tan. 509

x. Rene Brossard. 510

GENERAL COMMENTS ABOUT THE PLAZA INVESTMENT. 512

JAKOBSTETTEL INN.. 513

i. Background. 513

ii. Nancy Herlick. 514

iii. Barry Cunningham.. 515

iv. Claudette Taylor. 517

v. Marina Ognjanovski 517

vi. Theresa Kaup. 519

vii. Eva Bernachi 520

viii. Gary Raycroft 521

ix. Wilma Jordan. 522

x. Kevin Hillman. 523

xi. Wayne Schroeder. 526

xii. Craig Mason. 528

MILLIONAIRE MORTGAGE. 530

i. Background. 530

ii. Michelle Keddie. 531

iii. Mark McGuire. 532

iv. Pat Westerhout 534

v. Eva Bernachi 536

vi. Peter Steenbergen. 538

vii. Jeannette Harrop. 539

viii. Gary Raycroft 541

ix. Isaac Thiessen. 543

x. Lloyd and Ruth Hoffman. 544

xi. Kevin Hillman. 546

xii. Andrew Eplen. 547

3. INDIVIDUALS INVOLVED IN MILLIONAIRE MORTGAGE PROGRAM... 550

i. BARRY CUNNINGHAM... 551

ii. CARIN SMITH.. 552

iii. SHERRILL (MARTIN) STEVENSON.. 554

iv. BRAD ASHMAN.. 556

v. LYNETTE CAIGER. 559

vi. PILITA GALANO.. 561

vii. LINDA CHAFFE. 563

viii. PAUL MELEG.. 564

ix. PAUL AND LISA SCHNARR. 566

x. CHERRIN MELEG.. 567

xi. STEVE MANUEL. 568

xii. DOUG THIEL. 569

4. MARKET CRISIS – 2008. 571

5. SWAN CREEK. 571

6. CHERYL REEVE – SEPARATION AGREEMENT. 572

C. DANIEL REEVE – CROSS-EXAMINATION.. 587

D. RE-EXAMINATION OF DANIEL REEVE.. 634

ANALYSIS.. 637

CONCLUSIONS.. 661

A. FORENSIC ACCOUNTING EVIDENCE.. 661

B. THE 41 ALLEGED VICTIMS AND OTHER INVESTORS.. 666

C. DAVID REEVE AND LINZIE BROWN.. 667

D. THE PROPOSED REAL ESTATE VENDORS.. 667

E. CHERYL REEVE.. 668

F. DPR FINANCIAL – THE INSIDERS.. 671

1. SHAREHOLDER LOANS, MAINLY TO CHERYL REEVE AND DANIEL REEVE. 672

2. EXPENSES OF THE VARIOUS REEVE COMPANIES. 675

3. REPAYMENTS TO THE ALLEGED VICTIMS AND OTHER INDIVIDUAL INVESTORS. 686

G. EVIDENCE OF THE INSIDERS.. 687

H. EVIDENCE OF DANIEL REEVE.. 688

1. SPOUSAL SUPPORT AND EQUALIZATION PAYMENTS MADE TO CHERYL REEVE. 689

2. ALLEGED AGREEMENT BY DAVID REEVE TO PAY $1.2 TO $1.6 MILLION.. 696

3. KNOWLEDGE OF USE OF ALLEGED VICTIMS’ INVESTMENT MONIES. 703

4. INCONSISTENT EVIDENCE. 722

5. INTENT TO INVEST IN LOW-RISK INVESTMENTS. 749

THE N.Y. PARK PLAZA INVESTMENTS. 754

THE BREADALBANE INVESTMENTS. 756

THE JAKOBSTETTEL INVESTMENTS. 760

THE MILLIONAIRE MORTGAGE INVESTMENTS. 762

CONCLUSION REGARDING INTENT TO INVEST IN LOW-RISK INVESTMENTS. 767

6. OVERALL CONCLUSION REGARDING THE CREDIBILITY OF DANIEL REEVE. 769

I. OVERALL CONCLUSIONS AS TO THE FACTS.. 770

POSITION OF THE DEFENCE.. 780

POSITION OF THE CROWN.. 781

LAW.. 783

A. COUNT 1 – FRAUD OVER $5,000. 798

1. ACTUS REUS OF FRAUD.. 798

2. MENS REA OF FRAUD.. 801

3. CONCLUSION REGARDING COUNT 1 – FRAUD OVER $5,000. 808

B. COUNT 2 – THEFT OVER $5,000. 809

1. CONCLUSION REGARDING COUNT 2 – THEFT OVER $5,000. 810

DECISION.. 810

EXECUTIVE SUMMARY.. 812

A. OVERVIEW... 812

B. ISSUES.. 812

C. VERDICT.. 812

D. STRUCTURE OF JUDGMENT AND SUMMARY OF EVIDENCE.. 813

EXAMPLE 1. 821

EXAMPLE 2. 822

EXAMPLE 3. 823

Schedules.. 833

Schedule A – Chronology of Investors and Absence of Any Repayment 1

Schedule B – Repayments (Pre-Separation Agreement) to Investors 1-12 Chronology 1

Schedule C – Investments and Losses of Investors (Pre-Separation Agreement) 1-12 Chronology 1

Schedule D – Repayments to Investors (Post-Separation Agreement) 13-41 Chronology 1

Schedule E – Investments and Losses of Investors (Post-Separation Agreement) 13-41 Chronology 1

Schedule F – Investments and Significant Uses of Investments (Pre-Separation Agreement) 1-12 Chronology. 1

Schedule G – Investments and Significant Uses of Investments of Investors (Post-Separation Agreement) 13-41 Chronology and Evidence of Edward Nagel in Cross-Examination 1

Schedule H – No Copies of Corporate Bonds Provided to Investors (Post-Separation Agreement) 13-41 Chronology. 1

Schedule I – Reimbursement of Deferred Sales Charges and Withholding Tax and Rate of Return in Final Year (Post-Separation Agreement) 13-41 Chronology. 1

Schedule J – Glossary of Terms and Acronyms. 1

Reasons for Judgment commence on the next page.

REASONS FOR JUDGMENT

The Honourable Justice T. Skarica

A. OVERVIEW

1Daniel Reeve (Daniel¹) was a successful financial planner who owned and operated a number of investment offices in Kitchener and the surrounding areas. He and his firms had an enviable reputation for integrity and success in the financial investment business. The Crown alleges that from the period of January 2007 to September 2009, Daniel took advantage of his reputation and to defraud at least 41 victims of approximately $10 million.

B. ISSUES

2The issues to be resolved in this case are factual ones:

1. The credibility of the witnesses;

2. Whether a fraud over $5,000 (count 1) has been committed in the context of the credible and reliable evidence; and

3. Whether a theft over $5,000 (count 2) has been committed in the context of the credible and reliable evidence.

C. STRUCTURE OF THE FACTS

3The Crown called as witnesses many of the alleged victims who are said to have lost money in their investment dealings with the accused and/or his companies. Their evidence will be summarized. Schedule J, attached to this judgment, provides a glossary of terms and acronyms. Hundreds of exhibits were filed; references to exhibits and critical documents have been bolded for easy reference. The Crown filed a USB flash drive containing further exhibits; references to documents on this device are denoted by “Exhibit Stick” and a file number.

CROWN EVIDENCE

A. THE INVESTORS

1A. JOSEPHINE DESALVO

4Ms. DeSalvo is an Italian immigrant. She has a Grade 9 education which she obtained in Italy. In Canada, she worked on a farm growing vegetables and brought them to a Toronto market. She also worked as a babysitter and a seamstress. She was able to save some monies and used these savings to buy two apartment buildings.

5In 2007, Ms. DeSalvo decided to sell one of the apartment buildings, a six-unit building in Brantford.

6During the first week of June 2007, she met the accused’s brother, David Reeve (David²), at her daughter’s home in Brantford. David suggested that once the building was sold, she could invest the proceeds with him and he would give her 8 to 10 percent on her investment. David worked for the accused’s investment business as a financial adviser and was, for a short time, president of DPR Financial, which was wholly owned by the accused.

FIRST INVESTMENT – JAKOBSTETTEL INN

7The apartment building was sold and Ms. DeSalvo netted $205,000. She called David and a meeting was set up at Ms. DeSalvo’s daughter Angela’s home in Brantford. David brought his brother, Daniel, the accused, to the meeting. Also present at this meeting, in addition to Ms. DeSalvo, were Angela, Joya (another daughter of Ms. DeSalvo) and Joya’s husband, Darcy.

8David introduced Daniel to Ms. DeSalvo, stating that he had brought the president of DPR Financial with him and that Daniel could offer more than 10 percent. David went to another part of the house with Darcy and Ms. DeSalvo never spoke to David again.

9Daniel spoke to Ms. DeSalvo and her daughters for almost two hours. Ms. DeSalvo told the accused that she didn’t want risks; she had worked all her life for this money.

10Daniel told her she could invest in the Jakobstettel Inn – a hotel he owned – and she would get 15 percent per year (in lieu of 12 percent plus a two-week stay at the Inn). Ms. DeSalvo visited the Inn on several occasions and confirmed it was a beautiful property.

11She invested $200,000 in the property. She handed a cheque for $200,000 personally to the accused. It appears as Exhibit 14, dated June 18 2007 and addressed to Emerald Met, one of the accused’s companies. Ms. DeSalvo described the cheque as “all [her] sweat from 1971 to 2007.”

12Ms. DeSalvo did not see or sign the Exhibit 14 written agreement until several months later around Christmastime. The accused, at the time he received the cheque, indicated that he had left the papers behind and needed a special stamp. Exhibit 15 is the agreement dated June 18, 2007 between Celebrity Management International Inc. (another one of the accused’s companies) and Ms. DeSalvo.

13The accused promised Ms. DeSalvo in June of 2007 that she could get her money back at any time she wanted, provided she gave two weeks’ notice. Ms. DeSalvo found that after she gave the $200,000 to the accused, she could not make ends meet. Her other apartment was mortgaged and she no longer had the income from the apartment she had sold. After several months, she requested that the accused return to her $120,000. The accused did not return this money to her; in fact the accused never paid her any of the $200,000 back and never paid her any of the 15 percent interest.

SECOND INVESTMENT – BREADALBANE INN

14Instead, the accused convinced Ms. DeSalvo to get a line of credit on her home which was fully paid up. The accused convinced Ms. DeSalvo to obtain $100,000 from the line of credit and invest it into a property that he was purchasing in Fergus, but there were only four days left to get into the investment. The accused promised her he would pay her 20 percent interest on this Fergus investment and promised that he would pay $1,666.66 directly into her bank account every month.

15Exhibit 16 is a Bank of Montreal bank draft, dated March 14, 2008, in the amount of $100,000 payable to Reeve Hotels and Resorts Inc. carrying on business as Breadalbane Inn (yet another company owned and operated by the accused). Ms. DeSalvo’s daughter Angela brought Ms. DeSalvo to the DPR Financial office in Cambridge and Ms. DeSalvo personally handed the cheque to the accused on March 15, 2008. As well, Ms. DeSalvo signed an agreement that was entered as Exhibit 17 – 13D. Angela and two female employees were present. There is no witness to the agreement. The accused told Ms. DeSalvo no witness was necessary. Ms. DeSalvo now had $300,000 invested with the accused.

SUBSEQUENT EVENTS

16In June of 2008, Ms. DeSalvo had still not received any monies on her original $200,000 investment. She had many meetings with the accused who was often away on business or on holidays in the Caribbean or Europe. Exhibit 18 is a corporate bond, dated June 18, 2008, between Jakobstettel Properties Inc. (a company owned and operated by the accused) and Josephine DeSalvo, in the amount of $200,000 expiring June 18, 2011, and paying 15 percent interest. This was a rollover of Ms. DeSalvo’s original $200,000 investment. Ms. DeSalvo remembers signing the document but thought it was only for a one-year period. She never received any monies in either capital or interest on this $200,000 and lost all of it.

17On the second investment of $100,000, she received $1,666.66 per month for approximately six months, give or take a month, starting in March 2008, and then the payments stopped. According to Ms. DeSalvo, “he made [her] happy for six months and then abandoned [her].”

18Ms. DeSalvo phoned the office frequently but normally the secretaries would answer. Finally, Ms. DeSalvo went to a lawyer and then to the police. She discussed these efforts with the accused. On the morning before she went to the police, the accused told her that if she went to the police, she would never see a penny of her money. She took this as a threat.

19The police told Ms. DeSalvo that the accused was “good people.” Sometime after, the accused returned $100,000 to Ms. DeSalvo in two installments. Accordingly, her losses total the original $200,000 investment, plus the interest payments she did not receive on the original $200,000 investment, plus the missed interest payments on the second $100,000 investment.

20In cross-examination, defence counsel attempted to portray Ms. DeSalvo as an aggressive and savvy investor/business woman. I do not accept this portrayal. As Ms. DeSalvo testified, her priority was to seek out the most secure investment available. Originally, David, the vice president of DPR Financial, had been recommended by a person who had invested in DPR. She had met Daniel, the president of DPR Financial, and she trusted him and that is why she did not go elsewhere.

21It was also suggested that Ms. DeSalvo wanted to leave her money with the accused for four years so that she could double her money, as recommended by the accused (the combination of Exhibit 15, signed in June 18, 2007, and Exhibit 18, the rollover of the $200,000 in June 18, 2008 for another three years, totals four years). The June 18, 2008 document was signed at a time that the accused was paying Ms. DeSalvo $1,666.66 per month on the $100,000 investment she made in March 2008 in order for her to make ends meet. The accused made one more payment of $1,666.66 in July (the fourth one) and the interest payments ceased thereafter on all of her investments.

22It is reasonable from the evidence to infer that Daniel did just enough in the form of promises and payments to continue to induce Ms. DeSalvo to have faith in his integrity and honesty.

23Accordingly, I accept Ms. DeSalvo’s explanation that she trusted Daniel as the reason for why she signed documents that were backdated and not witnessed appropriately, which was not in accord with her usual practices.

24For the first time at trial, Ms. DeSalvo in cross-examination mentioned that the accused had tried to get her to leverage her other apartment for a $400,000 investment. It just popped into her head and the defence clearly inferred that this was recent fabrication. However, in re-examination, the Crown produced Exhibit 19 which is a handwritten note prepared by Daniel regarding a $400,000 investment that was prepared in front of Ms. DeSalvo by Daniel in a St. Jacobs restaurant. This note had been previously produced to the police by Ms. DeSalvo. Accordingly, I reject the defence suggestion of recent fabrication on this point.

25Similarly, the defence cross-examined Ms. DeSalvo on her original statement that she had prepared with her daughter. There is no mention in the statement of Ms. DeSalvo not getting the Exhibit 15 agreement many months after providing the $200,000 to the accused. Her explanation for this omission was that (1) she would have remembered better if she had dictated the statement in Italian as opposed to English; (2) she did not include everything because she was going to talk to the police later; (3) she had never had this type of experience before; and (4) she left out other details as well, which is why she is testifying to “tell God’s truth” at this trial. Ms. DeSalvo is an uneducated woman who by force of will and determination saved a nest egg and bought rental properties. This does not make her a sophisticated investor or witness. I accept her explanations for this omission in her statement.

1B. ANGELA DESALVO

26Further, the Crown called Angela DeSalvo (Angela³), the daughter who accompanied Ms. DeSalvo when she had her meetings with the accused. Angela substantially corroborated her mother’s evidence. Angela provided significant details regarding a meeting that occurred on December 8, 2008 when Daniel visited her studio with her mother and lawyer present. By that time, they had found out that Daniel didn’t own the Breadalbane Inn; David had told them that on November 18, 2008. Daniel was asked how things at the Breadalbane were going. Daniel replied that it was the best year ever. Daniel never denied owing money to Ms. DeSalvo and signed something to the effect that he would pay back the money. Daniel only paid back $100,000 of the $300,000 he owed Ms. DeSalvo. Angela indicated that she assisted her mother when her mother prepared her statement that was provided to the police.

27On cross-examination Angela confirmed that on August 5, 2008, her mother gave written notice to Daniel that she wanted her Jakobstettel investment back. On September 11, 2008, a day before David Reeve’s wedding, there was a meeting involving David, Daniel, Angela, Ms. DeSalvo, and another sister, regarding Daniel’s failure to pay and return monies to Ms. DeSalvo. Daniel promised he would have a cheque for her on the following Monday but no payment was ever made. The wedding proceeded on September 12, 2008. Angela DeSalvo was there and spoke to a Gord Black who told her that David was leaving DPR Financial. Angela received correspondence from David in October 2008 that he was leaving DPR Financial.

1C. CONCLUSION

28As indicated in her preliminary hearing, at pages 76-77, Ms. Josephine DeSalvo invested a total of $300,000 with the accused. She eventually received payments of $30,000 and $70,000 from the accused and this $100,000 was used to pay off the line of credit on her house. She received a total of four interest payments of $1,666.64 plus another $2,500 for a total return of $109,166.64, or over a little of one third, on her total investment.

29To put it simply, the evidence establishes that Ms. DeSalvo is a hardworking immigrant woman with little formal education who trusted the accused due to his reputation and personal promises; he betrayed her trust in him and as a direct result, Ms. DeSalvo lost her life savings of $200,000 and significant interest payments due to her.

30The DeSalvos’ evidence is prototypical of the evidence given by the other 40 plus investors. Like the DeSalvos, the investors who lost money were generally decent, honest, hardworking people. I find the DeSalvos’ evidence to be credible as it was internally consistent and consistent with evidence given by other investors and witnesses. Their evidence was corroborated by exhibits and documentary evidence, and withstood extensive and exhaustive cross-examination.

2. NANCY HERLICK

31Nancy Herlick was married to Daniel’s personal driver, Tony Herlick. Mr. Herlick was the accused’s driver for four-and-a-half years, ending in October of 2009.

32On May 5, 2007 Ms. Herlick invested $100,000 in the Jakobstettel Inn (see Exhibit 22). The ownership agreement between her and Celebrity Management Inc. (the accused’s company) indicates she would receive 15 percent annual interest (standard 12 percent plus 3 percent in lieu of a two-week stay at the Inn). Ms. Herlick testified it was for one term. On May 5, 2008 the principal and interest were due.

33In cross-examination, Ms. Herlick indicated that the $100,000 was to be used for renovating the basement of the Jakobstettel. She saw the basement – it was dingy and nothing was going on there. Daniel advised her that the Exhibit 22 investment should go into Ms. Herlick’s name for tax reasons; she had less income than her husband.

34The accused later told her that the interest would be paid on May 8, 2008 and the principal would be paid later. She told Daniel this was unacceptable; it was all due on May 5, 2008.

35On May 9, 2008, Daniel attended her home with a cheque in the amount of $115,000. Daniel said, “I assume this is for you.” Her husband took the cheque to the bank the next day and it was returned NSF. Ms. Herlick phoned Daniel and asked him what was going on. Daniel told her to leave it with him and he would see what he could do.

36Ms. Herlick called every day or every other day. Daniel had lots of excuses, i.e., he was waiting for a “drop,” the bank was holding a large cheque, etc.

37Ms. Herlick told Daniel that the money was given in good faith and asked him, “How did you get in this predicament?” Daniel agreed that he had not used the money as he was supposed to and he did not have the money. She told him that he was going to the police as this was her husband Tony’s pension money. Daniel told her that he would see if he could get a loan on his house. He told her that he applied for a loan for his home and would get back to her.

38About three weeks after these conversations, on July 14, 2008, Ms. Herlick received two cheques, one for $115,000 and the other for $3,000. Ms. Herlick accordingly got her full investment back with interest and suffered no losses.

39Ms. Herlick is a credible witness. Her testimony was backed up by documentation regarding her investment and her testimony was not significantly challenged upon cross-examination.

3. ANDREA MORGAN

40Andrea Morgan in 2008 was a retired registered nurse. Her husband Gwyn was employed and their combined income in 2008 was $150,000 per year. They owned a house that was paid off and worth $400,000. She had no significant debts and had $300,000 in RRSPs and a further $200,000 in a deferred saving plan and a nurse’s pension. Her investing experience was limited and was basically limited to investing in RRSPs.

41In 2007, she had RRSPs and equities with Rickard Financial. She had been with Tony Rickard for about ten years.

42In January, 2007 Ms. Morgan and her husband met with Daniel and Steve Haney at the Jakobstettel Inn. Daniel did most of the talking and spoke about the benefits of life insurance products, leveraged loans and segregated funds. Daniel said that RRSPs were a good product but there was a better method. The better method was to pay yourself first; monies would flow from life insurance policies tax-free. Daniel said that leveraging was very important. Daniel was in charge and Mr. Haney had little to say.

43Daniel was the owner of DPR Financial and he had a number of books on the table. The Three Buckets was one of the books that he had authored.

44In March of 2007, Ms. Morgan transferred her investments from Rickard Financial to DPR Financial. From January 2007 to April 2008, she met mostly with Mr. Haney. Mr. Haney was the “quarterback” in charge of her investments.

45In early April of 2008, Mr. Haney called her regarding an investment proposal. She and her husband met with Daniel and Mr. Haney in a little room behind the Jakobstettel Inn. Daniel had an investment proposal. It involved a limited partnership with ten people and an investment involving a corporate bond that was to be used to purchase the Breadalbane Inn in Fergus. Reeve Hotels and Resorts was to be the purchaser. Daniel told Ms. Morgan and her husband that the purchase would be definitely done by the end of April 2008, and if they were interested, they would have to move quickly. Daniel told them on April 2 that he would need the money by April 9 to purchase the property

46The Morgans decided to invest in the Breadalbane Inn and provided Daniel with two bank drafts: (1) an April 9, 2008 bank draft of $32,000, and (2) an April 15, 2008 bank draft of $144,739, which came from both her registered and non-registered accounts with DPR.

47Daniel told them the $176,000 would be returned in five years, 16 percent interest would be paid annually on April 3 for the next five years, and that Daniel would reimburse them for all penalties and taxes incurred in cashing in the RRSPs. They were told the sale of the Breadalbane was imminent. The accused told them that RRSPs were a slow way to make money.

48For months thereafter, no contract was received by the Morgans. Daniel told them they would get their contract when the Breadalbane sale went through. Finally, on August 11, 2008, the Morgans got a “sort of” contract (see Exhibit 23). Exhibit 23 is an unsigned contract from Reeve Hotels and Resorts Inc. dated April 9, 2008. The Morgans were told that it would be signed when the Breadalbane Inn sale went through. At the end of May 2008, the dining manager at the Breadalbane told the Morgans that the Inn was not for sale. The accused said that the Breadalbane had not been purchased yet given a problem with the liquor licence. The accused told them not to worry and that they would collect interest from April 1.

49The Morgans had concerns and discussed them with Mike Floyd, a DPR financial planner who was creating a financial plan for them. Mr. Floyd told them no one should be worried; Daniel was surrounded by bricks and mortar. He told them that neither Mr. Haney nor he were worried. However, on September 8, 2008, Mr. Haney left DPR. On September 28, 2008, Ms. Morgan spoke to Nancy Herlick who told her that Daniel was a pathological liar, mortgaged to the hilt and was greedy and conducting frauds. On September 29, 2008, Ms. Morgan told Daniel that the Breadalbane was a bogus deal and that he had taken her money on false pretences. Daniel replied that they were going to miss a great opportunity but yes, the Morgans would get their money back in thirty days.

50On September 30, the Morgans sent a letter to the accused asking for the return of $176,793. The accused provided them with a draft in the amount of $200,000 payable on October 31, 2008. Ms. Morgan indicated that the $200,000 exceeded the 16 percent interest they were owed but it didn’t include penalties and taxes that Daniel had agreed to pay when she cashed in her RRSP. Ms. Morgan flatly denied the suggestion on cross-examination that Daniel had only promised to pay the capital gains taxes. Ms. Morgan was adamant that Mr. Reeve promised to her withholding taxes from cashing in her RRSPs and was firm that capital gains taxes were never mentioned by the accused. Ms. Morgan indicated in cross-examination that the accused agreed to pay $200,000 and in fact paid $186,000 to prevent her from going to the police.

51On the morning of October 31, 2008, Daniel told the Morgans not to cash the draft; he had another plan in place. The Morgans told him that if the cheque did not go through, they were going to the police. At 4 p.m. on October 31, 2008 Daniel contacted them and asked them to meet him at the TD Bank in Cambridge where he would have their money. He said he would give them $186,000 on the Friday and $14,000 on the Monday. She cashed the $186,000 cheque on November 3, 2008 and she received $186,000. She never received the other $14,000. They tried to phone Daniel but were unable to contact him. The Morgans never saw Daniel again.

52Again, I find Ms. Morgan to be a credible witness whose evidence was supported by documentation in the form of exhibits. There were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

4A. RONALD DEKONING

53Ronald DeKoning is 55 years of age and is a construction supervisor.

54In April 1977, Mr. DeKoning had significant assets which included a house worth $300,000 to $350,000 which was mortgage-free, $185,000 in RRSPs, $100,000 from the sale of his concrete cutting business, and h several heavily mortgaged residential rental properties with his brother.

55Mr. DeKoning met Daniel in February 2007 at a wine and cheese party where Daniel gave a presentation on his and DPR Financial’s investment philosophies. In April 2007 Mr. DeKoning transferred his investment assets to DPR and had Steve Haney as his financial advisor. Mr. DeKoning met regularly with Mr. Haney and with other DPR representatives including David.

56On March 5, 2008, Mr. DeKoning met with Daniel at the Jakobstettel Inn regarding an investment opportunity Daniel wished to present. Present at this meeting were Mr. DeKoning, Mr. DeKoning’s wife, their 20-year-old son and Daniel.

57Daniel told them that he had an opportunity to buy the Breadalbane Inn in Fergus. Daniel described it as a gem. The Inn was family-owned and the owner was ill. Daniel indicated that the sale had to take place immediately and that there was minimal risk due to it being a real estate investment.

58Daniel indicated that he had the majority of funds but wanted to know if they wanted to contribute. Daniel told them they could cash in their RRSPs tax-free. They would pay the tax up front and Daniel would compensate them for the full amount of the RRSP and interest at the maturity date. Daniel said he would offer 20-percent return on the investment. Daniel said he needed another $200,000 to make the purchase but needed the money right away.

59The following day, they decided to participate in the investment. They filled out the redemption forms for one RSP in the name of Frieda DeKoning and RRSPs in the name of Frieda DeKoning and Ron DeKoning. The RSP redemption form has a note from “Janice” that the clients are withdrawing the funds to purchase a home. The listed financial advisor is noted as Steve Haney but one of the forms also has David Reeve listed underneath Mr. Haney’s name as the financial advisor. The RSP has a redemption charge. Daniel said he would cover all redemption charges.

60The total of all three redemptions, after deductions for service charges and withholding taxes was approximately $187,000. The gross amount cashed in before service charges and withholding taxes was approximately $237,000. The withdrawal instructions indicate that Janice from Mr. Haney’s office should be contacted so that the advisor could pick up the cheques from the Canada Life offices.

61Exhibit 24 – 12J shows that a Corporate Bond Agreement was signed between Reeve Hotels and Resorts carrying on business as Breadalbane Inn and Ronald and Frieda DeKoning. The amount listed as owing is $237,961.07 which is the gross amount of monies cashed in from Canada Life before deductions for withholding taxes and surrender fees. The term is for two years and pays 20 percent interest for two years, paid annually. The document is dated March 10, 2008, but the documents were signed by the parties, including Daniel, a week later on March 18, 2008.

62Daniel told the DeKonings that “the deal had gone through” and that the Breadalbane had been purchased on March 10, 2008. There was no discussion of any other properties other than the Breadalbane. The DeKonings had invested their money solely for the Breadalbane Inn. Daniel said the next step was to have lunch at the Breadalbane. The deal had gone through!

63In October 2008, Ron DeKoning heard from a lawyer Bob Waters, in Elmira, that the accused did not own the Breadalbane Inn. Mr. DeKoning phoned Daniel and confronted him with this information. A meeting was set up for November 2008 and Daniel admitted that he did not own the Breadalbane. Mr. DeKoning indicated he wanted his money back immediately. Daniel said he could not give the money back. It was invested for the long term. Daniel indicated he needed a 30-day written request. That request was made a day or two later – see Exhibit 24 – 12K. It is dated November 21, 2008 and is a written request for the return of $237,961.07. The accused agreed and signed this document at Waterloo in the Millionaire building.

64Between November 21, 2008 and March 25, 2009, there were numerous meetings with the accused who made numerous promises to pay – see, for example, the March 25, 2009 demand payment for failure to pay interest. The accused had also promised, in December 2008, to pay $50,000 per month starting in January/February 2009.

65The bottom line, however, was that no monies of any type were paid. There was no repayment of principal, interest, taxes or surrender charges.

66The DeKonings accordingly lost $237,961.07 plus any interest owing to them.

67In cross-examination, Mr. DeKoning indicated that his financial advisors – Mr. Haney and David (who took over in January 2008), from February 2007 until January 2008 – suggested that there were private investment opportunities through Reeve Hotels and Resorts.

68Mr. DeKoning denied the suggestion by the defence that the accused did not say that Mr. DeKoning could withdraw his RRSP tax-free. Mr. DeKoning was firm that the accused had said that “you could withdraw your RRSP tax-free.”

69In October of 2008, Mr. DeKoning received an email from David that he was leaving DPR Financial. On November 18, 2008 Mr. DeKoning met with David at David’s new office. David advised Mr. DeKoning that Daniel did not own the Breadalbane. Mr. DeKoning was upset and shocked. In June of 2008, Mr. DeKoning had met David and was under the assumption that David was aware of the corporate bond investment details. David had been his financial advisor since January of 2008 and had told him that the accused did private investments. David suggested that Mr. DeKoning could call the police. Given the conflicting information given by David, Mr. DeKoning transferred his leveraged investments to another firm in late 2008 or early 2009.

4B. BRENT DEKONING

70Brent DeKoning (Brent⁴) is the son of Ronald and Frieda DeKoning.

71In 2008, his parents asked him to come to a meeting with them and Daniel Reeve at the Jakobstettel.

72Daniel had a new investment idea: cash out RRSPs tax-free and get a 20 percent interest rate. Daniel would pay for the deferred sale charges and withholding taxes and it was risk free. Daniel said that he was going to purchase the Breadalbane from a widowed lady and that it was a cash cow. He was getting investors together. Daniel was only $200,000 away and they only had 24 hours to make up their minds.

73In cross-examination, Brent indicated that he did not recall deferred sales charges being discussed. Brent denied that Daniel said that it was Daniel’s intention to buy the Breadalbane. Daniel’s wording was that Daniel was going to purchase the Breadalbane and they had an opportunity to be involved. Brent told his parents to get more information but he did not tell them not to do it. At the time he was impressed by the 20 percent interest rate but now, with his subsequent education and experience, he would have seen bad signals and not been impressed. At the end of the meeting, Daniel told Brent that he might have an opportunity for him and to contact him in a couple of weeks. Brent was at school and was working part-time for TD bank.

74His parents entered into the agreement that was entered into evidence as Exhibit 24 – 12J. Brent saw the paperwork regarding the $200,000 withdrawal at his parents’ home.

75In June of 2008, Brent finished his first year at Conestoga College and received his life insurance licence in August, which permitted him to sell segregated funds and life insurance products.

76Brent worked at DPR from June to approximately November of 2008, part-time for one to two days per week. Regarding the Millionaire Mortgage program, Daniel was of the opinion that you were an idiot not to do it. In cross-examination, Brent indicated that he was hired to work on the Millionaire Mortgage program and worked with Janice Berkin regarding filling out forms. He saw Daniel do the Millionaire Mortgage presentation.

77Brent left in November or December of 2008 because the company was unethical and was misleading clients. For example:

1. Daniel would steer clients’ answers by feeding clients answers when asking questions;

2. Clients were being told that they could get high rates of return risk-free;

3. Too many clients were leveraged, and were leveraged to 100 percent of equity (with which Brent was not comfortable); and

4. Daniel did not have a licence.

In cross-examination, Brent indicated that he knew Daniel didn’t have a licence and that is one of the reasons he left. Brent stated that clients would think that Daniel had a licence as he was always telling clients about the markets when making the Millionaire Mortgage presentation. Daniel would adjust the presentation to the particular client’s situation but would manipulate returns by adjusting the interest rates to get higher returns.

78Brent was never aware of any difficulties of DPR and/or the other companies that Daniel owned.

79I find the DeKonings to be credible witnesses. Their evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in their evidence in either examination-in-chief or cross-examination.

5. WARREN BOLDT

80Warren Boldt is disabled due to a car accident and last worked in 2003.

81In 2006, Mr. Boldt received a settlement of $450,000 of which he netted $315,000. He gave $300,000 to his brother-in-law Rob Pigeon who worked at DPR Financial in Windsor with David Reeve. Mr. Pigeon was managing to get Mr. Boldt about 15% monthly on his investment. Mr. Boldt, at that time, had no experience investing or university education.

82In 2007 to 2008, he attended two wine and cheese parties put on by DPR Financial in Windsor. The second one was held in the new DPR building which was very posh and left him with a favourable impression. Daniel gave a presentation at one or more of these parties. Mr. Pigeon, for no reason, stopped managing Mr. Boldt’s money so Mr. Boldt went to see Daniel.

83In February or March of 2008, Mr. Boldt spoke to Daniel personally at a meeting. Daniel brought up the Breadalbane Inn and Daniel said, “You know what? I’m going to invest your money in the Breadalbane Inn.” Mr. Boldt told Daniel that he was disabled and that his money was from his accident settlement, it was all the money he had, and he could not afford to lose it.

84Daniel indicated that Mr. Boldt would get 20 percent per month for three years and that it was a special rate that Daniel wanted to help Mr. Boldt out with. Mr. Boldt decided to invest his $300,000 with Daniel. On February 29, 2008 a bank draft of $300,000 was made out in favour of Reeve Hotels and Resorts.

85On March 3, 2008, a corporate bond in the amount of $300,000 was made out between Reeve Hotels and Resorts Inc., c.o.b. as Breadalbane Inn, and Banyan Inc. Banyan Inc., which was Mr. Boldt’s company. The bond had a three-year maturity which provided monthly income of $5,000 which equalled a 20 percent annual interest rate. Previous drafts had provided for only 15 percent per year. Daniel and Mr. Boldt signed the bond in each other’s presence. A secretary came in and saw them sign but the bond was already pre-signed by a witness before Mr. Boldt and Daniel signed it. At the preliminary hearing, Mr. Boldt did not mention anything about the pre-signing, explaining at trial that he was never asked about it at the preliminary hearing.

86Previously, Daniel had said he was going to put the money into the Breadalbane Inn. On March 3, 2008, when Mr. Boldt and Daniel signed the bond agreement, Daniel told Mr. Boldt that he, Daniel, owned the Breadalbane Inn. The entire bond document was read to Mr. Boldt by Daniel.

87Interest payments thereafter were late. Daniel made excuses to Mr. Boldt as to why, including (1) when his first interest payment was late, Daniel stated that “the girls had lost his void cheque” so Mr. Boldt had to provide a new one; and (2) Mr. Boldt did not bank at TD, and when they walked his cheque over to HSBC, the bank was closed.

88Mr. Boldt received a total of seven payments of $5,000 for a sum of $35,000. He got a T5 in 2008 for a payment of $5,000 from Celebrity Management but no T5s for the other $30,000. Mr. Boldt never dealt with Celebrity Management. In cross-examination, Mr. Boldt indicated he received $5,000 payments in April, May, June, July, and August of 2008 and then payments were missed, with the exception of a payment in October 2008 and the last one in January 2009.

89A couple of months after March 3, 2008, Mr. Boldt told Daniel he was going to the Breadalbane, but Daniel told him not to do that and gave him a deal at the Jakobstettel.

90After his problems with payment, Mr. Boldt went to a lawyer. Following a title search on Breadalbane, Mr. Boldt called the police. In cross-examination, Mr. Boldt indicated the title search revealed that Daniel Reeve was not the owner of the Breadalbane; another man owned it with an $85,000 mortgage on it.

91In December of 2008, at a meeting at Starbucks in the Chapters Store at the Devonshire Mall in Windsor, Mr. Boldt spoke to Daniel about getting his money back. Daniel indicated he would make $100,000 payments in each of December, January and February, but nothing came of it. Mr. Boldt’s loss is therefore $300,000 plus unpaid accrued interest.

92In cross-examination, Mr. Boldt confirmed he borrowed $50,000 with David in May 2008 (after the bond agreement) and put this money into segregated funds. Daniel was not involved. This investment was quickly down $5,000 but David said “stay with it.” Soon after, the investment was down $15,000. David managed this fund for a short time, approximately 1.5 to two years.

93In Exhibit 30, dated March 14, 2008, David Reeve met with Mr. Boldt and there was no indication of any wrongdoing. However, on April 6, 2009 (see Exhibit 35), in a letter signed by David Reeve, there was a reference to wrongdoing by DPR Financial and Daniel, with David was saying that he, that is, David, had not encouraged any investments at DPR Financial. Mr. Boldt felt that Exhibits 30 and 35 were contradictory, and he recalled being upset when he received the Exhibit 35 letter.

94I find Mr. Boldt to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

6. BARRY CUNNINGHAM

95Barry Cunningham owns an international trucking business. He has owned that business for about 23 years and has 48 employees. He has a grade 12 education with no experience in the investing industry.

96Daniel was his financial advisor from 1993 to 2007. In 2007, Daniel told Mr. Cunningham he was doing different things with Reeve Hotels and that David was taking over as his financial advisor. Daniel was working through DPR Financial and had Mr. Cunningham involved in segregated funds and leveraged loans.

FIRST INVESTMENT – JAKOBSTETTEL INN

97In 2007, Daniel arranged a meeting at Mr. Cunningham’s office. Present were Mr. Cunningham, his wife Sharon Hepburn (the Cunninghams), Daniel and David. Daniel discussed investing in the Jakobstettel. Daniel stated that he owned it and it had no mortgage; however, other investors were involved in loans against the Jakobstettel. Daniel recommended cashing in $200,000 in RRSPs, investing it in the Hendrick suite in the Jakobstettel and getting 18 percent interest. Daniel said, “Pay the piper now instead of later when retired.” Daniel did not indicate what was to be done with the money.

98In 2005, Mr. Cunningham’s company had invested $100,000 in Jakobstettel for two years at 12 percent interest. The company got the money back in 2007 together with the interest owing. The money had been invested with Celebrity Management, one of Daniel’s holding companies.

99In cross-examination, it was revealed that Mr. Cunningham, in January of 2008, received another $100,000 back from an investment with Reeve Hotels along with $25,000 interest for a six-month investment – see Exhibit 40. The $100,000 had been used to acquire the Waterloo office. Accordingly, Mr. Cunningham had made two prior private investments with Daniel, and all contracts had been honoured.

100As indicated in Exhibit 39 – 11C through 11F, the Cunninghams cashed out their RRSPs with Manulife (which totalled approximately $250,000) and on May 31, 2007 provided two cheques to Celebrity Management for $100,000 each.

101The Jakobstettel Joint Ownership Agreement is dated June 1, 2007 and is between Celebrity Management and the Cunninghams. The amount invested was $200,000 with an interest rate of 18 percent (in lieu of 15 percent plus two weeks’ stay at the Inn). There was no maturity date but Mr. Cunningham testified it was understood it was for a one-year period. The document was signed on May 31, 2007 when Daniel and the Cunninghams were present. It is initialled by those parties. Mr. Cunningham believes Daniel signed as seller and for Celebrity Management. The witness portion was not filled out.

102Daniel was provided with the two $100,000 cheques. Daniel said he would pay interest every 30 days. Paragraph 34 of the ownership agreement states that interest is to be paid annually on June 1^st of each year and did not set out any monthly payments.

103No interest was received by the Cunninghams over the next year. On June 1, 2008, the Cunninghams were owed $36,000 in interest plus the original $200,000 investment. Daniel said the stock markets had gone south and they should trust him. Daniel also recommended the Cunninghams roll over the $236,000 total owing into a new bond with Jakobstettel Properties Inc. Exhibit 39 – 11H indicates that is what was done. A new bond, dated June 1, 2008 was drawn up and signed by the parties on that date. It was witnessed by Peter Briss, an employee of the Cunninghams. The consideration was $236,000 with a maturity date of June 1, 2011. The bond provided for monthly payments of $2,000 beginning on July 1, 2008 and on the first of each month thereafter.

104The Cunninghams received a $2,000 payment in July of 2008 and another $1,000 cheque thereafter for a total of $3,000. They received no other payments on this particular investment.

SECOND INVESTMENT – BREADALBANE INN

105In the spring of 2008, in or around March (there was snow on the ground), David and Daniel Reeve met with the Cunninghams at their home on Spragues Road in Cambridge.

106Daniel suggested that the Cunninghams take a mortgage on their home and invest in segregated funds. Mr. Cunningham remortgaged the house for $1 million (previously the mortgage was for $326,000).

107In May of 2008, the Cunninghams again met with David and Daniel at their home. Daniel did 75 percent of the talking. Daniel said he was buying the Breadalbane Inn in Fergus and it was closing June 1, 2008. Daniel gave a personal guarantee that if something went awry, they could get their money from Daniel personally. Both Daniel and David said that the proposed investment of $500,000 would be invested with Ron Mark (Daniel’s lawyer) in trust.

108After the May meeting, Mr. Cunningham was going to invest in segregated funds rather than with Daniel because it was not guaranteed money. There were two May meetings. The first meeting was to discuss the Breadalbane investment and the second time, they were thinking about not being involved and David and Daniel said the money was going to Mr. Mark’s trust account. Ultimately, he decided to invest in the Breadalbane Inn. Exhibit 39 – 11I is a $500,000 bank draft dated June 2, 2008 and was made payable to Reeve Hotels and Resorts. There were no dealings with any lawyer and the draft is not made out to a lawyer in trust. Mr. Cunningham’s wife gave the bank draft to Daniel. Daniel told his wife that the bank draft was going to be with his lawyer in trust.

109A limited partnership agreement was drawn up between Reeve Hotels and Resorts (hereinafter referred to as Breadalbane Properties Inc.) and Sharon Hepburn and Barry Cunningham, dated June 2, 2008. The consideration was $500,000 and no interest rate is outlined on the document but it indicates that payment was to be made annually. Mr. Cunningham’s understanding was that interest was to be paid monthly at a rate of 18 percent. The signing date on the document is June 11, 2008. Present for the signing were Daniel, Mr. Cunningham and his wife Ms. Hepburn.

SUBSEQUENT EVENTS

110Later David told Mr. Cunningham that David was jumping ship and leaving DPR and if he wanted to get his money back to give Daniel written notice.

111On October 22, 2008, the Cunninghams gave Daniel written notice that they wanted $236,000 plus interest (given to Jakobstettel Properties Inc.) and $500,000 plus interest (given to Reeve Hotels and Resorts Inc.) returned within 30 days.

112Near the end of November 2008, Mr. Cunningham went to see Daniel Reeve at the DPR office in Waterloo to get his money back. Daniel said he could only give him $25,000 at that time and gave him the $25,000.

113On November 21, 2008 payment schedules were signed by Daniel Reeve and the Cunninghams. The payment schedules provided for the return of the $236,000 and $500,000 in installments to be completed by the end of January 2009. Other payment schedules were also drawn up at other times. The defence, in cross-examination, pointed out that Daniel never denied owing the Cunninghams their money.

114The payment schedules were not complied with and in January 2009, Mr. Cunningham again met with Daniel and received another $25,000.

115The $53,000 returned in total was comprised two payments of $25,000 and the $3,000 referred to earlier regarding Jakobstettel. Accordingly, the Cunninghams’ loss is $736,000, minus $53,000, for a total of $683,000, plus unpaid interest.

116Ultimately, a $700,000 judgment was obtained against Mr. Reeve. This was an attempt by the Cunninghams to hold Mr. Reeve to his previous words that he would be personally liable for the investment regarding the Breadalbane Inn.

117In cross-examination, it was pointed out that David was involved in cashing out the Cunninghams’ RRSPs – see the Exhibit 42 report dated May 31, 2007. David was aware of the private investments made with Daniel and never said anything was wrong or improper. However, in the fall of 2008, David phoned Mr. Cunningham and attended Mr. Cunningham’s office to say he was leaving DPR and was starting his own company. David further stated that he had a number of clients not being paid by Daniel and that Mr. Cunningham should give Daniel written notice to get his money back.

118I find Mr. Cunningham to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

7. BRIAN CROZIER

119Brian Crozier has a university degree in agricultural business and average investment experience.

120Mr. Crozier met Daniel in December 2006. Mr. Crozier went to a presentation given by Daniel at the Jakobstettel Inn and was very impressed. Daniel had a published a book called The Three Buckets. The three buckets consisted of (1) an RRSP, (2) borrowing, and (3) life insurance. Daniel’s goal was a 10 percent return.

121In January of 2007, Mr. Crozier retained Daniel as his financial advisor and transferred his portfolio to DPR Financial by April of 2007. In April of 2007, Steve Haney became Daniel Reeve’s financial advisor because Daniel Reeve was too busy.

122In early 2008, Daniel told Mr. Crozier that he could get a better deal than an RRSP. Daniel could get him 20 percent. In addition, Daniel would pay the taxes incurred from withdrawing the funds from the RRSP. Daniel said the money would be invested for a two-year term. Interest would be paid annually and if not paid, all monies would be due.

123Mr. Crozier met with Daniel in March of 2008. Daniel was raising money to purchase the Breadalbane Inn. He indicated that he was going to raise $300,000 to $400,000 and was looking for investors to get in and that it would not take long to get those funds.

124There was no discussion of risk and no discussion of exactly how the money would be used, other than to purchase the Breadalbane Inn. Daniel said that he had not purchased the Inn yet; he was going to raise the money and then make an offer.

125Mr. Crozier decided to cash in his entire RRSP and invest in the Breadalbane Inn. Exhibit 43 – 10C indicates that Mr. Crozier signed the RRSP instructions on March 4, 2008. Mr. Crozier is positive that Daniel signed the instructions, despite Steve Haney being listed as the financial advisor. Mr. Crozier stated that Daniel did the paperwork as Daniel said that Mr. Haney was on holidays. Exhibit 43 – 10D is the confirmation of withdrawal dated March 5, 2008; this document indicates that $166,325.09 was withdrawn, and after a service charge deduction of $6,723.14, $159,601.95 was issued to Mr. Crozier. Withholding taxes should have been deducted, but for some reason, were not. Daniel said he would cover the service charge that Mr. Crozier had to pay.

126Mr. Crozier, on March 6, 2008, made out a cheque in the amount of $159,601.95 to Celebrity Management which Daniel had told him was a company within Reeve Hotels and Resorts.

127A corporate bond agreement was entered into between Reeve Hotels and Resorts Inc., carrying on business as Breadalbane Inn, and Mr. Crozier in the amount of $166,325.09 (which is the full amount of the RRSP before deductions for service charges). The document had a two-year term and paid 20 percent annual interest. Mr. Crozier saw Daniel initial and sign the corporate bond agreement on March 10, 2008, which is the date on the document. Mr. Crozier also signed, and Annie Smith witnessed. The funds were to be used for the purchase of the Breadalbane Inn.

128Mr. Crozier’s T4RSP slip indicates RRSP income of 159,601.95 with no taxes paid.

129Mr. Crozier met with Daniel on December 9, 2008. Daniel signed a document, Exhibit 43 – 10H, indicating that Reeve Hotels and Resorts Inc. would pay the owing taxes on the transaction involving the withdrawal of Mr. Crozier’s RRSP in the gross amount of $166,325.09 in order to enter the corporate bond transaction. The taxes payable were listed as $47,880.59, which would be the normal 30 percent withholding tax. This document had originally been given unsigned to Mr. Crozier by Daniel at the time of the signing of the corporate bond agreement on March 10, 2008. Daniel Reeve never paid anything on this signed document.

130Accordingly, when Mr. Crozier filed his income taxes, he owed $65,839.77 in taxes. To pay that sum, Mr. Crozier had to take out a line of credit, which he is still paying down. It was conceded by Mr. Crozier in cross-examination that Daniel did not promise to pay this entire amount but only the amount listed in Exhibit 43 – 10H.

131On January 7, 2009, Mr. Crozier gave Ms. Ruggle Exhibit 43 – 10I. This document gave Daniel and Reeve Hotels and Resorts 30 days’ notice to return $166,329.09 plus interest. Mr. Crozier never received any money on the corporate bond agreement and lost $166,329.09. The reason Mr. Crozier prepared Exhibit 43 – 10I was that he had learned (through lawyer Bob Waters) that Daniel Reeve had not actually purchased the Breadalbane Inn; thereafter he went to the police. Daniel was surprised when he received this exhibit and promised a week later that money would be returned in 30 days. No money was returned.

132In cross-examination, Mr. Crozier confirmed that his money was to be used only for the purchase of the Breadalbane Inn. He assumed he would get his money back if the Breadalbane Inn deal did not go through. Daniel had told Mr. Crozier that he could withdraw his monies from his RRSP tax-free as Daniel would pay all of the withholding tax. Daniel never offered to pay his adjusted income taxes.

133I find Mr. Crozier to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

8. DOUG THIEL

134Mr. Thiel is a professional engineer with Nalco Canada and has, obviously, a university education. He estimates his assets to be $900,000.

135From March of 2003 until 2008, David Reeve was his financial advisor. David gave him a book: The Three Buckets. It is one of the books filed in Exhibit 7 and Mr. Thiel recognized it.

136In 2004 and 2005, Mr. Thiel took out leveraged loans. The interest on the loans was written off against investment gains. Mr. Thiel was happy with David as his financial advisor.

137In 2008, David said that Mr. Thiel should be looking to take out some money. David referred to Daniel’s credentials and asked if Mr. Thiel would be interested in meeting Daniel. Mr. Thiel said that he would.

138On May 19, 2008 Mr. Thiel met Daniel at a Tim Horton’s with David present. Daniel said he owned the Jakobstettel Inn and was looking at the Breadalbane. Daniel outlined the benefits of a limited partnership. Any losses could flow through and would offset other capital gains. Daniel also said that he was thinking of expanding into the U.S. Mr. Thiel decided to invest $200,000 but needed to withdraw approximately $340,000 in order to pay taxes.

139Exhibit 44 – 40B is the Manulife withdrawal instructions. They are dated May 19, 2008 and were filled out by David at the Tim Horton’s meeting with Daniel. At the meeting, Daniel said he did not have full financing for the Breadalbane and would like to have the money transferred as soon as possible. The withdrawal instructions do have notes which state: “please rush,” and “Client initiated closing RSP. Client is aware of tax withdrawal. Please withdraw 40% withholding tax.” The latter note appears to have the initials “DR” and appears to be signed by David Reeve as the authorized representative. Exhibit 44 – 40D is the 2008 T4RSP slip, which shows approximately $335,000 was withdrawn with taxes of approximately $134,000 being deducted upon withdrawal.

140The following Thursday morning, Mr. Thiel met Daniel at the TD Bank at 8 a.m. A limo pulled up and Daniel was in it and asked, “Do we want to do this?” and Mr. Thiel responded yes. Mr. Thiel gave $200,000 to Daniel. Daniel told Mr. Thiel to meet him on Monday, May 26 to get a temporary receipt. Exhibit 44 – 40A is a TD receipt showing a transfer of $200,000 on May 22, 2008 at 8:10 a.m. from Mr. Thiel’s account to the account of Reeve Hotels and Resorts

141On May 26, 2008, Mr. Thiel met with Daniel and they both signed and initialled an agreement for a limited partnership, dated May 26, 2008, between Reeve Hotels and Resorts Inc. for $200,000 with payments consisting of annual flow back of unused losses.

142On October 30, 2008, Mr. Thiel received an email from David advising that David was leaving DPR and forming a new company, Davlyn Financial.

143Mr. Thiel booked an appointment with David Reeve at his new office on Frederick Street on November 17, 2008. David was nervous and said that he left DPR because he did not feel comfortable with where Daniel was taking the company. David said that he believed Daniel was taking money for certain businesses but using money for other businesses. In cross-examination, Mr. Thiel clarified that David said that Daniel was accepting money and using it for purposes it was not intended for. David suggested calling CrimeStoppers, which Mr. Thiel did but was told to contact the fraud division of the Waterloo police instead.

144Mr. Thiel asked about the Breadalbane and David replied that he did not know if Daniel owned the Breadalbane or the Jakobstettel. David gave Mr. Thiel some addresses and told Mr. Thiel to draft a letter requesting his money back within 30 days and to attach a void cheque. In cross-examination, Mr. Thiel indicated that he found this information upsetting and shocking as it contradicted his own experience. Further, he was surprised that David did not know the details as this did not seem reasonable.

145Mr. Thiel drafted the Exhibit 44 – 40F email that very night requesting the return of his $200,000 within 30 days. The email indicates that Mr. Thiel contacted the Breadalbane and learned that Daniel did not own it.

146Mr. Thiel met Daniel on December 20, 2008. Daniel said he did not own the Breadalbane but was working on it and the deal was not dead yet. Mr. Thiel said that he wanted out of the deal. December was way beyond when the deal was supposed to happen and he wanted his $200,000 back. Daniel said the money was in guaranteed investments and there would be no problem in returning it. Mr. Thiel said it was acceptable to have the money returned in three payments over 90 days. Daniel said to come back on December 27, 2008. Daniel would know about the Breadalbane and would provide a repayment schedule and perhaps details about another property he might be interested in.

147The December 27 meeting did not happen. Daniel’s cell phone was disconnected. A number of meetings were set up but fell through. Finally, Mr. Thiel met Daniel on January 27 at 8:45 p.m. Daniel, at that meeting, said the Breadalbane was not going to happen. Daniel said the $200,000 would be repaid in three payments over 90 days. Daniel said someone would call back next week to provide a schedule but that did not happen – see Exhibit 44 – 40I emails, dated January 30, 2009 and February 6, 2009.

148Mr. Thiel had no further contact with Daniel. On February 19, 2009, Mr. Thiel met with a lawyer and initiated a civil suit against Daniel and his company and David as well. He contacted the police on March 14, 2009. In June of 2009, David was still managing Mr. Thiel’s assets but Mr. Thiel transferred his account at that time to a different financial advisor.

149Mr. Thiel never received any money on his investment. No interest or principal was ever paid. His loss is $200,000 at a minimum.

150I find Mr. Thiel to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

9. DR. IRA BERNSTEIN

151Dr. Ira Bernstein has been a medical doctor since 1992. In 2004, he had a number of investments with RBC, CIBC and Altamira. He was at that time looking to consolidate his investments with one financial advisor. Dr. Bernstein was referred to David Reeve by a friend.

152Dr. Bernstein had approximately $500,000 in RRSPs and non-registered funds. The investments were mainly mutual funds with some stocks and bonds. He considers himself an average investor.

153In the spring of 2004, David and Daniel picked up Dr. Bernstein and had supper at Red Lobster.

154They discussed a variety of investment concepts including getting a leveraged loan to buy investments and deducting the interest payments; this would require long-term investments. Dr. Bernstein was impressed by the conversation and transferred almost his entire portfolio to David. Approximately $400,000 to $500,000 was transferred. Dr. Bernstein also agreed to purchase a universal life shelter and did a leveraged loan of $200,000 in order to purchase segregated funds.

155From 2004 to 2008, David was Dr. Bernstein’s financial advisor. Further he attended presentations given by the Reeve brothers in 2005 and 2007. Dr. Bernstein held Daniel in high regard due to Daniel publishing investment books, having a variety of investment offices, and appearing on the TV show Canada AM. Further he was impressed that Daniel owned the Jakobstettel Inn. In addition, his investments had done well from 2004 to 2008.

FIRST INVESTMENT – BREADALBANE INN

156In March of 2008, Dr. Bernstein received an email from Daniel’s assistant, Linzie Brown, that Daniel would like to speak to him. This was followed by a phone call from Daniel. Daniel said that the markets were not doing well in 2008 and he could not see them doing well in the future. Daniel said he had a proposal that Dr. Bernstein might like. Daniel mentioned that Dr. Bernstein had helped Daniel in a medical matter and Daniel would like to help him. Daniel indicated that he had an Inn, the Jakobstettel, and was planning on buying another inn, the Breadalbane Inn, on July 1, 2008, which he planned to renovate. Daniel was looking for investors.

157Daniel proposed that Dr. Bernstein collapse all his leveraged loans and related investments as well as his non-registered savings. Daniel indicated he would provide a two-year term providing 20 percent interest. Daniel indicated he would pay any penalties and deferred service charges.

158Daniel continued saying over the phone that, “There is no risk. This is guaranteed. You are giving money to Reeve Hotels and Resorts. If something goes wrong, you can place a lien.” Dr. Bernstein believed that Reeve Hotels and Resorts owned the Jakobstettel Inn. Dr. Bernstein had no reason to question anything; he had four years of comfort due to legitimate dealings with David. In cross-examination, Dr. Bernstein indicated that it never occurred to him that the deal would not go through due to the assurances given to him by Daniel.

159Exhibit 48 consists of two letters of direction to Manulife dated March 27, 2008. There is no letterhead. Dr. Bernstein signed this document when Karen Gingrich attended his office. He had never met her before. The second paragraph of the letters indicates that Dr. Bernstein was withdrawing the money against the recommendation of David Reeve; Dr. Bernstein testified that he was not withdrawing the money against the recommendation of David Reeve for personal reasons. Dr. Bernstein was not provided with a copy of this letter and only saw it for the first time in a subsequent civil law suit against Daniel Reeve.

160The net proceeds after deductions for deferred services charges was $494,807.70. Exhibit 49 – 3A is a cheque for that amount dated March 28, 2008 payable to Reeve Hotels and Resorts, signed by Dr. Bernstein. The endorsement on the cheque indicates it was deposited to the account of Reeve Hotels and Resorts on March 28, 2008.

SECOND INVESTMENT – BREADALBANE INN, AGAIN

161On April 28, 2008, Daniel attended Dr. Bernstein’s office to present and sign an agreement between Reeve Hotels and Resorts Inc. and Dr. Bernstein. The consideration was $507,126.33 (which is $494,807.70 plus the deferred service charges). The terms were 20 percent interest with a two-year maturity. The document was back-dated to March 28, 2008 per Daniel’s instructions, since March 28 was the date of payment to Reeve Hotels and Resorts. The document was signed and initialled by Dr. Bernstein. Dr. Bernstein believes Daniel signed and initialled it in his presence but was not 100 percent sure. The document was witnessed by Annie Smith who was not present. Daniel indicated that they had her signature on file at the office.

162At the time of the signing the March 28 document on April 28, 2008, Daniel discussed another proposal. Daniel had a convincing story about RRSPs not being a good long-term investment and proposed that Dr. Bernstein cash in his RRSPs and do a second investment in the Breadalbane. Daniel said there would be initial losses but they would be deductible. Dr. Bernstein did not really understand the proposal, but he trusted Daniel. Exhibit 49 – 3E is instructions to Canada Life to redeem his RRSPs dated April 28, 2008. Dr. Bernstein said the document was not filled out in his presence and is not sure if Daniel or Karen Gingrich presented it. The document, however, bears his signature and he consented to redeem his RRSPs.

163Exhibit 49 – 3F is specific instructions to Canada Life to redeem Dr. Bernstein’s RRSPs, dated April 28, 2008. It has the same proviso that the redemption was against David’s recommendation. Dr. Bernstein was not sure if Ms. Gingrich or Daniel filled it out.

164Exhibits 49 – 3D and 3G confirm that on April 29, 2008, Dr. Bernstein’s RRSPs, in the amount of approximately $281,154.84, were redeemed. After the deferred service charge of approximately $10,000 and federal withholding tax of approximately $81,000 were deducted, $189,698.78 was left over. On May 1, 2008, a cheque in the amount of $189,698.78 was made out to Reeve Hotels and Resorts. No agreement forms were signed until September 2008.

165Dr. Bernstein had never redeemed RRSPs before and was not sure of how it worked. Daniel told him that the tax would be paid up front and what was left is what is left. In cross-examination, Dr. Bernstein indicated that Daniel told him that all you will ever have to pay (in tax) will be deducted at source. Daniel also indicated that he would rebate the approximate $10,000 deferred service charge deduction.

166Dr. Bernstein testified that Daniel never told him that the 30 percent withholding tax was just the first stage. The redemption would be ultimately taxed at his 47 percent marginal rate.

SUBSEQUENT EVENTS

167In June of 2008, Mike Floyd and David Reeve attended Dr. Bernstein’s office to provide him with Dr. Bernstein’s financial plan. It appears at Exhibit 49 – 3J. At pages 20, 62 and 65 of Exhibit 49 – 3J, the two private equity agreements and amounts involving Dr. Bernstein and Reeve Hotels and Resorts Inc. are listed. Dr. Bernstein asked if everything was okay, and David answered that David had nothing to do with Daniel’s private equity deals and knew very little about them.

168In September of 2008, Daniel attended Dr. Bernstein’s office and presented the Exhibit 49 – 3I agreement for signing. This document is a corporate bond agreement between Reeve Hotels and Resorts Inc. and Dr. Ira Bernstein in the amount of $189,678.78 with 16 percent interest to be paid annually on the anniversary date. It was to mature on May 2, 2013. The document was back-dated to May 2, 2008 per Daniel’s instructions. Originally the discussion was that there would be a limited partnership but Dr. Bernstein testified that it morphed into this. Dr. Bernstein signed and initialled the document and believes Daniel did so as well. There are no witness signatures.

169Daniel, at the time of signing of Exhibit 49 – 3I, indicated that the Breadalbane Inn was doing well; given the economy, people were basically travelling less and travelling locally. Daniel said the Inn was booked well into next year.

170Sometime in August or September of 2008, Dr. Bernstein spoke to his accountant who was very upset about what Dr. Bernstein had done. Dr. Bernstein wanted to talk to Daniel but this did not happen.

171Further, Dr. Bernstein contacted the Breadalbane Inn regarding bookings in spring of 2009 and was told there was lots of availability.

172Further, in September of 2008, Dr. Bernstein met with David who was still his financial advisor. David suggested contacting Daniel’s accountant Sarah Snow regarding details of Reeve Hotels and Resorts and to ask for a financial statement. Sarah told Dr. Bernstein that she did not have that information and told him to contact Daniel. In September or October of 2008, Dr. Bernstein did have a conversation with Daniel who told him things were going well at the Inn.

173In October of 2008, Dr. Bernstein received written correspondence by either email or letter that David was leaving DPR and setting up Davlyn Financial, along with forms for the transfer of his investments. This came as a shock to Dr. Bernstein as David was the president of DPR Financial. This state of affairs made Dr. Bernstein nervous and uneasy.

174On December 3, 2008, Dr. Bernstein’s life “changed forever.” David asked how things were going with the private equity investments with Daniel. Dr. Bernstein stated that he had no idea and that maybe David could tell him. David said that he did not know if Daniel owned the Breadalbane Inn. David said some of his other clients were not getting paid by Daniel. Daniel had lost his licence and had gone through three accountants and was not paying staff. David suggested that Dr. Bernstein send a written notice to Daniel requesting his money back. David went on Dr. Bernstein’s computer and drafted an email requesting the return of monies, which Dr. Bernstein sent off to Daniel after reviewing what David had written.

175Dr. Bernstein phoned the Breadalbane and talked to the owner’s wife who confirmed that Daniel did not own the Breadalbane Inn.

176Subsequent to December 3, 2008, Dr. Bernstein phoned Daniel. Daniel confirmed that he did not own the Breadalbane. Daniel had not bought it due to a debt of several hundred thousand dollars that was on it. Dr. Bernstein wanted his money back and Daniel said that was possible but the return would have to be staggered. Dr. Bernstein asked where his money was. Daniel said it was in first, second and third mortgages. There had been no discussion regarding what would happen if the Inn was not purchased.

177Dr. Bernstein was very upset. For months he had thought that Daniel owned the Breadalbane Inn. Daniel had said that he had owned it when in fact he did not own it. Dr. Bernstein now just wanted his principal back and did not care about the interest. Daniel said he would pay the money back but needed time to make staggered payments.

178At a meeting in Toronto between Daniel and Dr. Bernstein in February 2009, Dr. Bernstein received an email from Daniel that was an acknowledgment of funds owing. At the meeting, Daniel proposed a repayment schedule starting March 1, 2009 with a $100,000 payment and staggered payments for months afterward. Dr. Bernstein accepted the schedule and just wanted his money returned.

179Dr. Bernstein never received any return of his investment as of the date of his testifying in July 2015. His loss is approximately $700,000 plus interest.

180Dr. Bernstein proceeded with civil litigation against Daniel and Reeve Hotels and Resorts Inc., and against David Reeve when he found out that Daniel did not own the Breadalbane Inn.

181Exhibit 48 is a letter of direction absolving David Reeve of any responsibility for the initial private investment. The letter indicates the investment is being done against David’s advice. Dr. Bernstein’s signature is on the documents but he disagrees that he agreed to the contents of the letter. It was one of many papers that he signed.

182In cross-examination, Dr. Bernstein said the purpose of the Breadalbane investment was to renovate and improve the property. Daniel said that the investment would incur some capital losses. Dr. Bernstein trusted Daniel and did not call David. They were part of the same company. Further, in June of 2008, David never said anything was awry. The June 10, 2008 financial plan – see Exhibit 49 – 3J – reviewed by David Reeve and Mike Floyd sets out the two private investments with Reeve Hotels and Resorts Inc. The people on Dr. Bernstein’s advisory team were clearly aware of the private investments and no red flags were raised.

183I find Dr. Bernstein to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

10. MICHELLE KEDDIE

184Michelle Keddie and her husband Mark of 21 years had investments in RRSPs. Ms. Keddie’s mother had a stroke in 2005 and Ms. Keddie was looking after her affairs. Ms. Keddie’s mother had memory problems and required a wheelchair.

185In the fall of 2006, Mr. and Ms. Keddie met Daniel. Ms. Keddie trusted Daniel because (1) her husband’s friend, Gary Spencer, had investments with Daniel that had done well and he highly recommended Daniel, (2) she had seen Daniel on Canada AM, (3) Daniel had authored several books (two of which she read), and (4) Daniel had a very impressive office.

186In February and March of 2007, Mr. and Ms. Keddie transferred their RRSPs to Daniel P. Reeve and Associates. Ms. Keddie’s financial advisor was listed as Steve Haney. The Keddies had approximately $170,000 in RRSPs.

187Ms. Keddie talked to Daniel about her mother’s $100,000 in a CIBC account. That was all the money her mother had. Ms. Keddie transferred her mother’s account to Daniel P. Reeve and Associates and the money was put into segregated funds.

FIRST INVESTMENT – MILLIONAIRE MORTGAGE

188In late 2007, Daniel told Ms. Keddie that his Millionaire Mortgage company would be the best investment for her mother. Daniel guaranteed a 20 percent return annually. Ms. Keddie did not want an annual payment. Daniel said that was fine and that Ms. Keddie’s mother would instead get quarterly payments of $5,000. Daniel said that the worst-case scenario was 20 percent guaranteed.

189When the papers were presented, it was a two-year deal but Daniel told Ms. Keddie that there was no need to worry. If her mother wanted the money back after one year, that would be no problem. Gary, Ms. Keddie’s friend, had told her that Daniel was always late with interest payments but not to worry if that happened.

190A month after Daniel discussed the Millionaire Mortgage investment, Ms. Keddie decided to proceed with it on behalf of her mother. Accordingly, $97,000 was withdrawn from her mother’s segregated funds. After penalties and her mother deciding to hold a few thousand back, a $90,000 cheque dated Feb. 5, 2008 was made out to Millionaire Mortgage Inc. Daniel said he felt terrible about all the penalty fees and said he would make it up.

191The agreement, located at Exhibit 50 – 23C, indicates a corporate bond between Millionaire Mortgage Inc. and Ms. Keddie in the amount of $97,691 with terms of payment of 20 percent annual interest with a two-year maturity. It is dated February 5, 2008. Ms. Keddie signed this agreement when Steve Haney dropped it off. She knew Mr. Haney as Daniel’s right-hand man. The initials and other signatures on the document were not there when she signed. Nothing was signed in front of her. Ms. Keddie had no conversations with Mr. Haney regarding the Millionaire Mortgage investment.

192Ms. Keddie did the Millionaire Mortgage investment because Daniel said there was no risk. It was a guaranteed investment of 20 percent with interest being paid every quarter, and she could get the money back in one or two years if she so desired.

193Her mother in fact only received three $5,000 interest payments for a total of $15,000. All of the payments were from a week to a month late. The fourth payment was very important because her mother needed the money to buy a wheelchair. Ms. Keddie called a month before the fourth payment was due but the payment was never made. In fact, Ms. Keddie’s mother never received any further interest payments and the principal was never paid back. Exhibit 50 – 23K is a T5 form showing interest payments of $10,000 in 2008 from Celebrity Management to Ms. Keddie.

SECOND INVESTMENT – BREADALBANE INN

194In March of 2008, Daniel set up an appointment with the Keddies at their home. Daniel told them he was getting the Breadalbane Inn; it was just a matter of time. Daniel also stated it was a “hot property.”

195Daniel said they could claim the investment on their income tax return. For example, on a $150,000 investment, they could write off $75,000 the first year and declining amounts thereafter. Further, they would earn 12 to 14 percent annual interest on their money and the return of the principal in five years. They asked if they could stay in longer than five years but Daniel said the Breadalbane Inn was his. Ms. Keddie did not really understand the arrangement, but she got in because she believed Daniel Reeve knew how to do things that other people did not know how to do.

196Daniel said that the worst-case scenario was 12 percent interest on their money and that the money was to be returned after five years. The discussion was always regarding the Breadalbane; there was no discussion of the money going anywhere else.

197Daniel said that the minimum investment was $150,000 but after paying taxes and penalties for withdrawing their RRSPs, the Keddies had less than that. They had RRSPs with Manulife and Canada Life. Daniel said that if they cashed in their RRSPs, they would probably have to pay a couple of thousand dollars more in income tax.

198Exhibit 50 – 23D is a bank draft for $100,000 payable to Reeve Hotels and Resorts, dated April 24, 2008, from the Keddies. Ms. Keddie remembers that there were problems getting the draft immediately; the bank said she would have to wait an hour. Daniel was upset it would take so long and was irritated – he wanted it really quickly. Ms. Keddie got the draft that day and took the draft directly to Daniel’s office.

199Exhibits 50 – 23E and 23F are RRSP withdrawal instructions signed by the Keddies. Steve Haney is listed as the financial advisor, and he signed the documents. Mr. Haney confirmed that they would have to pay extra taxes in the amount of a few thousand but looked uncomfortable when he told them that. Exhibits 50 – 23G and 23H are Canada Life confirmation forms of the RRSP withdrawals. They confirm that the Keddies withdrew approximately $153,000, and after paying for approximately $6,400 in fees and approximately $44,000 in withholding taxes, the Keddies had about $103,000 left for their corporate bond investment.

200The cashing in of their RRSPs eventually cost the Keddies another $16,000 in taxes but Ms. Keddie was able to reduce it to $12,000 after getting her mother’s credits. In cross-examination, Ms. Keddie testified that despite doing her own taxes, Ms. Keddie completely believed Daniel regarding paying just a few extra thousand dollars when cashing in her RRSPs and she did not feel a need to talk to her accountant and/or third parties. Daniel was close in estimating the withholding taxes but was way off on the additional taxes that she had to pay after doing her income tax forms.

201On May 26, 2008, the Keddies signed the corporate bond agreement that appears at Exhibit 50 – 23J. The agreement was back-dated to May 1, 2008. The consideration is for $150,000. Daniel bumped it up to $150,000 because he felt bad about their losses and Daniel was confident about the deal. The agreement provided for annual flow back of unused losses (for renovations and improvements). Daniel said that the worst-case scenario was getting their money back and 12 percent a year. The agreement indicates the parties are the Keddies and Reeve Hotels and Resorts (hereinafter referred to as Breadalbane Properties Inc.). The Keddies equated Reeve Hotels and Resorts with Daniel Reeve. The other signatures on the agreement document were not there when they signed the document.

202Exhibit 53 is Daniel’s notes regarding his calculations that $100,000 would be left over after cashing in their RRSPs and their investment in the limited partnership at the hotel would be $150,000. Daniel knew what the Keddies’ income was and they took his word what the tax consequences would be as Daniel gave direct, quick answers as if he had done it many times before.

203Daniel said that he was buying the Breadalbane for sure. Daniel said that a father and son owned the Breadalbane and they were having arguments. Daniel said he was getting the Inn and they were going to get their 12 percent per year.

SUBSEQUENT EVENTS

204Ms. Keddie phoned once per month after providing Daniel with the $100,000 cheque and Daniel said it was still happening with reference to the purchase of the Breadalbane Inn. However, after several months, Daniel said the Inn was not happening but not to worry as their money was sitting and making 12 percent. Daniel said that he was going to do something with it. Ms. Keddie expressed concerns about their money and the economy, and Daniel got really upset stating that there was no recession.

205Their interest payment was supposed to be once per year. Over time, it was harder and harder to get a hold of Daniel. Four meetings were scheduled but each was cancelled at the last moment.

206The Keddies never received anything on their Breadalbane investment. They received no interest and received no return of their principal.

207Their total losses are the $150,000 on the Breadalbane investment made by the Keddies plus the approximate $97,000 owed to Ms. Keddie’s mother on the Millionaire Mortgage investment plus the unpaid interest payments on both the investments.

208I find Ms. Keddie to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

11. LORNA EADIE

209Ms. Eadie is a retired school teacher with four degrees. Her husband David Hocking is a retired principal. She testified that neither one of them have much investing experience.

210In January of 2007, Ms. Eadie attended an investment presentation by Daniel. The presentation was well done and she felt that Daniel knew what he was talking about. She got his card and skimmed one of his books, The Three Buckets. She also read about Daniel in a magazine article.

211In February of 2007, she met with David and Daniel. They told her that they would monitor Ms. Eadie and Mr. Hocking’s accounts 24/7 and reset their investments twice per year. She and her husband had about $70,000 each in RRSPs and they owned a $350,000 home with no mortgage. Their income was $150,000 per year and they owned a $150,000 rental property.

212In April of 2007, Ms. Eadie and Mr. Hocking decided to give DPR Financial a try. They met with David and Daniel again and transferred their RRSPs from CIBC to Canada Life.

213On May 3, 2007, Ms. Eadie and Mr. Hocking met with David Reeve who was now their financial advisor.

214In September of 2007, Tom Handler from DPR Financial phoned and spoke to Ms. Eadie and Mr. Hocking. The stock market was not doing well so Ms. Eadie instructed Tom to do a reset on their RRSPs to prevent further losses. This was not done for her husband and her husband’s account was $22,000 less than if the reset had been done. They met Daniel and told him they were disappointed.

215In March of 2008, Steve Haney became their financial advisor.

216On April 21, 2008, Ms. Eadie and her husband arranged an appointment at the Jakobstettel to ask about their portfolio. They were met by David and not Mr. Haney. David acknowledged the company had disappointed them but Daniel had an exciting proposal for them. They met with Daniel who told them that “‘we’ would like to make it up to you guys.” Daniel told them that they had an opportunity to invest in the Breadalbane Inn. They would need $150,000 each. Daniel said that he had not yet purchased the Breadalbane. Daniel said that he wanted the deal done by August 2008. In cross-examination, Ms. Eadie indicated that Daniel said the money was being held by lawyers in a trust account. She had no idea that money being held in a lawyer’s trust account was not available to pay interest.

217Daniel said that they could raise the money by cashing in their RRSPs and that Ms. Eadie could take a line of credit against her home. Ms. Eadie indicated that she could not afford to lose money because she planned to retire in six months. Daniel said his team had looked over the tax implications and it was a worthwhile investment. Daniel told them that they would have to pay taxes and withdrawal charges when cashing in their RRSPs. Ms. Eadie and Mr. Hocking said that they would think about it. This was Monday, April 21, 2008. Daniel said that he needed the money by April 25, 2008.

218Ms. Eadie and Mr. Hocking thought about it. In cross-examination, Ms. Eadie said that they never spoke much with Mr. Haney. They were impressed by the renovations at the Jakobstettel. They decided to proceed with Daniel’s proposal and signed the paperwork on April 23, 2008. The withdrawal instructions were signed by Mr. Haney, Ms. Eadie and Mr. Hocking on April 22, 2008 – see Exhibits 69 – 14C through 14F. On April 25, 2008, Ms. Eadie and Mr. Hocking met Annie Smith outside a CIBC branch and gave her two bank drafts: $150,000 from a line of credit on their house and $90,000 from cashing in their RRSPs. Exhibits 69 – 14A and 14B are two bank drafts both made out to Reeve Hotels and Resorts Inc. in the amounts of $150,000 and $94,235.49 respectively.

219On May 13, 2008, Ms. Eadie and Mr. Hocking met Daniel at a restaurant near his office. Exhibits 69 – 14E and 14F are limited partnership agreements in the amount of $150,000 for each of Lorna Eadie and David Hocking. Ms. Smith is the witness on both documents but she was not there. The documents are dated May 12, 2008 but were signed the following day. The party for Daniel on the agreement is noted as “Reeve Hotels and Resorts Inc. hereinafter referred to as Breadalbane Properties Inc.” Both documents refer to annual flow back of unused losses. Ms. Eadie and Mr. Hocking thought that this entitled them to write off any capital losses against capital gains. The amount listed for David Hocking’s agreement is $150,000 but all they gave for that agreement was $94,000. Daniel said the corporation would take care of this over five years. Daniel told them that they had an option after five years to stay in or get their money back. The document does not spell out a 15 percent interest payment per year. Daniel said that, and Ms. Eadie trusted him. The interest payment was to be from May 2008 until the deal closed. After that, they would get the capital loss to write off.

220Daniel said that ten investors would invest at $150,000 and they would be limited partners in Breadalbane. The money was designed only for the purchase of the Breadalbane Inn. Daniel led Ms. Eadie and Mr. Hocking to believe that their money would be safe; a lawyer was involved and the money was with hedge funds. There was no discussion of risk. Daniel said the money was safe in holding accounts and would be available for the purchase of the Breadalbane Inn. Daniel told them that he would pay them 15 percent interest but only one monthly interest payment would ever be made.

221In August 2008, Daniel said that he was waiting for the liens to clear and they had no concerns at that time.

222In October 12 and 29 of 2008, Ms. Eadie and Mr. Hocking met Daniel at the Jakobstettel Inn. They asked if their money was safe. Daniel replied that it was safer than if it were in the bank. At this point, no interest had been paid and they were asking for their interest payment. Daniel said he was waiting for a lien on the Breadalbane to be lifted. Ms. Eadie and Mr. Hocking know nothing about Cheryl Reeve. On November 12, 2008, they had a meeting with Daniel about their interest payments. Daniel said someone had screwed up and he would need another void cheque and he would ensure that they would receive their interest payments. At that point, Daniel had possessed their money since April of 2008 with no interest payments being made.

223On November 17, 2008, they received a single interest payment of $1,800. Exhibit 69 – 14I is a T5 slip that says Celebrity Management paid them $15,000 interest. They had never heard of Celebrity Management and only received $1,800. This amount was far less than the 15 percent over eight months that Daniel had promised them.

224In November of 2008, Daniel told them that the Breadalbane deal was not happening and asked if they were interested in another deal. They said no. Daniel said he would give their money back with 30 days’ written notice. Exhibit 69 – 14J is a letter signed by Ms. Eadie and Mr. Hocking, dated December 18, 2008, demanding the return of $150,000 and $94,235.49 and interest owed to them by January 20, 2009. This letter was delivered to Daniel.

225Exhibits 69 – 14K and 14L, dated February 12 and 13, 2009 respectively are unsigned letters purporting to be authored by Daniel Reeve indicating a repayment schedule of $10,000 every Friday starting February 20, 2009 until all amounts were repaid. Ms. Eadie was unsure of how she received these letters. They never got any monies on this repayment schedule. In cross-examination, Ms. Eadie confirmed that Daniel never denied owing her money but on the other hand, he never paid it.

226Exhibit 69 – 14M is a cheque dated April 1, 2009 for $20,000 from Jakobstettel Inn to David Hocking. It was returned NSF. In the result, Ms. Eadie and Mr. Hocking never recovered any of the $150,000 or $94,235.49 invested with Daniel Reeve. With interest payments not being paid, their loss is at least $250,000.

227I find Ms. Eadie to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

12. MARK MCGUIRE

228Mark McGuire is 66 years of age and is self-employed in the tool selling business. He has a common law spouse named Inger Aas.

229Mr. McGuire’s highest level of education is Grade 10. He rates his investment knowledge as low: 2 on a scale of 1 to 10, with 1 being lowest knowledge and 10 highest knowledge. He was comfortable investing in blue chip stocks.

230In 2006, he was referred to Daniel by a colleague. He had no financial advisor but had about $400,000 in RRSPs and $100,000 in a group pension plan. He had a house worth $300,000 to $350,000 with a $125,000 mortgage. His company, at its peak, had nine employees and he had family income of $200,000.

231At a second meeting with Daniel, Daniel said that Mr. McGuire could improve his investments through a “Three Buckets” strategy. Mr. McGuire signed the forms transferring his investments and Daniel became his financial advisor. Daniel gave the Three Buckets book to him and he read it.

232At a third meeting with Daniel, Mr. McGuire stated that his target return was 10 percent as that was what he was getting. Daniel said that was no problem; DPR, at that time, was getting 18 percent over the last three to four years.

233Mr. McGuire got a $100,000 loan per the “Three Buckets” approach and invested it in segregated funds. He also transferred his RRSPs to Canada Life and Manulife.

FIRST INVESTMENT – BREADALBANE INN

234Daniel approached Mr. McGuire regarding getting a better return through a corporate bond. Mr. McGuire met Daniel at the 46 Cambridge Street office in Cambridge; Mr. McGuire does not think anyone else was there. David, his financial advisor, was not there. Daniel suggested that a corporate bond would give Mr. McGuire a higher rate of return. The bond that Daniel wanted to get him into was offering 18 percent annually. Daniel indicated that the corporate bond was to be used to purchase the Breadalbane Inn. Daniel had coveted the Breadalbane for a long time and it was part of a package of hotels he wanted to purchase.

235Daniel said that the Breadalbane had not been purchased yet but its purchase was imminent. Accordingly, Mr. McGuire had to move quickly if he was to invest. No specific time was given. Daniel did not discuss risk. Daniel said that property values were going up and there was little risk. The purpose of Mr. McGuire’s investment was the purchase of the Breadalbane Inn.

236Mr. McGuire thought about it for one or two days and then decided to do the investment and cash in his RRSPs. On April 2, 2008, Mr. McGuire signed the withdrawal instructions to fully redeem his RRSPs. David was his financial advisor and signed the document – see Exhibit 73 – 28B. Page 4 of Exhibit 73 – 28B is a Letter of Direction dated April 2, 2008 signed by Mr. McGuire indicating that the withdrawal was being made against the advice of his financial advisor (who was David). Mr. McGuire explained that David said that he had to tell us he was advising against this. Mr. McGuire also explained that the letter contradicted what happened. In cross-examination, Mr. McGuire retreated from this position somewhat. He conceded that David had suggested a meeting with Daniel regarding the private investments. At page 19 of his video statement taken in 2010, Mr. McGuire made no mention of David advising against the withdrawal. The statement indicates that David pushed in front of Mr. McGuire a whole bunch of papers to sign.

237After paying approximately $73,000 in withholding taxes and $8,000 in service charges, $169,590.39 was left over. This was the amount of a bank draft, dated April 4, 2008, made out to Reeve Hotels and Resorts Inc. Daniel said that the income tax deductions and fees that were paid by Mr. McGuire were to be paid on the maturity of the bond. This did not happen. Eventually, Mr. McGuire had to pay an additional $9,000 of additional tax on the RRSP withdrawal.

238Approximately eight to ten weeks later, an agreement was signed, back-dated to April 3, 2008 between “Reeve Hotels and Resorts Inc. (c.o.b. as Breadalbane Properties Inc.)” and Mark McGuire. The consideration was $169,590.39 and provided for the “annual flow back of unused losses.” Mr. McGuire received no disclosure as to what that meant. This bond did not reflect Mr. McGuire’s agreement with Daniel. Mr. McGuire provided Daniel with the numbers of their agreement and a second bond was drawn up.

239The second agreement between Reeve Hotels and Resorts Inc. and Mark McGuire, also backdated to April 3, 2008, provided for an 18 percent interest rate. Paragraph 1 of the document provided that, on maturity of the bond on April 3, 2013, Mr. McGuire would be repaid his original deposit of $169,590.35 plus the penalty and prepaid taxes paid when withdrawing his RRSPs of $9,751.71 and $72,681.59 respectively. Mr. McGuire believes that he and Daniel signed this document in July of 2008 and that it was provided to him by Daniel at that time. Mr. McGuire never received any interest payments on this agreement.

SECOND INVESTMENT – JAKOBSTETTEL INN

240After the first bond agreement payment but before he received the temporary bond agreement, Lee-Anne Ruggle from DPR Financial phoned to call for an appointment with Daniel. A meeting took place sometime in April of 2008. Daniel had another bond investment and the money was to be used to buy the Jakobstettel Inn although Mr. McGuire could not remember who owned the Inn. This time Daniel wanted Mr. McGuire’s wife to cash in her RRSPs for a corporate bond deal similar to what Mr. McGuire had gotten, i.e., 18 percent interest and the return of prepaid tax and penalties upon maturity of the bond.

241Mr. McGuire had a power of attorney over his spouse’s affairs; he signed the instructions to redeem Inger Aas’ RRSP account. These instructions were entered as Exhibit 73 – 28H. Mr. Haney’s name is crossed out and replaced by David Reeve’s. The document is dated July 9, 2008. There is another Letter of Direction, dated July 9, 2008 attached to these withdrawal instructions. It again indicates that the financial advisor has advised against this withdrawal. In examination-in-chief, Mr. McGuire testified that he thought David was not there but was on holidays. In cross-examination, Mr. McGuire stated that David told him that he had to say he was against the withdrawal. Mr. McGuire doesn’t recall when he signed it but believes the July 9 date is right. Further, in cross-examination, Mr. McGuire testified that somebody gave him a ton of documents to sign and this could be one of them.

242After payment of approximately $74,700 in prepaid taxes and $10,300 in service charges, there was $171,932.54 left over from the cashing in of Ms. Aas’ RRSPs. A bank draft in that amount dated July 14, 2008 was made out to Jakobstettel Properties Inc.

243Later in July, Mr. McGuire received a copy of the Jakobstettel corporate bond. It appears as Exhibit 73 – 28K. The parties to the bond are Jakobstettel Properties Inc. and Inger Aas. The consideration is $171,932.54 and pays 18 percent annually on the anniversary date. The bond was back-dated to July 10, 2008 and Mr. McGuire believes it is initialled by Daniel and himself. Paragraph 1 of the bond indicates that on the five-year anniversary date of the bond on July 10, 2013, the original deposit is payable along with overdue interest and the penalties paid of $10,348.66 and prepaid tax of $73,685.37. There was no discussion of any other investment other than Jakobstettel. Daniel was present when this document was signed.

THIRD INVESTMENT – MILLIONAIRE MORTGAGE

244There was yet another investment to be made. It was around August 2008, when David did a PowerPoint presentation regarding Millionaire Mortgage with Inger Aas and Mr. McGuire present. The concept had been brought up by Daniel as another way of getting money to get a good return. David told them not to invest in any more of Daniel’s private equity deals. David said that they had enough of Daniel’s stuff. David went through the details of taking the equity out of your house, getting a mortgage, and investing it in one of three vehicles: laddered GICs, Fidelity T-SWP with an 8 percent return, or private equity.

245David never really explained what a T-SWP was but Mr. McGuire told David to go ahead with the T-SWP with the 8 percent return. Mr. McGuire did not sign any specific forms for the T-SWP and never received anything from Fidelity.

246Exhibit 73 – 28L is a bank draft, dated October 15, 2008, made out to Millionaire Mortgage for $173,765.85. Mr. McGuire dropped off the bank draft at the DPR offices. He did not know that making the draft to Millionaire Mortgage was not a T-SWP investment. Mr. McGuire never decided to do anything other than a T-SWP investment. Again, the formal documents were not signed until later.

247Exhibit 73 – 20M – is an agreement between Millionaire Mortgage Inc. and Mark McGuire for $173,736.85 paying annual 18 percent for a one-year term. The document was signed by Mr. McGuire, Daniel, and Lee-Anne Ruggle. The document is dated October 14, 2008 but Mr. McGuire says it was signed four to eight weeks after this date. In cross-examination, it was noted that the interest rate was the same rate as his Breadalbane investment.

248When Mr. McGuire pointed out to Daniel that he was only expecting 8 percent, Daniel told him that he should be happy and that the money was invested in first and second mortgages. Mr. McGuire asked for some documentation to confirm that but Daniel never produced it.

SUBSEQUENT EVENTS

249Regarding the Breadalbane, Daniel told Mr. McGuire over the months to be patient; it hadn’t been purchased yet due to the lack of a liquor licence. Finally, in late 2008, Daniel told Mr. McGuire that he had not bought the Breadalbane but it didn’t matter; the money was invested in Reeve Hotels and it was safe. Also in late 2008, Mr. McGuire received a cheque for $1,000 but it bounced. At the end, Mr. McGuire told Daniel he would prefer to have his investments in something that he could see.

250At around the time that Daniel gave him the final Millionaire Mortgage agreement, Daniel also provided him with an interim statement indicating that $13,030.35 was payable on March 15, 2009. This was provided to Mr. McGuire by Daniel in the new Waterloo DPR building. Daniel said that Mr. McGuire had agreed to this schedule but could not produce any documentation to prove that. Mr. McGuire remembers telling Daniel that he wanted all three investments collapsed because Daniel could not show where the money was. Mr. McGuire never had any discussion with Daniel or anyone else that the three investments were to be used for any other purpose than the stated purpose set out in discussions with Daniel.

251In the end, Mr. McGuire, on all three investments, never received any return of capital or interest at all. His and his spouse’s combined losses therefore are $169,590.39 plus $171,932.54 plus $173,736.85 for a total loss of $515,259.78. This total does not include unpaid interest or the amounts promised for prepaid taxes and penalties from cashing in the RRSPs.

252I find Mr. McGuire to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

13. HEATHER GARDNER

253Heather Gardner is a nurse. She employed Daniel as her financial advisor since the early 1990s. She has had investments in RRSPs, RIFs, segregated funds, GICs and leveraged loans with Canada Life with the funds borrowed from the National Bank.

254In 2003, she gave Daniel a business loan for the Jakobstettel Inn. She was paid her interest until 2007 and thereafter the payments stopped.

255In 2007, Ms. Gardner’s husband became ill with pancreatic cancer and death was imminent. She went to Daniel’s office and wanted safe investments with a reasonable rate of return.

FIRST INVESTMENT – JAKOBSTETTEL INN

256Daniel suggested an investment in the Jakobstettel; it was safe, it was backed by bricks and mortar. She decided to put $200,000 into it in the form of two cheques dated June 27, 2007. Daniel told her to make the cheques out to Celebrity Management, Daniel’s holding company. She did so – see Exhibit 75 – 17A and 17B.

257A day or so later, Ms. Gardner and her husband met with Daniel and they signed Exhibit 75 – 17C, a joint ownership agreement, dated June 28, 2007, between “Celebrity Management International Inc. carrying on business as the Jakobstettel Inn” and Heather and Albert Gardner. The document was in the amount of $200,000 with 15 percent interest payable and was with reference to the Bauman Suite.

SECOND INVESTMENT – N.Y. PARK PLAZA

258Before the Jakobstettel investment, Daniel also spoke to Ms. Gardner regarding an investment in the New York Plaza hotel. Daniel told her a group of people were going to invest in a suite named the Wellington Suite. Daniel indicated that the investors had the option of periodic stays, but if you did not choose the periodic stays, you would get a higher interest rate. The bulk of the time the suite would be rented out at Plaza rates. Daniel said that he went down to see it and they were renovating and he was involved in negotiations.

259Ms. Gardner decided to invest in the Plaza. When she did so, she thought Daniel had already bought it, but could not say for sure whether or not he had bought it. She cashed in some RRSPs and invested $100,000 in the Plaza – see Exhibit 75 – 17D cheque dated July 12, 2007 for $100,000 made out to DPR Financial. Exhibit 75 – 17E is a joint ownership agreement, dated July 12, 2007, regarding the Wellington Suite of the Plaza Hotel, N.Y., N.Y. between Reeve Hotels and Resorts Inc. and Heather and Albert Gardner. It is for consideration of $100,000 with annual interest of 18 percent.

260On August 3, 2008, she gave two more cheques made out to DPR Financial and gave them to Daniel for the N.Y. Plaza investment. The total of the two cheques was $100,000. This raised her investment in the Plaza to $200,000. Accordingly, another Plaza agreement was drawn up. It is Exhibit 75 – 17K dated August 13, 2007. It is between Reeve Hotels and Resorts and Heather Gardner and Albert Gardner. This document is for $100,000 and the interest rate was 18 percent annually.

261Daniel, at some point, told Ms. Gardner he was giving up his licence and was transferring her portfolio to David, but promised he would keep an eye on her investments.

THIRD INVESTMENT – BREADALBANE INN

262On April 8, 2008, Ms. Gardner’s husband died.

263Later, Ms. Gardner attended the office to provide a death certificate to David. Daniel entered and talked about the Breadalbane Inn. Daniel said that he could operate it at a loss while renovating it and write the capital losses off against the capital gains with the client receiving 12 to 15 percent. This was similar to Ms. Gardner’s experience with the Jakobstettel. David said that the Breadalbane and real estate investments were good investments.

264In cross-examination, Ms. Gardner testified that subsequent to the David Reeve meeting but before the Breadalbane investment, Daniel met with her at her home and discussed the Breadalbane investment. She used proceeds from one of her husband’s life insurance policies to come up with the $375,000. Daniel said she could cash in RRSPs but she used up nearly all of the policy to do the Breadalbane investment.

265Ms. Gardner provided two cheques to Reeve Hotels and Resorts Inc. for the Breadalbane investment. The first cheque was dated May 19, 2008 for $100,000 and the second cheque was dated June 27, 2008 for $275,000.

266Exhibit 75 – 17N is an agreement between Reeve Hotels and Resorts Inc. and Heather Gardner for consideration of $375,000 for a corporate bond paying 12 percent annually and maturing on June 27, 2013. Ms. Gardner indicated that it was signed at the Jakobstettel on December 6 of 2008 but back-dated by her and Daniel to June 27, 2008. In the beginning, Daniel told her he was getting investors for the Breadalbane, but by December of 2008, she thought Daniel had bought the Breadalbane Inn. He told her that he had permission to build condos.

SUBSEQUENT EVENTS

267To summarize, Ms. Gardner, in 2007 to 2008, put $200,000 into the Jakobstettel, $200,000 into the Plaza and $375,000 into the Breadalbane for an investment total of $775,000.

268From July 2007 until July 2008, she received $3,000 interest per month on her Plaza investment for a total of $33,000. She never received any interest payments on Jakobstettel or Breadalbane.

269Daniel attended Ms. Gardner’s home before Christmas of 2008 and provided her with a $30,000 cheque dated November 6, 2008. It was returned NSF on November 10, 2008 – see Exhibit 75 – 17R.

270On December 6, 2008, Daniel provided Ms. Gardner with another agreement (see Exhibit 75 – 17P) between Jakobstettel and herself. This document is dated December 6, 2008 and the consideration is $338,021.97, which consists of $138,021.90 on a 2003 investment in the Jakobstettel (see Exhibit 77) and the $200,000 invested in 2007. On this day, Daniel provided her with three separate agreements to catch up on all the investments she had made with him and to take out her deceased’s husband’s name. They are Exhibits 75 – 17P, 17N and 17F. They were all made out in different colours.

271In January of 2009, Daniel deposited $10,000 into Ms. Gardner’s bank account. This was the last money she ever received from him. Accordingly on her investment of $775,000, all she ever received was $43,000 in interest payments. She never received any principal back.

272Accordingly, her total loss is $775,000 plus unpaid interest for 2007 to 2008 plus the $138,000 from 2003.

273Exhibit 75 – 17Q is a letter to Daniel dated October 22, 2008. In that letter, Ms. Gardner indicates she wants to sell her room at the Plaza and have her $200,000 returned together with interest owing from 2007. She gives 60 days’ notice. This money, of course, was not returned.

274Exhibit 75 – 17S is a letter dated January 26, 2008 wherein Ms. Gardner confirms that she still wants her money back as set out in her October 28, 2008 letter.

275It was her understanding that DPR Financial was the holding company that was to take her money and then pay it out to purchase the inns and investments. It was her understanding that the Jakobstettel and Plaza were bought and the Breadalbane was to be bought once a $100,000 lien was removed. At the December 6, 2008 meeting, she understood Daniel had bought the Breadalbane because Daniel had said that he had approval to build condos. She wanted paperwork but he did not provide it. She admitted in cross-examination that he never said he bought the Breadalbane; he left her with the impression that he had it.

276In cross-examination, Ms. Gardner testified that she met with David in October of 2008 when David was leaving DPR. This was a shock to her. David said he did not like the way that Daniel was running things and David didn’t want to be sued by his clients. David advised her to write letters to pull out of the corporate bond investments and this inspired her to write the letters in October and January. She took them down to Daniel and gave them to Sarah Snow. In early 2009 she went to the police.

277In cross-examination, Ms. Gardner was referred to Exhibit 77 which is an agreement with Celebrity Management for a $138,021.90 loan at 15 percent interest. There were no problems with the payments until the fall of 2008. This loan money had been used to purchase the Jakobstettel. Per Exhibit 76, complete interest payments were made in 2004 to 2007 but nothing after 2007.

278Exhibit 75 – 17F is an agreement between Reeve Hotels and Resorts Inc. and Heather Gardner, dated July 12, 2007, for $200,000 at 18 percent interest. This was executed by Daniel at the December 6, 2008 meeting to replace the two $100,000 agreements for the Plaza (Exhibits 75 – 17E and 17K) that had her husband’s name on them.

279I find Ms. Gardner to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

14. PATRICIA WESTERHOUT

280Patricia Westerhout has a Grade 12 education. She is retired and formerly operated a salon. She testified that she had little investment experience. Her husband was deceased in 1998.

281In 2006, her net worth was approximately $4 million. She met Daniel through a friend at her house. She was looking to buy life insurance.

282She invested $1.75 million with Manulife and $1.60 million with Canada Life. She paid $8,000 for Wealth Institute education. She attended three classes in September to November 2008.

283On July 15, 2006, she purchased an interest in the Paris Suite of the Jakobstettel Inn for $100,000. The agreement was with Celebrity Management and it was understood that the agreement was to pay 12 percent interest plus 3 percent if she did not use the suite – see Exhibits 82 and 78 – 42A.

284On September 5, 2006, Ms. Westerhout purchased an interest in the Presidential Suite of the Jakobstettel Inn also for $100,000 and for the same agreement of 12 percent interest plus 3 percent if she did not use the suite

FIRST INVESTMENT – LOAN TO DPR

285On April 10 and 17, 2007, Ms. Westerhout provided DPR Financial with a loan of $100,000 on each date for a total loan of $200,000 – see Exhibits 78 – 42A and 42C bank draft and cheque. There was no paperwork. Daniel was always late with paperwork and at first, this did not concern her. The interest to be paid was 18 percent. She provided the money to Daniel for whatever he wished to use it for. Daniel had asked for the loan and was offering 18 percent on the $200,000 for two years.

SECOND INVESTMENT – BREADALBANE INN

286Ms. Westerhout got the $200,000 loan back in June of 2008. This occurred due to a meeting that took place with Daniel, David and herself in April of 2008. Daniel did most of the talking. Daniel told her that he owned the Breadalbane Inn, that he had purchased it, and that it had closed and he wanted to do renovations. Ms. Westerhout flatly denied the suggestion in cross-examination that Daniel said that he was going to purchase it. She felt she was being pressured into the Breadalbane investment. She told Daniel that she did not have a balanced portfolio and was not comfortable with this investment. She felt pressured by the tone in which Daniel was speaking to her. Daniel said to her, “You have real estate. You have fixed income. What more do you want?” David went along with Daniel: it would be fixed income. Eventually it was agreed that she would leave her $200,000 that she already had with Reeve Hotels, she would get back the $200,000 loan (which was paid back in June 2008), and she would do the Breadalbane investment for a return of 20 percent for approximately $4,000 per month.

287Accordingly, Exhibit 78 – 42D was entered into between Reeve Hotels and Resorts Inc. and Ms. Westerhout. The document is dated April 11, 2008 but she signed it at a later date. The agreement is for consideration of $237,286.46 which is the amount of the cheque provided to Daniel and Reeve Hotels and Resorts on April 11, 2008 – see Exhibit 78 – 42C. The terms are 20 percent with monthly payments of $3,945.47. The maturity date is April 11, 2011. The document says that it was signed in Waterloo on April 11, 2008 but Ms. Westerhout indicated it was signed at the Jakobstettel at a later date. She received two $4,000 interest payments in September and October of 2008 but received no interest payments thereafter.

THIRD INVESTMENT – MILLIONAIRE MORTGAGE

288In November or December of 2007, Ms. Westerhout and her boyfriend Tim met with Daniel at the Jakobstettel. Daniel explained his Millionaire Mortgage concept to them (i.e., remortgage home for 40-year term and use equity to get line of credit and then write off interest on leveraged loans for investment purposes). Daniel said he had a patent on it and was going to sell it to RE/Max. Daniel was offering 25 percent on their money and needed a loan for three months.

289Exhibits 78 – 42A and 42C are two cheques in the amount of $700,000 and $100,000 made out to DPR Financial, dated November 28, 2007. This was for the Millionaire Mortgage loan. Ms. Westerhout provided all of the money except for $50,000 which came from Tim. She gave the cheques to Daniel at the Jakobstettel. She got a letter, dated December 4, 2007, confirming the investment – see Exhibit 84.

290After three months, in April of 2008, Tim got a $100,000 cheque and Ms. Westerhout got an interest payment of $175,000 (which is 25 percent of $700,000). Daniel asked to keep the $700,000 for another three months to which Ms. Westerhout agreed.

291Accordingly a new agreement was drawn up – see Exhibit 78 – 42B. This document is dated March 1, 2008 but was signed on April 7, 2008. The consideration was for $700,000 with 25 percent interest for a 90-day term. Ms. Westerhout testified it was understood that she would be paid the 25 percent in three months and not 12 months. Paragraph 2 of the document provides for return of the $700,000 and 25 percent interest on June 1, 2008.

292Accordingly, on June 1, 2008, $875,000 was due to Ms. Westerhout. She received $100,000 on this investment in July of 2008 and $100,000 in October of 2008. She also received a payment in July of 2008 of $15,000 for her Jakobstettel investment. Accordingly her loss on the Millionaire Mortgage investment was $875,000, minus $200,000, equalling $675,000 plus accrued interest.

FOURTH INVESTMENT – JAKOBSTETTEL INN

293On June 18, 2008, Ms. Westerhout renewed her Jakobstettel investment of $200,000. She had received the $30,000 interest payment in July of 2007 and received the second year interest payment of $30,000 as well in July of 2008 (a $15,000 payment and an $115,000 payment which included $15,000 for Jakobstettel and $100,000 for MM). Exhibit 78 – 42E is the rolled-over $200,000 Jakobstettel investment. The document appears to indicate she signed it on September 15, 2008. It is a corporate bond. In cross-examination, Ms. Westerhout indicated the document was supposed to be for joint ownership of two suites at the Jakobstettel but she didn’t notice until she got home. Ms. Westerhout indicated she rolled over the investment because it was profitable in the past at 15 percent per year. By July of 2008, she had received $60,000 on the original 2006 investment of $200,000. However, there was a NSF cheque dated July 21, 2008 for $15,000 (see Exhibit 78 – 42F) but she got the $115,000 payment shortly after.

294In cross-examination, Ms. Westerhout indicated she met with David Reeve at the Cambridge office in October of 2008 and he said he was leaving and was setting up Davlyn Financial with his wife. David provided her with contact information and documents to transfer her investments. She did not sign at that point. In early 2009, she visited David with Tim; David told her he would lose his licence if he stayed at DPR Financial. His wife would lose her licence as well. David did not say why.

295Ms. Westerhout was shown her preliminary hearing evidence from July 4, 2013 wherein she testified that David also told her that Daniel had lost his licence. She did not stay with David because she did not feel comfortable with him. In June of 2009 transferred her investments back to Bank of Montreal – Nesbitt Burns.

296Daniel provided Ms. Westerhout with repayment schedules in September 2008, October 2008 and January 2009 on the Millionaire Mortgage investment (see Exhibits 78 – 42G, 42H, and 42I). Aside from a $100,000 payment made in October of 2008, she never received any money after October 2008 on any of her investments. She had a meeting with Daniel on January 23, 2009 and Daniel told her that a $4,000 payment was being made at her bank as they spoke, but no such payment was ever made.

297Ms. Westerhout confirmed that there were no discussions with Daniel that he was using her money to give to other people and there were no discussions that her money would go to Daniel’s ex-wife.

298Ms. Westerhout’s losses can be summarized as follows:

1. On the original $200,000 Jakobstettel investment, made in 2006 and rolled over in 2008 (see Exhibit 78 – 42E), she received her interest on the original investment but received nothing – principal or interest – on the rolled-over investment. Her loss is $200,000 plus accrued interest.

2. On the $200,000 loan to DPR Financial for 18 percent, made in April of 2007, she received the principal back in June of 2008 but received no interest. Her loss on the loan is $36,000 in unpaid interest.

3. On the Breadalbane – Reeve Hotels and Resorts Inc. investment, made on April 11, 2008, for consideration of $237,286.46, with interest payments of approximately $4,000 per month for three years (see Exhibit 78 – 42D), she received two interest payments of $4,000 each on September and October of 2008 and received nothing thereafter. Her loss on the Breadalbane investment is $237,286.46 and accrued interest.

4. On the rolled-over Millionaire Mortgage investment of $700,000 (see Exhibit 78 – 42B), her loss, as previously calculated, is $675,000 plus accrued interest.

5. Her loss, accordingly, is $200,000, plus $36,000, plus $237,286.46, plus $675,000, plus various accrued interest amounts, for a total loss of $1,148,286.46 plus accrued interest.

299I find Ms. Westerhout to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

15. LAURA KERR

300In 2007, Laura Kerr was married but was leaving her husband and knew she was going to come into some money. She was going to get a lump sum from the sale of the matrimonial home pursuant to a separation agreement.

301Ms. Kerr met with David Reeve in June of 2007 and filled out the client profile form – see Exhibit 85 – 24A.

302Ms. Kerr met with David at the Jakobstettel Inn for a second meeting. She was interested in putting her money where it was safe. In cross-examination she indicated it was an emotional time for her and she was handing herself over to David. She had next-to-no investment knowledge, did not know anything about leveraged loans at that time, and had very vague knowledge regarding segregated funds. David provided her with three options: (1) interest return of 3 to 4 percent; (2) investment in property which would return 7 to 8 percent; or (3) a private real estate investment with Daniel that would return 18 percent. In cross-examination, she indicated she was not thinking at that time that higher returns meant higher risk. Further, Ms. Kerr was also directed to her preliminary hearing testimony wherein she stated that David, at the second meeting, gave her two options: (1) a low-interest account at 3 to 4 percent, or (2) a real estate option at 7 to 8 percent.

303Her separation agreement was signed in August of 2007 and there was a third meeting with David at the Jakobstettel Inn. She had $100,000 to invest. Daniel joined the meeting and Ms. Kerr told him that she could not tolerate any risk. Daniel told her that he had bought suites in the Plaza Hotel in New York City and he was looking for people to buy into it. Daniel stated, “What could be safer than the Plaza Hotel?”

304Daniel explained that the terms were $100,000 with an 18 percent return to be paid annually at the end of the term. Ms. Kerr wrote out a cheque in that amount and gave it to Daniel. She received no documentation at that time. The cheque is dated September 13, 2007 and is made out to Reeve Hotels and Resorts Inc. – see Exhibit 85 – 24B.

305Exhibit 85 – 24C is a joint ownership agreement between “Reeve Hotels and Resorts Inc. – The Plaza” and Laura Kerr for $100,000 (CAD), with 18 percent annual interest, regarding the Wellington Suite. The document was signed at the Benjamin Restaurant with just Laura Kerr and Daniel being present. It is dated September 14, 2007 and purports to be witnessed by Annie Smith. Daniel said that he had already purchased the suites at the Plaza but did not provide the date of purchase. Daniel said, “I have bought some suites at the Plaza Hotel.” Daniel further indicated that the suites were being continually rented.

306In July or August of 2008, Ms. Kerr asked DPR Financial for $3,000 back on the investment. Barb Menard gave this money to Ms. Kerr at the Jakobstettel Inn.

307In October of 2008, the interest was past due on the Plaza investment. On October 6, 2008, Ms. Kerr met with Daniel and told him she was having difficulties getting her interest and asked if her investment was okay. Daniel said that everything was safe and on track. Daniel told her she could give written notice to withdraw the investment. He indicated there was just a little glitch in the office handling the interest and the interest would be paid in a day or two. She received $18,000 shortly after. She also received a T5 indicating that she had received the $18,000 interest from Celebrity Management – see Exhibit 85 – 24D. She had no idea what Celebrity Management was.

308In cross-examination, it was brought out that Ms. Kerr met with Ms. Menard regarding the Plaza investment on October 22, 2008. Ms. Menard told Ms. Kerr that she and David were leaving and asked her to transfer her RRSP accounts to David’s new firm, Davlyn Financial. Ms. Kerr signed the forms but later changed her mind. Ms. Kerr did not know what David’s departure meant, but two weeks later she asked for her money back from the Plaza investment.

309On November 5, 2008, she sent a letter to Daniel asking for the return of her $100,000 investment – see Exhibit 85 – 24E. In cross-examination, Ms. Kerr testified that Daniel had told her before that with 30 days’ notice she could expect the return of her investment.

310Ms. Kerr didn’t get her money back within the 30 days and started to hassle DPR Financial by way of threatening emails.

311Exhibit 85 – 24F is one such threatening email, dated January 15, 2009, wherein Ms. Kerr demanded the immediate return of her money even if Daniel had to “pull it out of [his] ass.” She also threatened to call the police and the newspapers. Lee-Anne Ruggle from DPR Financial responded to the email and eventually dropped off a cheque to Ms. Kerr.

312Exhibit 85 – 24G is the cheque for $100,000 made out to Laura Kerr from Millionaire Mortgages Inc. for $100,000. It is dated January 30, 2009. When deposited, the cheque was returned NSF.

313Ms. Kerr’s total loss is the $100,000 investment minus the $3,000 returned in July or August 2008 for a total of $97,000.

314I find Ms. Kerr to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

16. AMOS LICHTY

315Amos Lichty is an 83-year-old retired truck driver and heavy equipment operator. He has a grade 8 education.

316He was introduced to Steve Haney by his daughter at a meeting where his daughter was present. Mr. Lichty sold his home in Listowel for $98,000 and wished to invest $100,000 and use the interest to pay his rent. In possibly 2003, he had dissolved his mutual funds to buy a van and he put about $10,000 in a RRIF.

317Two weeks after his initial meeting with Mr. Haney, Mr. Lichty and his wife met with Daniel and Mr. Haney at a meeting at the Jakobstettel Inn. Mr. Lichty told Daniel that he was retired and his only income was a CPP pension and that he had $100,000 to invest.

318Daniel told Mr. Lichty to invest in the Plaza Hotel in New York. Daniel was using the money to renovate the Wellington Suite in the Plaza Hotel. Daniel showed him pictures of the Plaza Hotel and Mr. Lichty decided to invest his money there.

319Exhibit 86 – 25A is Mr. Lichty’s cheque dated September 4, 2007 in the amount of $100,000. It is made out to Reeve Hotels and Resorts Inc. pursuant to Daniel’s instructions to Mr. Lichty.

320Exhibit 86 – 25B is the joint ownership agreement regarding the Plaza which was provided to Mr. Lichty at the time of making out the cheque for $100,000. It is dated September 5, 2007 and is between Reeve Hotels and Resorts Inc. and Amos and Dorothy Lichty. The consideration is $100,000 for an ownership interest in the Wellington Suite in the N.Y. Plaza Hotel with interest payments to be 18 percent annually and paid out monthly at $1,500 per month. The initials on the document were made by Mr. Lichty, his wife and Daniel. The document was signed by those three parties and witnessed by Mr. Haney who was present at the September 5, 2007 meeting. At that time, Mr. Lichty understood that his money was to be used to purchase the suite and renovate it and then rent the unit out.

321After this investment, Mr. Haney arranged for a $100,000 leveraged loan investment. In June of 2013, Mr. Lichty got rid of the leveraged loan.

322Mr. Lichty received interest payments of $1,500 in 2008 and 2009 that were not always on time. After October 8, 2008, the payments stopped altogether. As indicated in cross-examination, Mr. Lichty received the first 13 months of interest payments for a total of $19,500.

323After the payments stopped, Mr. Lichty met with Daniel. Exhibit 86 – 25C is a letter dated March 20, 2009 sent by Daniel to the Lichtys. Mr. Lichty does not recall how he received it. In the letter, Daniel promised to pay the Lichtys $5,000 monthly commencing April 3, 2009 with all money to be returned by December 2009.

324Subsequent to the letter, on April 8, 2009, Mr. Lichty received $3,000 but this would be the last payment he ever received. He received a total of $22,500 in interest payments but never received any of his principal back.

325Accordingly, Mr. Lichty’s loss is $100,000 plus unpaid interest. As a result, Mr. Lichty had to look for work, but at his age, it was tough to get any employment.

326I find Mr. Lichty to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

17. ANNE COLQUHOUN

327Anne Colquhoun lives in Toronto. She has a B.Sc. and was a dietician. Her husband was an architect.

328Her husband died in 2003 and she received life insurance proceeds. In 2003 her assets consisted of (1) life insurance proceeds of $238,000, which were placed in a Desjardins daily interest account; (2) a Toronto home valued at $700,000; (3) RRSPs of $300,000; and (4) stocks in the amount of approximately $100,000.

329She read the Three Buckets book authored by Daniel and met him one or two times. She met Daniel and David and a Najeem Rafi at the DPR office in 2005.

330In 2007, she sold her Toronto home for $825,000. She bought a condo for $500,000 and, after helping her children, she had $150,000 left to invest. She wanted $50,000 to go into a life insurance vehicle which left a further $100,000 to invest. She decided to approach Daniel and David regarding how to invest this $100,000.

FIRST INVESTMENT – JAKOBSTETTEL INN

331Daniel said that he had a good investment for her. She could put $100,000 into a limited partnership in the Jakobstettel Inn. The money was to be used to renovate the Inn and it would pay 18 percent interest. If she was not satisfied, she could sell the condo back to Daniel in one year’s time (he was the only person she could sell to). The money was to be used to renovate the Inn. There was no discussion that the money was to be used to pay any other investors.

332In cross-examination, Ms. Colquhoun confirmed that Daniel told her that he owned the Inn. She attended at the Inn and saw renovations and stayed at the Inn. Daniel told her that it was guaranteed she would get her money and he would buy the unit after one year.

333Exhibit 87 – 9B is a bank draft dated September 12, 2007 for $100,000 payable to Celebrity Management International Inc. Exhibit 87 – 9C is a joint ownership agreement between Celebrity Management International Inc. and Ms. Colquhoun for $100,000 for the Bauman Suite with a term of 18 percent interest. The Bauman Suite was one of the suites to be renovated. The document was pre-witnessed but she signed and initialled it and assumes that Daniel did so as well. Paragraph 13 of the document refers to named beneficiaries which she gave to Daniel in face-to-face meetings.

334A year later, as of September 12, 2008, the $100,000 was owed to Ms. Colquhoun, as well as $18,000 in interest, for a total of $118,000. She eventually got $40,000 as return of capital from September 2008 to January 2009.

335Her loss on this investment is $78,000 plus unpaid interest.

SECOND INVESTMENT – N.Y. PARK PLAZA

336During the meetings regarding the Jakobstettel Inn investment, Daniel presented another investment – the Park Plaza in New York.

337Daniel said the Park Plaza Hotel in New York would bring 18 percent. She could stay there once the renovation was completed. Daniel presented it as an opportunity to purchase and do renovations. In cross-examination, she indicated that she was not aware of the exact details. Daniel said there was a timeline and a limited opportunity to invest in the suite so the deal had to be arranged quickly.

338Ms. Colquhoun told Daniel that she didn’t have $200,000. Daniel said she did; she could cash in $200,000 in non-registered investments. The capital gain on the investment was $100,000 which would result in an additional $30,000 additional tax. She decided to do the Plaza investment. Exhibit 87 – 9E is the withdrawal instructions to Manulife, which she signed on September 19, 2007. Box 9 was signed by David who was her main adviser. She was later told by David that Daniel did not have a licence.

339Exhibit 87 – 9D is a cheque dated September 20, 2007 in the amount of $200,000 payable to Reeve Hotels and Resorts Inc. Ms. Colquhoun testified that this cheque was for the Plaza investment.

340Exhibit 87 – 9F is the confirmation notice of withdrawal from Manulife, dated September 20, 2007. There were service charges of approximately $13,000 to $14,000 on the withdrawing of approximately $214,000 of segregated funds. Ms. Colquhoun indicated in cross-examination that Daniel told her to cash the whole thing in and denies that he advised her regarding the services charges, but specifically she does not remember.

341Exhibit 87 – 9I is the joint ownership agreement for the Wellington Suite in the Plaza dated September 20, 2007 for consideration of $200,000. The interest rate was 18 percent annually. She initialled the document and guessed that Daniel did so as well. Daniel told her the Wellington Suite was to be renovated and that was what her money was to be used for. There was no discussion that her money would be used for anything else. She signed it on September 27, 2007 and it was back-dated. Also it was pre-witnessed, which Daniel said was to save time.

342Over the next year, Daniel told her that the renovations were ongoing and would be finished by the fall of 2008. In cross-examination, Ms. Colquhoun indicated that Daniel never said the deal went through but never said it did not go through.

343She never received any payments or return of principal on this investment. Her loss is $200,000 plus accrued interest.

THIRD INVESTMENT – BAYFIELD PROPERTY

344On July 23, 2008, Ms. Colquhoun received a phone call from Daniel Reeve. Daniel said he had a real estate investment in Bayfield Ontario. He had a list of potential investors. In cross-examination, she indicated she told Daniel that she could not cash in her RRSPs unless Daniel could guarantee income. She told Daniel she had a lot of expenses and needed $3,000 per month. Daniel said that he would contact his accountant and ask if it was doable. Lee-Anne Ruggle phoned later and said that the accountant had said yes.

345On July 24, 2008, Daniel phoned and said he could pay $3,000 per month on the 15^th of the month. She knew there would be a large tax hit but she did not run the investment by her own accountant because she trusted Daniel and there were time pressures. She was not aware there would be tax consequences over and above the 30 percent withholding tax. Daniel was aware that her RRSPs were not preforming well and Daniel knew her financial situation thoroughly.

346Exhibit 87 – 9G is a T4RSP that indicates she withdrew $299,947.34 and the withholding tax deducted was just under $90,000. On top of this withholding tax, she eventually paid an additional $30,417 in tax.

347Exhibit 87 – 9J is an RBC bank draft dated July 30, 2008 in the amount of $200,000 payable to Reeve Hotels and Resorts Inc. Daniel said that a bank draft was required as the deal was to close on July 31, 2008.

348Eventually, after a lot of cajoling, Ms. Colquhoun got the documentation on the deal on September 23, 2008. Exhibit 87 – 9K is a three-year corporate bond between Ms. Colquhoun and Reeve Hotels and Resorts. It is in the amount of $200,000 with interest payable annually at 16 percent. In cross-examination, it was pointed out that paragraph 1 of the document makes no mention of the Bayfield property. Further the document later refers to the Breadalbane Inn. Ms. Colquhoun indicated in cross-examination that she had not heard of Breadalbane until she received this document. All her discussions with Daniel were about Bayfield, not Breadalbane. Daniel phoned her and told her that his driver would deliver the document. Daniel instructed her to back-date her signature to July 30, 2008. The document was pre-witnessed.

349Daniel had told Ms. Colquhoun that she would get a limited partnership for three years and would be able to write off tax losses; this would enable her to recover the tax she had paid to cash in her RRSP. She signed the document in the lobby of her building. Afterward, she discovered that it was a bond and not a limited partnership.

350She phoned Daniel about why it was a bond and not a limited partnership. Daniel told her that due to the problems with the liquor licence, a bond was needed. There was no discussion regarding using the money for any other purpose other than using it for the Bayfield property. Due to the success of her prior investments with Daniel over at least three years, she trusted him and believed what he told her. However she became concerned when she received no documents on this third investment and when she phoned, she got a variety of excuses.

SUBSEQUENT EVENTS

351Things fell apart in the fall of 2008:

1. Regarding the first investment, the Jakobstettel Inn, on September 12, 2008, principal of $100,000 and interest of $18,000 was due but Ms. Colquhoun received no money on that date. She eventually received $40,000 by January 2009.

2. Regarding the second investment, the N.Y. Plaza, on September 20, 2008, interest of $36,000 was due but did not come. No money was ever paid, either in interest or principal.

3. Regarding the third investment, the Bayfield property, on September 15, 2008, the $3,000 interest was not paid. No money was ever paid, either in interest or principal.

352Ms. Colquhoun believed that the Plaza had been purchased. When she asked about the renovations, Daniel said they were going fine. Further, Daniel never told her the Bayfield investment never went through. Daniel appeared annoyed with her when she would not do things on the spot, i.e., sign for a large life insurance policy.

353At the end of September 2008, David said he was leaving DPR Financial and setting up a new company. Ms. Colquhoun agreed to stay with David for a short period of time and stayed for about six months. David told her that Daniel had not had a licence since early 2007. She was upset that Daniel, the regulatory agency, and David (if he knew) did not advise her that Daniel had no licence.

354Her losses are:

1. On the first investment, $78,000 plus accrued interest;

2. On the second investment, $200,000 plus accrued interest; and

3. On the third investment, $200,000 plus accrued interest.

Her total losses, therefore, amounted to $478,000 plus accrued interest.

355I find Ms. Colquhoun to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

18. GLEN BRUBACHER

356Glen Brubacher is 52 years old and is a farmer with a Grade 8 education. He has limited investment experience, mainly with mutual funds (he had around $60,000 in mutual funds, which aside from his house, were his only assets).

357In August or September of 2006, Mr. Brubacher met Daniel at a wine and cheese party at the Jakobstettel Inn in St. Jacobs. Daniel introduced himself as a financial advisor and investor. Mr. Brubacher’s impression was that Daniel was a licenced financial who knew his stuff but was a bit arrogant. One to two weeks later, Daniel introduced Steve Haney to Mr. Brubacher as his quarterback.

358In September of 2006, Mr. Brubacher sold the dairy division of his farm. After the sale, he had $400,000 to $500,000 left over. He decided to invest it with Daniel.

FIRST INVESTMENT – JAKOBSTETTEL INN

359Daniel explained that Mr. Brubacher’s money was to buy shares in the Jakobstettel Inn. Daniel said he owned it. Daniel said he would pay 12 percent interest or $4,000 per month. Exhibit 89 – 6A is a cheque in the amount of $400,000, dated October 17, 2006, from Mr. Brubacher’s company, Glendra Farms, payable to Jakobstettel Inn. The agreement was tendered in cross-examination as Exhibit 90. The agreement is between Celebrity Management and the Brubachers, and provides for annual interest of 12 percent with the buyer buying 40 percent of the Presidential Suite of the Jakobstettel Inn.

360After providing the cheque to Daniel, Mr. Brubacher had to wait six months for his first payment. He got $24,000 in April of 2007. In 2007, he received a total of $56,000 in interest payments.

SECOND INVESTMENT – N.Y. PARK PLAZA

361In April of 2007, Mr. Brubacher sold the poultry division of his farm for over $1 million. After payments, he had an additional $400,000 to invest. Of those funds, $350,000 went into mutual funds and segregated funds.

362In August of 2007, Daniel strongly recommended that Mr. Brubacher pull his investments out and put the proceeds into the Plaza Hotel in New York. Mr. Brubacher indicated in cross-examination that he was reluctant to follow this advice because (1) he would have to cash in his mutual funds, and (2) this property was in the U.S. He did not like to deal with the U.S. with farm products. The Americans had abruptly halted cattle trading in in May 2003 due to mad cow disease concerns. After May 2003, Mr. Brubacher preferred to just make Canadian sales.

363However, Daniel indicated that he owned portions of the Plaza Hotel, namely some of the suites. Daniel said that Mr. Brubacher would get better cashflow, 18 percent, and that there was more stability in real estate, whereas mutual funds go up and down with the market. Under cross-examination, Mr. Brubacher indicated that he himself preferred real estate investments, since mutual funds go up and down and are prone to crashes. Daniel said he owned suites in the Plaza Hotel in New York. Mr. Brubacher thought he was getting ownership of a Plaza suite; Daniel said it was similar to the Jakobstettel arrangement. By this time, Mr. Brubacher was receiving consistent interest payments on his Jakobstettel investment. Mr. Brubacher was never told that Daniel did not own the suite; if that was the case, he would never have invested his monies with Daniel.

364Further, Daniel said that the Plaza investment was low-risk, involving real estate and a high-end hotel frequented by celebrities.

365On August 14, 2008, Mr. Brubacher made out two cheques totaling $350,000 to Reeve Hotels and Resorts Inc. – see Exhibit 89 – 6A.

366This $350,000 was raised by cashing in his segregated funds in addition to the sale of his turkey quota from his farm business. Exhibit 89 – 6B indicates that on February 6, 2007, Mr. Brubacher transferred his mutual fund investments to Canada Life with Steve Haney as his financial advisor. However, Mr. Brubacher said that it was always Daniel that advised him and managed everything. Exhibit 89 – 6C shows that on April 18, 2007 Mr. Brubacher deposited $370,000 to Canada Life which was put into mutual fund tranches of $200,000 and $170,000.

367Exhibit 89 – 6D shows that the $200,000 tranche was cashed in on August 15, 2007. The investment had gone down by over $6,000 and after service charges, $185,887.37 was left over for the Plaza investment. In cross-examination, Mr. Brubacher indicated that he had arguments about cashing in this investment and paying all these fees and losses. However, he went along with it because he trusted Daniel. Further, Mr. Brubacher did it because of the promised 18 percent return and the fact that real estate was more stable. Accordingly, he felt the Plaza was a better investment than the limited gains he was seeing in the Canada Life statement of April 18, 2007 – see Exhibit 89 – 6C.

368Mr. Brubacher did not get the Plaza agreement right away. On September 1, 2007 he received the agreement from Daniel himself – see Exhibit 89 – 6E. The agreement is dated September 1, 2007 and is between Mr. Brubacher and his wife and Reeve Hotels and Resorts Inc. in the amount of $360,000. It provides for 18 percent annual interest with an ownership interest in the Wellington Suite at the Plaza. Daniel said that the Wellington Suite was one of the suites he owned. Mr. Brubacher thought the money was going to buy the suites. Daniel said he owned several suites. Mr. Brubacher pointed out that the document was for $360,000 and Mr. Brubacher had only paid $350,000. Daniel told him not to worry about it and said, “Let’s move forward.”

369In cross-examination, Mr. Brubacher denied the suggestion that Daniel was discussing a future project to buy the suite. Mr. Brubacher indicated Daniel led him to believe Daniel was purchasing the suite and that he owned several suites.

370Daniel stated that the return was 18 percent due to the high-end, celebrity nature of the hotel. Clause 3 of the agreement provided that the 18 percent was to be paid monthly in the amount of $5,400, as orally agreed to by Daniel. The document was initialled by the Brubachers. Mr. Brubacher assumes it was initialled by Daniel as it was Daniel who gave him the document.

SUBSEQUENT EVENTS

371Mr. Brubacher got interest payments until November of 2008 and then they stopped. After November 2008, Daniel kept reassuring him that everything was okay.

372Meanwhile, on June 12, 2008, Mr. Brubacher and his wife sent Daniel a letter requesting termination of the Plaza investment and the return of the $360,000 plus interest by September 1, 2008 – see Exhibit 89 – 6F. Mr. Brubacher thinks he hand-delivered this letter to Daniel. Daniel said it was not necessary for Daniel to sign it; he told Mr. Brubacher to send it and Daniel would honour it. Daniel said these things in June 2008.

373Mr. Brubacher heard rumours that Jakobstettel had problems. He met Daniel at a restaurant and Daniel told him not to worry; he would get his money. On a Sunday afternoon, Daniel gave Mr. Brubacher two cheques: (1) a cheque for $50,000 from Jakobstettel Inn dated October 24, 2008; and (2) a cheque for $100,000 from Jakobstettel Inn dated November 7, 2008 – see Exhibit 89 – 6G. The $50,000 cheque was returned NSF and Mr. Brubacher did not attempt to cash the other one. Daniel Reeve also provided him with payment schedules dated November 21, 2008 providing for the return of the Plaza investment of $360,000 in installments in November and December of 2008, as well as the return of the Jakobstettel investment of $400,000 in installments in December of 2008 – see Exhibits 89 – 6H and 93. None of these payments were made.

374In cross-examination, Mr. Brubacher indicated that he and his wife also took out leveraged loans in excess of $1 million to invest in mutual funds. He also took out a life insurance policy in excess of $1 million with Universal Life. In re-examination, Mr. Brubacher indicated these investments were Daniel’s idea.

375Exhibits 91 and 92, introduced in cross-examination, showed that interest payments of $111,700 and $86,400 were made on the Jakobstettel and Plaza investments respectively. The final payment regarding the Jakobstettel of $10,000 was made on January 3, 2009, and the final payment regarding the Plaza was made in December 2008.

376No payments were made on the principal amounts owing on either investment. Mr. Brubacher’s total losses were $400,000 on the Jakobstettel (investment made in 2006 before the January 2007 date outlined in the indictment) and $350,000 on the Plaza investment for a total loss of $750,000. Only $350,000 of this loss can be attributed to the time period set out in the indictment.

377I find Mr. Brubacher to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

19. CLAUDETTE TAYLOR

378Claudette Taylor has been married for 38 years. In 2007, she lived in Georgetown. Her 2007 assets consisted of ownership of two farms and machinery, while she and her husband had $25,000 each in RRSPs with Sun Life. She had no experience in investing.

379In 2007, she sold one of the farms. Her friends, the Austins, recommended their financial advisor, Steve Haney, to her. In September or October of 2007, she and her husband met with Mr. Haney in Mississauga.

380At the first meeting with Mr. Haney, the investment philosophies of DPR Financial were discussed. This was new territory for her. In cross-examination, it was brought out that Mr. Haney had told them that their investments would be watched closely and checked regularly. Mr. Haney also told them that Daniel was looking for a large sum of money for private equity investments.

381A second meeting took place at the home of Ms. Taylor on October 31, 2007, attended by herself, her husband, Mr. Haney and Daniel. Ms. Taylor’s impression of Daniel was that he was smart and knew what he was talking about. Daniel provided more in-depth information about DPR Financial’s investment philosophy and referred to the books he had authored such as The Three Buckets and Millionaire Mortgage. Daniel confirmed that he was looking for large sums of money to be used for renovations in real estate investments in the New York Plaza and the Jakobstettel Inn. At these meetings Ms. Taylor made it clear that they had $800,000 but needed access to the money to pay capital gains taxes over five years.

382At this second meeting, Daniel had paperwork for these private equity investments. They discussed 18 percent interest. Ms. Taylor wondered how Daniel could pay 18 percent when most people were paying 6 to 8 percent. Daniel said that there were companies out there who needed money to finish their businesses and were willing to pay a higher rate. Ms. Taylor asked Daniel how safe the money in the U.S. was and he told her it was safe. The money was going to Reeve Hotels and Resorts and then into the U.S. She decided to sign the paperwork and write the cheques.

FIRST INVESTMENT – JAKOBSTETTEL INN

383Exhibit 94 – 39A is a cheque dated October 31, 2007 made out to Celebrity Management for $300,000. The money was for renovations at the Jakobstettel Inn. Daniel told Ms. Taylor he wanted to update the Inn so that it could accommodate weddings. There was no other discussion of any other use for the money. Daniel gave the impression that he owned Jakobstettel Inn. He used expressions such as, “We are having weddings,” and “We are doing an expansion.” In cross-examination, it was conceded that Daniel never specifically said he owned anything.

384Exhibit 94 – 3C is the joint ownership agreement between “Celebrity Management carrying on business as Jakobstettel Inn” and the Taylors, dated November 1, 2007. The consideration was for $300,000 with an interest rate of 18 percent and the joint ownership was in the Cress Suite (paragraph 1 of the documents specifies the Taylors owned one tenth of the suite). The document has no maturity date but in cross-examination, Ms. Taylor indicated it was understood between the parties that this was a loan for a short two-year term. Paragraph 34 at page 7 of the document specifies that the 18 percent interest totals $54,000 annually and would be paid out at $4,500 per month.

385The Taylors had not heard of the suite name before that night and Daniel breezed over it. The document is witnessed by Annie Smith, who was not there; Ms. Taylor indicates that signature was not done in her presence. Basically, the $300,000 was a loan to the Jakobstettel Inn. Daniel said they could spend a week there if they wished and they presumed this meant they could stay at the Cress Suite.

SECOND INVESTMENT – N.Y. PARK PLAZA

386Ms. Taylor also decided to invest in the Plaza Hotel at the same meeting when the Jakobstettel Inn loan investment was made. Exhibit 94 – 3B is a cheque made out to Reeve Hotels and Resorts Inc. for $400,000, dated October 31, 2007.

387Exhibit 94 – 3D is the joint ownership agreement regarding the Plaza Hotel between Reeve Hotels and Resorts Inc. and the Taylors, also dated November 1, 2007. It is for consideration of $400,000 with an interest rate of 18 percent and is in regard to the Wellington Suite. There is no maturity date and in cross-examination, Ms. Taylor indicated that they understood they could pull out at any time. Paragraph 3 of the document provides for interest payments of $72,000 annually to be paid in monthly installments of $6,000. Paragraph 3 also stipulates that Reeve Hotels is the only buyer on resale and must refund principal and interest after 60 days’ notice. Mr. Haney was at the meeting and witnessed the document.

388Daniel told Ms. Taylor that the agreement was a loan for renovations to the Park Plaza Hotel that the hotel wanted to finish. The money would go to Reeve Hotels and Resorts Inc. and then to the Plaza. Daniel didn’t explain the connection. The suite name of Wellington was not really explained and she wondered whether that was the suite to be renovated. There was no discussion that the money would be used for anything other than the renovations for the Park Plaza. Daniel said that, if they want to stay there, to let him know and he would arrange it. Mr. Haney was there but he did not talk about the agreements. Earlier he had talked about life insurance and segregated funds.

389Daniel gave Ms. Taylor books he had authored: Butterfly Effect, Millionaire in You. She read them over time. Mr. Haney did some investments with segregated funds with the Taylors but Daniel was not part of that.

SUBSEQUENT EVENTS

390The interest on the two agreements was to be paid monthly starting December of 2007 but payments did not come on time; they were sporadic. They contacted Daniel by phone and he said it was a software problem. She made it clear to Daniel that payments were not coming in regularly, especially in the fall of 2008. At a meeting at the Jakobstettel, she provided him with a spreadsheet regarding payments and non-payments. Daniel made copies and he said his staff would look into it.

391The spreadsheets were entered in as Exhibits 95A (Jakobstettel Inn interest payments) and 95B (Plaza interest payments). Regarding the Jakobstettel, there was a $13,500 shortfall by December 2008. This was covered by a $22,500 lump sum payment in October 2008. By the end of 2008, there was a $9,000 overpayment for the year. This covered $9,000 that owed for January and February of 2009. After this date, nothing was paid, so the loss on the Jakobstettel investment is the principal of $300,000 and accrued interest. Regarding the Plaza investment, at the end of 2008, only $39,000 out of $78,000 owing had been paid (a $39,000 shortfall). There were two $6,000 payments to be made in January and February of 2009 which would make $51,000 to be paid by the end of February. Twenty-one thousand dollars in interest was paid in January of 2009. Accordingly, $30,000 interest was owing in interest by the end of February 2009. No further payments were made and the principal was never repaid. The loss on the Plaza investment is therefore $400,000 plus accrued interest.

392The Taylors also had leveraged loans totalling $550,000 which were invested in segregated funds with Canada Life (which plunged in 2008 and took a year to recover) and a life insurance policy arranged by Mr. Haney. In August 2008, they received a letter that Mr. Haney was leaving DPR Financial and that David was looking after their investments with Canada Life.

393Between August and October of 2008, the Taylors had no contact with David. In October of 2008, David told them he was leaving DPR by way of a letter. David told them over the phone that DPR was a mess and that no one was looking after their investments. In cross-examination, Ms. Taylor indicated that David didn’t say specifically that DPR was in a mess but that he had no idea who was looking after their investments.

394The Taylors met with David on November 30, 2008 at Davlyn Financial and made him their agent of record regarding their investments. They asked David about their private investments with Daniel. David told them to send Daniel an e-mail and tell him they wanted their money back, and/or to contact Daniel’s lawyer, Ron Mark. The Taylors were getting worried. They had been told their investments would be monitored by DPR Financial and they would be contacted if their investments went down about 10 percent. This was their first meeting with David and their segregated funds were down about a third of their value. In cross-examination, Ms. Taylor indicated that David never told them he was president of DPR Financial.

395On November 30, 2008, they met with their lawyer. They took no action but sent Daniel an email dated December 1, 2008. This email appears as Exhibit 94 – 39E. It indicates that $30,500 in interest payments is owing on their investments and they require the money to pay capital gains taxes to Canada Revenue Agency, as was discussed previously. The email concludes that after receiving legal advice, they are seeking the return of their capital of $700,000 immediately. In cross-examination, Ms. Taylor indicated that the last payment at that time for the Jakobstettel agreement had been on November 4, 2008 and the last monthly payment on the Plaza agreement had been in August 2008. In cross-examination, Ms. Taylor indicated that they had received $5.7 million on the sale of their farm and had to pay capital gains tax of $70,000 to $100,000 for five years.

396On December 10 or 11, 2008, Ms. Taylor met with Daniel at Benjamin’s Restaurant. Daniel indicated that there were people who had lost their jobs and needed their money and his payment to them had exhausted his resources. Daniel stated that, by early January, he could give $100,000 back.

397Subsequently, on February 11, 2009, Daniel came to the house and told the Taylors he would pay back the money. He agreed to pay $10,000 every Friday and lump sums periodically. Daniel indicated that things were looking up; he was hiring other assistants and had other investors. He told them not to panic.

398The Taylors received no other payments ever. In April 2009, they met Daniel at a restaurant. Daniel admitted that there were problems but asked them to be patient as he was trying to get their money back. He told them that if they went to court, they would get nothing. In cross-examination, Ms. Taylor indicated that they felt that they had no other choice but to try to work with him. Daniel confirmed that there were a number of upset clients.

399In April 2009, a notice was posted on the Jakobstettel Inn that it was closed. The Taylors thereafter eventually went to the police and contacted Constable De Boer.

400The loss on the two investments is their entire capital of $700,000, which was paid to enter into the two agreements, plus unpaid accrued interest. The Taylors were very stressed over what happened. They do not trust anyone anymore and this has affected the way they live.

401I find Ms. Taylor to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

20. PETER STEENBERGEN

402Peter Steenbergen has been a farmer since 1973 and lives in Drayton, Ontario. In 2006, he had some investing experience with mutual funds, segregated funds and RRSPs, and had a financial advisor named Tony Mensch.

403Mr. Steenbergen spoke to an Andy Martin who talked about DPR Financial and Daniel Reeve. Mr. Steenbergen came to the conclusion that his investments were doing worse than the investments of DPR Financial‘s clients.

404Accordingly, in October of 2006, Mr. Steenbergen attended a DPR Financial presentation at the Jakobstettel Inn. Daniel made the presentation and talked about the Three Buckets book and leveraged loans. Daniel said that funds were monitored daily and it sounded like they were doing a really good job.

405In November of 2006, after thinking about it, Mr. Steenbergen transferred his portfolio to DPR Financial. Both Steve Haney and Daniel were present at the Jakobstettel Inn when the transfer occurred. Mr. Haney’s name was on the paperwork. In cross-examination, Mr. Steenbergen indicated that, in the first year, his investments did well.

406In early 2008, Daniel phoned Mr. Steenbergen and told him that he had a good investment opportunity and asked if Mr. Steenbergen would be willing to cash in his investments to invest in a building.

407On January 6 or 7, 2008, Mr. Steenbergen attended a meeting at Jakobstettel Inn with just Daniel. Daniel said he had a good offer which would do better than Mr. Steenbergen’s current investments. Daniel said he was building a new building—the Millionaire Mortgage Building—and was starting a new business to invest in mortgages. Mr. Steenbergen felt special for being chosen for this opportunity.

408Daniel said Mr. Steenbergen should cash in his mutual funds of $259,000 which was his whole portfolio, except his RRSPs. Daniel said there would be a $10,000 penalty for withdrawing the mutual funds but Daniel would compensate him by giving him 25 percent interest on the investment.

FIRST INVESTMENT – MILLIONAIRE MORTGAGE

409Exhibit 96 – 36E is a bank draft (Daniel wanted a bank draft) in the amount of $249,437.90, dated January 16, 2008, which was made out to Millionaire Mortgage Inc. by Mr. Steenbergen. The money was raised from the proceeds gained from cashing in his mutual funds – see Exhibit 97.

410Exhibit 96 – 36F is an agreement between Millionaire Mortgage Inc. and Peter Steenbergen, purportedly signed on January 16, 2008, for consideration of $249,437.90, paying 25 percent interest with a maturity date of September 1, 2008, at which time the original deposit and interest were to be paid. In cross-examination. Mr. Steenbergen indicated, that although the agreement has no specifics as to how the money was to be used, it was his understanding that the money was for the building and anything else to get the new business running over the next eight months. The document was signed a few weeks after January 16, 2008 as Daniel did not have the document ready at the time of the meeting.

SECOND INVESTMENT – MILLIONAIRE MORTGAGE

411Mr. Steenbergen had the idea that he would like to do two $100,000 investments for his children, Ken and Lisa. He borrowed $160,000 against his line of credit and they had $40,000. The money was to be used to get the Millionaire Mortgage building built and to get the business going. There was no discussion about the money going anywhere else. There was no discussion about the money going to Cheryl Reeve or to pay for the expenses of DPR Financial. Mr. Steenbergen does not recall what he told Daniel but he would have told Daniel that he was helping out his children and assumed that he told Daniel where the money was coming from.

412Exhibit 96 – 36A is a bank draft for $200,000dated January 8, 2008 and payable to Millionaire Mortgage Inc. for the investment for Mr. Steenbergen’s children. Exhibits 96 – 36C and 36D are similar agreements of $100,000 each with interest payable at 18 percent with the deposit and interest to be paid on August 31, 2008. One of the agreements is between Millionaire Mortgage Inc. and Ken Steenbergen and the other agreement is between Millionaire Mortgage Inc. and Lisa Steenbergen. They both purport to be signed on January 8, 2008 but one of the documents was in fact not signed until a year later in early 2009.

THIRD INVESTMENT – N.Y. PARK PLAZA

413In June of 2008, Daniel called Mr. Steenbergen and suggested he cash in his RRSPs to invest in a land investment in New York. When Daniel was asked about taxes to be paid upon withdrawal, Daniel said that the renovations would generate tax credits. Daniel took Mr. Steenbergen out to lunch to discuss this investment. Daniel stated that he was buying a hotel in New York and was completing the same concept as the Jakobstettel Inn. In cross-examination, Mr. Steenbergen indicated that he had been at the Jakobstettel Inn. There was no discussion of risk. Daniel stated that he had bus tours in Niagara for clients.

414Mr. Steenbergen decided to withdraw his RRSPs. He cashed in $75,000 and after $25,000 in withholding tax was deducted, he had $50,000 left over. Exhibit 96 – 36G is a bank draft, dated June 27, 2008, payable to Reeve Hotels and Resorts Inc. Mr. Steenbergen assumed that this was the company that owned the Jakobstettel Inn and the hotel in New York.

415Mr. Steenbergen did not receive any documentation right away; it was a challenge to get it. In January of 2009, he finally got Exhibit 96 – 36H, which is an agreement between Reeve Hotels and Janice and Peter Steenbergen for $50,000 with an interest rate of 15 percent payable annually commencing June 27, 2009 and maturing June 27, 2011. Mr. Steenbergen indicated the agreement was supposed to be for five years. It was signed by Daniel and the Steenbergens and back-dated to June 27, 2008. In cross-examination, it was pointed out that paragraph 1 of the agreement indicated that the 15 percent interest was to be paid on corporate debt secured against Jakobstettel property and the principal was to be returned on the maturity date. The money was to be used for renovations for a hotel in New York. Mr. Steenbergen indicated in cross-examination that Daniel never named the hotel. There were no discussions that the monies were to be paid to Ms. Reeve or to be used to pay general expenses of DPR Financial Inc.

SUBSEQUENT EVENTS

416With the three investments, Mr. Steenbergen had invested $250,000 (he still owed $200,000 for the leverage loans initially entered into in order to purchase the mutual funds that he had cashed in), plus $200,000 (he still owed $160,000 on his line of credit), plus $50,000, for a total of $500,000. His debt was $200,000 for the leveraged loan and $160,000 from the line of credit for a total debt load of $360,000.

417Mr. Steenbergen called Daniel before August 31, 2008; he was buying a house on September 1, 2008 and needed his money. Daniel told him over the phone that someone had made a mistake and had re-invested his money by mistake and that Mr. Steenbergen had to wait for his money.

418Daniel met Mr. Steenbergen in January of 2009 in a restaurant in order to sign the documents as previously outlined. Daniel asked Mr. Steenbergen what the rush was as Mr. Steenbergen was getting 25 percent. In cross-examination, Mr. Steenbergen indicated that Daniel mentioned a hotel in Fergus.

419After this restaurant meeting, Daniel was hard to get hold of. Mr. Steenbergen finally secured a meeting with Daniel and asked him when he was going to get paid. Daniel provided him with a schedule of payments. It appears as Exhibit 96 – 36I and is dated January 21, 2009. Daniel printed the letter out after preparing it and gave it to Mr. Steenbergen. It outlines payments from February 6, 2009 until July 15, 2009 at a rate of $10,000 per week escalating to $50,000 per week. Mr. Steenbergen never received anything.

420In cross-examination, Mr. Steenbergen indicated that in February or March of 2009, he went to the Millionaire Mortgage premises in Waterloo. The doors were locked.

421No payments were ever made either on principal or interest on the three agreements. The loss to the Steenbergens is $500,000 plus accrued interest.

422Currently, of his initial $360,000 debt load, Mr. Steenbergen has paid a little more than half off.

423I find Mr. Steenbergen to be a credible witness. His evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in his evidence in either examination-in-chief or cross-examination.

21. MARINA OGNJANOVSKI

424Marina Ognjanovski has a high school education and works as an administrative assistant. She has minimal investment experience. Her husband died on November 16, 2006 and she inherited $2 million from a life insurance policy. Her only other asset was her house which had a mortgage.

425In February of 2008 Ms. Ognjanovski was introduced to Daniel Reeve by her financial advisor Chris Bendo. In cross-examination, Ms. Ognjanovski indicated that Mr. Bendo was working for Daniel and had his own business as well. Daniel told her he had an investment that was risk free and would pay 16 percent. Daniel also indicated that she could withdraw her money at any time. In cross-examination, Ms. Ognjanovski indicated that she told Daniel that she did not want to lose the money because it was eventually to go to her children. Daniel told her not to worry and that she would make good money on her investment.

426Daniel told her that she could invest $400,000 in the Jakobstettel Inn and would get partial ownership. She made out two cheques to Celebrity Management in the total amount of $400,000 – see Exhibits 98 – 31A and 31B.

427Ms. Ognjanovski got the contract on March 4, 2008. It appears as Exhibit 99 and is between Celebrity Management and Marina Ognjanovski in the amount of $400,000 paying 16 percent interest (stipulated as $7,000 monthly) and maturing in March of 2010. In cross-examination, it was pointed out that 16 percent annually works out to $64,000 total interest per year or $5,300 per month. Exhibit 98 – 31D is a letter written by Ms. Ognjanovski which indicates that part of the monthly payment was repayment of principal. The contract also stipulates that she owes four-tenths of a suite but it is not named on the title page of the document. She understood that Daniel was the Chief Executive Officer of Celebrity Management. The document was signed on March 4, 2008 and witnessed by Mr. Bendo who was there at the time of signing.

428Ms. Ognjanovski testified in chief that she received nine months of payments of $7,000 each. However in cross-examination and pursuant to her letter to Daniel, dated February 17, 2009 (see Exhibit 98 – 31D), she in fact received ten monthly payments of $7,000. The payments were always late but she received them in the month they were due.

429Finally, in January of 2009, Ms. Ognjanovski did not receive any payment. She called Mr. Bendo who called Daniel. Daniel called in February of 2009 and told her that that the money would be deposited in her bank and she should check. She checked and no money was there. Accordingly she prepared the Exhibit 98 – 31D letter with Mr. Bendo’s help and requested the return of her investment within 30 days. As of the date of the letter, February 17, 2009, $368,333.30 was still owed to her.

430Ms. Ognjanovski required the $7,000 per month to live and pay bills. Daniel had told her that her money was to be invested in the Jakobstettel Inn and that she had partial ownership. There was no discussion of her money being used for any other purpose. Daniel had said the investment was risk-free and guaranteed and that she could pull out her money any time. Daniel further had said that the Jakobstettel Inn was worth $10 million and Mr. Bendo had said that there was only $2 million in debt. Mr. Bendo had been supportive of the investment.

431In addition to the private investment with Daniel, Ms. Ognjanovski invested $800,000 with David. Of the $2 million she had received in life insurance, $1.3 million had been put in the bank after paying bills. Another $400,000 was invested with Daniel as described above and $800,000 was invested with David in segregated funds. She just wanted the interest as the money was for her children. However, when Daniel stopped making the $7,000 interest payments, she started taking money out of her other investments. In the fall of 2008, David told her he was leaving DPR Financial and she transferred her investments to David’s new firm, Davlyn Financial. She is still with David.

432In the spring of 2009, she sued Daniel for the $400,000 minus the payments she had made.

433Her loss is $368,333.30.

434I find Ms. Ognjanovski to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

22. WILMA JORDAN

435Wilma Jordan is the mother of Karen Gingrich who worked for DPR Financial in the Cambridge office until she quit in 2008. Ms. Jordan has no investment experience.

436In 2007, Ms. Jordan had an approximately 20-year relationship with Cheryl Reeve and a ten-year financial relationship with Daniel.

437Ms. Jordan’s husband passed away in 2006 and she inherited her husband’s RRSP.

438In early 2007, Daniel went to Ms. Jordan’s home and talked her into investing in the Smith Room at the Jakobstettel Inn. She had received her RRSPs from her husband and paid the income tax when she cashed it in.

439Ms. Jordan decided to do the Jakobstettel Inn investment. Exhibits 21A and 21B are two cheques made out to Celebrity Management Inc. or Corp., dated January 29, 2007 and February 1, 2007, in the amount of $96,000 by Wilma Jordan.

440Exhibit 21C is a joint ownership agreement in the amount of $100,000 between Celebrity Management International Inc. and Wilma Jordan dated February 2, 2007. Paragraph 34 at page 7 indicates that Ms. Jordan was to be paid 12 percent interest in monthly instalments of $1,000. The document was signed on or about February 2, 2007. In cross-examination, Ms. Jordan testified that she was obtaining partial ownership of the Smith Suite and that Daniel bumped up the amount to $100,000 but she does not remember why.

441In May of 2007 Ms. Jordan received her first payment in the amount of $3,000. Ms. Jordan kept a record of the interest payments on a spreadsheet – see Exhibit 101. It was brought out in cross-examination that from May 9, 2007 to January of 2008, Wilma received $11,000 in interest. From March 5, 2008 until January 5, 2009, Wilma received $12,000 in interest for a total of $23,000 in interest payments.

442From February 2009 onwards, Ms. Jordan received no further interest payments. She never received any of her principal back.

443On October 7 of 2008, Ms. Jordan gave 30 days’ written notice to Daniel that she wanted her investment returned with interest by November 7, 2008. In cross-examination, Ms. Jordan indicated that she does not remember why she wanted her money back but that she had told Daniel orally on September 30, 2008 that she wanted her money out. Ms. Gingrich, her daughter, had resigned at that point. Up until 2009, all of Ms. Jordan’s investments with Daniel were profitable. No payments after 2009 were a gross deviation from the past.

444In 2007, David took over Ms. Jordan’s portfolio because Daniel was too busy with his hotel business. She did not meet David until April 2008. In October or November 2008, she transferred her investments from David to another financial advisor as she was dissatisfied with David.

445In August 2008, Daniel wanted another $50,000 from Ms. Jordan but she did not provide this money.

446Ms. Jordan’s loss is $96,000 plus accrued interest.

447I find Ms. Jordan to be a credible witness. Her evidence was supported by documentation in the form of exhibits and there were no significant inconsistencies in her evidence in either examination-in-chief or cross-examination.

23. CHIN TAN

448Chin Tan is a research scientist with a Ph.D. who works for Agriculture Canada. In 2007 to 2008, he had a medium knowledge of stock and mutual fund investing.

449In August of 2007, Mr. Tan and his wife attended a seminar given by Daniel Reeve. Daniel’s strategies appealed to him and at some point Daniel gave him a copy of the Three Buckets and Mr. Tan read it.

450Mr. Tan made an appointment at the Millionaire building in Windsor. The meeting was on September 14, 2007 and was attended by David Reeve and Mr. Tan and his wife. The notes of the meeting were introduced by the defence in cross-examination as Exhibit 103. They discussed segregated funds and David said his brother Daniel had a fixed investment in the New York Plaza that they might be interested in. The Tans had paid off their mortgage and had a $250,000 line of credit. In cross-examination it was brought out that David said that Daniel’s investments had higher interest rates than the average investment.

451David then left the room and Daniel came in. Daniel indicated that he had investments in the New York Plaza and the per-unit cost was $100,000 and Daniel had a couple left. In cross-examination, Mr. Tan was referred to his statement and indicated that Daniel was offering 18 percent on the Plaza investment. Further, Mr. Tan cannot say that Daniel said he owned the units but Mr. Tan assumed that he did. There was no discussion what the money invested was to be used for. Mr. Tan understood that the money was to be invested in the Plaza.

452Exhibit 102 – 38A is notes written by Daniel dated September 17, 2007. They indicate that on the $200,000 investment at 18 percent Mr. Tan would earn $36,000, and after paying the $12,500 interest on his line of credit, his profit would be $23,500 which would be tax-deductible.

453Exhibit 102 – 3B is a cheque dated September 17, 2007 (the same date as Daniel’s notes