CBI Venu / Keystone Class Action

This is the specific page for the CBI Venu / Keystone Class Action. Check back to this page frequently for updates.

 UPDATE : APRIL 10, 2017

We do not provide T5’s, or documents you need for income tax related to any shares you held in any CBI corporations.  We didn’t issue the CBI shares, have no control over them, we didn’t zero them for value and so we cannot help you with that part.  Please direct all your inquiries to Olympia Trust if you held shares with them that were zeroed.  Or alternatively, speak to your accountant.  We post  this as many people continue to contact us asking for these documents.  We have said this a variety of times, so we hope everyone understands that we have just settled your lawsuit and have settlement proceeds. Currently, your settlement proceeds are an interest in land, and you will get a payout of cash, via cheque, when the land sells.  That is distinct from your investment vehicle documents.  Please do not contact us to clarify this further, as we cannot.  Again, any information you need will come from your accountant and if the accountant needs anything, they can contact CBI about the original investment. 

UPDATE: January 5th, 2016

We are now in the process of concluding the class action settlement in this matter, which will involve the return of participation fees to those investors who initially contributed to the class action.

As we have noted previously, the likelihood for recovery for both the CBI Venu / Keystone and CBI PIC projects is low due to the existence of mortgages and encumbrances which exceed the value of the investment properties. We are evaluating options for investors to move forward to obtain some form of recovery. Please keep checking our website and monitor your e-mail addresses for updates.

 

UPDATE: September 28th, 2015

CBI VENU / KEYSTONE SETTLEMENT FAQ

We have received multiple e-mails and phone calls from investors with respect to the settlement. Please note that due to the volume of calls and e-mails we receive, we cannot answer individual questions about the settlement. We have reviewed the questions that investors have sent us, and we have found some common themes. We have provided our response to these questions below:

1. What is the settlement exactly?

The settlement is $60,000.00, which will go towards paying legal fees, disbursements (out of pocket expenses), and paying out the investors who contributed to the cost of funding this class action lawsuit at the commencement of the litigation. If you did not contribute initially to fund the litigation, you will not be receiving any of the settlement funds.

2. Why did you agree to settle for such a relatively small amount compared to the overall investment?

There are two general reasons for why we decided to settle. The first reason is through examination of the Cadmans, we determined that a class action lawsuit would not provide any recovery for investors. Unlike the CBI Lakehouse project, where investors are able to recover the property, the property involved with the CBI Venu / Keystone project is heavily mortgaged through development financing, which is ahead in priority to the investors.

For the CBI Venu / Keystone investors, their interest is in the Keystone Communities project. There is currently a Royal Bank of Canada mortgage worth far more than the value of the property that is in default. Due to the low likelihood of recovery, continuing with the class action would not yield any benefit for CBI Venu / Keystone investors. It will simply force the RBC Bank to foreclose.

The second reason is that for the Keystone Communities project in particular, the CBI PIC investors and CBI Venu / Keystone investors are both competing to get value out of the one property. Litigation pits these projects against each other. However, with litigation discontinued, there is a possibility of investors to recover something if both groups come together to bring in a competent developer to re-finance, deal with structuring payment of the creditors in priority, and to complete development of the Keystone Communities property. This is the only way for investors to recover. The class actions are an impediment to that solution. Faced with this, the representative plaintiff agreed that the best course of action would be to discontinue the litigation in order to pursue a potential business solution. The known investors also agreed with this.

3. I did not fund the litigation initially and I will not receive any benefit. Why should I agree to this?

Investors have the right to Opt-Out if they so choose. However, we ask investors to agree to this settlement so we can begin to make arrangements for investors to re-develop and re-finance the Keystone Communities project with the CBI PIC investors.

The effect of Opting-Out will be that investors must start a new action on their own. The costs of doing so make no sense. As we described in Question 2, the likelihood of recovery through litigation is, in our opinion, is non-existent.

Should investors Opt-Out and commence new lawsuits, our ability to help investors re-develop will be significantly hindered, as the CBI Group will be dealing with new lawsuits rather than working with us to give investors control and re-develop the Keystone Communities project.

Bluntly, litigation is not the answer. The only chance here for any recovery is for investors to work together.

4. If I Opt-Out can I continue the current lawsuit? Can I still participate in any re-development?

Opting-Out does not prohibit you from participating in the re-development of the Keystone Communities project in the future. However, as we stated before, Opting-Out and carrying on a lawsuit will not assist anyone in that goal. It is not likely people opting out will be starting their own lawsuit, for a variety of reasons.

You will not be able to continue the current lawsuit and would have to bring an entirely separate one. The current lawsuit will be settled and discontinued.

5. Why am I only hearing about this now post-settlement? Why was I not notified previously?

Prior to the settlement approval, we did not have the investor lists. We were only aware of the investors who reached out to contact us and help fund the initial litigation. The Defendants were in control of the lists and were responsible for contacting investors about the Notice of Settlement Approval Hearing in June 2015. The defendants sent out notice of the intent to settle back in June. We are now in possession of the investor lists and are contacting investors via e-mail (or mail if we do not have your e-mail address). If you have not been contacted, the forms can be downloaded HERE or at the “Information Forms” section to the left of this page.

6. Why am I not getting any notifications when other investors are?

The investor lists contain the addresses and e-mails of investors at the time of their investment. If your address and e-mail address has been changed then we are unable to contact you. Please contact us via e-mail and we will re-send the form to you. Alternatively you can download the forms HERE or at the “Information Forms” section to the left of this page.

We are updating investor information when you provide the same to us so we can contact you for future updates.

7. What is the likelihood that the re-development will be successful?

It is too early to tell at this stage what the potential re-development would look like, whether it would be successful, and if it is, what investors’ potential for recovery would be.

We still believe that this is the only chance for investors to see some form of recovery.

8. When is the investors’ meeting to discuss re-development?

We are hoping to hold an investors meeting in early 2016 to discuss re-development options with investors in the CBI PIC and CBI Venu / Keystone projects.

9. I invested through Olympia Trust as an RSP investment. Are you aware of my investment?

Regardless of whether investors invested through Olympia Trust or directly with the CBI Group, we have your contact information. For the purposes of settlement, this makes no difference.

10. I received T5 slips / other tax slips for this investment, but have not received any actual investment income. How do I address this with the CRA?

Unfortunately we cannot answer any questions related to the tax aspects of this matter, as we are solely dealing with the litigation and settlement. We recommend seeking the advice of a tax professional for any tax issues arising.

We have received multiple e-mails and phone calls from investors with respect to the settlement. Please note that due to the volume of calls and e-mails we receive, we cannot answer individual questions about the settlement. We have reviewed the questions that investors have sent us, and we have found some common themes. We have provided our response to these questions below:

 

UPDATE: September 10th, 2015

CBI KEYSTONE/VENU ACTION CERTIFIED

This matter has now been resolved in accordance with the settlement agreement which received unanimous and overwhelming approval. This settlement ends the litigation for investors in the CBI Keystone / Venu matter. The funds received as settlement shall be put towards the cost of funding the litigation. Investors who contributed funds at the outset shall be made whole and have their contribution returned to them.

As opposed to the CBI Lakehouse project, there is a large encumbrance on the CBI Keystone / Venu property held by Royal Bank of Canada, which is currently worth more than the value of the property itself. Keystone / Venu investors rank behind in priority to RBC, and there is additional investment by the CBI PIC investors. As it currently stands, there is not enough equity in this property, if it were sold, to pay out the Royal Bank of Canada mortgage in first position.  That means litigation is not going to be an effective tool to realize value for investors.

The only way for CBI Keystone / Venu investors to make a return on their investment is to bring in a new developer with new financing, so that this project can be developed and value can be created for investors. We will be working with CBI Keystone / Venu investors following the resolution of this claim to try and find a competent developer who can come in and finish the project.

Our focus is to find a way to create value for investors. This proposal is expected to be made to investors, so they can plot or plan a way to do so. This will require cooperation with the CBI PIC investors so that both sets of investors can come together to re-develop and re-finance the property. For this project in particular, any proposal will have to involve new financing, as the Royal Bank of Canada mortgage in priority to all investors, must be paid out.

Once the litigation is resolved, we will be in contact with investors to discuss some potential go forward strategies with competent developers to find a way to create value for investors.

We thank investors for their cooperation and patience in this matter. McGuigan Nelson LLP is working diligently to help investors to try and obtain some return on their investment in this property.

Click here to review the Notice of Settlement Approval, Opt – Out Form, and Claim Form, or visit the Forms page to the left. We ask that investors fill out the claim form to allow us to identify your investment, which will enable us to contact you to hold an investor meeting in the near future to discuss go the best way to move forward.

UPDATE: August 7th, 2015:

As we are getting closer to the Settlement Approval Hearing for the CBI Property Income Corp and CBI Venu / Keystone projects on September 9th, we have heard from a number of investors who received the Notice of Settlement Approval Hearing and they have expressed some confusion about what to do and what is going on here. Please note that we cannot respond to each individual investor as it takes a significant amount of time. We have been updating our website frequently as more information becomes available.

We would like to provide the following clarification to investors, as there seems to be some confusion about what is happening:

  1. As stated in our earlier updates, this is a Notice of Settlement Approval Hearing There is nothing for investors to do at this time other than to be aware that the hearing is coming up and we propose to have our settlement approved by the Court. If you wish to object to the proposed settlement, you can provide us your written comments to us by no later than August 9th, 2015 , and we will inform the Court of these objections on September 9th.
  1. Through the course of questioning, in the PIC and Keystone/Venu actions, the Defendants admitted under oath that there is no equity in either project.  Title to the Keystone/Venu property demonstrates that the Venu investors were subordinated to financing from PIC provided at a later time.  The intent here was not to have investor classes competing with one another for priority and in any event, there is no equity in the Venu project.  The litigation inhibits the ability of the investor groups to try to work together to formulate a business solution to try to take development further, in hopes of creating value for investors here.  Currently there is nothing for investors and no assets to collect against.  So this is effectively the only solution.
  1. If the settlement is approved in Court in September, a second notice will go out to investors, called a Notice of Settlement Approval. If you wish to Opt – Out of the settlement ,this is your chance to do so. If you do Opt-Out, you are then essentially left with the option of suing yourself.  That is not a viable or cost effective option, in our view.  However, if you remain within, the intent is to get the PIC and Keystone/Venu groups to work together to find someone to finish development of Venu.  That will be something determined by investors, at a later date.
  1. Additionally, with PIC, the investors may recoup something in the Keystone Business Park, as we are currently working toward moving that action forward and hope to find a structured settlement that will allow investors to derive benefit.  As PIC has a mortgage on that investment there is a hope for PIC to recoup something there as well.
  1. To be clear, the “settlement” in this case is that the claim will be discontinued, with a $60,00.00 contribution from the Defendants for both actions. Those funds will be solely directed to offsetting the fees and disbursements of the legal actions.  Everyone who made contribution toward disbursements in either action will receive the entirety of their contribution returned.
  1. We are not promising anyone in either PIC or Venu that the business option will be successful.  But what we can tell you now is that based on investigation of the encumbrances, and based on the sworn evidence we have, there is zero equity currently in either project and they are total losses for investors.  We are going to try to help investors find a way to realize value here by trying to find experienced developers to assist with completion of work.
  1. We have heard from several investors who have expressed dissatisfaction that this settlement will not “punish” the Cadmans.  Civil litigation is not about punishment.  The Alberta Securities Commission has some hearings with the Cadmans in relation to some of their investment vehicles and you can look those up if you wish.  However, sanctions relate to fines paid to the ASC and that provides no benefit to investors.  The focus of the lawsuits is to attempt to help investors recoup and mitigate their investment here.  In other words, this is about trying to find value for investors.  There is no prospect of that through litigation.

Given the fact that we are likely years away from getting to and through a trial, there is no money or appetite of investors to run a trial, and the fact that the Cadmans have confirmed that the PIC and Venu / Keystone projects have no funds to collect on, there really is no choice here. 

Faced with these risks, we have structured a proposed settlement which allows investors who have contributed towards the legal disbursement costs of the litigation to recover those amounts, which frees us to seek a negotiated business solution with other creditors. If you are not happy with this, you are entitled to Opt-Out, and you can try to sue on your own, if you cannot accept any of the above. 

We understand that this information is hard to process and accept.  Please do not “shoot the messenger”.  Bluntly, these projects have failed and the money is spent.  And unfortunately, most of the monies were distributed out at the front end of these investments and all of that was disclosed to you in your Offering Memorandums.

We hope this clarifies some of the concerns investors have about the settlement. We look forward to updating investors after September 9th, 2015.  We trust everyone will opt in, and we look forward to meeting all of you when we try to put together a structure to complete the Venu project and PIC investors will also be involved in our attempt to deal with the Keystone Business Park.

 

UPDATE: July 9th, 2015:

Notice of Settlement Approval Hearing

Kevin McGuigan is pleased to announce that on June 23rd, 2015, Justice Macleod granted the Settlement Approval Hearing Order.  This will mean the following:  In the next several weeks, investors in the CBI Venu / Keystone investment will receive a “Notice of Settlement Approval Hearing”  from Defendants’ counsel. This means that a date has been set for the court to approve the settlement between Class Members and the Defendants.

If you do not receive anything about CBI Venu / Keystone and you are an investor, please email Kevin at kevin@mnllp.ca directly.  Please only email if you do not receive the forms.  If you receive the forms, you do not have to do anything at this time. If you do not approve of the settlement as proposed then review the Notice, which will set out your options.

We have a return date of September 9th, 2015, before Justice Macleod.  At that application, we will seek to approve the settlement. If the settlement is approved, then a second notice will be sent to all investors, informing everyone of the settlement. At that time investors will either make a claim to be a part of the settlement, or have the option of opting out of the settlement and proceeding with their own individual claim against the Defendants. 

To review the proposed settlement agreement, please click here or visit the CBI Group Form Downloads page.

-Kevin McGuigan

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