Most investors are from Saskatchewan and Manitoba
More than 460 investors from across the country hoped to cash in on undiscovered gold in British Columbia’s interior. But instead of striking it rich, they are suing the mining company for millions in a class action lawsuit after they say their money disappeared and the Canada Revenue Agency ruled their income tax deductions invalid.
“It’s affected my ability to enjoy some of my retirement plans in terms of travel, improvements around the house, acting as a safeguard for my old age,” Ed Walker of Winnipeg, who says he lost tens of thousands of dollars in the alleged scheme, told the CBC News I-Team in an interview. Reynold Robertson, the lawyer representing investors, estimates the lawsuit is worth at least $10 million.
The investors — who are mostly from Saskatchewan and Manitoba, with some from Alberta, British Columbia, Ontario and New Brunswick — are suing Royal Crown Gold Reserve Inc., its president Douglas Stewart Scott and his associate Claude Taillefer for deceit, misrepresentation, and breach of contract. It also said the prominent legal firm, McMillan LLP, and one of its lawyers, Michael Friedman, were negligent.
“Our motto — let’s get the gold!” is how Scott signed off in a 2009 letter addressed to Royal Crown investors.
In order to get to the gold, the company needed money. Through sales agents, investors said Royal Crown sold them parts of the mine at $100,000 per unit.
Investors allege that Royal Crown, Scott and Taillefer lied to them about the mine’s potential.
According to the claim, they only had to put down $25,000 in cash and the remaining $75,000 could be covered by a promissory note, which investors would pay back once the mine started making money.
In addition, investors said they paid four per cent interest per year on the promissory note plus administration costs. They also said they expected to receive at least $3,000 per year in royalties.
But investing in a larger-than-life pot of gold wasn’t the only enticement for investors, according the the lawsuit. A document produced by Royal Crown says investment in the mine, located 10 kilometres southwest of Cranbrook, B.C., qualified as a “Canadian development expense” under the Income Tax Act.
This led investors to believe they could deduct 30 per cent of their investment from their income taxes and could continue to do so on a declining basis “until the entire cost [had] been written off.”
“It was considered to be quite an inducement,” said Robertson, the Saskatoon lawyer representing investors.
Investors said sales agents provided them with a copy of a letter from McMillan LLP addressed to Royal Crown and its president, Scott, which said the tax write-off was valid.
For the rest of this article, click here: http://www.cbc.ca/news/canada/manitoba/b-c-mining-company-faces-multimillion-dollar-class-action-lawsuit-1.2446217