Calgary man misappropriated $3.4M from sale of Edmonton strip mall, regulator finds

The Alberta Securities Commission has found a Calgary man misappropriated more than $3 million in funds invested in a south Edmonton strip mall development.

A three-person ASC paneldetermined last weekthat Ali Ghani and five entities he controlled perpetrated investment fraud through the development and sale of Summerside Plaza.

The panel found Ghani distributed $3.4 million from the plaza sale to other projects without investors' knowledge or permission. That resulted in the total loss of their investments, according to the Nov. 7 decision.

Approximately 207 investors, more than half of whom were Alberta residents, put up money for the mall.

Six witnesses testified during a six-day hearing on the matter about a year ago, including one investor and a former employee who reported to Ghani.

Ghani did not participate in the hearing, but ASC investigative staff interviewed him twice in 2021.

During the hearing, the commission's legal team argued that Ghani's evidence provided during those interviews was "untruthful, inconsistent, misleading, and obfuscating."

CBC News asked Ghani to comment on this story but did not receive a response.

Father-son duo

Ghani told the commission that he and his father, Abdul Ghani, founded Prism, a collection of largely commercial and residential real estate development entities in Alberta. The elder Ghani died in early 2020.

Summerside Plaza was one of Prism's multiple real estate projects.

According to the decision, investors were told their funds would be used to obtain land and develop Summerside Plaza. The plaza would then generate and distribute tenants' income and a return on investment once the property was sold.

Raintree Financial Solutions, an investment service, offered the Summerside units to its clients and raised most of the invested funds.

A grand opening for the mall was held in June 2015.

Class-action lawsuit

In September 2016, Summerside Development Corporation agreed to sell the plaza to a numbered company for $24 million. The sale went through in 2017, and about $17 million of the proceeds was used to pay out the property's mortgages.

During the ASC hearing, Raintree's CEO testified that by the spring of 2017, the company had concluded that it could no longer trust Ghani to communicate with the firm and believed there could be a total loss of the invested capital it had raised for various Prism developments.

A Raintree employee is the representative plaintiff in a$42-million class-action lawsuitthat was brought against the Ghanis and other entities, including the Summerside Development Trust, in 2018.

An amended statement of claim alleges the Ghanis "wrongfully extracted all of the value from the Prism entities," causing proposed class members to lose all or most of their investments.

The allegations have not been proven in court.

In an amended statement of defence, Ghani said he and his father always cooperated and "provided the information and records that they had, which showed the plaintiff and the other investors that the real estate projects had failed and there was no misappropriation or fraud."

One investor testified at the hearing and said he invested $50,000 in the Summerside development in 2014 after having previously invested with Prism. He complained to the ASC in 2018 and testified that Ghani had promised returns in the first quarter of that year but did not deliver.

Commission staff interviewed eight to 10 other investors who saw the same outcome, and the Raintree CEO testified that as far as he was aware, no Summerside Plaza investors had been repaid or received returns.

Commission staff told the hearing panel that investors noted their money was used without their permission. The reasons included repaying unrelated debts and construction costs, buying equipment for other businesses, buying at least three vehicles, paying rent to unrelated landlords and making payments to entities under Ghani's control and entities in which he had an interest.

Comingling of funds

While being interviewed by the ASC, Ghani said that Prism directed money raised by specific projects through the Prism Real Estate Investment Corporation (PREIC), or the company's "funding arm."

"We never commingled funds," he said.

But his statement of defence, filed as part of the class-action lawsuit in 2021, said funds "were comingledamong the Prism Entities as we tried to pay expenses for the projects and keep them all going."

The statement of defence claims people who lost money on their investments did so because Alberta's real estate market worsened and projects were sold at a loss.

"There was no money left over for the investors," the document says.

According to the ASC decision, Ghani tried to downplay the significance of his role with Prism and exaggerate that of his father a strategy the commission's staff argued was an attempt to shift some of the blame to his dead father.

The panel found that Ghani was the guiding mind of the entities and that he knew moving money through PREIC could end in losses.

Possible sanctions will be determined at a later date.

In 2010, Ghani admitted tobreaching Alberta securities lawsregarding prohibited representations. According to a settlement agreement, the allegations were withdrawn, and he agreed to pay the ASC $35,000 plus $2,500 for the costs of its investigation.