Investors who lost hundreds of millions collectively when Epic Alliance Real Estate collapsed in January 2022 want the province to fine the company’s founders Rochelle LaFlamme and Alisa Thompson and ban the pair from ever trading securities again.
The Financial and Consumer Affairs Authority of Saskatchewan (FCAA) will hold 14 days of hearings, scheduled to begin on Aug. 28, to consider the allegations raised by a dozen investors.
“If the panel finds that there were at least one, or multiple, or however many violations of various securities laws, the next step in the proceedings would be to have a sanctions hearing,” FCAA lawyer Connor Smith said in an interview.
LaFlamme and Thompson created Epic Alliance in August 2013 and ran it until Jan. 19, 2022, when they told 121 investors in a video meeting that there was no money left.
A court-appointed investigator looking into the Epic Alliance group of companies said the public may never fully know what happened to the hundreds of millions raised by the failed real estate venture.
“Based on the unaudited books and records of EA Group, total funds raised from Investors amounted to approximately $211.9 million,” wrote Peter Chisholm from Ernst and Young in a 58-page report.
“Due to incomplete books and records prior to 2019, the Inspector has been unable to reach conclusions regarding the use of Investor funds for that period of time.”
A dozen investors allege that LaFlamme and Thompson sold securities when they were not licensed to do so and pitched investments without a prospectus. It’s further alleged that they continued to raise money after the province ordered them to stop.
The investors want LaFlamme and Thompson to be permanently banned from raising money and trading securities. They also want each woman fined $100,000, with another $100,000 fine levied against the company.
“The respondent shall pay financial compensation to each person or company found to have sustained financial loss as a result, in whole or in part, of the respondent’s contraventions of Saskatchewan securities laws, in amounts to be determined,” says the statement of accusations posted on the FCAA website.
Over the years after its founding, Epic Alliance evolved into a web of named and numbered companies, including Epic Alliance Real Estate, Epic Alliance Electrical, Epic Accounting and Bookkeeping, and Epic Holdings. It had 118 employees.
LaFlamme and Thompson created and ran three main ventures: a loan program based on promissory notes, a “Fund-A-Flip” program and a “Hassle Free Landlord Program.”
The company built up a pool of capital by enticing people to give Epic $50,000 to $500,000 in exchange for a promissory note. The single-page notes, of which multiple examples were provided in affidavits, were extremely simple. They featured the loan amount, when the term began and ended, and the interest rate.
The stated rates of return varied from 15 to 20 per cent.
“You have a pool of unsecured funds that can be used for whatever. There’s no specific purpose given to those funds when they’re loaned,” said lawyer Mike Russell.
The “Fund-A-Flip” program had investors buying homes through Epic, doing improvements and upgrades, and then selling for a profit. The company’s promotional material suggested a 10 per cent return on a one-year investment.
Finally, the “Hassle Free Landlord Program” had investors — most from out of the province — buying homes acquired by Epic through the Fund-a-Flip program. The investors took out the mortgage on the home and Epic took responsibility for everything from finding tenants to maintaining the property. It offered the investors a 15 per cent guaranteed rate of return.