Victoria mortgage broker Gregory Martel has been put on a court-imposed spending allowance and two more of his companies have been drawn into receivership at the behest of PricewaterhouseCoopers.
B.C. Supreme Court ruled Tuesday that Martel, facing civil lawsuits that claim he and his company owe nearly $30 million to investors, can spend no more than $5,000 a month on living expenses and spend $15,000 for legal advice and representation.
Madame Justice Shelley Fitzpatrick expanded the powers granted to the receiver to investigate the case. She ruled that Martel Investments Ltd. and Shop Your Own Mortgage Corp. — companies that are owned entirely by Martel and have received money from his firm, My Mortgage Auction — would join My Mortgage Auction, doing business as Shop Your Own Mortgage, and Martel as defendants in the court-ordered receivership.
In verbal reasons for judgement, Fitzpatrick said she agreed with the receiver that expanding its power was “appropriate and necessary in all the circumstances.”
With the court order, the receiver can freeze the assets of Martel and the four companies and compel related companies and individuals to provide information about their financial dealings.
The lawyer representing My Mortgage Auction suggested all this may be for naught.
Ritchie Clark, who expects to be named as Martel’s attorney as well, said he has been given general instruction that “the company has the assets and the ability to discharge its obligations.”
Clark was granted an adjournment until next week so that he can get adequate instruction from his client as well as time to review the case.
He said it is a complicated situation.
When addressing Martel’s spending allowance set by the court, Clark said they may request an increase.
But Fitzpatrick suggested it is really simple. “Show me the money,” she said. “I think it boils down to that.”
Fitzpatrick suggested if Martel does have the resources, “then I think that the earlier the better that good news is imparted for the benefit of what are clearly a concerned group of people.”
Last week, the court appointed PricewaterhouseCoopers to take control of My Mortgage Auction Corp., which does business as Shop Your own Mortgage, a company founded by Martel in 2016.
The court acted when one of Martel’s investors, an Alberta company that claimed to have invested more than $17 million with Martel, said neither Martel nor his company has made payment for outstanding amounts due under investment agreements
The Alberta firm urged the court to appoint a receiver so Martel’s business assets could be protected, reviewed and assessed for the benefit of all stakeholders.
Since the first lawsuit was filed in April, several others have followed. Each lawsuit claims an individual or company invested money with Martel on the understanding the money would be used to provide short-term bridge loans for commercial and residential real estate deals.
In making its case for the added power, receiver counsel Peter Rubin noted there are assets outside of B.C. and it’s clear that money has left My Mortgage Auction’s Canadian bank accounts.
“Given money has moved outside of the jurisdiction, my submission is there’s clear irreparable harm to all of these investors,” Rubin said, with a nod to the 50 people who turned up in a Vancouver courtroom Tuesday morning, and more than 400 others watching online.
Those watching heard Rubin go through the two receiver’s reports that were filed Tuesday.
In them, the receiver noted that while there were gaps in the information available, over the first four days of its investigation it was able to determine there is reason for concern.
“The receiver has significant concerns about the lack of information regarding the bridge loans and their recovery,” said Rubin. “The receiver understands that Mr. Martel was primarily responsible for the management of these bridge loans.”
In the reports, the receiver noted both Victoria and Toronto offices appear to have been vacated and that work carried on elsewhere for some time.
The report noted only $273 was in Royal Bank of Canada accounts. Those same accounts had $58 million deposited and withdrawn over the past six months, with no explanation evident to the receiver.
In the last month, the receiver said, $3.5 million was deposited and $5 million withdrawn, with a number of large withdrawals relating to other Martel companies — $3.5 million went to Martel Investments Ltd. and $500,000 was transferred to Shop Your Own Corp.
The second report, which included a detailed financial position of My Mortgage Auction, said unaudited statements suggest the company had $234 million in total assets at the end of the fiscal year in September — $342,000 in cash, loans receivable totalling $186 million, shareholder advances of $3.2 million and advances to related parties of $45 million.
The report pointed out $3.2 million was advanced to Martel himself in 2022 and was used for personal expenses including private jets, luxury apartment rentals, event tickets, vehicle purchases and home escrow payments.
Martel also received a $6.5 million dividend.
The receiver noted advances to related parties increased significantly in 2022 with $16 million going to Shop Your Own alone.
Fitzpatrick said the receiver’s investigation shows substantial monies were deposited by investors and substantial monies were moved between accounts.
“As the receiver’s counsel notes, there may be a perfectly legitimate explanation for the various transactions,” she said. “But that is not yet evident from the receiver’s initial investigations.”
The receivership case has been adjourned until Wednesday in Vancouver.
A few of the investors were able to address the court Tuesday, a number of them admitting they were “bewildered” by the process and unsure of what they should do to protect themselves.
Kira Kelly from Victoria said she didn’t hold out much hope after she learned one of Martel’s employees was trying to get their money out as well. “I really hope I haven’t lost my life savings.”
Sue Gordon told the court she’s learned Martel has everything needed to pay them all back, and was concerned the receivership case might be a hurdle to being made whole.
“I think a big fear is if it continues down the receivership road, the timeline to be paid back will be substantial, and depending on how the assets appear, will everyone get what they’re owed,” she said.
The receiver intends to hold a town hall to help inform the hundreds of investors who are involved.
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