Of all the questions surrounding Bridging Finance Inc. – the $ 2 billion private debt manager placed under the control of a receiver last week – few compare to the one posed at 2:22 p.m. last Thursday.
At the time, David Sharpe, CEO of Bridging, was at home and being questioned by video conference by a forensic accountant and lawyer for the Ontario Securities Commission. Under oath, he was repeatedly asked if he had ever accepted money from one of Bridging’s biggest borrowers, a Winnipeg businessman named Sean McCoshen, whose companies had borrowed more. $ 180 million to Bridging.
Mr. Sharpe was almost unequivocal: to his knowledge, no, he had not.
Why then, they asked, did a company controlled by Mr. McCoshen deposit a total of $ 19.5 million into Mr. Sharpe’s personal chequing account?
Mr Sharpe asked for a moment to speak with his lawyer, then after a 10 minute break he changed his mind: “So I had personal financial relations with Sean McCoshen and loans from him.” “. he told them.
When asked to explain why he hadn’t disclosed this earlier, Mr. Sharpe replied, “Honestly, I didn’t think it was applicable.” A little later, in a hurry to explain why the payments seemed to take place a few days after Bridging gave loans to Mr McCoshen’s businesses, Mr Sharpe conceded: “It sure doesn’t look good. That’s for sure. “
The OSC agreed, and just over 24 hours after that interview, a transcript of which was filed in court, the regulator turned to Ontario Superior Court Judge Glenn Hainey for place Bridging under the control of the receiver PricewaterhouseCoopers LLP.
Next, Bridging’s investor clients, the majority of whom are accredited retail investors, wonder what will happen to their money. The court documents describe a complex web of loans and payments between bridge funds, clients, owners and executives that will take time to work while the fund manager is under the control of PwC.
The deals include the $ 19.5 million payment from Mr McCoshen, as well as Bridging’s decision to assign Mr McCoshen a large loan that she made to ailing construction company Bondfield Construction at cost and without payment.
Bridging’s relationship with former co-owner Gary Ng is also under the microscope. Two days before Mr. Sharpe’s interview, the OSC asked Bridging co-owner Jenny Coco for a $ 10 million dividend that the company paid Mr. Ng a few weeks before buying back his $ 50 million stake. dollars for $ 5 because of fraud allegations against him. Through her lawyer, Ms. Coco said the money was advanced to help Mr. Ng pay off some troubled loans.
In its application for receivership, the OSC alleged a number of disclosure and conflict of interest irregularities at Bridging: that Bridging inappropriately used investors’ money to buy out another company, Ninepoint Partners LP, with whom she had co-managed the Bridging. Income funds; that Mr. Sharpe asked a client to participate in a questionable transaction which was intended to “give the impression” that Ninepoint’s payment had been financed by a loan; and that Bridging loaned $ 32 million in investor money to Mr. Ng just two weeks before he bought a 50 percent stake in Bridging.
But at the heart of the OSC’s case, and the predominant topic its staff returned to time and time again when they polled Mr. Sharpe last week, is its relationship with Mr. McCoshen, the visionary behind a line project. railway connecting northern Alberta and the ports of Alaska. .
The Alaska-Alberta Railway Development Corp., or AARDC, which was founded by Mr. McCoshen, is Bridging’s largest borrower, with debts of over $ 180 million.
Mr. McCoshen did not respond to requests for comment. AARDC, where Mr. McCoshen also serves as CEO, released a statement saying it “was disappointed to learn of the allegations against Bridging Finance and its executives.”
The OSC’s analysis of Mr. Sharpe’s Bank of Montreal chequing account, which was filed in court, shows that between 2017 and 2019, a company controlled by Mr. McCoshen made six payments to Mr. Sharpe – all of them carried out within days of advancing Mr. McCoshen’s business transition loans.
In its interview on Thursday, the OSC pushed Mr. Sharpe on these transactions – which he refused to mention in a previous interview in 2020. Asked about the existence of a loan agreement explaining the payments, Mr. Sharpe replied, “There probably is,” before making a more definitive statement that, yes, there was an agreement. It was a hard copy at the transition office, he said.
Investigators demanded that he produce the loan documents by 5 p.m. that day, citing concerns that Mr. Sharpe had “intentionally cheated” – a qualification disputed by Mr. Sharpe’s attorney. At 8:13 p.m. that evening, his attorney emailed OSC attorney Carlo Rossi to tell him that Mr. Sharpe had visited Bridging’s office but could not find the agreement.
During his interview, mandated by Ontario securities law, Mr. Sharpe was vague about the purpose of the loan made by Mr. McCoshen, saying it was “for investments.”
Mr. Rossi asked Mr. Sharpe a direct question: “So, Mr. Sharpe, I just want to make it clear to you. Are these bribes Mr. McCoshen is paying you in the course of granting loans to his businesses? “
Mr. Sharpe replied, “No, they are not.”
Investigators also questioned Mr. Sharpe about what happened to the millions Mr. McCoshen advanced to him. Mr. Sharpe’s checking account showed that in addition to payments for renovations and car rentals, Mr. Sharpe made payments to two Bridging employees: $ 260,000 to the company’s vice president of sales , Ian Baele, and payments totaling $ 180,000 to Bridging’s Chief Compliance Officer. , Andrew Mushore. Mr. Sharpe said they were “freebies”.
Investigators asked him how normal it was for him to give such big gifts to his employees.
Mr. Sharpe replied, “I am a very generous person.”
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