Arrest made in Cinar/Norshield fraud scandal |
Date: Thursday, March 3, 2011
Author: Jason Magder and Paul Cherry, Montreal Gazette
Four people faces 36 charges of fraud
An 8-year-old investigation has yielded 36 charges against four men involved in an alleged fraud scandal that dates back to 1998.
The four men face charges in the fraud that saw millions of dollars from former animation company Cinar Corp. diverted to Bahamian investment companies with links to Montreal's Norshield Financial Group.
Sûreté du Québec Sgt. Martine Isabelle said Richmond Hill resident Hasanain Panju, 44, the former chief financial officer of Cinar, was arrested yesterday. The SQ is searching for Montreal residents Ronald Weinberg, 49, founder and former president of Cinar; John Xanthoudakis, 52, president of Norshield Financial Group; and Lino Matteo, 48, president of Mount Real. The SQ posted the pictures of the men on its website asking anyone who knows of their whereabouts to contact police. Isabelle said one of the three with an arrest outstanding is out of the country, but she would not specify who that was.
Cinar, a Montreal-based animation studio, was bought by Toronto-based Cookie Jar Entertainment Inc. in 2004, and the Montreal studio was closed. Norshield, a Montreal-based hedge-fund manager, went into receivership in 2005, leaving investors in its complex offshore investment structure with more than $400 million in losses.
An arrest warrant filed at the Montreal courthouse Wednesday afternoon lists a total of 36 criminal charges. Included are 32 counts of forgery, three counts of fraud and one count of making or circulating a false prospectus. The charges state some of the alleged fraud and forgeries were committed in Florida and in the Bahamas through foreign exchange contracts.
Panju and Weinberg are alleged to have published a prospectus, dated March 3, 1999, "that they knew to be false in a material particular, with intent to induce" people to become shareholders in Cinar Corp. Panju and Weinberg are also alleged to have forged a corporate resolution on behalf of Cinar to open investment accounts with a company in 1998 and again in 1999. They also face charges of falsifying documents, for example, a revenue schedule and Cinar's financial statements for 1998.
Another charge alleges all four men forged letters confirming securities held by Cinar Corp. and a statement of account of Xanthoudakis's Norshield Financial Group and Norshield International from 1998 to 2000. More specifically, the four men are alleged to have produced a forged document, on Jan. 12, 2000, that falsely confirmed securities held by Cinar and a statement of account related to Norshield.
Most of the charges involve a period that runs between 1998 and 2000. But one charge in particular stands out and alleges all four men defrauded Cinar over a period of eight years, from September 1997 and Dec. 31, 2005. A conviction under a charge of forgery comes with a maximum 10-year prison term and the current maximum sentence for fraud is 14 years, but it was 10 years during the period covered in the warrant.
Several of the charges involve Globe-X Canadiana, a Nassau-based financial services company whose funds were at the centre of the scandal when Cinar investors learned in 2000 that more than $120 million had been placed with Globe-X without the authorization of Cinar's board of directors.
An SQ statement Wednesday alleged Xanthoudakis allowed Weinberg and Panju to invest in the Bahamas, while Matteo helped hide the traces of the investment.
The last time Cinar and Norshield made headlines, Weinberg, Panju and the estate of Weinberg's late wife, Micheline Charest, who co-founded Cinar, had reached an out-of-court settlement in a $116-million lawsuit brought on by Cinar against them.
The lawsuit had alleged more than $120 million U.S. of company money - the equivalent of one year of revenues - was transferred to a murky set of Bahamian investment companies with ties to Norshield.
A former top executive of the Bahamian companies testified in 2004 that Norshield assisted Weinberg, Charest and Panju to siphon millions of dollars from Cinar coffers with sham foreign-exchange operations. The executive, Robert Daviault, alleged the money was sent by Cinar to the Bahamas in 1998 to pay for almost $8 million U.S. in bogus foreign-exchange losses. The Cinar money made its way into Killington Holdings Ltd., an offshore company owned by Weinberg, Charest and Panju, Daviault alleged.
At the time these allegations were reported, a lawyer for Weinberg insisted his client was involved in no wrongdoing and attacked Daviault's credibility. Former Norshield CEO John Xanthoudakis has also denied Daviault's version of events.
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